As filed with the Securities and Exchange Commission on September 29, 1997
Securities Act Registration No. 333-14855
Investment Company Act Registration No. 811-7877
-----------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (X)
Post-Effective Amendment No. 1 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 (X)
Amendment No. 3 (X)
(Check appropriate box or boxes)
THE GARZARELLI FUNDS
(Exact Name of Registrant as Specified in Charter)
100 South Wacker Drive, Suite 2100
Chicago, Illinois 60606-4002
(Address of Principal Executive Offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (312) 782-1525
H. Steel Bokhof, Jr. Copy to:
100 South Wacker Drive, Suite 2100 David A. Sturms, Esq.
Chicago, Illinois 60606-4002 Vedder, Price, Kaufman and Kammholz
(Name and Address of Agent for Service) 222 North LaSalle Street
Chicago, Illinois 60601-1003
Registrant has registered an indefinite number of shares of its common stock
under The Securities Act of 1933 and will file its required Rule 24f-2 Notice
for Registrant's fiscal year ending October 31, 1997 prior to December 31, 1997.
It is proposed that this filing will become effective:
(X) immediately upon filing pursuant to paragraph (b)
( ) on (date) pursuant to paragraph (b)
( ) 60 days after filing pursuant to paragraph (a)(i)
( ) on (date) pursuant to paragraph (a)(i)
( ) 75 days after filing pursuant to paragraph (a)(ii)
( ) on (date) pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
( ) This Post-Effective Amendment designates a new effective date for a
previously filed Post-Effective Amendment.
- -------------------------------------------------------------------------------
THE GARZARELLI FUNDS
CROSS REFERENCE SHEET
(Pursuant to Rule 481 showing the location in the Prospectus and the
Statement of Additional Information of the responses to the Items of Parts A
and B of Form N-1A).
Caption or Subheading in Prospectus or
Item No. on Form N-1A Statement of Additional Information
--------------------- --------------------------------------
1. Cover Page Cover Page
2. Synopsis Expense Summary
3. Condensed Financial *
Information
4. General Description of The Garzarelli Funds; Other Investment
Registrant Policies and Risk Considerations;
Investment Limitations
5. Management of the Fund Management of the Fund; Transfer and
Dividend Disbursing Agent, Custodian and
Independent Auditors
5A. Management's Discussion of *
Fund Performance
6. Capital Stock and Other Capital Structure; Dividends and
Securities Distributions; Taxes; Shareholder
Reports and Information
7. Purchase of Securities How to Purchase Shares; Pricing of Fund
Being Offered Shares; How to Exchange Shares;
Retirement Plans; Service and
Distribution Plan
8. Redemption or Repurchase How to Redeem Shares; Pricing of Fund
Shares; How to Exchange Shares
9. Legal Proceedings *
PART B -
INFORMATION REQUIRED IN STATEMENT OF ADDITIONAL INFORMATION
- -----------------------------------------------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and **
History
13. Investment Objectives and Additional Investment Information;
Policies Investment Restrictions
14. Management of the Fund Additional Trust Information
15. Control Persons and Additional Trust Information
Principal Holders of
Securities
16. Investment Advisory and Additional Trust Information
Other Services
17. Brokerage Allocation and Portfolio Transactions and Brokerage
Other Policies
18. Capital Stock and Other Description of Shares
Securities
19. Purchase, Redemption and Included in the Prospectus under the
Pricing of Securities heading "How to Purchase Shares,"
Being Offered "Pricing of Fund Shares," "How to
Exchange Shares" and "How to Redeem
Shares" and in the Statement of
Additional Information under the
headings "Individual Retirement
Accounts"
20. Tax Status Included in the Prospectus under the
headings "Taxes" and "Dividends and
Distributions" and in the Statement of
Additional Information under the heading
"Taxes" and "Additional Investment
Information"
21. Underwriters *
22. Calculation of Performance Included in the Prospectus under the
Data heading "Fund Performance" and in the
Statement of Additional Information
under the heading "Performance
Information"
23. Financial Statements Financial Statements
- ----------------------
* Answer negative or inapplicable
** Complete answer to Item is contained in the Prospectus
GARZARELLI BALANCED FUND
Supplement to the Prospectus dated March 31, 1997,
as Supplemented September , 1997
--
EXPENSE SUMMARY
The following paragraph replaces footnote 4 of the Expense Summary on pages 4-5
of the Prospectus:
The Fund's adviser has voluntarily agreed to limit the total operating expenses
of the Fund (excluding interest, taxes, brokerage and extraordinary expenses) to
an annual rate of 1.25% of the Fund's average net assets until at least October
31, 1997, subject to earlier termination by the Adviser on 30 days' notice. If
the Adviser had chosen not to limit the Fund's total operating expenses, "Other
Expenses" would have been 51.68% and "Total Operating Expenses" would have
been 52.43%.
FINANCIAL HIGHLIGHTS
The following table is to be inserted following the Example on page 5 of the
Prospectus:
The financial information of a share of the Garzarelli Balanced Fund ("Fund")
outstanding during the period from March 31, 1997 (commencement of operations)
to July 31, 1997 included in this table has been derived from the unaudited
semi-annual financial statements of the Fund. The table should be read
in conjunction with the financial statements and related notes included in the
Statement of Additional Information.
March 31, 1997<F1>
to July 31, 1997
-----------------
Net asset value, beginning of period $10.00
Income from investment operations:
Net investment income 0.03
Net realized and unrealized gains
on securities 1.86
--------
Total from investment operations 1.89
Less distributions:
Dividends from net investment income (0.03)
--------
Total Distributions (0.03)
Net asset value, end of period $11.86
========
Total return<F2> 18.95%
Supplemental data and ratios:
Net assets, end of period $1,295,814
Ratio of net expenses to average net
assets <F3><F4> 1.25%
Ratio of net investment income to
average net assets <F3><F4> 1.86%
Portfolio turnover rate 17.36%
Average commission rate paid on portfolio
investment transactions $0.1172
<F1> Commencement of Operations.
<F2> Not annualized.
<F3> Annualized.
<F4> Net of reimbursements and waivers. Without reimbursements and waivers,
the ratio of net expenses to average net assets would have been 52.43%,
and the ratio of net investment income to average net assets would have
been (49.32)%.
The purpose of this post-effective amendment is to fulfill Registrant's
undertaking to file a post-effective amendment with unaudited financial
statements within four to six months from the effective date of Registrant's
Registration Statement. Parts A and B of pre-effective amendment No. 2, which
are amended hereby, are incorporated by reference herein.
- -------
Report of Independent Auditors
To the Shareholders and
Board of Trustees of
The Garzarelli Funds
We have audited the accompanying statement of assets and liabilities of the
Garzarelli Balanced Fund, comprising The Garzarelli Funds (the "Trust") as of
March 12, 1997. This statement of assets and liabilities is the responsibility
of the Trust's management. Our responsibility is to express an opinion on this
statement of assets and liabilities based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of assets and liabilities is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
statement of assets and liabilities presentation. We believe that our audit of
the statement of assets and liabilities provides a reasonable basis for our
opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of the
Garzarelli Balanced Fund at March 12, 1997, in conformity with generally
accepted accounting principles.
/s/ERNST & YOUNG LLP
Chicago, Illinois
March 12, 1997
- -------
THE GARZARELLI FUNDS
Garzarelli Balanced Fund
Statement of Assets and Liabilities
March 12, 1997
==============================================================================
Assets:
Cash $100,000
Unamortized organization costs 90,000
- ------------------------------------------------------------------------------
Total assets 190,000
- ------------------------------------------------------------------------------
Liabilities:
Accrued organizational costs 51,078
Payable to Adviser 38,922
- ------------------------------------------------------------------------------
Total liabilities 90,000
- ------------------------------------------------------------------------------
Net assets $100,000
==============================================================================
Represented by:
Capital stock, no par value (unlimited shares
authorized and 10,000 shares outstanding) $100,000
- ------------------------------------------------------------------------------
Net assets $100,000
==============================================================================
Offering price, redemption price and
net asset value per share (based
on 10,000 shares of capital stock) $ 10.00
==============================================================================
See accompanying notes to Statement of Assets and Liabilities.
- -------
THE GARZARELLI FUNDS
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
MARCH 12, 1997
(1) Organization
------------
The Garzarelli Funds ("Garzarelli") was organized in October 1, 1996 as
a Delaware Business Trust and is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company issuing its shares in series, each series representing
a distinct portfolio with its own investment objectives and policies.
The only series presently authorized is the Garzarelli Balanced Fund (the
"Fund"). The Fund has had no operations other than those relating to
organizational matters, including the sale of 10,000 shares to capitalize
the Fund for cash in the amount of $100,000.
(2) Significant Accounting Policies
-------------------------------
(a) Organization Costs
Costs incurred by the Fund in connection with its organization,
registration and the initial public offering of shares have been
deferred and will be amortized over the period of benefit, but not to
exceed five years from the date upon which the Fund commenced its
investment activities. If any of the original shares of the Fund
purchased by the initial shareholder are redeemed by any holder
thereof prior to the end of the amortization period, the redemption
proceeds will be reduced by the pro rata share of the unamortized
costs as of the date of redemption. The pro rata share by which the
proceeds are reduced will be derived by dividing the number of
original shares of the Fund being redeemed by the total number of
original shares outstanding at the time of redemption.
(b) Federal Income Taxes
The Fund intends to comply with the requirements of the Internal
Revenue Code necessary to qualify as a regulated investment company
and to make the requisite distributions of income to its shareholders
which will be sufficient to relieve it from all or substantially all
Federal income taxes.
(3) Investment Adviser
------------------
The Fund has an agreement with Garzarelli Investment Management, LLC (the
"Adviser") to furnish investment advisory services to the Fund. Under
the terms of this agreement, the Adviser is compensated at 0.75% of
average daily net assets of the Fund. The Adviser has agreed to
voluntarily reduce its fees for expenses (exclusive of brokerage,
interest, taxes and extraordinary expenses) that exceed the annual
expense limitation of 1.25% of average net assets for the Fund during the
first twelve months of operations.
(4) Sub-Adviser
-----------
The Adviser has entered into an agreement with Affinity Investment
Advisors, Inc. (the "Sub-Adviser") to serve as the Fund's portfolio
manager, subject to the Adviser's supervision. Under the terms of the
agreement, the Sub-Adviser is compensated by the Adviser at 12% of the
Adviser's fees, net of any fees waived by the adviser.
(5) Administrator
-------------
Sunstone Financial Group, Inc. (the "Administrator") acts as
Administrator for the Fund. As compensation for its administrative
services and the assumption of certain administrative expenses, the
Administrator is entitled to a fee computed daily and payable monthly, at
an annual rate of 0.20 of 1.0% on the first $50,000,000 of average net
assets, 0.13 of 1.0% on the next $50,000,000 of average net assets, and
0.05 of 1.0% on the average net assets over 100 million, subject to an
annual minimum of $65,000, plus out-of-pocket expenses. The minimum
annual fee is subject to an automatic annual escalation of 5%.
The Administrator may periodically volunteer to reduce all or a portion
of its administrative fee with respect to the Fund. These waivers may be
terminated at any time at the Administrator's discretion. The
Administrator may not seek reimbursement of such voluntarily reduced fees
at a later date. The reduction of such fee will cause the yield of the
Fund to be higher than it would be in the absence of such reduction.
(6) Capital Stock
-------------
Garzarelli is authorized to issue an unlimited number of shares of common
stock with no par value. The Board of Trustees is empowered to issue
other series of Garzarelli shares without shareholder approval
- --------
GARZARELLI BALANCED FUND
- ---------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
JULY 31, 1997 (UNAUDITED)
NUMBER OF
SHARES VALUE
--------- -----
COMMON STOCK 61.22%
AEROSPACE 1.11%
125 Northrop Grumman Corp. $ 14,391
--------
AUTOMOTIVE PARTS 2.88%
500 Dana Corp. 22,719
250 TRW, Inc. 14,625
--------
37,344
--------
CONSUMER PRODUCTS 4.36%
600 American Stores Co. 15,150
200 Avon Products, Inc. 14,512
200 ConAgra, Inc. 14,062
250 Quaker Oats Co. 12,797
--------
56,521
--------
COMMUNICATION PRODUCTS 0.95%
500 Iridium World Communications Ltd.* 12,250
--------
COMPUTER HARDWARE 4.88%
500 Compaq Computer Corp.* 28,563
300 Hewlett Packard Co. 21,019
300 Sun Microsystems, Inc.* 13,706
--------
63,288
--------
COMPUTER SOFTWARE 2.15%
200 Adobe Systems, Inc. 7,475
300 Computer Associates International, Inc. 20,419
--------
27,894
--------
DRUGS 1.68%
400 Schering-Plough Corp. 21,825
--------
HEALTHCARE SUPPLIES 4.54%
400 Amgen, Inc.* 23,525
250 Becton, Dickinson & Co. 13,406
400 Biomet, Inc. 7,975
275 Kimberly-Clark Corp. 13,939
--------
58,845
--------
HOSPITAL MANAGEMENT 1.73%
750 Tenet Healthcare Corp.* 22,453
--------
HOTEL/MOTEL 1.06%
200 Marriott International, Inc. 13,750
--------
NUMBER OF
SHARES VALUE
--------- -----
LIFE INSURANCE 0.94%
300 Conseco, Inc. $ 12,225
--------
MACHINERY AND EQUIPMENT 3.33%
245 Applied Materials, Inc.* 22,509
500 Snap-On, Inc. 20,625
--------
43,134
--------
MAJOR REGIONAL BANKS 4.55%
300 Bank of New York Co., Inc. 14,569
200 Comerica, Inc. 15,125
175 First Union Corp. 17,752
100 Republic New York Corp. 11,550
--------
58,996
--------
MULTILINE INSURERS 3.43%
225 Allstate Corp. 17,775
200 Travelers, Inc. 14,388
500 USF&G Corp. 12,281
--------
44,444
--------
OIL - INTERNATIONAL INTEGRATED 1.43%
160 Texaco, Inc. 18,570
--------
OIL AND GAS (DRILLING & EQUIPMENT) 5.00%
400 Baker Hughes, Inc. 17,625
250 Halliburton Co. 11,500
400 Phillips Petroleum Co. 18,425
525 Rowan Companies, Inc.* 17,259
--------
64,809
--------
PRINTING AND PUBLISHING 1.93%
100 Gannett Company, Inc. 9,931
300 New York Times Co. Class A 15,075
--------
25,006
--------
RESTAURANTS 1.04%
550 Wendy's International, Inc. 13,441
--------
RETAIL 1.11%
250 CVS Corp. 14,219
--------
SEMICONDUCTORS 2.13%
300 Intel Corp. 27,544
--------
TELEPHONE 3.38%
100 Genesys Telecommunication
Laboratories, Inc.* 2,950
375 Nynex Corp. 20,789
550 U.S. West Communications Group 20,109
--------
43,848
--------
NUMBER OF
SHARES VALUE
--------- -----
TEXTILE - APPAREL MANUFACTURERS 2.62%
200 Liz Claiborne, Inc. $ 9,575
225 Nike, Inc. Class B 14,020
100 Polo Ralph Lauren Corp.* 2,681
85 VF Corp. 7,629
--------
33,905
--------
TOBACCO 1.92%
550 Philip Morris Cos., Inc. 24,819
--------
UTILITIES 3.07%
300 Columbia Gas System, Inc. 20,625
775 Public Service Enterprise Group 19,181
--------
39,806
--------
Total Common Stock (cost $693,459) $793,327
--------
PRINCIPAL
AMOUNT
- ---------
U.S. TREASURY NOTES 33.44%
25,000 6.375%, 4/30/99 $25,270
50,000 6.375%, 5/15/99 50,527
25,000 6.00%, 8/15/99 25,113
50,000 5.25%, 1/31/01 49,140
25,000 6.25%, 4/30/01 25,329
25,000 6.375%, 9/30/01 25,442
50,000 6.25%, 2/28/02 50,678
25,000 6.625%, 4/30/02 25,723
25,000 6.375%, 8/15/02 25,516
125,000 6.625%, 2/15/27 130,506
--------
Total U.S. Treasury Notes (cost $427,428) 433,244
--------
SHORT-TERM INVESTMENTS 1.71%
22,194 UMB Bank, n.a., Money Market Fiduciary 22,194
--------
Total Short-term Investments
(cost $22,194) 22,194
--------
Total Investments (cost $1,143,081) 96.37% $1,248,765
---------
Cash and Other Assets, less
Liabilities 3.63% 47,049
--------
NET ASSETS 100.00% $1,295,814
=========
* Non-income producing security
See notes to the financial statements.
GARZARELLI BALANCED FUND
- ---------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1997 (UNAUDITED)
ASSETS:
Investments at value (cost $1,143,081) $1,248,765
Deferred organizational costs 90,550
Prepaid expenses 32,134
Dividends and interest receivable 11,662
- ---------------------------------------------------------------------------
Total Assets 1,383,111
- ---------------------------------------------------------------------------
LIABILITIES:
Accrued expenses 60,358
Payable to adviser 23,164
Dividend payable 3,775
- ---------------------------------------------------------------------------
Total Liabilities 87,297
- ---------------------------------------------------------------------------
NET ASSETS $1,295,814
===========================================================================
NET ASSETS CONSIST OF:
Capital stock $1,178,926
Undistributed net investment income 13
Undistributed net realized gain on investments 11,191
Net unrealized appreciation on investments 105,684
- ---------------------------------------------------------------------------
NET ASSETS $1,295,814
===========================================================================
CAPITAL STOCK, NO PAR VALUE, UNLIMITED AUTHORIZATION
Issued and outstanding 109,256
NET ASSET VALUE, REDEMPTION PRICE
AND OFFERING PRICE PER SHARE $11.86
===========================================================================
See notes to the financial statements.
GARZARELLI BALANCED FUND
- ---------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE PERIOD MARCH 31, 1997 TO JULY 31, 1997 (UNAUDITED)
INVESTMENT INCOME:
Dividends $2,190
Interest 4,143
- ---------------------------------------------------------------------------
6,333
- ---------------------------------------------------------------------------
EXPENSES:
Fund administration and accounting fees 21,539
Trustees' fees 19,123
Federal and state registration fees 15,052
Shareholder servicing fees 13,705
Reports to shareholders 10,436
Legal fees 6,845
Amortization of organizational costs 6,765
Audit fees 5,965
Other 3,808
Investment advisory fees 1,527
Custody fees 1,465
12b-1 fees 509
- ---------------------------------------------------------------------------
Total expenses before reimbursement and waiver 106,739
Reimbursement and waiver of expenses by adviser (104,194)
- ---------------------------------------------------------------------------
Net Expenses 2,545
- ---------------------------------------------------------------------------
NET INVESTMENT INCOME 3,788
- ---------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 11,191
Net unrealized appreciation on investments 105,684
- ---------------------------------------------------------------------------
Net Gain on Investments 116,875
- ---------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $120,663
===========================================================================
See notes to the financial statements.
GARZARELLI BALANCED FUND
- ---------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD MARCH 31, 1997 TO JULY 31, 1997 (UNAUDITED)
OPERATIONS:
Net investment income $3,788
Net realized gain on investments 11,191
Net unrealized appreciation on investments 105,684
- ---------------------------------------------------------------------------
Net increase in net assets resulting from operations 120,663
- ---------------------------------------------------------------------------
DIVIDENDS PAID FROM:
Net investment income (3,775)
- ---------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from 99,450 shares issued 1,081,100
Cost of 194 shares redeemed (2,174)
- ---------------------------------------------------------------------------
Net increase 1,078,926
- ---------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 1,195,814
NET ASSETS:
Beginning of period 100,000
- ---------------------------------------------------------------------------
End of period $1,295,814
===========================================================================
See notes to the financial statements.
THE GARZARELLI BALANCED FUND
- ---------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (UNAUDITED)
MARCH 31,1997<F1>
TO JULY 31,1997
----------------
Net Asset Value, Beginning of Period $10.00
Income from Investment Operations:
Net investment income 0.03
Net realized and unrealized gains
on securities 1.86
- ----------------------------------------------------------------------
Total from Investment Operations 1.89
Less Distributions:
Dividends from net investment income (0.03)
- ----------------------------------------------------------------------
Total Distributions (0.03)
- ----------------------------------------------------------------------
Net Asset Value, End of Period $11.86
======================================================================
Total Return<F2> 18.95%
Supplemental Data and Ratios:
Net assets, end of period $1,295,814
Ratio of net expenses to average net assets<F3><F4> 1.25%
Ratio of net investment income to average
net assets<F3><F4> 1.86%
Portfolio turnover rate 17.36%
Average commission rate paid on portfolio
investment transactions $0.1172
<F1> Commencement of operations.
<F2> Not annualized.
<F3> Annualized.
<F4> Net of reimbursements and waivers. Without reimbursements and waivers, the
ratio of net expenses to average net assets would have been 52.43%, and
the ratio of net investment income to average net assets would have been
(49.32)%.
See notes to the financial statements.
GARZARELLI BALANCED FUND
NOTES TO THE FINANCIAL STATEMENTS
JULY 31, 1997
(UNAUDITED)
(1) Organization
------------
The Garzarelli Funds (the "Trust") was organized in October 1, 1996 as a
Delaware Business Trust and is registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), as an open-end management investment
company issuing its shares in series, each series representing a distinct
portfolio with its own investment objectives and policies. The only series
presently authorized and operating is the Garzarelli Balanced Fund (the
"Fund").
(2) Significant Accounting Policies
-------------------------------
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles
("GAAP"). The presentation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates and
assumptions.
(a) Investment Valuation
Securities which are traded on a recognized stock exchange are valued
at the last sale price on the securities exchange on which such
securities are primarily traded. Securities traded on only over-the-
counter markets are valued on the basis of closing over-the-counter
trade prices. Securities for which there were no transactions are
valued at the closing bid prices. Debt securities (other then short-
term instruments) are valued at prices furnished by a pricing service.
Debt instruments maturing within 60 days are valued by the amortized
cost method. Any securities for which market quotations are not
readily available are valued at their fair value as determined in good
faith by Garzarelli Investment Management, LLC (the "Adviser")
pursuant to guidelines established by the Board of Trustees.
(b) Organization Costs
Costs incurred by the Fund in connection with its organization,
registration and the initial public offering of shares have been
deferred and will be amortized over the period of benefit, but not to
exceed five years from the date upon which the Fund commenced its
investment activities. If any of the original shares of the Fund
purchased by the initial shareholder are redeemed by any holder
thereof prior to the end of the amortization period, the redemption
proceeds will be reduced by the pro rata share of the unamortized
costs as of the date of redemption. The pro rata share by which the
proceeds are reduced will be derived by dividing the number of
original shares of the Fund being redeemed by the total number of
original shares outstanding at the time of redemption.
(c) Federal Income and Excise Taxes
No provision for federal income taxes has been made since the Fund has
complied to date with the provisions of the Internal Revenue Code
available to regulated investment companies and intends to continue to
so comply in future years.
(d) Distributions to Shareholders
Dividends from net investment income will be declared and paid
quarterly. Distributions of net realized gains, if any, will be
declared at least annually. Distributions to shareholders are recorded
on the ex-dividend date. The Fund may periodically make
reclassifications among certain of its capital accounts as a result of
the recognition and characterization of certain income and capital
gain distributions determined annually in accordance with federal tax
regulations which may differ from GAAP. As of July 31, 1997 there were
no such reclassifications.
(e) Securities Transactions and Investment Income
Investment transactions are accounted for on the trade date plus one.
The Fund determines the gain or loss realized from investment
transactions by comparing the original cost of the security lot sold
with the net sale proceeds. Dividend income is recognized on the ex-
dividend date and interest income is recognized on an accrual basis.
Acquisition and market discounts will be amortized over the life of
the security.
(3) Investment Transactions
-----------------------
The aggregate purchases and sales of securities, excluding short-term
investments and U.S. government obligations, for the Fund for the period
March 31, 1997 to July 31, 1997 are summarized below:
Purchases
U.S. Government $427,342
Other 781,939
Sales
Other 99,671
At July 31, 1997, gross unrealized appreciation and depreciation of
investments, based on cost for federal income tax purposes of $1,143,081
were as follows:
Appreciation $108,527
Depreciation (2,843)
-------
Net appreciation on investments $105,684
=======
(4) Investment Adviser
------------------
The Fund has an agreement with the Adviser, with whom certain officers and
Trustees of the Fund are affiliated, to furnish investment advisory
services to the Fund. Under the terms of this agreement, the Adviser is
compensated at 0.75% of average daily net assets of the Fund. The Adviser
has agreed to voluntarily reduce its fees for expenses (exclusive of
brokerage, interest, taxes and extraordinary expenses) that exceed the
annual expense limitation of 1.25% of average net assets for the Fund
during the first fiscal year end. In addition to waiving its fee the
Adviser has also agreed to reimburse the Fund for any expenses that exceed
1.25% of average net assets. During the period ended July 31, 1997, the
Adviser waived fees of $1,527 and reimbursed the Fund an additional
$102,667 for expenses that exceeded the expense limitation of 1.25%.
(5) Sub-Adviser
-----------
The Adviser has entered into an agreement with Affinity Investment
Advisors, Inc. (the "Sub-Adviser") to serve as the Fund's portfolio
manager, subject to the Adviser's supervision. Under the terms of the
agreement, the Sub-Adviser is compensated by the Adviser at 12% of the
Adviser's fees, net of any fees waived by the Adviser.
(6) Service and Distribution Plan
-----------------------------
The Trust has entered into a distribution agreement with Sunstone
Distribution Services, LLC (the "Distributor"), an affiliate of Sunstone
Financial Group, Inc. (the "Administrator") and Sunstone Investor Services,
LLC (the "Transfer Agent"). Pursuant to Rule 12b-1 under the 1940 Act, the
Trust has adopted a Service and Distribution Plan (the "Plan"). Under the
Plan, the Fund is authorized to pay expenses incurred for the purpose of
financing activities, including the employment of other dealers, intended
to result in the sale of shares of the Fund at an annual rate of up to
0.25% of the Fund's average daily net assets. As of July 31, 1997, there
have not been any payments made under the Plan.
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
---------------------------------
A. FINANCIAL STATEMENTS:
(i) Financial statements included in Part A of the Registration
Statement:
Financial Highlights
(ii) The following financial statement has been audited and is
included in Part B:
Report of Independent Accountants
Statement of Assets & Liabilities as of March 12, 1997
Notes to Financial Statements
The following unaudited financial statements for the fund
are included in Part B:
Schedule of Investments for the period ended July 31, 1997
Statement of Assets and Liabilities for the period ended
July 31, 1997
Statement of Operations for the period ended July 31, 1997
Statement of Changes in Net Assets for the period ended
July 31, 1997
Financial Highlights for the period ended July 31, 1997
Notes to Financial Statements
B. EXHIBITS
1.1 Registrant's Agreement and Declaration of Trust
1.2 Written Instrument Abolishing The Garzarelli Affinity Equity Fund
Series
2. Registrant's By-Laws
3. None
4. None
5.1 Investment Advisory Agreement - Garzarelli Balanced Fund
5.2 Sub-Advisory Agreement - Garzarelli Balanced Fund
6. Distribution Agreement by and between Registrant and Sunstone
Distribution Services, LLC
7. None
8. Custody Agreement by and between Registrant and UMB Bank, n.a.
9.1 Administration and Fund Accounting Agreement by and between
Registrant and Sunstone Financial Group, Inc.
9.2 Transfer Agency Agreement by and between Registrant and Sunstone
Investor Services, LLC
10. Legal Opinion of Vedder, Price, Kaufman & Kammholz
11. Consent of Independent Auditors
12. None
13. Subscription Agreement
14. Form of Individual Retirement Custodial Account Agreement and
Disclosure Statement
15. Registrant's Service and Distribution Plan pursuant to Rule 12b-1
under the Investment Company Act of 1940
16. Computation of Performance Figures
17. Financial Data Schedule
18. None
19. Limited Power of Attorney
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
-------------------------------------------------------------
Registrant neither controls any person nor is under common control with
any other person.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
-------------------------------
Number of Record
Title of Class Holders as of September 1, 1997
-------------- -------------------------------
Garzarelli Balanced Fund 123
ITEM 27. INDEMNIFICATION.
---------------
Article V of Registrant's Declaration of Trust (Exhibit 1 hereto, which is
incorporated by reference) provides in effect that the Registrant will indemnify
its officers and trustees under certain circumstances. However, in accordance
with Section 17(h) and 17(i) of the Investment Company Act of 1940 and its own
terms, said Article of the Declaration of Trust does not protect any person
against liability to the Registrant or its shareholders to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to trustees, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a trustee, officer, or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of 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.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
-----------------------------------------------------
Garzarelli Investment Management, LLC, Registrant's investment adviser, provides
investment advisory services for individual and institutional investors. Set
forth below is additional biographical information and a description of any
company with which the officers and directors of Garzarelli Investment
Management, LLC have been engaged at any time since June 1, 1994 in the capacity
of director, officer, employee, partner or trustee: H. Steel Bokhof, Jr. is the
President of Garzarelli Investment Management LLC and has acted as such since
its incorporation in July 1995. Mr. Bokhof has also been general partner in the
investment advisory firm of Graver, Bokhof, Goodwin and Sullivan, LP.
ITEM 29. PRINCIPAL UNDERWRITERS
----------------------
(a) Sunstone Distribution Services, LLC currently serves as distributor of
the shares of The Northern Funds, The Haven Capital Management Trust,
and First Omaha Funds, Inc.
(b) To the best of Registrant's knowledge, the executive officers of
Sunstone Distribution Services, LLC, distributor for Registrant, are
as follows:
POSITIONS AND OFFICES
NAME AND PRINCIPAL WITH SUNSTONE DISTRIBUTION POSITIONS AND OFFICES
BUSINESS ADDRESS SERVICES, LLC. WITH REGISTRANT
- ------------------ -------------------------- ---------------------
Miriam M. Allison President and Director None
207 E. Buffalo Street
Suite 400
Milwaukee, WI 53202
Daniel S. Allison Secretary and Director None
207 E. Buffalo Street
Suite 400
Milwaukee, WI 53202
Mary M. Tenwinkel Vice President None
207 E. Buffalo Street
Suite 400
Milwaukee, WI 53202
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
--------------------------------
All accounts, books or other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the rules promulgated thereunder
are in the possession of the Registrant, at Registrant's corporate offices,
except (1) records held and maintained by UMB Bank, n.a. relating to its
functions as custodian; (2) records held and maintained by Sunstone Financial
Group, Inc., 207 East Buffalo Street, Suite 400, Milwaukee, Wisconsin, 53202,
relating to its functions as administrator and fund accountant; records held and
maintained by Sunstone Investor Services, LLC., 207 East Buffalo Street, Suite
315, Milwaukee, Wisconsin, 53202, relating to its function as transfer agent,
and records held and maintained by Sunstone Distribution Services, LLC., 207
East Buffalo Street, Suite 400, Milwaukee, Wisconsin, 53202, relating to its
function as distributor.
ITEM 31. MANAGEMENT SERVICES.
-------------------
All management-related service contracts entered into by Registrant are
discussed in Parts A and B of this Registration Statement.
ITEM 32. UNDERTAKINGS.
------------
(a) Not applicable.
(b) Not applicable.
(c) The Registrant undertakes to furnish each person to whom a prospectus
is delivered a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and that it has duly caused this
Registration Statement on Form N-1A to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago, State of
Illinois, on the 19th day of September, 1997.
THE GARZARELLI FUNDS
(Registrant)
By: /s/ H. Steel Bokhof, Jr.
-----------------------
H. Steel Bokhof, Jr.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement on Form N-1A has been signed below by the following person in the
capacities and on the date indicated.
Name Title Date
- ---- ----- ----
/s/ H. Steel Bokhof, Jr. President; Trustee September 19, 1997
- ---------------------- (principal executive
H. Steel Bokhof, Jr. officer)
/s/ Andrew J. Goodwin, III Secretary and Treasurer September , 1997
- -------------------------- (principal financial --
Andrew J. Goodwin, III officer; principal
accounting officer)
/s/Elaine M. Garzarelli* Trustee (Chairperson of September 19, 1997
- --------------------- the Board)
Elaine M. Garzarelli
/s/Margaret E. Leak* Trustee September 19, 1997
- -----------------
Margaret E. Leak
/s/Idelle A. Howitt* Trustee September 19, 1997
- -----------------
Idelle A. Howitt
/s/Pamela J. Maraldo* Trustee September 19, 1997
- ------------------
Pamela J. Maraldo
*By: /s/H. Steel Bokhof, Jr.
----------------------
H. Steel Bokhof, Jr., Attorney in fact,
pursuant to the Limited Power of Attorney filed as an exhibit hereto
EXHIBIT INDEX
1.1 Registrant's Agreement and Declaration of Trust
1.2 Written Instrument Abolishing The Garzarelli Affinity Equity Fund
Series
2. Registrant's By-Laws
3. None
4. None
5.1 Investment Advisory Agreement - Garzarelli Balanced Fund
5.2 Sub-Advisory Agreement - Garzarelli Balanced Fund
6. Distribution Agreement by and between Registrant and Sunstone
Distribution Services, LLC
7. None
8. Custody Agreement by and between Registrant and UMB Bank, n.a.
9.1 Administration and Fund Accounting Agreement by and between
Registrant and Sunstone Financial Group, Inc.
9.2 Transfer Agency Agreement by and between Registrant and Sunstone
Investor Services, LLC
10. Legal Opinion of Vedder, Price, Kaufman & Kammholz
11. Consent of Independent Auditors
12. None
13. Subscription Agreement
14. Form of Individual Retirement Custodial Account Agreement and
Disclosure Statement
15. Registrant's Service and Distribution Plan pursuant to Rule 12b-1
under the Investment Company Act of 1940
16. Computation of Performance Figures
17. Financial Data Schedule
18. None
19. Limited Power of Attorney
DECLARATION OF TRUST
OF
THE GARZARELLI FUNDS
A Delaware Business Trust
October 1, 1996
DECLARATION OF TRUST OF
THE GARZARELLI FUNDS
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
The Trust ........................................................... 1
1.1 Name........................................................ 1
1.2 Trust Purpose............................................... 1
1.3 Definitions................................................. 2
ARTICLE II
Trustees ............................................................ 3
2.1 Number and Qualification.................................... 3
2.2 Term and Election........................................... 4
2.3 Resignation and Removal...................................... 4
2.4 Vacancies................................................... 4
2.5 Meetings.................................................... 5
2.6 Officers; Chairperson of the Board.......................... 6
2.7 By-Laws..................................................... 6
ARTICLE III
Powers of Trustees................................................... 6
3.1 General..................................................... 6
3.2 Investments................................................. 6
3.3 Legal Title................................................. 7
3.4 Sale of Interests........................................... 7
3.5 Borrow Money................................................ 7
3.6 Delegation; Committee....................................... 8
3.7 Collection and Payment...................................... 8
3.8 Expenses.................................................... 8
3.9 Miscellaneous Powers........................................ 8
3.10 Further Powers.............................................. 9
ARTICLE IV
Investment Advisory, Administrative, and Placement Agent Services.... 9
4.1 Investment Advisory and Other Services...................... 9
4.2 Parties to Contract......................................... 9
ARTICLE V
Limitations of Liability............................................. 10
5.1 No Personal Liability of Trustees, Officers,
Employees or Agents...................................... 10
5.2 Indemnification of Trustees, Officers,
Employees and Agents..................................... 10
5.3 Liability of Holders; Indemnification....................... 11
5.4 No Bond Required of Trustees................................ 11
5.5 No Duty of Investigation; Notice in Trust Instruments, Etc.. 11
5.6 Reliance on Experts, Etc.................................... 12
5.7 Assent to Declaration....................................... 12
ARTICLE VI
Interests in the Trust............................................... 12
6.1 General Characteristics..................................... 12
6.2 Establishment of Series of Interests........................ 13
6.3 Establishment of Classes.................................... 13
6.4 Assets of Series............................................ 14
6.5 Liabilities of Series....................................... 14
6.6 Dividends and Distributions................................. 15
6.7 Voting Rights............................................... 15
6.8 Record Dates................................................ 16
6.9 Transfer.................................................... 16
6.10 Equality.................................................... 16
6.11 Fractions................................................... 16
6.12 Class Differences........................................... 16
6.13 Conversion of Interests..................................... 16
6.14 Investments in the Trust.................................... 17
6.15 Trustees and Officers as Holders............................ 17
6.16 No Preemptive Rights; Derivative Suits...................... 17
6.17 No Appraisal Rights......................................... 17
6.18 Status of Interests and Limitation of Personal Liability.... 17
ARTICLE VII
Purchases and Redemptions............................................ 18
7.1 Purchases................................................... 18
7.2 Redemption by Holder........................................ 18
7.3 Redemption by Trust......................................... 18
7.4 Net Asset Value............................................. 18
ARTICLE VIII
Holders . 19
8.1 Rights of Holders........................................... 19
8.2 Register of Interests....................................... 19
8.3 Notices..................................................... 20
8.4 Meetings of Holders......................................... 20
8.5 Notice of Meetings.......................................... 20
8.6 Record Date................................................. 20
8.7 Proxies, Etc................................................ 21
8.8 Reports..................................................... 21
8.9 Inspection of Records....................................... 21
8.10 Voting Powers............................................... 21
8.11 Holder Action by Written Consent............................ 22
8.12 Holder Communications....................................... 22
ARTICLE IX
Duration; Termination of Trust; Amendment; Mergers; Etc.............. 23
9.1 Duration.................................................... 23
9.2 Termination of Trust........................................ 23
9.3 Amendment Procedure......................................... 24
9.4 Merger, Consolidation and Sale of Assets.................... 24
9.5 Incorporation............................................... 25
ARTICLE X
Miscellaneous........................................................ 25
10.1 Certificate of Designation; Agent for Service of Process..... 25
10.2 Governing Law................................................ 25
10.3 Counterparts................................................. 26
10.4 Reliance by Third Parties.................................... 26
10.5 Provisions in Conflict With Law or Regulations............... 26
10.6 Trust Only................................................... 26
10.7 Withholding.................................................. 27
10.8 Headings and Construction.................................... 27
DECLARATION OF TRUST
OF
THE GARZARELLI FUNDS
This DECLARATION OF TRUST OF THE GARZARELLI FUNDS is made on the 1st
day of October, 1996 by the party signatory hereto, as Trustee.
WHEREAS, the Trustee desires to form a business trust under the law of
Delaware for the investment and reinvestment of its assets; and
WHEREAS, it is proposed that the Trust assets be composed of cash,
securities and other assets contributed to the Trust by the Holders of Interests
in the Trust entitled to ownership rights in the Trust;
NOW, THEREFORE, the Trustee hereby declares that the Trustees will
hold in trust all cash, securities and other assets which they may from time to
time acquire in any manner as Trustees hereunder, and manage and dispose of the
same for the benefit of the Holders of Interests in the Trust, and subject to
the following terms and conditions.
ARTICLE I
The Trust
---------
1.1 NAME. The name of the Trust created hereby (the "Trust") shall
be "THE GARZARELLI FUNDS," and so far as may be practicable the Trustees shall
conduct the Trust's activities, execute all documents and sue or be sued under
that name, which name (and the word "Trust" wherever hereinafter used) shall not
refer to the Trustees in their individual capacities or to the officers, agents,
employees or Holders of Interest in the Trust. However, should the Trustees
determine that the use of the name of the Trust is not advisable, they may
select such other name for the Trust as they deem proper and the Trust may hold
its property and conduct its activities under such other name. Any name change
shall become effective upon the execution by a majority of the then Trustees of
an instrument setting forth the new name and the filing of a certificate of
amendment pursuant to Section 3810(b) of the DBTA. Any such instrument shall
not require the approval of the Holders of Interests in the Trust, but shall
have the status of an amendment to this Declaration.
1.2 TRUST PURPOSE. The purpose of the Trust is to conduct,
operate and carry on the business of an open-end management investment company
registered under the 1940 Act. In furtherance of the foregoing, it shall be the
purpose of the Trust to do everything necessary, suitable, convenient or proper
for the conduct, promotion and attainment of any businesses and purposes which
at any time may be incidental or may appear conducive or expedient for the
accomplishment of the business of an open-end management investment company
registered under the 1940 Act and which may be engaged in or carried on by a
trust organized under the DBTA, and in connection therewith, the Trust shall
have and may exercise all of the powers conferred by the laws of the State of
Delaware upon a Delaware business trust.
1.3 DEFINITIONS. As used in this Declaration, the following terms
shall have the following meanings:
(a) "1940 Act" shall mean the Investment Company Act of 1940, as
amended from time to time, and the rules and regulations thereunder, as adopted
or amended from time to time.
(b) "Affiliated Person," "Assignment" and "Interested Person"
shall have the meanings given such terms in the 1940 Act.
(c) "Administrator" shall mean any party furnishing services to
the Trust pursuant to any administrative services contract described in Section
4.1.
(d) "By-Laws" shall mean the By-Laws of the Trust as amended
from time to time.
(e) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the rules and regulations thereunder, as adopted
or amended from time to time.
(f) "Commission" shall mean the Securities and Exchange
Commission.
(g) "Declaration" shall mean this Declaration of Trust, as
amended from time to time. References in this Declaration to "Declaration,"
"hereof," "herein" and "hereunder" shall be deemed to refer to the Declaration
rather than the article or section in which such words appear. This Declaration
shall, together with the By-Laws, constitute the governing instrument of the
Trust under the DBTA.
(h) "DBTA" shall mean the Delaware Business Trust Act, Delaware
Code Annotated Title 12, Sections 3801, et seq., as amended from time to time.
(i) "Fiscal Year" shall mean an annual period as determined by
the Trustees unless otherwise provided by the Code or applicable regulations.
(j) "Holders" shall mean as of any particular time any or all
holders of record of Interests in the Trust or in Trust Property, as the case
may be, at such time.
(k) "Interest" shall mean a Holder's units of interest into
which the beneficial interest in the Trust and each series and class of the
Trust shall be divided from time to time.
(l) "Investment Adviser" shall mean any party furnishing
services to the Trust pursuant to any investment advisory contract described in
Section 4.1 hereof.
(m) "Majority Interests Vote" shall mean the vote, at a meeting
of the Holders of Interests, of the lesser of (i) 67% or more of the Interests
present or represented at such meeting, provided the Holders of more than 50% of
the Interests are present or represented by proxy or (ii) more than 50% of the
Interests.
(n) "Person" shall mean and include an individual, corporation,
partnership, trust, association, joint venture and other entity, whether or not
a legal entity, and a government and agencies and political subdivisions
thereof.
(o) "Registration Statement" as of any particular time shall
mean the Registration Statement of the Trust which is effective at such time
under the 1940 Act.
(p) "Trust Property" shall mean as of any particular time any
and all property, real or personal, tangible or intangible, which at such time
is owned or held by or for the account of the Trust or the Trustees or any
series of the Trust established in accordance with Section 6.2.
(q) "Trustees" shall mean such persons who are indemnified as
trustees of the Trust on the signature page of this Declaration, so long as they
shall continue in office in accordance with the terms of this Declaration of
Trust, and all other persons who at the time in question have been duly elected
or appointed as trustees in accordance with the provisions of this Declaration
of Trust and are then in office, in their capacity as trustees hereunder.
ARTICLE II
Trustees
--------
2.1 NUMBER AND QUALIFICATION. The number of Trustees shall initially
be one and shall thereafter be fixed from time to time by written instrument
signed by a majority of the Trustees so fixed, then in office, provided,
however, that the number of Trustees shall in no event be less than one. A
Trustee shall be an individual at least 21 years of age who is not under a legal
disability.
(a) Any vacancy created by an increase in Trustees shall be
filled by the appointment or election of an individual having the qualifications
described in this Article as provided in Section 2.4. Any such appointment
shall not become effective, however, until the individual appointed or elected
shall have accepted in writing such appointment or election and agreed in
writing to be bound by the terms of the Declaration. No reduction in the number
of Trustees shall have the effect of removing any Trustee from office.
(b) Whenever a vacancy in the number of Trustees shall occur,
until such vacancy is filled as provided in Section 2.4 hereof, the Trustees in
office, regardless of their number, shall have all the powers granted to the
Trustees and shall discharge all the duties imposed upon the Trustees by this
Declaration.
2.2 TERM AND ELECTION. Each Trustee named herein, or elected or
appointed prior to the first meeting of the Holders, shall (except in the event
of resignations or removals or vacancies pursuant to Section 2.3 or 2.4 hereof)
hold office until his or her successor has been elected at such meeting and has
qualified to serve as Trustee. Beginning with the Trustees elected at the first
meeting of Holders, each Trustee shall hold office during the lifetime of this
Trust and until its termination as hereinafter provided unless such Trustee
resigns or is removed as provided in Section 2.3 below or his term expires
pursuant to Section 2.4 hereof.
2.3 RESIGNATION AND REMOVAL. Any Trustee may resign (without need
for prior or subsequent accounting) by an instrument in writing signed by him or
her and delivered or mailed to the Chairperson, if any, the President or the
Secretary and such resignation shall be effective upon such delivery, or at a
later date according to the terms of the instrument.
(a) Any of the Trustees may be removed with or without cause by
the affirmative vote of the Holders of two-thirds (2/3) of the Interests or
(provided the aggregate number of Trustees, after such removal and after giving
effect to any appointment made to fill the vacancy created by such removal,
shall not be less than the number required by Section 2.1 hereof) with cause, by
the action of two-thirds (2/3) of the remaining Trustees, or without cause, by
the action of eighty percent (80%) of the remaining Trustees. Removal with
cause shall include, but not be limited to, the removal of a Trustee due to
physical or mental incapacity.
(b) Upon the resignation or removal of a Trustee, or his or her
otherwise ceasing to be a Trustee, he or she shall execute and deliver such
documents as the remaining Trustees shall require for the purpose of conveying
to the Trust or the remaining Trustees any Trust Property held in the name of
the resigning or removed Trustee. Upon the death of any Trustee or upon removal
or resignation due to any Trustee's incapacity to serve as trustee, his or her
legal representative shall execute and deliver on his or her behalf such
documents as the remaining Trustees shall require as provided in the preceding
sentence.
2.4 VACANCIES. The term of office of a Trustee shall terminate and a
vacancy shall occur in the event of the earliest to occur of the following: the
Trustee's attainment of age 72, the Trustee's death, resignation, adjudicated
incompetence or other incapacity to perform the duties of the office, or the
removal of the Trustee. A vacancy shall also occur in the event of an increase
in the number of Trustees as provided in Section 2.1. No such vacancy shall
operate to annul this Declaration or to revoke any existing trust created
pursuant to the terms of this Declaration. In the case of a vacancy, the
Holders of a plurality of the Interests entitled to vote, acting at any meeting
of the Holders held in accordance with Article VIII hereof, or, to the extent
permitted by the 1940 Act, a majority vote of the Trustees continuing in office
acting by written instrument or instruments, may fill such vacancy, and any
Trustee so elected by the Trustees or the Holders shall hold office as provided
in this Declaration. There shall be no cumulative voting by the Holders in the
election of Trustees.
2.5 MEETINGS. Meetings of the Trustees shall be held from time to
time within or without the State of Delaware upon the call of the Chairperson,
if any, the President, the Chief Operating Officer, the Secretary, an Assistant
Secretary or any two Trustees.
(a) Regular meetings of the Trustees may be held without call or
notice at a time and place fixed by the By-Laws or by resolution of the
Trustees. Notice of any other meeting shall be given not later than 72 hours
preceding the meeting by United States mail or by electronic transmission to
each Trustee at his or her business address as set forth in the records of the
Trust or otherwise given personally not less than 24 hours before the meeting
but may be waived in writing by any Trustee either before or after such meeting.
The attendance of a Trustee at a meeting shall constitute a waiver of notice of
such meeting except where a Trustee attends a meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting has
not been lawfully called or convened.
(b) A quorum for all meetings of the Trustees shall be one-third
of the total number of Trustees, but (except at such time as there is only one
Trustee) no less than two Trustees. Unless provided otherwise in this
Declaration, any action of the Trustees may be taken at a meeting by vote of a
majority of the Trustees present (a quorum being present) or without a meeting
by written consent of a majority of the Trustees, which written consent shall be
filed with the minutes of proceedings of the Trustees or any such committee. If
there be less than a quorum present at any meeting of the Trustees, a majority
of those present may adjourn the meeting until a quorum shall have been
obtained.
(c) Any committee of the Trustees, including an executive
committee, if any, may act with or without a meeting. A quorum for all meetings
of any such committee shall be two or more of the members thereof, unless the
Board shall provide otherwise. Unless provided otherwise in this Declaration,
any action of any such committee may be taken at a meeting by vote of a majority
of the members present (a quorum being present) or without a meeting by written
consent of a majority of the members, which written consent shall be filed with
the minutes of proceedings of the Trustees or any such committee.
(d) With respect to actions of the Trustees and any committee of
the Trustees, Trustees who are Interested Persons of the Trust or are otherwise
interested in any action to be taken may be counted for quorum purposes under
this Section 2.5 and shall be entitled to vote to the extent permitted by the
1940 Act.
(e) All or any one or more Trustees may participate in a meeting
of the Trustees or any committee thereof by means of a conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant to such
communications system shall constitute presence in person at such meeting,
unless the 1940 Act specifically requires the Trustees to act "in person," in
which case such term shall be construed consistent with Commission or staff
releases or interpretations.
2.6 OFFICERS; CHAIRPERSON OF THE BOARD. The Trustees shall, from
time to time, elect officers of the Trust, including a President, a Secretary
and a Treasurer. The Trustees shall elect or appoint, from time to time, a
Trustee to act as Chairperson of the Board who shall preside at all meetings of
the Trustees and carry out such other duties as the Trustees shall designate.
The Trustees may elect or appoint or authorize the President to appoint such
other officers or agents with such powers as the Trustees may deem to be
advisable. The President, Secretary and Treasurer may, but need not, be a
Trustee. The Chairperson of the Board and such officers of the Trust shall
serve in such capacity for such time and with such authority as the Trustees
may, in their discretion, so designate or as provided for in the By-Laws.
2.7 BY-LAWS. The Trustees may adopt and, from time to time, amend or
repeal the By-Laws for the conduct of the business of the Trust not inconsistent
with this Declaration, and such By-Laws are hereby incorporated in this
Declaration by reference thereto.
ARTICLE III
Powers of Trustees
------------------
3.1 GENERAL. The Trustees shall have exclusive and absolute control
over management of the business and affairs of the Trust, but with such powers
of delegation as may be permitted by this Declaration and the DBTA. The
Trustees may perform such acts as in their sole discretion are proper for
conducting the business and affairs of the Trust. The enumeration of any
specific power herein shall not be construed as limiting the aforesaid power.
Such powers of the Trustee may be exercised without order of, or recourse to,
any court.
3.2 INVESTMENTS. The Trustees shall have power to:
(a) conduct, operate and carry on the business of an investment
company; and
(b) subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, assign, transfer, exchange, distribute or otherwise
deal in or dispose of United States and foreign currencies and related
instruments including forward contracts, and securities, including common and
preferred stock, warrants, bonds, debentures, time notes and all other evidences
of indebtedness, negotiable or non-negotiable instruments, obligations,
certificates of deposit or indebtedness, commercial paper, repurchase
agreements, reverse repurchase agreements, convertible securities, forward
contracts, options, futures contracts, and other securities, including, without
limitation, those issued, guaranteed or sponsored by any state, territory or
possession of the United States and the District of Columbia and their political
subdivisions, agencies and instrumentalities, or by the United States
Government, any foreign government, or any agency, instrumentality or political
subdivision of the United States Government or any foreign government, or
international instrumentalities, or by any bank, savings institution,
corporation or other business entity organized under the laws of the United
States or under foreign laws; and to exercise any and all rights, powers and
privileges of ownership or interest in respect of any and all such investments
of every kind and description, including, without limitation, the right to
consent and otherwise act with respect thereto, with power to designate one or
more persons, firms, associations, or corporations to exercise any of said
rights, powers and privileges in respect of any of said instruments; and the
Trustees shall be deemed to have the foregoing powers with respect to any
additional securities in which the Trustees may determine to invest.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.
3.3 LEGAL TITLE. Legal title to all the Trust Property shall be
vested in the Trust as a separate legal entity under the DBTA, except that the
Trustees shall have the power to cause legal title to any Trust Property to be
held by or in the name of one or more of the Trustees or in the name of any
other Person on behalf of the Trust on such terms as the Trustees may determine.
In the event that title to any part of the Trust Property is vested in
one or more Trustees, the right, title and interest of the Trustees in the Trust
Property shall vest automatically in each person who may hereafter become a
Trustee upon his or her due election and qualification. Upon the resignation,
removal or death of a Trustee he or she shall automatically cease to have any
right, title or interest in any of the Trust Property, and the right, title and
interest of such Trustee in the Trust Property shall vest automatically in the
remaining Trustees. To the extent permitted by law, such vesting and cessation
of title shall be effective whether or not conveyancing documents have been
executed and delivered.
3.4 SALE OF INTERESTS. Subject to the more detailed provisions set
forth in Article VII, the Trustees shall have the power to permit persons to
purchase Interests and to add or reduce, in whole or in part, their Interest in
the Trust.
3.5 BORROW MONEY. The Trustees shall have power to borrow money or
otherwise obtain credit and to secure the same by mortgaging, pledging or
otherwise subjecting as security the assets of the Trust, including the lending
of portfolio securities, and to endorse, guarantee or undertake the performance
of any obligation, contract or engagement of any other person, firm, association
or corporation.
3.6 DELEGATION; COMMITTEE. The Trustees shall have the power,
consistent with their continuing exclusive authority over the management of the
Trust and the Trust Property, to delegate from time to time to such of their
number or to officers, employees or agents of the Trust the doing of such things
and the execution of such instruments, either in the name of the Trust or the
names of the Trustees or otherwise, as the Trustees may deem expedient.
3.7 COLLECTION AND PAYMENT. The Trustees shall have the power to
collect all property due to the Trust; to pay all claims, including taxes,
against the Trust Property; to prosecute, defend, compromise or abandon any
claims relating to the Trust Property; to foreclose any security interest
securing any obligations, by virtue of which any property is owed to the Trust;
and to enter into releases, agreements and other instruments.
3.8 EXPENSES. The Trustees shall have the power to incur and pay
any expenses which in the opinion of the Trustees are necessary or incidental to
carry out any of the purposes of this Declaration, and to pay reasonable
compensation from the funds of the Trust to themselves as Trustees. The
Trustees shall fix the compensation of all officers, employees and Trustees. The
Trustees may pay themselves such compensation for special services, including
legal and brokerage services, as they in good faith may deem reasonable (subject
to any limitations in the 1940 Act), and reimbursement for expenses reasonably
incurred by themselves on behalf of the Trust. There shall be no retirement
compensation plan for the Trustees; provided, however, that the Trustees may
adopt a deferred compensation plan consistent with industry and regulatory
standards.
3.9 MISCELLANEOUS POWERS. The Trustees shall have the power to: (a)
employ or contract with such Persons as the Trustees may deem desirable for the
transaction of the business of the Trust and terminate such employees or
contractual relationships as they consider appropriate; (b) enter into joint
ventures, partnerships and any other combinations or associations; (c) purchase,
and pay for out of Trust Property, insurance policies (including, but not
limited to, fidelity bonding and errors and omission policies) insuring the
Investment Adviser, Administrator, distributor, Holders, Trustees, officers,
employees, agents, or independent contractors of the Trust against all claims
arising by reason of holding any such position or by reason of any action taken
or omitted by any such Person in such capacity, whether or not the Trust would
have the power to indemnify such Person against liability; (d) establish
pension, profit-sharing and other retirement, incentive and benefit plans for
any officers, employees and agents of the Trust; (e) to the extent permitted by
law, indemnify any Person with whom the Trust has dealings, including the
Investment Adviser, Administrator, distributor, Holders, Trustees, officers,
employees, agents or independent contractors of the Trust, to such extent as the
Trustees shall determine; (f) guarantee indebtedness or contractual obligations
of others; (g) determine and change the Fiscal Year of the Trust and the method
by which its accounts shall be kept; and (h) adopt a seal for the Trust, but the
absence of such seal shall not impair the validity of any instrument executed on
behalf of the Trust.
3.10 FURTHER POWERS. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices, whether within or without the State of Delaware, in any
and all states of the United States of America, in the District of Columbia, in
any foreign countries, and in any and all commonwealths, territories,
dependencies, colonies, possessions, agencies or instrumentalities of the United
States of America and of foreign countries, and to do all such other things and
execute all such instruments as they deem necessary, proper or desirable in
order to promote the interests of the Trust although such things are not herein
specifically mentioned. Any determination as to what is in the interests of the
Trust made by the Trustees in good faith shall be conclusive and shall be
binding upon the Trust and the Holders, past, present and future. In construing
the provisions of this Declaration, the presumption shall be in favor of a grant
of power to the Trustees. The Trustees shall not be required to obtain any
court order to deal with Trust Property.
ARTICLE IV
Investment Advisory, Administrative,
and Placement Agent Services
------------------------------------
4.1 INVESTMENT ADVISORY AND OTHER SERVICES. The Trustees may in their
discretion, from time to time, enter into contracts or agreements for investment
advisory services, administrative services (including transfer and dividend
disbursing agency services), distribution services, fiduciary (including
custodian) services, placement agent services, Holder servicing and distribution
services, or other services, whereby the other party to such contract or
agreement shall undertake to furnish the Trustees such services as the Trustees
shall, from time to time, consider desirable and all upon such terms and
conditions as the Trustees may in their discretion determine. Notwithstanding
any other provisions of this Declaration to the contrary, the Trustees may
authorize any Investment Adviser (subject to such general or specific
instructions as the Trustees may, from time to time, adopt) to effect purchases,
sales, loans or exchanges of Trust Property on behalf of the Trustees or may
authorize any officer, employee or Trustee to effect such purchases, sales,
loans or exchanges pursuant to recommendations of any such Investment Adviser
(all without further action by the Trustees). Any such purchases, sales, loans
or exchanges shall be binding upon the Trust.
4.2 PARTIES TO CONTRACT. Any contract or agreement of the character
described in Section 4.1 of this Article IV or in the By-Laws of the Trust may
be entered into with any Person, although one or more of the Trustees or
officers of the Trust or any Holder may be an officer, director, trustee,
shareholder, or member of such other party to the contract or agreement, and no
such contract or agreement shall be invalidated or rendered voidable by reason
of the existence of any such relationship, nor shall any person holding such
relationship be liable merely by reason of such relationship for any loss or
expense to the Trust under or by reason of such contract or agreement or held
accountable for any profit realized directly or indirectly therefrom, provided
that the contract or agreement when entered into was reasonable and fair and not
inconsistent with the provisions of this Article IV or the By-Laws. Any Trustee
or officer of the Trust or any Holder may be the other party to contracts or
agreements entered into pursuant to Section 4.1 hereof or the By-Laws of the
Trust, and any Trustee or officer of the Trust or any Holder may be financially
interested or otherwise affiliated with Persons who are parties to any or all of
the contracts or agreements mentioned in this Section 4.2.
ARTICLE V
Limitations of Liability
------------------------
5.1 NO PERSONAL LIABILITY OF TRUSTEES, OFFICERS, EMPLOYEES OR AGENTS.
No Trustee, officer, employee or agent of the Trust when acting in such capacity
shall be subject to any personal liability whatsoever, in his or her individual
capacity, to any Person, other than the Trust or its Holders, in connection with
Trust Property or the affairs of the Trust; and all such Persons shall look
solely to the Trust Property for satisfaction of claims of any nature against a
Trustee, officer, employee or agent of the Trust arising in connection with the
affairs of the Trust. No Trustee, officer, employee or agent of the Trust shall
be liable to the Trust, Holders of Interests therein, or to any Trustee,
officer, employee, or agent thereof for any action or failure to act (including,
without limitation, the failure to compel in any way any former or acting
Trustee to redress any breach of trust), except for his or her own bad faith,
willful misfeasance, gross negligence or reckless disregard of his or her
duties.
5.2 INDEMNIFICATION OF TRUSTEES, OFFICERS, EMPLOYEES AND AGENTS. The
Trust shall indemnify each of its Trustees, officers, employees, and agents
(including Persons who serve at its request as directors, officers or trustees
of another organization in which it has any interest, as a shareholder, creditor
or otherwise) against all liabilities and expenses (including amounts paid in
satisfaction of judgments, in compromise, as fines and penalties, and as counsel
fees) reasonably incurred by him or her in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
in which he or she may be involved or with which he or she may be threatened,
while in office or thereafter, by reason of his or her being or having been such
a Trustee, officer, employee or agent, except with respect to any matter as to
which he or she shall have been adjudicated to have acted in bad faith, willful
misfeasance, gross negligence or reckless disregard of his or her duties;
provided, however, that as to any matter disposed of by a compromise payment by
such Person, pursuant to a consent decree or otherwise, no indemnification
either for said payment or for any other expenses shall be provided unless there
has been a determination that such Person did not engage in willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office by the court or other body approving the settlement
or other disposition or by a reasonable determination, based upon review of
readily available facts (as opposed to a full trial-type inquiry), that he or
she did not engage in such conduct or by a reasonable determination, based upon
a review of the facts, that such Person was not liable by reason of such
conduct, by (a) the vote of a majority of a quorum of Trustees who are neither
"interested persons" of the Trust as defined in Section 2(a)(19) of the 1940 Act
nor parties to the proceeding, or (b) a written opinion from independent legal
counsel approved by the Trustees. The rights accruing to any Person under these
provisions shall not exclude any other right to which he or she may be lawfully
entitled; provided that no Person may satisfy any right of indemnity or
reimbursement granted herein or in Section 5.1 or to which he or she may be
otherwise entitled except out of the Trust Property. The Trustees may make
advance payments in connection with indemnification under this Section 5.2,
provided that the indemnified Person shall have given a written undertaking to
reimburse the Trust in the event it is subsequently determined that he or she is
not entitled to such indemnification.
5.3 LIABILITY OF HOLDERS; INDEMNIFICATION. The Trust shall indemnify
and hold each Holder harmless from and against any claim or liability to which
such Holder may become subject solely by reason of his or her being or having
been a Holder and not because of such Holder's acts or omissions or for some
other reason, and shall reimburse such Holder for all legal and other expenses
reasonably incurred by him or her in connection with any such claim or liability
(upon proper and timely request by the Holder); provided, however, that no
Holder shall be entitled to indemnification by any series established in
accordance with Section 8.8 unless such Holder is a Holder of Interests of such
series. The rights accruing to a Holder under this Section 5.3 shall not
exclude any other right to which such Holder may be lawfully entitled, nor shall
anything herein contained restrict the right of the Trust to indemnify or
reimburse a Holder in any appropriate situation even though not specifically
provided herein.
5.4 NO BOND REQUIRED OF TRUSTEES. No Trustee shall, as such, be
obligated to give any bond or surety or other security for the performance of
any of his or her duties hereunder.
5.5 NO DUTY OF INVESTIGATION; NOTICE IN TRUST INSTRUMENTS, ETC. No
purchaser, lender, or other Person dealing with the Trustees or any officer,
employee or agent of the Trust shall be bound to make any inquiry concerning the
validity of any transaction purporting to be made by the Trustees or by said
officer, employee or agent or be liable for the application of money or property
paid, loaned, or delivered to or on the order of the Trustees or of said
officer, employee or agent. Every obligation, contract, instrument, certificate
or other interest or undertaking of the Trust, and every other act or thing
whatsoever executed in connection with the Trust, shall be conclusively relied
upon as having been executed or done by the executors thereof only in their
capacities as Trustees, officers, employees or agents of the Trust. Every
written obligation, contract, instrument, certificate or other interest or
undertaking of the Trust made by the Trustees or by any officer, employee or
agent of the Trust, in his or her capacity as such, shall contain an appropriate
recital to the effect that the Trustee, officer, employee or agent of the Trust
shall not personally be bound by or liable thereunder, nor shall resort be had
to their private property or the private property of the Holders for the
satisfaction of any obligation or claim thereunder, and appropriate references
shall be made therein to the Declaration, and may contain any further recital
which they may deem appropriate, but the omission of such recital shall not
operate to impose personal liability on any of the Trustees, officers, employees
or agents of the Trust. The Trustees may maintain insurance for the protection
of the Trust Property, Holders, Trustees, officers, employees and agents in such
amount as the Trustees shall deem advisable.
5.6 RELIANCE ON EXPERTS, ETC. Each Trustee and officer or employee
of the Trust shall, in the performance of his or her duties, be fully and
completely justified and protected with regard to any act or any failure to act
resulting from reliance in good faith upon the books of account or other records
of the Trust, upon an opinion of counsel, or upon reports made to the Trust by
any of its officers or employees or by any Investment Adviser, Administrator,
accountant, appraiser or other experts or consultants selected with reasonable
care by the Trustees, officers or employees of the Trust, regardless of whether
such counsel or expert may also be a Trustee.
5.7 ASSENT TO DECLARATION. Every Holder, by virtue of having become
a Holder in accordance with the terms of this Declaration, shall be held to have
expressly assented and agreed to the terms hereof and to have become a party
hereto.
ARTICLE VI
Interests in the Trust
----------------------
6.1 GENERAL CHARACTERISTICS. (a) The Trustees shall have the power
and authority, without Holder approval, to issue Interests in one or more series
from time to time as they deem necessary or desirable. Each series shall be
separate from all other series in respect to the assets and liabilities
allocated to that series and shall represent a separate investment portfolio of
the Trust. The Trustees shall have exclusive power, without Holder approval, to
establish and designate such separate and distinct series, as set forth in
Section 6.2, and to fix and determine the relative rights and preferences as
between the Interests of the separate series as to right of redemption, special
and relative rights as to dividends and other distributions and on liquidation,
conversion rights, and conditions under which the series shall have separate
voting rights or no voting rights.
(b) The Trustees may, without Holder approval, divide Interests
of any series into two or more classes, Interests of each such class having such
preferences and special or relative rights and privileges (including conversion
rights, if any) as the Trustees may determine as provided in Section 6.3. The
fact that a series shall have been initially established and designated without
any specific establishment or designation of classes, shall not limit the
authority of the Trustees to divide a series and establish and designate
separate classes thereof.
(c) The number of Interests authorized shall be unlimited, and
the Interests so authorized may be represented in part by fractional Interests.
From time to time, the Trustees may divide or combine the Interests of any
series or class into a greater or lesser number without thereby changing the
proportionate beneficial interests in the series or class. The Trustees may
issue Interests of any series or class thereof for such consideration and on
such terms as they may determine (or for no consideration if pursuant to an
Interest dividend or split-up), all without action or approval of the Holders.
All Interests when so issued on the terms determined by the Trustees shall be
fully paid and non-assessable. The Trustees may classify or reclassify any
unissued Interests or any Interests previously issued and reacquired of any
series or class thereof into one or more series or classes thereof that may be
established and designated from time to time. The Trustees may hold as treasury
Interests, reissue for such consideration and on such terms as they may
determine, or cancel, at their discretion from time to time, any Interests of
any series or class thereof reacquired by the Trust.
6.2 ESTABLISHMENT OF SERIES OF INTERESTS. (a) Without limiting the
authority of the Trustees set forth in Section 6.2(b) to establish and designate
any further series, the Trustees hereby establish and designate two series, as
follows:
Garzarelli Affinity Equity Fund
Garzarelli Balanced Fund
The provisions of this Article VI shall be applicable to the above
designated series and any further series that may from time to time be
established and designated by the Trustees as provided in Section 6.2(b).
(b) The establishment and designation of any series of Interests
other than the two set forth above shall be effective upon the execution, by a
majority of the Trustees, of an instrument setting forth such establishment and
designation and the relative rights and preferences of such series, or as
otherwise provided in such instrument. At any time that there are no Interests
outstanding of any particular series previously established and designated, the
Trustees may by an instrument executed by a majority of their number abolish
that series and the establishment and designation thereof. Each instrument
referred to in this paragraph shall have the status of an amendment of this
Declaration.
(c) Section 9.2 of this Declaration of Trust shall apply also
with respect to each such series as if such series were a separate trust.
6.3 ESTABLISHMENT OF CLASSES. (a) The division of any series into
two or more classes and the establishment and designation of such classes shall
be effective upon the execution by a majority of the Trustees of an instrument
setting forth such division, and the establishment, designation, and relative
rights and preferences of such classes, or as otherwise provided in such
instrument. The relative rights and preferences of the classes of any series
may differ in such respects as the Trustees may determine to be appropriate,
provided that such differences are set forth in the aforementioned instrument.
At any time that there are no Interests outstanding of any particular class
previously established and designated, the Trustees may by an instrument
executed by a majority of their number abolish that class and the establishment
and designation thereof. Each instrument referred to in this paragraph shall
have the status of an amendment to this Declaration.
(b) Section 9.2 of this Declaration of Trust shall apply also
with respect to each such class as if such class were a separate trust.
6.4 ASSETS OF SERIES. All consideration received by the Trust for
the issue or sale of Interests of a particular series together with all Trust
Property 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 of such series and except as may otherwise be required by
applicable tax laws, and shall be so recorded upon the books of account of the
Trust. Separate and distinct records shall be maintained for each series and
the assets associated with a series shall be held and accounted for separately
from the other assets of the Trust, or any other series. In the event that
there is any Trust Property, or any income, earnings, profits, and proceeds
thereof, funds, or payments which are not readily identifiable as belonging to
any particular series, the Trustees shall allocate them 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. Each
such allocation by the Trustees shall be conclusive and binding upon the Holders
of all Interests for all purposes.
6.5 LIABILITIES OF SERIES. (a) The Trust Property belonging to
each particular series shall be charged with the liabilities of the Trust in
respect to 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. Each allocation of liabilities, expenses, costs, charges
and reserves by the Trustees shall be conclusive and binding upon the Holders of
all Interests for all purposes. 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 Holders.
(b) Without limitation of the foregoing provisions of this
Section, but subject to the right of the Trustees in their discretion to
allocate general liabilities, expenses, costs, charges or reserves as herein
provided, the debts, liabilities, obligations and expenses incurred, contracted
for or otherwise existing with respect to a particular series shall be
enforceable against the assets of such series only, and not against the assets
of any other series. Notice of this limitation on interseries liabilities shall
be set forth in the certificate of trust of the Trust (whether originally or by
amendment) as filed or to be filed in the Office of the Secretary of State of
the State of Delaware pursuant to the DBTA, and upon the giving of such notice
in the certificate of trust, the statutory provisions of Section 3804 of the
DBTA relating to limitations on interseries liabilities (and the statutory
effect under Section 3804 of setting forth such notice in the certificate of
trust) shall become applicable to the Trust and each series. Every note, bond,
contract or other undertaking issued by or on behalf of a particular series
shall include a recitation limiting the obligation represented thereby to that
series and its assets.
6.6 DIVIDENDS AND DISTRIBUTIONS. (a) Dividends and distributions on
Interests of a particular series or any class thereof may be paid with such
frequency as the Trustees may determine, which may be daily or otherwise,
pursuant to a standing resolution or a resolution adopted only once or with such
frequency as the Trustees may determine, to the Holders of Interests in that
series or class, from such of the income and capital gains, accrued or realized,
from the Trust Property belonging to that series, or in the case of a class,
belonging to that series and allocable to that class, as the Trustees may
determine, after providing for actual and accrued liabilities belonging to that
series. All dividends and distributions on Interests in a particular series or
class thereof shall be distributed pro rata to the Holders of Interests in that
series or class in proportion to the total outstanding Interests in that series
or class held by such Holders at the date and time of record established for the
payment of such dividends or distribution, except to the extent otherwise
required or permitted by the preferences and special or relative rights and
privileges of any series or class. Such dividends and distributions may be made
in cash or Interests of that series or class 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 Holder of the mode of the paying
of such dividend or distribution to that Holder. Any such dividend or
distribution paid in Interests will be paid at the net asset value thereof as
determined in accordance with Section 7.4.
(b) The Interests in a series or a class of the Trust shall
represent beneficial interests in the Trust Property belonging to such series or
in the case of a class, belonging to such series and allocable to such class.
Each Holder of Interests in a series or a class shall be entitled to receive its
pro rata share of distributions of income and capital gains made with respect to
such series or such class. Upon reduction or withdrawal of its Interests or
indemnification for liabilities incurred by reason of being or having been a
Holder of Interests in a series or a class, such Holder shall be paid solely out
of the funds and property of such series or in the case of a class, the funds
and property of such series and allocable to such class of the Trust. Upon
liquidation or termination of a series or class of the Trust, Holders of
Interests in such series or class shall be entitled to receive a pro rata share
of the Trust Property belonging to such series or in the case of a class,
belonging to such series and allocable to such class.
6.7 VOTING RIGHTS. Notwithstanding any other provision hereof, on
each matter submitted to a vote of the Holders, each Holder shall be entitled to
one vote for each whole Interest standing in his name on the books of the Trust,
and each fractional Interest shall be entitled to a proportionate fractional
vote, irrespective of the series thereof or class thereof, and all Interests of
all series and classes thereof shall vote together as a single class; provided,
however, that (a) as to any matter with respect to which a separate vote of one
or more series or classes thereof is permitted or required by the 1940 Act or
the provisions of the instrument establishing and designating the series or
class, such requirements as to a separate vote by such series or class thereof
shall apply in lieu of all Interests of all series and classes thereof voting
together; and (b) as to any matter which affects only the interests of one or
more particular series or classes thereof, only the Holders of the one or more
affected series or classes shall be entitled to vote, and each such series or
class shall vote as a separate series or class.
6.8 RECORD DATES. The Trustees may from time to time close the
transfer books or establish record dates and times for the purposes of
determining the Holders entitled to be treated as such, to the extent provided
or referred to in Section 8.6.
6.9 TRANSFER. All Interests of each particular series or class
thereof shall be transferable, but transfers of Interests of a particular series
or class thereof will be recorded on the Interest transfer records of the Trust
applicable to that series or class only at such times as Holders shall have the
right to require the Trust to redeem Interests of that series or class and at
such other times as may be permitted by the Trustees.
6.10 EQUALITY. Except as provided herein or in the instrument
designating and establishing any class or series, all Interests of each
particular series or class thereof shall represent an equal proportionate
interest in the assets belonging to that series, or in the case of a class,
belonging to that series and allocable to that class, subject to the liabilities
belonging to that series, and each Interest of any particular series or class
shall be equal to each other Interest of that series or class; but the
provisions of this sentence shall not restrict any distinctions permissible
under Section 6.6 that may exist with respect to dividends and distributions on
Interests of the same series or class. The Trustees may from time to time
divide or combine the Interests of any particular series or class into a greater
or lesser number of Interests of that series or class without thereby changing
the proportionate beneficial interest in the assets belonging to that series or
class or in any way affecting the rights or Interests of any other series or
class.
6.11 FRACTIONS. Any fractional Interest of any series or class, if
any such fractional Interest is outstanding, shall carry proportionately all the
rights and obligations of a whole Interest of that series or class, including
rights and obligations with respect to voting, receipt of dividends and
distributions, redemption of Interests, and liquidation of the Trust.
6.12 CLASS DIFFERENCES. Subject to Section 6.3, the relative rights
and preferences of the classes of any series may differ in such other respects
as the Trustees may determine to be appropriate in their sole discretion,
provided that such differences are set forth in the instrument establishing and
designating such classes and executed by a majority of the Trustees.
6.13 CONVERSION OF INTERESTS. Subject to compliance with the
requirements of the 1940 Act, the Trustees shall have the authority to provide
that Holders of Interests of any series shall have the right to convert said
Interests into one or more other series in accordance with such requirements and
procedures as may be established by the Trustees. The Trustees shall also have
the authority to provide that Holders of Interests of any class of a particular
series shall have the right to convert said Interests into one or more other
classes of that particular series or any other series in accordance with such
requirements and procedures as may be established by the Trustees.
6.14 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
Interests that conform to such authorized terms and to reject any purchase
orders for Interests whether or not conforming to such authorized terms.
6.15 TRUSTEES AND OFFICERS AS HOLDERS. 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 Interests 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
Interests 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 Interests generally.
6.16 NO PREEMPTIVE RIGHTS; DERIVATIVE SUITS. Holders shall have no
preemptive or other right to subscribe to any additional Interests or other
securities issued by the Trust. No action may be brought by a Holder on behalf
of the Trust unless Holders owning no less than 10% of the then outstanding
Interests, or series or class thereof, join in the bringing of such action. A
Holder of Interests in a particular series or a particular class of the Trust
shall not be entitled to participate in a derivative or class action lawsuit on
behalf of any other series or any other class or on behalf of the Holders of
Interests in any other series or any other class of the Trust.
6.17 NO APPRAISAL RIGHTS. Holders shall have no right to demand
payment for their Interests or to any other rights of dissenting Holders in the
event the Trust participates in any transaction which would give rise to
appraisal or dissenters' rights by a stockholder of a corporation organized
under the General Corporation Law of Delaware, or otherwise.
6.18 STATUS OF INTERESTS AND LIMITATION OF PERSONAL LIABILITY.
Interests shall be deemed to be personal property giving only the rights
provided in this Amended and Restated Declaration of Trust. Every Holder by
virtue of acquiring Interests shall be held to have expressly assented and
agreed to the terms hereof and to be bound hereby. The death, incapacity,
dissolution, termination or bankruptcy of a Holder during the continuance of the
Trust shall not operate to dissolve or terminate the Trust or any series thereof
nor entitle the representative of such Holder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but shall
entitle the representative of such Holder only to the rights of such Holder
under this Trust. Ownership of Interests shall not entitle the Holder 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 Interests constitute the Holders 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 Holder, nor except as specifically provided
herein to call upon any Holder for the payment of any sum of money or assessment
whatsoever other than such as the Holder may at any time personally agree to
pay.
ARTICLE VII
Purchases and Redemptions
-------------------------
7.1 PURCHASES. The Trustees, in their discretion, may, from time to
time, without a vote of the Holders, permit the purchase of Interests by such
party or parties (or increase in the Interests of a Holder), for such type of
consideration, including, without limitation, cash or property, at such time or
times (including, without limitation, each business day), and on such terms as
the Trustees may deem best, and may in such manner acquire other assets
(including, without limitation, the acquisition of assets subject to, and in
connection with the assumption of, liabilities) and businesses.
7.2 REDEMPTION BY HOLDER. Each Holder of Interests of the Trust or
any series or class thereof shall have the right at such times as may be
permitted by the Trust to require the Trust to redeem all or any part of his or
her Interests of the Trust, or series or class thereof, at a redemption price
equal to the net asset value per Interest of the Trust or series or class
thereof, next determined in accordance with Section 7.4 hereof after the
Interests are properly tendered for redemption, subject to any contingent
deferred sales charge or redemption charge in effect at the time of redemption.
Payment of the redemption price shall be in cash; provided, however, that if the
Trustees determine, which determination shall be conclusive, that conditions
exist which make payment wholly in cash unwise or undesirable, the Trust may,
subject to the requirements of the 1940 Act, make payment wholly or partly in
securities or other assets belonging to the Trust or series or class thereof of
which the Interests being redeemed are part of the value of such securities or
assets used in such determination of the net asset value.
Notwithstanding the foregoing, the Trust may postpone payment of the
redemption price and may suspend the right of the Holders of Interests of the
Trust, or series or class thereof, to require the Trust to redeem Interests of
the Trust, or of any series or class thereof, during any period or at any time
when and to the extent permissible under the 1940 Act.
7.3 REDEMPTION BY TRUST. Each Interest of the Trust, or series or
class thereof that has been established and designated is subject to redemption
by the Trust at the redemption price which would be applicable if such Interest
was then being redeemed by the Holder pursuant to Section 7.2 hereof: (a) at any
time, if the Trustees determine in their sole discretion and by majority vote
that it is in the best interest of the Trust, or any series or class thereof, to
so redeem, 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 Holder accounts of a minimum amount. Upon
such redemption the Holders of the Interests so redeemed shall have no further
right with respect thereto other than to receive payment of such redemption
price.
7.4 NET ASSET VALUE. The net asset value per Interest of any series
shall be (a) in the case of a series whose Interests are not divided into
classes, 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 Interests of that
series outstanding, and (b) in the case of a class of Interests of a series
whose Interests are divided into classes, the quotient obtained by dividing the
value of the net assets of that series allocable to such class (being the value
of the assets belonging to that series allocable to such class less the
liabilities belonging to such class) by the total number of Interests of such
class outstanding; all determined in accordance with the methods and procedures,
including without limitation those with respect to rounding, established by the
Trustees from time to time.
The Trustees may determine to maintain the net asset value per Interest of any
series or any class at a designated constant dollar amount and in connection
therewith may adopt procedures consistent with the 1940 Act for continuing
declarations of income attributable to that series or that class as dividends
payable in additional Interests of that series at the designated constant dollar
amount and for the handling of any losses attributable to that series or that
class. Such procedures may provide that in the event of any loss each Holder
shall be deemed to have contributed to the capital of the Trust attributable to
that series his or her pro rata portion of the total number of Interests
required to be cancelled in order to permit the net asset value per Interest of
that series or class to be maintained, after reflecting such loss, at the
designated constant dollar amount. Each Holder of the Trust shall be deemed to
have agreed, by his or her investment in any series or class with respect to
which the Trustees shall have adopted any such procedure, to make the
contribution referred to in the preceding sentence in the event of any such
loss.
ARTICLE VIII
Holders
-------
8.1 RIGHTS OF HOLDERS. The right to conduct any business
hereinbefore described is vested exclusively in the Trustees, and the Holders
shall have no rights under this Declaration or with respect to the Trust
Property other than the beneficial interest conferred by their Interests and the
voting rights accorded to them under this Declaration.
8.2 REGISTER OF INTERESTS. A register shall be kept by the Trust
under the direction of the Trustees which shall contain the names and addresses
of the Holders and the number of Interests held by each Holder. Each such
register shall be conclusive as to the identity of the Holders of the Trust and
the Persons who shall be entitled to payments of distributions or otherwise to
exercise or enjoy the rights of Holders. No Holder shall be entitled to receive
payment of any distribution, nor to have notice given to it as herein provided,
until it has given its address to such officer or agent of the Trustees as shall
keep the said register for entry thereon. No certificates certifying the
ownership of interests need be issued except as the Trustees may otherwise
determine from time to time.
8.3 NOTICES. Any and all notices to which any Holder hereunder may
be entitled and any and all communications shall be deemed duly served or given
if presented personally to a Holder, left at his or her residence or usual place
of business, or sent via United States mail or by electronic transmission to a
Holder at his or her address as it is registered with the Trust, as provided in
Section 8.2. If mailed, such notice shall be deemed to be given when deposited
in the United States mail addressed to the Holder at his or her address as it is
registered with the Trust, as provided in Section 8.2, with postage thereon
prepaid.
8.4 MEETINGS OF HOLDERS. Meetings of the Holders may be called at
any time by a majority of the Trustees and shall be called by any Trustee upon
written request of Holders holding, in the aggregate, not less than 10% of the
Interests (or series or class thereof), such request specifying the purpose or
purposes for which such meeting is to be called. Any such meeting shall be held
within or without the State of Delaware on such day and at such time as the
Trustees shall designate. Holders of one-third of the Interests in the Trust,
present in person or by proxy, shall constitute a quorum for the transaction of
any business, except as may otherwise be required by the 1940 Act or other
applicable law or by this Declaration or the By-Laws of the Trust. If a quorum
is present at a meeting, an affirmative vote by the Holders present, in person
or by proxy, holding more than 50% of the total Interests (or series or class
thereof) of the Holders present, either in person or by proxy, at such meeting
constitutes the action of the Holders, unless the 1940 Act, other applicable
law, this Declaration or the By-Laws of the Trust require a greater number of
affirmative votes. Notwithstanding the foregoing, the affirmative vote by the
Holders present, in person or by proxy, holding less than 50% of the Interests
(or class or series thereof) of the Holders present, in person or by proxy, at
such meeting shall be sufficient for adjournments. Any meeting of Holders,
whether or not a quorum is present, may be adjourned for any lawful purpose
provided that no meeting shall be adjourned for more than six months beyond the
originally scheduled meeting date. Any adjourned session or sessions may be
held, within a reasonable time after the date set for the original meeting
without the necessity of further notice.
8.5 NOTICE OF MEETINGS. Written or printed notice of all meetings of
the Holders, stating the time, place and purposes of the meeting, shall be given
as provided in Section 8.3. At any such meeting, any business properly before
the meeting may be considered, whether or not stated in the notice of the
meeting. Any adjourned meeting held as provided in Section 8.4 shall not
require the giving of additional notice.
8.6 RECORD DATE. For the purpose of determining the Holders who are
entitled to notice of any meeting, to vote at any meeting, to participate in any
distribution, or for the purpose of any other action, the Trustees may from time
to time fix a date, not more than 90 calendar days prior to the date of any
meeting of the Holders or payment of distributions or other action, as the case
may be, as a record date for the determination of the persons to be treated as
Holders of record for such purposes, and any Holder who was a Holder at the date
and time so fixed shall be entitled to vote at such meeting or to be treated as
a Holder of record for purposes of such other action, even though he or she has
since that date and time disposed of his or her Interests, and no Holder
becoming such after that date and time shall be so entitled to vote at such
meeting or to be treated as a Holder of record for purposes of such other
action. If the Trustees shall divide the Interests into two or more series in
accordance with Section 6.2 herein, nothing in this Section shall be construed
as precluding the Trustees from setting different record dates for different
series and if the Trustees shall divide any series into two or more classes in
accordance with Section 6.3 herein, nothing in this Section 8.6 shall be
construed as precluding the Trustees from setting different record dates for
different classes.
8.7 PROXIES, ETC. At any meeting of Holders, any Holder entitled to
vote thereat may vote by proxy, provided that no proxy shall be voted at any
meeting unless it shall have been placed on file with the Secretary, or with
such other officer or agent of the Trust as the Secretary may direct, for
verification prior to the time at which such vote shall be taken.
(a) Pursuant to a resolution of a majority of the Trustees,
proxies may be solicited in the name of one or more Trustees or one or more of
the officers of the Trust. Only Holders of record shall be entitled to vote.
Each Holder shall be entitled to a vote proportionate to its Interest in the
Trust.
(b) When Interests are held jointly by several persons, any one
of them may vote at any meeting in person or by proxy in respect to such
Interest, but if more than one of them shall be present at such meeting in
person or by proxy, and such joint owners or their proxies so present disagree
as to any vote to be cast, such vote shall not be received in respect to such
Interest.
(c) A proxy purporting to be executed by or on behalf of a
Holder shall be deemed valid unless challenged at or prior to its exercise, and
the burden of proving invalidity shall rest on the challenger. If the Holder is
a minor or a person of unsound mind, and subject to guardianship or to the legal
control of any other person regarding the charge or management of his or her
Interest, he or she may vote by his or her guardian or such other person
appointed or having such control, and such vote may be given in person or by
proxy.
8.8 REPORTS. The Trustees shall cause to be prepared, at least
annually, a report of operations containing a balance sheet and statement of
income and undistributed income of the Trust prepared in conformity with
generally accepted accounting principles and an opinion of an independent public
accountant on such financial statements. The Trustees shall, in addition,
furnish to the Holders at least semi-annually an interim report containing an
unaudited balance sheet as of the end of such period and an unaudited statement
of income and surplus for the period from the beginning of the current Fiscal
Year to the end of such period.
8.9 INSPECTION OF RECORDS. The records of the Trust shall be open to
inspection by Holders during normal business hours and for any purpose not
harmful to the Trust.
8.10 VOTING POWERS. (a) The Holders shall have power to vote only (i)
for the election of Trustees as contemplated by Section 2.2 hereof, (ii) with
respect to any investment advisory contract as contemplated by Section 4.1
hereof, (iii) with respect to termination of the Trust as provided in Section
9.2 hereof, (iv) with respect to amendments to the Declaration of Trust as
provided in Section 9.3 hereof, (v) with respect to any merger, consolidation or
sale of assets as provided in Section 9.4 hereof, (vi) with respect to
incorporation of the Trust to the extent and as provided in Section 9.5 hereof,
and (vii) with respect to such additional matters relating to the Trust as may
be required by the 1940 Act, DBTA, or any other applicable law, the Declaration,
the By-Laws or any registration of the Trust with the Commission (or any
successor agency) or any state, or as and when the Trustees may consider
necessary or desirable.
(b) Each Holder shall be entitled to vote based on the ratio his
or her Interest bears to the Interests of all Holders entitled to vote. Until
Interests are issued, the Trustees may exercise all rights of Holders and may
take any action required by law, the Declaration or the By-Laws to be taken by
Holders. The By-Laws may include further provisions for Holders' votes and
meetings and related matters not inconsistent with this Declaration.
8.11 HOLDER ACTION BY WRITTEN CONSENT. Any action which may be taken
by the Holders may be taken without notice and without a meeting if Holders
holding more than 50% of the total Interests entitled to vote (or such larger
proportion thereof as shall be required by any express provision of this
Declaration) shall consent to the action in writing and the written consents
shall be filed with the records of the meetings of Holders. Such consents shall
be treated for all purposes as votes taken at a meeting of the Holders.
8.12 HOLDER COMMUNICATIONS. (a) Whenever ten or more Holders who
have been such for at least six months preceding the date of application, and
who hold in the aggregate at least 1% of the total Interests, shall apply to the
Trustees in writing, stating that they wish to communicate with other Holders
with a view to obtaining signatures for a request for a meeting of Holders and
accompanied by a form of communication and request which they wish to transmit,
the Trustees shall within five business days after receipt of such application
either (i) afford to such applicants access to a list of the names and addresses
of all Holders as recorded on the books of the Trust; or (ii) inform such
applicants as to the approximate number of Holders, and the approximate cost of
transmitting to them the proposed communication and form of request.
(b) If the Trustees elect to follow the course specified in
clause (ii) above, the Trustees, upon the written request of such applicants,
accompanied by a tender of the material to be transmitted and of the reasonable
expenses of transmission, shall, with reasonable promptness, transmit, by United
States mail or by electronic transmission, such material to all Holders at their
addresses as recorded on the books, unless within five business days after such
tender the Trustees shall transmit, by United States mail or by electronic
transmission, to such applicants and file with the Commission, together with a
copy of the material to be transmitted, a written statement signed by at least a
majority of the Trustees to the effect that in their opinion either such
material contains untrue statements of fact or omits to state facts necessary to
make the statements contained therein not misleading, or would be in violation
of applicable law, and specifying the basis of such opinion. The Trustees shall
thereafter comply with any order entered by the Commission and the requirements
of the 1940 Act and the Securities Exchange Act of 1934.
ARTICLE IX
Duration; Termination of Trust;
Amendment; Mergers; Etc.
-------------------------------
9.1 DURATION. Subject to possible termination in accordance with the
provisions of Section 9.2, the Trust created hereby shall continue perpetually
pursuant to Section 3808 of DBTA.
9.2 TERMINATION OF TRUST. (a) The Trust may be terminated (i) by
the affirmative vote of the Holders of not less than two-thirds of the Interests
in the Trust at any meeting of the Holders, or (ii) by an instrument in writing,
without a meeting, signed by a majority of the Trustees and consented to by the
Holders of not less than two-thirds of such Interests, or (iii) by the Trustees
by written notice to the Holders. Upon any such termination,
(i) The Trust shall carry on no business except for the
purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of
the Trust and all of the powers of the Trustees under this Declaration
shall continue until the affairs of the Trust shall have been wound up,
including the power to fulfill or discharge the contracts of the Trust,
collect its assets, sell, convey, assign, exchange, or otherwise dispose of
all or any part of the remaining Trust Property to one or more Persons at
public or private sale for consideration which may consist in whole or in
part of cash, securities or other property of any kind, discharge or pay
its liabilities, and do all other acts appropriate to liquidate its
business; provided that any sale, conveyance, assignment, exchange, or
other disposition of all or substantially all of the Trust Property shall
require approval of the principal terms of the transaction and the nature
and amount of the consideration by the Holders with a Majority Interests
Vote.
(iii) After paying or adequately providing for the payment
of all liabilities, and upon receipt of such releases, indemnities and
refunding agreements, as they deem necessary for their protection, the
Trustees may distribute the remaining Trust Property, in cash or in kind or
partly each, among the Holders according to their respective rights.
(b) Upon termination of the Trust and distribution to the
Holders as herein provided, a majority of the Trustees shall execute and lodge
among the records of the Trust an instrument in writing setting forth the fact
of such termination and file a certificate of cancellation in accordance with
Section 3810 of the DBTA. Upon termination of the Trust, the Trustees shall
thereon be discharged from all further liabilities and duties hereunder, and the
rights and interests of all Holders shall thereupon cease.
9.3 AMENDMENT PROCEDURE.
(a) All rights granted to the Holders under this Declaration of
Trust are granted subject to the reservation of the right of the Trustees to
amend this Declaration of Trust as herein provided, except as set forth herein
to the contrary. Subject to the foregoing, the provisions of this Declaration
of Trust (whether or not related to the rights of Holders) may be amended at any
time, so long as such amendment is not in contravention of applicable law,
including the 1940 Act, by an instrument in writing signed by a majority of the
Trustees (or by an officer of the Trust pursuant to the vote of a majority of
such Trustees). 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.
(b) No amendment may be made, under Section 9.3(a) above, which
would change any rights with respect to any Interest in the Trust by reducing
the amount payable thereon upon liquidation of the Trust, by repealing the
limitations on personal liability of any Holder or Trustee, or by diminishing or
eliminating any voting rights pertaining thereto, except with a Majority
Interests Vote.
(c) A certification signed by a majority of the Trustees setting
forth an amendment and reciting that it was duly adopted by the Holders or by
the Trustees as aforesaid or a copy of the Declaration, as amended, and executed
by a majority of the Trustees, shall be conclusive evidence of such amendment
when lodged among the records of the Trust.
(d) Notwithstanding any other provision hereof, until such time
as Interests are first sold, this Declaration may be terminated or amended in
any respect by the affirmative vote of a majority of the Trustees or by an
instrument signed by a majority of the Trustees.
9.4 MERGER, CONSOLIDATION AND SALE OF ASSETS. The Trust may merge or
consolidate with any other corporation, association, trust or other organization
or may sell, lease or exchange all or substantially all of its property,
including its good will, upon such terms and conditions and for such
consideration when and as authorized by no less than a majority of the Trustees
and by a Majority Interests Vote of the Trust or by an instrument or instruments
in writing without a meeting, consented to by the Holders of not less than 50%
of the total Interests of the Trust or such series, as the case may be, and any
such merger, consolidation, sale, lease or exchange shall be deemed for all
purposes to have been accomplished under and pursuant to the statutes of the
State of Delaware. In accordance with Section 3815(f) of DBTA, an agreement of
merger or consolidation may effect any amendment to the Declaration or By-Laws
or effect the adoption of a new declaration of trust or by-laws of the Trust if
the Trust is the surviving or resulting business trust. A certificate of merger
or consolidation of the Trust shall be signed by a majority of the Trustees.
9.5 INCORPORATION. Upon a Majority Interests Vote, the Trustees may
cause to be organized or assist in organizing a corporation or corporations
under the laws of any jurisdiction or any other trust, partnership, association
or other organization to take over all of the Trust Property or to carry on any
business in which the Trust shall directly or indirectly have any interest, and
to sell, convey and transfer the Trust Property to any such corporation, trust,
association or organization in exchange for the equity interests thereof or
otherwise, and to lend money to, subscribe for the equity interests of, and
enter into any contracts with any such corporation, trust, partnership,
association or organization, or any corporation, partnership, trust, association
or organization in which the Trust holds or is about to acquire equity
interests. The Trustees may also cause a merger or consolidation between the
Trust or any successor thereto and any such corporation, trust, partnership,
association or other organization if and to the extent permitted by law, as
provided under the law then in effect. Nothing contained herein shall be
construed as requiring approval of the Holders for the Trustees to organize or
assist in organizing one or more corporations, trusts, partnerships,
associations or other organizations and selling, conveying or transferring a
portion of the Trust Property to such organizations or entities.
ARTICLE X
Miscellaneous
-------------
10.1 CERTIFICATE OF DESIGNATION; AGENT FOR SERVICE OF PROCESS. The
Trust shall file, in accordance with Section 3812 of DBTA, in the office of the
Secretary of State of Delaware, a certificate of trust, in the form and with
such information required by Section 3810 of DBTA and executed in the manner
specified in Section 3811 of DBTA. In the event the Trust does not have at
least one Trustee qualified under Section 3807(a) of DBTA, then the Trust shall
comply with Section 3807(b) of DBTA by having and maintaining a registered
office in Delaware and by designating a registered agent for service of process
on the Trust, which agent shall have the same business office as the Trust's
registered office. The failure to file any such certificate, to maintain a
registered office, to designate a registered agent for service of process, or to
include such other information shall not affect the validity of the
establishment of the Trust, the Declaration, the By-Laws or any action taken by
the Trustees, the Trust officers or any other Person with respect to the Trust
except insofar as a provision of the DBTA would have governed, in which case the
Delaware common law governs.
10.2 GOVERNING LAW. This Declaration is executed by all of the
Trustees and delivered with reference to DBTA and the laws of the State of
Delaware, and the rights of all parties and the validity and construction of
every provision hereof shall be subject to and construed according to DBTA and
the laws of the State of Delaware (unless and to the extent otherwise provided
for and/or preempted by the 1940 Act or other applicable federal securities
laws); provided, however, that there shall not be applicable to the Trust, the
Trustees or this Declaration (a) the provisions of Section 3540 of Title 12 of
the Delaware Code, or (b) any provisions of the laws (statutory or common) of
the State of Delaware (other than the DBTA) pertaining to trusts which are
inconsistent with the rights, duties, powers, limitations or liabilities of the
Trustees set forth or referenced in this Declaration.
10.3 COUNTERPARTS. This Declaration may be simultaneously executed in
several counterparts, each of which shall be deemed to be an original, and such
counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any such original counterpart.
10.4 RELIANCE BY THIRD PARTIES. Any certificate executed by an
individual who, according to the records of the Trust or of any recording office
in which this Declaration may be recorded, appears to be a Trustee hereunder,
certifying to (a) the number or identity of Trustees or Holders, (b) the due
authorization of the execution of any instrument or writing, (c) the form of any
vote passed at a meeting of Trustees or Holders, (d) the fact that the number of
Trustees or Holders present at any meeting or executing any written instrument
satisfies the requirements of this Declaration, (e) the form of any By-Laws
adopted by or the identity of any officers elected by the Trustees, or (f) the
existence of any fact or facts which in any manner relate to the affairs of the
Trust, shall be conclusive evidence as to the matters so certified in favor of
any person dealing with the Trustees and their successors.
10.5 PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS. (a) The
provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the DBTA, or with other applicable laws and
regulations, the conflicting provisions shall be deemed never to have
constituted a part of this Declaration; provided, however, that such
determination shall not affect any of the remaining provisions of this
Declaration or render invalid or improper any action taken or omitted prior to
such determination.
(b) If any provision of this Declaration shall be held invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
10.6 TRUST ONLY. It is the intention of the Trustees to create only a
business trust under DBTA with the relationship of trustee and beneficiary
between the Trustees and each Holder from time to time. It is not the intention
of the Trustees to create a general partnership, limited partnership, joint
stock association, corporation, bailment, or any form of legal relationship
other than a Delaware business trust except to the extent such trust is deemed
to constitute a corporation under the Code and applicable state tax laws.
Nothing in this Declaration of Trust shall be construed to make the Holders,
either by themselves or with the Trustees, partners or members of a joint stock
association.
10.7 WITHHOLDING. Should any Holder be subject to withholding
pursuant to the Code or any other provision of law, the Trust shall withhold all
amounts otherwise distributable to such Holder as shall be required by law and
any amounts so withheld shall be deemed to have been distributed to such Holder
under this Declaration of Trust. If any sums are withheld pursuant to this
provision, the Trust shall remit the sums so withheld to and file the required
forms with the Internal Revenue Service, or other applicable government agency.
10.8 HEADINGS AND CONSTRUCTION. 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. Whenever the
singular number is used herein, the same shall include the plural; and the
neuter, masculine and feminine genders shall include each other, as applicable.
IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.
- --------------------
October 1, 1996
H. Steel Bokhof, Jr.
Trustee
The Garzarelli Funds
Written Instructions Abolishing The Garzarelli Affinity
Equity Fund Series
The undersigned, being the sole trustee of The Garzarelli Funds (the "Trust"), a
Delaware business trust organized pursuant to a Declaration of Trust dated
October 1, 1996, pursuant to Section 6.2(b) of Article VI and Section 9.3 of
Article IX of the Declaration of Trust, does hereby abolish the Garzarelli
Affinity Equity Fund series of the Trust and the establishment and designation
thereof. This instrument shall constitute an amendment to the Declaration of
Trust.
IN WITNESS WHEREOF, the undersigned has this 20th day of February, 1997
signed these presents.
/s/ H. Steel Bokhof, Jr.
-----------------------
H. Steel Bokhof, Jr.
President
THE GARZARELLI FUNDS
--------------------
BY-LAWS
-------
These By-Laws are made as of the 1st day of October, 1996 and adopted
pursuant to Section 2.7 of the Declaration of Trust establishing the THE
GARZARELLI FUNDS dated October 1, 1996, as from time to time amended
(hereinafter called the "Declaration"). All words and terms capitalized in
these By-Laws shall have the meaning or meanings set forth for such words or
terms in the Declaration.
ARTICLE I
Meetings of Holders
-------------------
Section 1.1 ANNUAL MEETING. An annual meeting of the Holders of
Interests in the Trust, which may be held on such date and at such hour as may
from time to time be designated by the Board of Trustees and stated in the
notice of such meeting, is not required to be held unless certain actions must
be taken by the Holders as set forth in Section 8.10 of the Declaration, or
except when the Trustees consider it necessary or desirable.
Section 1.2 CHAIRPERSON. The President or, in his or her absence,
the Chief Operating Officer shall act as chairperson at all meetings of the
Holders and, in the absence of both of them, the Trustee or Trustees present at
the meeting may elect a temporary chairperson for the meeting, who may be one of
themselves or an officer of the Trust.
Section 1.3 PROXIES: VOTING. Holders may vote either in person or
by duly executed proxy and each Holder shall be entitled to a vote proportionate
to his or her Interest in the Trust, all as provided in Article VIII of the
Declaration. No proxy shall be valid after eleven (11) months from the date of
its execution, unless a longer period is expressly stated in such proxy.
Section 1.4 FIXING RECORD DATES. For the purpose of determining the
Holders who are entitled to notice of or to vote or to act at a meeting,
including any adjournment thereof, or who are entitled to participate in any
distributions, or for any other proper purpose, the Trustees may from time to
time fix a record date in the manner provided in Section 8.6 of the Declaration.
If the Trustees do not, prior to any meeting of the Holders, so fix a record
date, then the date of mailing notice of the meeting shall be the record date.
Section 1.5 INSPECTORS OF ELECTION. In advance of any meeting of the
Holders, the Trustees may appoint Inspectors of Election to act at the meeting
or any adjournment thereof. If Inspectors of Election are not so appointed, the
chairperson, if any, of any meeting of the Holders may, and on the request of
any Holder or his or her proxy shall, appoint Inspectors of Election of the
meeting. The number of Inspectors shall be either one or three. If appointed
at the meeting on the request of one or more Holders or proxies, a Majority
Interests vote shall determine whether one or three Inspectors are to be
appointed, but failure to allow such determination by the Holders shall not
affect the validity of the appointment of Inspectors of Election. In case any
person appointed as Inspector fails to appear or fails or refuses to act, the
vacancy may be filled by appointment made by the Trustees in advance of the
convening of the meeting or at the meeting by the person acting as chairperson.
The Inspectors of Election shall determine the Interests owned by Holders, the
Interests represented at the meeting, the existence of a quorum, the
authenticity, validity and effect of proxies, shall receive votes, ballots or
consents, shall hear and determine all challenges and questions in any way
arising in connection with the right to vote, shall count and tabulate all votes
or consents, determine the results, and do such other acts as may be proper to
conduct the election or vote with fairness to all Holders. If there are three
Inspectors of Election, the decision, act or certificate of a majority is
effective in all respects as the decision, act or certificate of all. On
request of the chairperson, if any, of the meeting, or of any Holder or his or
her proxy, the Inspectors of Election shall make a report in writing of any
challenge or question or matter determined by them and shall execute a
certificate of any facts found by them.
Section 1.6 PLACE OF MEETINGS. All meetings of Holders shall be held
at the principal office of the Trust or at such other place within the United
States as shall be designated by the Trustees or the President of the Trust.
The principal office of the Trust is located at 100 South Wacker Drive, Suite
2100, Chicago, Illinois 60606-4005.
ARTICLE II
Trustees
--------
Section 2.1 ANNUAL AND REGULAR MEETINGS. The Trustees shall hold an
Annual Meeting of the Trustees for the election of officers and the transaction
of other business which may come before such meeting. Regular meetings of the
Trustees may be held without call or notice at such place or places and times as
the Trustees may by resolution provide from time to time.
Section 2.2 SPECIAL MEETINGS. Special Meetings of the Trustees shall
be held upon the call of the Chairperson, if any, the President, the Secretary,
or any two Trustees, at such time, on such day and at such place, as shall be
designated in the notice of the meeting.
Section 2.3 NOTICE. Notice of a meeting shall be given by mail
(which term shall include overnight mail) or by telegram (which term shall
include a cablegram or telefacsimile) or delivered personally (which term shall
include notice by telephone). If notice is given by mail, it shall be mailed
not later than 72 hours preceding the meeting and if given by telegram or
personally, such notice shall be delivered not later than 24 hours preceding the
meeting. Notice of a meeting of Trustees may be waived before or after any
meeting by signed written waiver. Neither the business to be transacted at, nor
the purpose of, any meeting of the Board of Trustees need the notice or waiver
of notice of such meeting, and no notice need be given of action proposed to be
taken by written consent. The attendance of a Trustee at a meeting shall
constitute a waiver of notice of such meeting except where a Trustee attends a
meeting for the express purpose of objecting, at the commencement of such
meeting, to the transaction of any business on the ground that the meeting has
not been lawfully called or convened.
Section 2.4 CHAIRPERSON: RECORDS. The Trustees shall appoint a
Chairperson of the Board from among their number. Such Chairperson of the Board
shall act as chairperson at all meetings of the Trustees; in his or her absence
the President shall act as chairperson; and, in the absence of all of them, the
Trustees present shall elect one of their number to act as temporary
chairperson. The results of all actions taken at a meeting of the Trustees, or
by written consent of the Trustees, shall be recorded by the Secretary.
Section 2.5 AUDIT COMMITTEE. The Board of Trustees may, by the
affirmative vote of a majority of the entire Board, appoint from its members an
Audit Committee composed of two or more Trustees who are not "interested
persons" (as defined in the 1940 Act) of the Trust, as the Board may from time
to time determine. The Audit Committee shall (a) recommend independent public
accountants for selection by the Board, (b) review the scope of audit,
accounting and financial internal controls and the quality and adequacy of the
Trust's accounting staff with the independent public accountants and such other
persons as may be deemed appropriate, (c) review with the accounting staff and
the independent public accountants the compliance of transactions of the Trust
with its investment adviser, administrator or any other service provider with
the financial terms of applicable contracts or agreements, (d) review reports of
the independent public accountants and comment to the Board when warranted, (e)
report to the Board at least once each year and at such other times as the
committee deems desirable, and (f) be directly available at all times to
independent public accountants and responsible officers of the Trust for
consultation on audit, accounting and related financial matters.
Section 2.6 NOMINATING COMMITTEE OF TRUSTEES. The Board of Trustees
may, by the affirmative vote of a majority of the entire Board, appoint from its
members a Trustee Nominating Committee composed of two or more Trustees. The
Trustee Nominating Committee shall recommend to the Board a slate of persons to
be nominated for election as Trustees by the Holders at a meeting of the Holders
and a person to be elected to fill any vacancy occurring for any reason in the
Board. Notwithstanding anything in this Section to the contrary, if the Trust
has in effect a plan pursuant to Rule 12b-1 under the 1940 Act, the selection
and nomination of those Trustees who are not "interested persons" (as defined in
the 1940 Act) shall be committed to the discretion of such non-interested
Trustees.
Section 2.7 EXECUTIVE COMMITTEE. The Board of Trustees may appoint
from its members an Executive Committee composed of those Trustees as the Board
may from time to time determine, of which committee the Chairperson of the Board
shall be a member. In the intervals between meetings of the Board, the
Executive Committee shall have the power of the Board to (a) determine the value
of securities and assets owned by the Trust, (b) elect or appoint officers of
the Trust to serve until the next meeting of the Board, and (c) take such action
as may be necessary to manage the business of the Trust. All action by the
Executive Committee shall be recorded and reported to the Board at its meeting
next succeeding such action.
Section2.8 OTHER COMMITTEES. The Board of Trustees may appoint from
among its members other committees composed of two or more of its Trustees which
shall have such powers as may be delegated or authorized by the resolution
appointing them.
Section2.9 COMMITTEE PROCEDURES. The Board of Trustees may at any
time change the members of any committee, fill vacancies or discharge any
committee. In the absence of any member of any committee, the member or members
thereof present at any meeting, whether or not they constitute a quorum, may
unanimously appoint to act in the place of such absent member a member of the
Board. Each committee may fix its own rules of procedure and may meet as and
when provided by those rules. Copies of the minutes of all meetings of
committees other than the Nominating Committee and the Executive Committee shall
be distributed to the Board unless the Board shall otherwise provide.
ARTICLE III
Officers
--------
Section3.1 OFFICERS OF THE TRUST; COMPENSATION. The officers of the
Trust shall consist of a President, a Secretary, a Treasurer and such other
officers or assistant officers, including Vice Presidents, as may be elected by
the Trustees. Any two or more of the offices may be held by the same person.
The Trustees may designate a Vice President as an Executive Vice President and
may designate the order in which the other Vice Presidents may act. No officer
of the Trust need be a Trustee. The Board of Trustees may determine what, if
any, compensation shall be paid to officers of the Trust.
Section3.2 ELECTION AND TENURE. At the initial organization meeting
and thereafter at each annual meeting of the Trustees, the Trustees shall elect
the President, Secretary, Treasurer and such other officers as the Trustees
shall deem necessary or appropriate in order to carry out the business of the
Trust. Such officers shall hold office until the next annual meeting of the
Trustees and until their successors have been duly elected and qualified. The
Trustees may fill any vacancy in office or add any additional officers at any
time.
Section3.3 REMOVAL OF OFFICERS. Any officer may be removed at any
time, with or without cause, by action of a majority of the Trustees. This
provision shall not prevent the making of a contract of employment for a
definite term with any officer and shall have no effect upon any cause of action
which any officer may have as a result of removal in breach of a contract of
employment. Any officer may resign at any time by notice in writing signed by
such officer and delivered or mailed to the President or Secretary, and such
resignation shall take effect immediately, or at a later date according to the
terms of such notice in writing.
Section 3.4 BONDS AND SURETY. Any officer may be required by the
Trustees to be bonded for the faithful performance of his or her duties in such
amount and with such sureties as the Trustees may determine.
Section 3.5 PRESIDENT AND VICE-PRESIDENTS. The President shall be
the chief executive officer of the Trust and, subject to the control of the
Trustees, shall have general supervision, direction and control of the business
of the Trust and of its employees and shall exercise such general powers of
management as are usually vested in the office of president of a corporation.
The President shall preside at all meetings of the Holders and, in the absence
of the Chairperson of the Board, the President shall preside at all meetings of
the Trustees. Subject to direction of the Trustees, the President shall have
the power, in the name and on behalf of the Trust, to execute any and all loan
documents, contracts, agreements, deeds, mortgages, and other instruments in
writing, and to employ and discharge employees and agents of the Trust. Unless
otherwise directed by the Trustees, the President shall have full authority and
power, on behalf of all of the Trustees, to attend and to act and to vote, on
behalf of the Trust at any meetings of business organizations in which the Trust
holds an interest, or to confer such powers upon any other persons, by executing
any proxies duly authorizing such persons. The President shall have such
further authorities and duties as the Trustees shall from time to time
determine. In the absence or disability of the President, the Vice Presidents
in order of their rank or the Vice President designated by the Trustees, shall
perform all of the duties of President, and when so acting shall have all the
powers of and be subject to all of the restrictions upon the President. Subject
to the direction of the President, the Treasurer and each Vice President shall
have the power in the name and on behalf of the Trust to execute any and all
loan documents, contracts, agreements, deeds, mortgages and other instruments in
writing, and, in addition, shall have such other duties and powers as shall be
designated from time to time by the Trustees, the Chairperson, or the President.
Section 3.6 SECRETARY. The Secretary shall keep the minutes of all
meetings of, and record all votes of, Holders, Trustees and any committees of
Trustees, provided that, in the absence or disability of the Secretary, the
Holders or Trustees or committee may appoint any other person to keep the
minutes of a meeting and record votes. The Secretary shall attest the signature
or signatures of the officer or officers executing any instrument on behalf of
the Trust. The Secretary shall also perform any other duties commonly incident
to such office in a Delaware business trust and shall have such other
authorities and duties as the Trustees shall from time to time determine.
Section 3.7 TREASURER. Except as otherwise directed by the Trustees,
the Treasurer shall have the general supervision of the monies, funds,
securities, notes receivable and other valuable papers and documents of the
Trust, and shall have and exercise under the supervision of the Trustees and of
the Chairperson and the President all powers and duties normally incident to his
office. He or she may endorse for deposit or collection all notes, checks and
other instruments payable to the Trust or to its order. He or she shall deposit
all funds of the Trust as may be ordered by the Trustees, the Chairperson or the
President. He or she shall keep accurate account of the books of the Trust's
transactions which shall be the property of the Trust and which, together with
all other property of the Trust in his or her possession, shall be subject at
all times to the inspection and control of the Trustees. Unless the Trustees
shall otherwise determine, the Treasurer shall be the principal accounting
officer of the Trust and shall also be the principal financial officer of the
Trust. He or she shall have such other duties and authorities as the Trustees
shall from time to time determine. Notwithstanding anything to the contrary
herein contained, the Trustees may authorize any adviser or administrator to
maintain bank accounts and deposit and disburse funds on behalf of the Trust.
Section 3.8 OTHER OFFICERS AND DUTIES. The Trustees may elect such
other officers and assistant officers as they shall from time to time determine
to be necessary or desirable in order to conduct the business of the Trust.
Assistant officers shall act generally in the absence of the officer whom they
assist and shall assist that officer in the duties of his or her office. Each
officer, employee and agent of the Trust shall have such other duties and
authority as may be conferred upon him or her by the Trustees or delegated to
him or her by the President.
ARTICLE IV
Custodian
---------
Section 4.1 APPOINTMENT AND DUTIES. The Trustees shall at all times
employ a custodian or custodians with authority as its agent, but subject to
such restrictions, limitations and other requirements, if any, as may be
contained in these By-Laws:
(1) to hold the securities owned by the Trust and deliver the
same upon written order;
(2) to receive and receipt for any moneys due to the Trust and
deposit the same in its own banking department or elsewhere as the Trustees
may direct;
(3) to disburse such funds upon orders or vouchers;
(4) if authorized by the Trustees, to keep the books and accounts
of the Trust and furnish clerical and accounting services; and
(5) if authorized to do so by the Trustees, to compute the net
income and net assets of the Trust;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. The Trustees may also authorize the custodian to employ one
or more subcustodians, from time to time, to perform such of the acts and
services of the custodian and upon such terms and conditions as may be agreed
upon between the custodian and such sub-custodian and approved by the Trustee.
Section 4.2 CENTRAL CERTIFICATE SYSTEM. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct the
custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, any such other person or
entity with which the Trustees may authorize deposit in accordance with the 1940
Act.
ARTICLE V
Miscellaneous
-------------
Section 5.1 DEPOSITORIES. In accordance with Article IV of these By-
Laws, the funds of the Trust shall be deposited in such depositories as the
Trustees shall designate and shall be drawn out on checks, drafts or other
orders signed by such officer, officers, agent or agents (including any adviser
or administrator), as the Trustees may from time to time authorize.
Section 5.2 SIGNATURES. All contracts and other instruments shall be
executed on behalf of the Trust by such officer, officers, agent or agents, as
provided in these By-Laws or as the Trustees may from time to time by resolution
or authorization provide.
Section 5.3 SEAL. The seal of the Trust shall, subject to alteration
by the Trustees, consist of a flat-faced circular die with the word "Delaware",
together with the name of the Trust and the year of its organization, cut or
engraved thereon; but, unless otherwise required by the Trustees, the seal shall
not be necessary to be placed on, and its absence shall not impair the validity
of, any document, instrument or other paper executed and delivered by or on
behalf of the Trust.
Section 5.4 FISCAL YEAR. The fiscal year of the Trust shall end on
October 31 of each year, subject, however, to change from time to time by the
Board of Trustees.
ARTICLE VI
Interests
---------
Section 6.1 INTERESTS. Except as otherwise provided by law, the
Trust shall be entitled to recognize the exclusive right of a person in whose
name Interests stand on the record of Holders as the owners of such Interests
for all purposes, including, without limitation, the rights to receive
distributions, and to vote as such owner, and the Trust shall not be bound to
recognize any owner, and the Trust shall not be bound to recognize any equitable
or legal claim to or interest in any such Interests on the part of any other
person.
Section 6.2 REGULATIONS. The Trustees may make such additional rules
and regulations, not inconsistent with these By-Laws, as they may deem expedient
concerning the sale and purchase of Interests of the Trust.
Section 6.3 DISTRIBUTION DISBURSING AGENTS AND THE LIKE. The
Trustees shall have the power to employ and compensate such distribution
disbursing agents, warrant agents and agents for the reinvestment of
distributions as they shall deem necessary or desirable. Any of such agents
shall have such power and authority as is delegated to any of them by the
Trustees.
ARTICLE VII
Amendment of By-Laws
--------------------
Section 7.1 AMENDMENT AND REPEAL OF BY-LAWS. In accordance with
Section 2.7 of the Declaration, the Trustees shall have the power to alter,
amend or repeal the By-Laws or adopt new By-Laws at any time. The Trustees
shall in no event adopt By-Laws which are in conflict with the Declaration,
DBTA, the 1940 Act or applicable federal securities laws.
Section7.2 NO PERSONAL LIABILITY. The Declaration establishing the
THE GARZARELLI FUNDS provides that the name "THE GARZARELLI FUNDS" does not
refer to the Trustees as individuals or personally; and no Trustee, officer,
employee or agent of, or Holder of Interest in, THE GARZARELLI FUNDS shall be
held to any personal liability, nor shall resort be had to their private
property for the satisfaction of any obligation or claim or otherwise in
connection with the affairs of THE GARZARELLI FUNDS (except to the extent of a
Holder's Interest in the Trust).
INVESTMENT ADVISORY AGREEMENT
THE GARZARELLI FUNDS, a Delaware business trust registered under the
Investment Company Act of 1940 ("1940 Act") as an open-end diversified
management investment company ("Trust"), hereby appoints GARZARELLI INVESTMENT
MANAGEMENT LLC, an Illinois limited liability company registered under the
Investment Advisers Act of 1940 as an investment adviser ("Adviser"), to furnish
investment advisory and portfolio management services with respect to the
portion of its assets represented by the shares of beneficial interest issued
in the series designated GARZARELLI BALANCED FUND (the "Fund"). Trust and
Adviser hereby agree that:
1. INVESTMENT ADVISORY SERVICES. Adviser shall manage the investment
operations of the Fund, subject to the terms of this Agreement and to the
supervision and control of Trust's Board of Trustees ("Trustees"). Adviser
agrees to perform, or arrange for the performance of, the following services
with respect to the Fund:
(a) to obtain and evaluate such information relating to economies,
industries, businesses, securities and commodities markets, and
individual securities, commodities and indices as it may deem
necessary or useful in discharging its responsibilities hereunder;
(b) to formulate and maintain a continuing investment program in a manner
consistent with and subject to (i) Trust's agreement and declaration
of trust and by-laws; (ii) the Fund's investment objectives, policies,
and restrictions as set forth in written documents furnished by the
Trust to Adviser; (iii) all securities, commodities, and tax laws and
regulations applicable to the Fund and Trust; and (iv) any other
written limits or directions furnished by the Trustees to Adviser;
(c) unless otherwise directed by the Trustees, to determine from time to
time securities, commodities, interests or other investments to be
purchased, sold, retained or lent by the Fund, and to implement those
decisions, including the selection of entities with or through which
such purchases, sales or loans are to be effected;
(d) to use reasonable efforts to manage the Fund so that it will qualify
as a regulated investment company under subchapter M of the Internal
Revenue Code of 1986, as amended;
(e) to make recommendations as to the manner in which voting rights,
rights to consent to Trust or Fund action, and any other rights
pertaining to Trust or the Fund shall be exercised;
(f) to make available to Trust promptly upon request all of the Fund's
records and ledgers and any reports or information reasonably
requested by the Trust; and
(g) to the extent required by law, to furnish to regulatory authorities
any information or reports relating to the services provided pursuant
to this Agreement.
Except as otherwise instructed from time to time by the Trustees, with
respect to execution of transactions on behalf of the Fund, Adviser shall place,
or arrange for the placement of, all orders for purchases, sales, or loans with
issuers, brokers, dealers or other counterparties or agents selected by Adviser.
In connection with the selection of all such parties for the placement of all
such orders, Adviser shall attempt to obtain most favorable execution and price,
but may nevertheless in its sole discretion as a secondary factor, purchase and
sell portfolio securities from and to brokers and dealers who provide Adviser
with statistical, research and other information, analysis, advice, and similar
services. In recognition of such services or brokerage services provided by a
broker or dealer, Adviser is hereby authorized to pay such broker or dealer a
commission or spread in excess of that which might be charged by another broker
or dealer for the same transaction if the Adviser determines in good faith that
the commission or spread is reasonable in relation to the value of the services
so provided.
Adviser may, where it deems to be advisable, aggregate orders for its other
customers together with any securities of the same type to be sold or purchased
for the Fund in order to obtain best execution or lower brokerage commissions.
In such event, Adviser shall allocate the shares so purchased or sold, as well
as the expenses incurred in the transaction, in a manner it considers to be
equitable and fair and consistent with its fiduciary obligations to the Fund,
and Adviser's other customers.
Adviser shall for all purposes be deemed to be an independent contractor
and not an agent of Trust and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent Trust in any way.
2. USE OF AFFILIATED COMPANIES AND SUBCONTRACTORS. In connection with
the services to be provided by Adviser under this Agreement, Adviser may, to the
extent it deems appropriate, and subject to compliance with the requirements of
applicable laws and regulations and upon receipt of written approval of the
Trustees, make use of (i) its affiliated companies and their directors,
trustees, officers, and employees and (ii) subcontractors selected by Adviser,
provided that Adviser shall supervise and remain fully responsible for the
services of all such third parties in accordance with and to the extent provided
by this Agreement. All costs and expenses associated with services provided by
any such third parties shall be borne by Adviser or such parties.
3. EXPENSES BORNE BY TRUST. Except to the extent expressly assumed by
Adviser herein or under a separate agreement between Trust and Adviser and
except to the extent required by law to be paid by Adviser, Adviser shall not be
obligated to pay any costs or expenses incidental to the organization,
operations or business of the Trust. Without limitation, such costs and
expenses shall include but not be limited to:
(a) all charges of depositories, custodians and other agencies for the
safekeeping and servicing of its cash, securities, and other property;
(b) all charges for equipment or services used for obtaining price
quotations or for communication between Adviser or Trust and the
custodian, transfer agent or any other agent selected by Trust;
(c) all charges for administrative and accounting services provided to
Trust by Adviser, or any other provider of such services;
(d) all charges for services of Trust's independent auditors and for
services to Trust by legal counsel;
(e) all compensation of Trustees, other than those affiliated with
Adviser, all expenses incurred in connection with their services to
Trust, and all expenses of meetings of the Trustees or committees
thereof;
(f) all expenses incidental to holding meetings of shareholders of the
Trust, including printing and of supplying each record-date
shareholder with notice and proxy solicitation material, and all other
proxy solicitation expense;
(g) all expenses of printing of annual or more frequent revisions of Trust
prospectus(es) and of supplying each then-existing shareholder with a
copy of a revised prospectus;
(h) all expenses related to preparing and transmitting certificates
representing Trust shares;
(i) all expenses of bond and insurance coverage required by law or deemed
advisable by the Board of Trustees;
(j) all brokers' commissions and other normal charges incident to the
purchase, sale, or lending of portfolio securities;
(k) all taxes and governmental fees payable to Federal, state or other
governmental agencies, domestic or foreign, including all stamp or
other transfer taxes;
(l) all expenses of registering and maintaining the registration of Trust
under the 1940 Act and, to the extent no exemption is available,
expenses of registering Trust's shares under the 1933 Act, of
qualifying and maintaining qualification of Trust and of Trust's
shares for sale under securities laws of various states or other
jurisdictions and of registration and qualification of Trust under all
other laws applicable to Trust or its business activities;
(m) all interest on indebtedness, if any, incurred by Trust or a Fund; and
(n) all fees, dues and other expenses incurred by Trust in connection with
membership of Trust in any trade association or other investment
company organization.
4. ALLOCATION OF EXPENSES BORNE BY TRUST. Any expenses borne by Trust
that are attributable solely to the organization, operation or business of the
Fund shall be paid solely out of Fund assets. Any expense borne by Trust which
is not solely attributable to the Fund, nor solely to any other series of shares
of Trust, shall be apportioned in such manner as Adviser determines is fair and
appropriate, or as otherwise specified by the Board of Trustees.
5. EXPENSES BORNE BY ADVISER. Adviser at its own expense shall furnish
all executive and other personnel, office space, and office facilities required
to render the investment advisory services set forth in this Agreement.
In the event that Adviser pays or assumes any expenses of Trust or the Fund
not required to be paid or assumed by Adviser under this Agreement, Adviser
shall not be obligated hereby to pay or assume the same or similar expense in
the future; PROVIDED that nothing contained herein shall be deemed to relieve
Adviser of any obligation to Trust or the Fund under any separate agreement or
arrangement between the parties.
6. INVESTMENT ADVISORY FEE. For the services rendered, facilities
provided, and charges assumed and paid by Adviser hereunder, Trust shall pay to
Adviser out of Fund assets a fee at the annual rate of 0.75%. The fee shall
accrue on each calendar day, and shall be payable monthly on the first business
day of the next succeeding calendar month. The daily fee accrual shall be
computed by multiplying the fraction of one divided by the number of days in the
calendar year by the applicable annual rate of fee, and multiplying this product
by the net assets of the Fund, determined in the manner established by the Board
of Trustees, as of the close of business on the last preceding business day on
which the Fund's net asset value was determined.
7. RETENTION OF SUB-ADVISER. Subject to obtaining the initial and
periodic approvals required under Section 15 of the 1940 Act, Adviser may retain
one or more sub-advisers at Adviser's own cost and expense for the purpose of
furnishing one or more of the services described in Section 1 hereof with
respect to the Fund. Retention of a sub-adviser shall in no way reduce the
responsibilities or obligations of Adviser under this Agreement, and Adviser
shall be responsible to Trust and its Funds for all acts or omissions of any
sub-adviser in connection with the performance of Adviser's duties hereunder.
8. NON-EXCLUSIVITY. The services of Adviser to Trust hereunder are not
to be deemed exclusive and Adviser shall be free to render similar services to
others.
9. STANDARD OF CARE. Neither Adviser, nor any of its members, officers,
managers, agents or employees shall be liable to Trust or its shareholders for
any error of judgment, mistake of law, loss arising out of any investment, or
any other act or omission in the performance by Adviser of its duties under this
Agreement, except for loss or liability resulting from willful misfeasance, bad
faith or gross negligence on Adviser's part or from reckless disregard by
Adviser of its obligations and duties under this Agreement.
10. AMENDMENT. This Agreement may not be amended without the affirmative
votes (a) of a majority of the Board of Trustees, including a majority of those
Trustees who are not "interested persons" of Trust or of Adviser, voting in
person at a meeting called for the purpose of voting on such approval, and (b)
of a "majority of the outstanding shares" of the Fund. The terms
"interested persons" and "vote of a majority of the outstanding
shares" shall be construed in accordance with their respective definitions
in the 1940 Act and, with respect to the latter term, in accordance with Rule
18f-2 under the 1940 Act.
11. EFFECTIVE DATE AND TERMINATION. This Agreement shall become effective
on the date hereof. This Agreement may be terminated at any time, without
payment of any penalty, by the Board of Trustees of Trust, or by a vote of a
majority of the outstanding shares of the Fund, upon at least sixty
(60) days' written notice to Adviser. This Agreement may be terminated by
Adviser at any time upon at least sixty (60) days' written notice to Trust.
This Agreement shall terminate automatically in the event of its "assignment"
(as defined in the 1940 Act). Unless terminated as hereinbefore provided, this
Agreement shall continue in effect until March 31, 1999 and thereafter from year
to year only so long as such continuance is specifically approved at least
annually (a) by a majority of those Trustees who are not interested persons of
Trust or of Adviser, voting in person at a meeting called for the purpose of
voting on such approval, and (b) by either the Board of Trustees of Trust or
by a "vote of a majority of the outstanding shares" of the Fund.
12. OWNERSHIP OF RECORDS; REPORTING. All records required to be
maintained and preserved by Trust pursuant to the provisions of rules or
regulations of the Securities and Exchange Commission under Section 31(a) of the
1940 Act or other applicable laws or regulations which are maintained and
preserved by Adviser on behalf of Trust and any other records the parties
mutually agree shall be maintained by Adviser on behalf of Trust are the
property of Trust and shall be surrendered by Adviser promptly on request by
Trust; PROVIDED that Adviser may at its own expense make and retain copies of
any such records.
Adviser shall prepare and furnish to Trust as to the Fund statistical data
and other information in such form and at such intervals as Trust may reasonably
request.
13. NON-LIABILITY OF TRUSTEES AND SHAREHOLDERS. Any obligation of Trust
hereunder shall be binding only upon the assets of the Fund and shall not be
binding upon any Trustee, officer, employee, agent or shareholder of Trust.
Neither the authorization of any action by the Trustees or shareholders of Trust
nor the execution of this Agreement on behalf of Trust shall impose any
liability upon any Trustee or any shareholder.
14. USE OF ADVISER'S NAME. Trust may use the name "The Garzarelli Funds"
and the Fund may use the name "Garzarelli Balanced Fund" or any other name
derived from the name "Garzarelli" only for so long as this Agreement or any
extension, renewal, or amendment hereof remains in effect, including any similar
agreement with any organization which shall have succeeded to the business of
Adviser as investment adviser. At such time as this Agreement or any extension,
renewal or amendment hereof, or such other similar agreement shall no longer be
in effect, Trust will cease to use any name derived from the name "Garzarelli"
or otherwise connected with Adviser, or with any organization which shall have
succeeded to Adviser's business as investment adviser.
15. APPLICABLE LAW. This Agreement shall be construed in accordance with
applicable federal law and (except as to Section 13 above which will be
construed in accordance with Delaware law) the laws of the State of Illinois.
16. REFERENCES AND HEADINGS. In this Agreement and in any such amendment,
references to this Agreement and all expressions such as "herein," "hereof," and
"hereunder" shall be deemed to refer to this Agreement as amended or affected by
any such amendments. Headings are placed herein for convenience of reference
only and shall not be taken as a part hereof or control or affect the meaning,
construction or effect of this Agreement. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original.
Dated: March 31, 1997
Attest: THE GARZARELLI FUNDS
/s/ Andrew J. Goodwin, III By: /s/ H. Steel Bokhof,Jr.
- -------------------------- ---------------------------
Andrew J. Goodwin, III H. Steel Bokhof, Jr.
Secretary President
Attest: GARZARELLI INVESTMENT MANAGEMENT LLC
/s/ Andrew J. Goodwin, III By: /s/ H. Steel Bokhof,Jr.
- -------------------------- ---------------------------
Andrew J. Goodwin, III H. Steel Bokhof, Jr.
Secretary President
SUB-ADVISORY AGREEMENT
AGREEMENT, made this 31st day of March, 1997, by and between GARZARELLI
INVESTMENT MANAGEMENT LLC, an Illinois limited liability company registered
under the Investment Advisers Act of 1940 ("Advisers Act") as an investment
adviser ("Adviser"), and AFFINITY INVESTMENT ADVISERS, INC., a California
corporation registered under the Advisers Act as an investment adviser ("Sub-
Adviser").
WHEREAS, THE GARZARELLI FUNDS, a Delaware business trust (the "Trust"), is
an open-end, management investment company registered under the Investment
Company Act of 1940 (the "1940 Act");
WHEREAS, the Trust has retained the Adviser to render to it investment
advisory services for the portion of its assets represented by the shares of
beneficial interest issued in the series designated GARZARELLI BALANCED FUND
(the "Fund") pursuant to an Investment Advisory Agreement dated March 31, 1997
(the "Investment Advisory Agreement");
WHEREAS, the Adviser desires at this time to retain Sub-Adviser to render
investment advisory services for that portion of the assets of the Fund
designated by the Adviser for investment in equity securities and Sub-Adviser is
willing to render such services;
NOW THEREFORE, in consideration of the mutual covenants herein contained,
it is hereby agreed by and between the parties as follows:
1. SUB-ADVISORY SERVICES. The Adviser hereby employs the Sub-Adviser to
render investment advisory services for that portion of the assets of the Fund
designated by the Adviser for investment in equity securities, subject to the
terms of this Agreement and to the supervision and control of the Adviser and
the Trust's Board of Trustees ("Trustees"). Sub-Adviser agrees to perform the
following services with respect to the Fund:
(a) to obtain and evaluate such information relating to economies,
industries, businesses, securities and commodities markets, and
individual securities, commodities and indices as it may deem
necessary or useful in discharging its responsibilities hereunder;
(b) to provide investment advice with respect to the investment and
reinvestment of the Fund assets designated by the Adviser for
investment in equity securities consistent with and subject to (i)
Trust's agreement and declaration of trust and by-laws; (ii) the
Fund's investment objectives, policies, and restrictions as set forth
in written documents furnished by the Trust or Adviser to Sub-Adviser;
(iii) all securities, commodities, and tax laws and regulations
applicable to the Fund and Trust; and (iv) any other written limits or
directions furnished by the Trust or Adviser to Sub-Adviser;
(c) unless otherwise directed by the Trustees, in consultation with and
subject to the approval of the Adviser, to determine from time to time
securities, commodities, interests or other investments to be
purchased, sold, retained or lent by the Fund, and to implement those
decisions, including the selection of entities with or through which
such purchases, sales or loans are to be effected;
(d) to use reasonable efforts to manage the Fund so that it will qualify
as a regulated investment company under subchapter M of the Internal
Revenue Code of 1986, as amended;
(e) to make recommendations as to the manner in which voting rights,
rights to consent to Trust or Fund action, and any other rights
pertaining to Trust or the Fund shall be exercised;
(f) to make available to Adviser and Trust promptly upon request all of
the Fund's records and ledgers and any reports or information
reasonably requested by the Adviser or Trust; and
(g) to the extent required by law, to furnish to regulatory authorities
any information or reports relating to the services provided pursuant
to this Agreement.
Except as otherwise instructed from time to time by the Trustees or
Adviser, with respect to execution of transactions on behalf of the Fund, Sub-
Adviser shall place, or arrange for the placement of, all orders for purchases,
sales, or loans with issuers, brokers, dealers or other counterparties or agents
selected by Sub-Adviser. In connection with the selection of all such parties
for the placement of all such orders, Sub-Adviser shall attempt to obtain most
favorable execution and price, but may nevertheless in its sole discretion as a
secondary factor, purchase and sell portfolio securities from and to brokers and
dealers who provide Sub-Adviser with statistical, research and other
information, analysis, advice, and similar services. In recognition of such
services or brokerage services provided by a broker or dealer, Sub-Adviser is
hereby authorized to pay such broker or dealer a commission or spread in excess
of that which might be charged by another broker or dealer for the same
transaction if the Sub-Adviser determines in good faith that the commission or
spread is reasonable in relation to the value of the services so provided.
Sub-Adviser may, where it deems to be advisable, aggregate orders for its
other customers together with any securities of the same type to be sold or
purchased for the Fund in order to obtain best execution or lower brokerage
commissions. In such event, Sub-Adviser shall allocate the shares so purchased
or sold, as well as the expenses incurred in the transaction, in a manner it
considers to be equitable and fair and consistent with its fiduciary obligations
to the Fund, and Sub-Adviser's other customers.
Sub-Adviser shall for all purposes be deemed to be an independent
contractor and not an agent of Trust or Adviser and shall, unless otherwise
expressly provided or authorized, have no authority to act for or represent
Trust or Adviser in any way.
2. EXPENSES BORNE BY SUB-ADVISER. Sub-Adviser at its own expense shall
furnish all executive and other personnel, office space, and office facilities
required to render the investment advisory services set forth in this Agreement.
3. SUB-ADVISORY FEE. For the services rendered and facilities provided
hereunder, Adviser shall pay to Sub-Adviser a fee of 12% of the investment
advisory fees received by the Adviser (net of any fee waivers or expense
reimbursements). The fee shall be payable monthly on the first business day of
the next succeeding calendar month.
4. NON-EXCLUSIVITY. The services of Sub-Adviser hereunder are not to be
deemed exclusive and Sub-Adviser shall be free to render similar services to
others.
5. STANDARD OF CARE. Neither Sub-Adviser, nor any of its directors,
officers, stockholders, agents or employees shall be liable to Adviser or Trust
or its shareholders for any error of judgment, mistake of law, loss arising out
of any investment, or any other act or omission in the performance by Sub-
Adviser of its duties under this Agreement, except for loss or liability
resulting from willful misfeasance, bad faith or gross negligence on Sub-
Adviser's part or from reckless disregard by Sub-Adviser of its obligations and
duties under this Agreement.
6. EFFECTIVE DATE AND TERMINATION. This Agreement shall become effective
on the date hereof. This Agreement may be terminated at any time, without
payment of any penalty, by the Board of Trustees of Trust, or by a vote of a
majority of the outstanding shares of the Fund, upon at least sixty (60) days'
written notice to Adviser and Sub-Adviser. This Agreement may be terminated by
Adviser at any time upon at least sixty (60) days' written notice to Sub-
Adviser. This Agreement may be terminated by Sub-Adviser at any time upon at
least sixty (60) days' written notice to Adviser and Trust. This Agreement
shall terminate automatically in the event of its "assignment" (as defined in
the 1940 Act) or in the event of the termination of the Investment Advisory
Agreement. Unless terminated as hereinbefore provided, this Agreement shall
continue in effect until March 31, 1999 and thereafter from year to year only so
long as such continuance is specifically approved at least annually (a) by a
majority of those Trustees who are not interested persons of Trust, of Adviser
or of Sub-Adviser, voting in person at a meeting called for the purpose of
voting on such approval, and (b) by either the Board of Trustees of Trust or by
a "vote of a majority of the outstanding shares" of the Fund. The terms
"interested persons" and "vote of a majority of the outstanding shares"
shall be construed in accordance with their respective definitions
in the 1940 Act and, with respect to the latter term, in accordance with Rule
18f-2 under the 1940 Act.
7. OWNERSHIP OF RECORDS; REPORTING. All records required to be
maintained and preserved by Trust pursuant to the provisions of rules or
regulations of the Securities and Exchange Commission under Section 31(a) of the
1940 Act or other applicable laws or regulations which are maintained and
preserved by Sub-Adviser on behalf of Trust and any other records the parties
mutually agree shall be maintained by Sub-Adviser on behalf of Trust are the
property of Trust and shall be surrendered by Sub-Adviser promptly on request by
Trust; PROVIDED that Sub-Adviser may at its own expense make and retain copies
of any such records.
Sub-Adviser shall prepare and furnish to Adviser and Trust as to the Fund
statistical data and other information in such form and at such intervals as
Adviser or Trust may reasonably request.
8. APPLICABLE LAW. This Agreement shall be construed in accordance with
applicable federal law and the laws of the State of Illinois.
9. REFERENCES AND HEADINGS. In this Agreement and in any such amendment,
references to this Agreement and all expressions such as "herein," "hereof," and
"hereunder" shall be deemed to refer to this Agreement as amended or affected by
any such amendments. Headings are placed herein for convenience of reference
only and shall not be taken as a part hereof or control or affect the meaning,
construction or effect of this Agreement. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original.
Attest: GARZARELLI INVESTMENT MANAGEMENT LLC
/s/ Andrew J. Goodwin, III By: /s/ H. Steel Bokhof,Jr.
- -------------------------- ---------------------------
Andrew J. Goodwin, III H. Steel Bokhof, Jr.
Secretary President
Attest: AFFINITY INVESTMENT ADVISERS, INC.
/s/ By: /s/ Gregory R. Lai
- -------------------------- ---------------------------
Name Gregory R. Lai
Title President
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of this day of April, 1997, by and between The
---
Garzarelli Funds, a Delaware business trust (the "Trust"), and Sunstone
Distribution Services, LLC, a Wisconsin limited liability company (the
"Distributor").
WHEREAS, the Trust is an open-end investment company registered under the
Investment Company Act of 1940, as amended (the "Act") and is authorized to
issue shares of beneficial interests (the "Shares") in separate series with
each such series representing interests in a separate portfolio of securities
and other assets;
WHEREAS, the Distributor is registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a member of
the National Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Trust and Distributor desire to enter into an agreement
pursuant to which Distributor shall be the distributor of the Shares of the
Trust representing the investment portfolios listed on Schedule A hereto and any
additional investment portfolios the Trust and Distributor may agree upon and
include on Schedule A as such Schedule may be amended from time to time (such
investment portfolios and any additional investment portfolios are individually
referred to as a "Fund" and collectively the "Funds").
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto, intending to be legally bound, do
hereby agree as follows:
1. APPOINTMENT OF THE DISTRIBUTOR.
------------------------------
The Trust hereby appoints the Distributor as agent for the distribution
of the Shares, on the terms and for the period set forth in this Agreement.
Distributor hereby accepts such appointment as agent for the distribution of the
Shares on the terms and for the period set forth in this Agreement.
2. SERVICES AND DUTIES OF THE DISTRIBUTOR.
--------------------------------------
2.1 Distributor will act as agent for the distribution of Shares in
accordance with the instructions of the Trust's Board of Trustees and the
registration statement and prospectuses then in effect with respect to the Funds
under the Securities Act of 1933, as amended (the "1933 Act").
2.2 Subject to the terms of Section 4.2, Distributor may finance
appropriate activities which it deems reasonable which are primarily intended to
result in the sale of Shares, including, but not limited to, advertising, the
printing and mailing of prospectuses to other than current shareholders, and the
printing and mailing of sales literature. Distributor may enter into servicing
and/or selling agreements with qualified broker/dealers and other persons with
respect to the offering of Shares to the public, in the form attached as
Appendix A, and if it so chooses Distributor will act only on its own behalf as
principal. The Distributor shall not be obligated to sell any certain number of
Shares of any Fund.
2.3 All Shares of the Funds offered for sale by Distributor shall be
offered for sale to the public at a price per unit (the "offering price") equal
to their net asset value (determined in the manner set forth in the Funds' then
current prospectus).
2.4 Distributor shall act as distributor of the Shares in compliance in
all material respects with all applicable laws, rules and regulations,
including, without limitation, all rules and regulations made or adopted
pursuant to the 1940 Act, by the Securities and Exchange Commission (the
"Commission") and the NASD. Distributor shall provide to the Trust's Board of
Trustees, at least quarterly, a report of its expenses incurred pursuant to this
Agreement.
3. DUTIES AND REPRESENTATIONS OF THE TRUST.
---------------------------------------
3.1 The Trust represents that it is registered as an open-end management
investment company under the 1940 Act and that it has and will continue to act
in conformity with its Declaration of Trust, By-Laws, its registration statement
as may be amended from time to time and resolutions and other instructions of
its Board of Trustees and has and will continue to comply with all applicable
laws, rules and regulations including without limitation the 1933 Act, the 1934
Act, the 1940 Act, the laws of the states in which shares of the Funds are
offered and sold, and the rules and regulations thereunder.
3.2 The Trust shall take or cause to be taken all necessary action to
register and maintain the registration of the Shares under the 1933 Act for sale
as herein contemplated and shall pay all costs and expenses in connection with
the registration of Shares under the 1933 Act, and be responsible for all
expenses in connection with maintaining facilities for the issue and transfer of
Shares and for supplying information, prices and other data to be furnished by
the Trust hereunder.
3.3 The Trust shall execute any and all documents and furnish any and all
information and otherwise take all actions which may be reasonably necessary in
the discretion of the Trust's officers in connection with the qualification of
the Shares for sale in such states as Distributor and the Trust may approve,
shall maintain the registration of a sufficient number or amount of shares
thereunder, and shall pay all expenses which may be incurred in connection with
such qualification.
3.4 The Trust shall furnish Distributor from time to time, for use in
connection with the sale of Shares, such information with respect to the Trust
and the Shares as Distributor may reasonably request, and the Trust warrants
that the statements contained in any such information shall be true and correct.
The Trust also shall furnish Distributor upon request with respect to each of
the Funds reports of books and accounts, financial statements, and from time to
time such additional information regarding the Trust's financial condition as
Distributor may reasonably request.
3.5 The Trust represents to Distributor that all registration statements
and prospectuses of the Trust filed or to be filed with the Commission under the
1933 Act with respect to the Shares have been and will be prepared in conformity
with the requirements of the 1933 Act, the 1940 Act, and the rules and
regulations of the Commission thereunder. As used in this Agreement the terms
"registration statement" and "prospectus" shall mean any registration statement
and prospectus (together with the related statement of additional information)
at any time now or hereafter filed with the Commission with respect to any of
the Shares and any amendments and supplements thereto which at any time shall
have been or will be filed with said Commission. The Trust represents and
warrants to Distributor that any registration statement and prospectus, when
such registration statement becomes effective, will contain all statements
required to be stated therein in conformity with the 1933 Act, the 1940 Act and
the rules and regulations of the Commission; that all statements of fact
contained in the registration statement and prospectus will be true and correct
in all material respects when such registration statement becomes effective; and
that neither the registration statement nor any prospectus when such
registration statement becomes effective will include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading to a purchaser of
Shares. The Trust agrees to file from time to time such amendments,
supplements, reports and other documents as may be necessary in order to comply
with the 1933 Act and the 1940 Act and in order that there may be no untrue
statement of a material fact in a registration statement or prospectus, or
necessary in order that there may be no omission to state a material fact in the
registration statement or prospectus which omission would make the statements
therein misleading. If the Trust shall not propose an amendment or amendments
and/or supplement or supplements within fifteen days after receipt by the Trust
of a written request in good faith from Distributor to do so, Distributor may,
at its option, immediately terminate this Agreement. The Trust shall not file
any amendment to the registration statement or supplement to any prospectus
without giving Distributor reasonable notice thereof in advance; provided,
however, that nothing contained in this Agreement shall in any way limit the
Trust's right to file at any time such amendments to any registration statement
and/or supplements to any prospectus, of whatever character, as the Trust may
deem advisable, such right being in all respects absolute and unconditional.
3.6 Whenever in their judgment such action is warranted by market,
economic or political conditions, or by circumstances of any kind, the Trust's
officers may decline to accept any orders for, or make any sales of, any Shares
until such time as they deem it advisable to accept such orders and to make such
sales and the Trust shall advise Distributor promptly of such determination.
3.7 The Trust agrees to advise the Distributor promptly in writing:
(i) of any correspondence or other communication by the Commission
or its staff relating to the Funds including requests by the Commission for
amendments to the registration statement or prospectuses;
(ii) in the event of the issuance by the Commission of any stop
order suspending the effectiveness of the registration statement or prospectuses
then in effect or the initiation of any proceeding for that purpose;
(iii) of the happening of any event which makes untrue any statement
of a material fact made in the registration statement or prospectuses or which
requires the making of a change in such registration statement or prospectuses
in order to make the statements therein not misleading; and
(iv) of all actions taken by the Commission with respect to any
amendments to any registration statement or prospectus which may from time to
time be filed with the Commission.
4. COMPENSATION.
------------
4.1 For the services provided pursuant to this Agreement, and subject to
the limitations contained in Section 4.3 below, the Funds will pay to the
Distributor a fee, payable monthly in arrears, at the annual rate of 0.025% per
annum of each Fund's average daily net assets; provided, however, that such
compensation shall be subject to an aggregate minimum annual fee of $25,000.
4.2 In addition to the compensation payable pursuant to Section 4.1, and
subject to the limitations contained in Section 4.3 below, the Funds will
reimburse the Distributor or pay directly, at the Distributor's discretion, the
Distributor's (i) out-of-pocket expenses incurred in connection with activities
primarily intended to result in the sale of Shares including, without
limitation, typesetting, printing and distribution of prospectuses and
shareholder reports, production, printing and distribution of sales materials
and forms, placement of media advertising, engagement of designers, free lance
writers and public relation firms, long distance telephone lines, services and
charges, postage, overnight delivery charges, storage of inventory, regulatory
filing fees and travel, lodging and meals, and (ii) amounts paid by Distributor
to dealers or other persons entering into a selling or servicing agreement with
Distributor.
4.3 Subject to and calculated in accordance with the Rules of Fair
Practice of the National Association of Securities Dealers, Inc., if during any
annual period the total of the compensation payable and out-of-pocket
reimbursements under Sections 4.1 and 4.2 to the Distributor exceeds 0.25% of a
Fund's average daily net assets, the Distributor will rebate that portion of its
fee necessary to result in the total of (i) and (ii) above not exceeding 0.25%
of the Fund's average daily net assets. The payment of compensation and
reimbursement of expenditures is authorized pursuant to the Trust's Service and
Distribution Plan under Rule 12b-1 under the 1940 Act and is contingent upon the
continued effectiveness of the Trust's Service and Distribution Plan.
5. INDEMNIFICATION.
---------------
5.1(a) The Trust authorizes Distributor to use any prospectus, in the
form furnished to Distributor from time to time, in connection with the sale of
Shares. The Trust shall indemnify, defend and hold the Distributor, and each of
its present or former directors, officers, employees, representatives and any
person who controls or previously controlled the Distributor within the meaning
of Section 15 of the 1933 Act, free and harmless from and against any and all
losses, claims, demands, liabilities, damages and expenses (including the costs
of investigating or defending any alleged losses, claims, demands, liabilities,
damages or expenses and any counsel fees incurred in connection therewith) which
Distributor, each of its present and former directors, officers, employees or
representatives or any such controlling person, may incur under the 1933 Act,
the 1934 Act, any other statute (including Blue Sky laws) or any rule or
regulation thereunder, or under common law or otherwise, arising out of or based
upon any untrue statement, or alleged untrue statement, of a material fact
contained in the registration statement or any prospectus, as from time to time
amended or supplemented, or an annual or interim report to shareholders, or
arising out of or based upon any omission, or alleged omission, to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that the Trust's
obligation to indemnify Distributor and any of the foregoing indemnitees shall
not be deemed to cover any losses, claims, demands, liabilities, damages or
expenses arising out of any untrue statement or alleged untrue statement or
omission or alleged omission made in the registration statement, prospectus, or
annual or interim report in reliance upon and in conformity with information
relating to the Distributor and furnished to the Trust or its counsel by
Distributor for the purpose of, and used in, the preparation thereof; and
provided further that the Trust's agreement to indemnify Distributor and any of
the foregoing indemnitees shall not be deemed to cover any liability to the
Trust or its shareholders to which Distributor would otherwise be subject by
reason of its willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its
obligations and duties under this Agreement. The Trust's agreement to indemnify
the Distributor, and any of the foregoing indemnitees, as the case may be, with
respect to any action, is expressly conditioned upon the Trust being notified of
such action brought against Distributor, or any of the foregoing indemnitees,
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the
Distributor, or such person, such notification to be given by letter or by
telegram addressed to the Trust's President, but the failure so to notify the
Trust of any such action shall not relieve the Trust from any liability which
the Trust may have to the person against whom such action is brought by reason
of any such untrue, or alleged untrue, statement or omission, or alleged
omission, otherwise than on account of the Trust's indemnity agreement contained
in this Section 5.1.
5.1(b) The Trust shall be entitled to participate at its own expense in
the defense or, if it so elects, to assume the defense of any suit brought to
enforce any such loss, claim, demand, liability, damage or expense, but if the
Trust elects to assume the defense, such defense shall be conducted by counsel
chosen by the Trust and approved by the Distributor, which approval shall not be
unreasonably withheld. In the event the Trust elects to assume the defense of
any such suit and retain such counsel, the indemnified defendant or defendants
in such suit shall bear the fees and expenses of any additional counsel retained
by them. If the Trust does not elect to assume the defense of any such suit, or
in case the Distributor does not, in the exercise of reasonable judgment,
approve of counsel chosen by the Trust, the Trust will reimburse the indemnified
person or persons named as defendant or defendants in such suit, for the fees
and expenses of any counsel retained by Distributor and them. The Trust's
indemnification agreement contained in this Section 5.1 and the Trust's
representations and warranties in this Agreement shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
the Distributor, and each of its present or former directors, officers,
employees, representatives or any controlling person, and shall survive the
delivery of any Shares and the termination of this Agreement. This Agreement of
indemnity will inure exclusively to the Distributor's benefit, to the benefit of
each of its present or former directors, officers, employees or representatives
or to the benefit of any controlling persons and their successors. The Trust
agrees promptly to notify Distributor of the commencement of any litigation or
proceedings against the Trust or any of its officers or directors in connection
with the issue and sale of any of the Shares.
5.2(a) Distributor shall indemnify, defend and hold the Trust, and each
of its present or former trustees, officers, employees, representatives, and any
person who controls or previously controlled the Trust within the meaning of
Section 15 of the 1933 Act, free and harmless from and against any and all
losses, claims, demands, liabilities, damages and expenses (including the costs
of investigating or defending any alleged losses, claims, demands, liabilities,
damages or expenses, and any counsel fees incurred in connection therewith)
which the Trust, and each of its present or former trustees, officers,
employees, representatives, or any such controlling person, may incur under the
1933 Act, the 1934 Act, any other statute (including Blue Sky laws) or any rule
or regulation thereunder, or under common law or otherwise, arising out of or
based upon any untrue, or alleged untrue, statement of a material fact contained
in the Trust's registration statement or any prospectus, as from time to time
amended or supplemented, or annual or interim report to shareholders or the
omission, or alleged omission, to state therein a material fact required to be
stated therein or necessary to make the statement not misleading, but only if
such statement or omission was made in reliance upon, and in conformity with,
information relating to the Distributor and furnished to the Trust or its
counsel by the Distributor for the purpose of, and used in, the preparation
thereof. Distributor's agreement to indemnify the Trust and any of the
foregoing indemnitees shall not be deemed to cover any liability to Distributor
to which the Trust would otherwise be subject by reason of its willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
by reason of its reckless disregard of its obligations and duties, under this
Agreement. The Distributor's Agreement to indemnify the Trust, and any of the
foregoing indemnitees, is expressly conditioned upon the Distributor's being
notified of any action brought against the Trust, and any of the foregoing
indemnitees, such notification to be given by letter or telegram addressed to
Distributor's President, within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall have
been served upon the Trust or such person, but the failure so to notify
Distributor of any such action shall not relieve Distributor from any liability
which Distributor may have to the person against whom such action is brought by
reason of any such untrue, or alleged untrue, statement or omission, otherwise
than on account of Distributor's indemnity agreement contained in this Section
5.2(a).
5.2(b) The Distributor shall be entitled to participate at its own
expense in the defense or, if it so elects, to assume the defense of any suit
brought to enforce any such loss, claim, demand, liability, damage or expense,
but if the Distributor elects to assume the defense, such defense shall be
conducted by counsel chosen by the Distributor and approved by the Trust, which
approval shall not be unreasonably withheld. In the event the Distributor
elects to assume the defense of any such suit and retain such counsel, the
indemnified defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by them. If the Distributor does
not elect to assume the defense of any such suit, or in case the Trust does not,
in the exercise of reasonable judgment, approve of counsel chosen by the
Distributor, the Distributor will reimburse the indemnified person or persons
named as defendant or defendants in such suit, for the fees and expenses of any
counsel retained by the Trust and them. The Distributor's indemnification
agreement contained in this Section 5.2 and the Distributor's representations
and warranties in this Agreement shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of the Trust, and
each of its present or former directors, officers, employees, representatives or
any controlling person, and shall survive the delivery of any Shares and the
termination of this Agreement. This Agreement of indemnity will inure
exclusively to the Trust's benefit, to the benefit of each of its present or
former directors, officers, employees or representatives or to the benefit of
any controlling persons and their successors. The Distributor agrees promptly
to notify the Trust of the commencement of any litigation or proceedings against
the Distributor or any of its officers or directors in connection with the issue
and sale of any of the Shares.
6. OFFERING OF SHARES.
------------------
No Shares shall be offered by either the Distributor or the Trust under any
of the provisions of this Agreement and no orders for the purchase or sale of
such Shares hereunder shall be accepted by the Trust if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the 1933
Act, or if and so long as the current prospectus as required by Section 10 of
the 1933 Act, as amended, is not on file with the Commission; provided, however,
that nothing contained in this paragraph 6 shall in any way restrict or have an
application to or bearing upon the Trust's obligation to repurchase Shares from
any shareholder in accordance with the provisions of the prospectus or
Declaration of Trust.
7. TERM.
----
7.1 This Agreement shall become effective with respect to each Fund listed
on Schedule A hereof as of the date hereof and, with respect to each Fund not in
existence on that date, on the date an amendment to Schedule A to this Agreement
relating to that Fund is executed. Unless sooner terminated as provided herein,
this Agreement shall continue in effect with respect to each Fund until April
__, 1998. Thereafter, if not terminated, this Agreement shall continue
automatically in effect as to each Fund for successive annual periods, provided
such continuance is specifically approved at least annually by (i) the Trust's
Board of Trustees or (ii) the vote of a majority (as defined in the 1940 Act) of
the outstanding voting securities of a Fund, and provided that in either event
the continuance is also approved by the Distributor and a majority of the
Trust's Board of Trustees who are not "interested persons" (as defined in the
1940 Act) of any party to this Agreement, by vote cast in person at a meeting
called for the purpose of voting on such approval.
7.2 This Agreement may be terminated without penalty with respect to a
particular Fund (1) through a failure to renew this Agreement at the end of a
term, (2) upon mutual consent of the parties, or (3) on no less than thirty (30)
days' written notice, by the Trust's Board of Trustees, by vote of a majority
(as defined with respect to voting securities in the 1940 Act) of the
outstanding voting securities of a Fund, or by the Distributor (which notice may
be waived by the party entitled to such notice). In addition, this Agreement
may be terminated at any time, without penalty, with respect to a particular
Fund by vote of a majority of the members of the Board of Trustees who are not
interested persons of the Trust (as defined in the 1940 Act) and have no direct
or indirect financial interest in the operation of the Trust's Service and
Distribution Plan or in this Agreement. The terms of this Agreement shall not be
waived, altered, modified, amended or supplemented in any manner whatsoever
except by a written instrument signed by the Distributor and the Trust. This
Agreement will also terminate automatically in the event of its assignment (as
defined in the 1940 Act).
8. MISCELLANEOUS.
-------------
8.1 The services of the Distributor rendered to the Funds are not deemed
to be exclusive. The Distributor may render such services and any other
services to others, including other investment companies. The Trust recognizes
that from time to time directors, officers, and employees of the Distributor may
serve as directors, trustees, officers and employees of other entities
(including other investment companies), that such other entities may include the
name of the Distributor as part of their name and that the Distributor or its
affiliates may enter into distribution, administration, fund accounting,
transfer agent or other agreements with such other entities.
8.2 Distributor agrees on behalf of itself and its employees to treat
confidentially and as proprietary information of the Trust all records relative
to the Funds and prior, present or potential shareholders of the Trust (and
clients of said shareholders), and not to use such records and information for
any purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Trust, which
approval may not be withheld where the Distributor may be exposed to civil or
criminal proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, when subject to governmental or
regulatory audit or investigation, or when so requested by the Trust. Records
and information which have become known to the public through no wrongful act of
the Distributor or any of its employees, agents or representatives shall not be
subject to this paragraph.
8.3 This Agreement shall be governed by Wisconsin law (except as to
Section 8.4 hereof which shall be construed in accordance with Delaware law).
To the extent that the applicable laws of the State of Wisconsin, or any of the
provisions herein, conflict with the applicable provisions of the 1940 Act, the
latter shall control, and nothing herein shall be construed in a manner
inconsistent with the 1940 Act or any rule or order of the Commission
thereunder. Any provision of this Agreement which may be determined by
competent authority to be prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
8.4 This Agreement is executed by or on behalf of the Trust and the
obligations hereunder are not binding upon any of the Trustees, officers or
shareholders of the Trust individually but are binding only upon the Funds to
which such obligations pertain and the assets and property of such Funds.
8.5 Any notice required or to be permitted to be given by either party to
the other shall be in writing and shall be deemed to have been given when sent
by registered or certified mail, postage prepaid, return receipt requested, as
follows: Notice to the Distributor shall be sent to Sunstone Distribution
Services, LLC, 207 East Buffalo Street, Suite 400, Milwaukee, WI, 53202,
Attention Miriam M. Allison, and notice to the Trust shall be sent to The
Garzarelli Funds, 100 South Wacker Drive, Suite 2100, Chicago, Illinois 60606-
4002, Attention: Andrew J. Goodwin III.
8.6 This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original agreement but such counterparts shall
together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by a duly authorized officer as of the day and year first above
written.
THE GARZARELLI FUNDS
(the "Trust")
By:
--------------------------------------
SUNSTONE DISTRIBUTION SERVICES, LLC
(the "Distributor")
By:
--------------------------------------
Miriam M. Allison
President
Appendix A
SERVICING AND DISTRIBUTION AGREEMENT
We wish to enter into this Servicing and Distribution Agreement
("Agreement") with you concerning the provision of distribution services (and,
to the extent provided below, support services) to your clients ("Clients")
who may from time to time acquire and beneficially own shares of any Fund
("Shares") offered by The Garzarelli Funds ("Trust").
The terms and conditions of this Agreement are as follows:
Section 1. You will provide reasonable assistance in connection with
the distribution of Shares to Clients as requested from time to time, which
assistance may include forwarding sales literature and advertising provided by
us for Clients. In addition, you agree to provide the following support
services to Clients who may from time to time acquire and beneficially own
shares<F11>: (i) processing dividend and distribution payments from us on
behalf of Clients for whom you are the holder of record; (ii) providing
information periodically to Clients showing their positions in Shares; (iii)
arranging for bank wires, (iv) responding to Client inquiries relating to the
services performed by you; (v) providing subaccounting with respect to Shares
beneficially owned by Clients for whom you are the holder of record; (vi) if
required by law, forwarding shareholder communications from us (such as proxies,
shareholder reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to Clients; (vii) assisting in processing
purchase, exchange and redemption requests from Clients and in placing such
orders with our service contractors; (viii) assisting Clients in changing
dividend options, account designations and addresses; and (ix) providing such
other similar services as we may reasonably request to the extent you are
permitted to do so under applicable statutes, rules and regulations.
Section 2. You will provide such office space and equipment, telephone
facilities and personnel (which may be any part of the space, equipment and
facilities currently used in your business, or any personnel employed by you) as
may be reasonably necessary or beneficial in order to provide the aforementioned
assistance and services to Clients.
Section 3. Neither you nor any of your officers, employees or agents
are authorized to make any representations concerning us or the Shares except
those contained in the Trust's then current prospectuses and statements of
additional information for Shares, copies of which will be supplied by us to
you, or in such supplemental literature or advertising as may be authorized by
us in writing.
- -----------------------
<F11> Services may be modified or omitted in the particular case and items
renumbered.
Section 4. For all purposes of this Agreement you will be deemed to be
an independent contractor, and will have no authority to act as an agent for us
in any matter or in any respect. By your written acceptance of this Agreement,
you agree to and do release, indemnify and hold us harmless from and against any
and all liabilities or losses resulting from requests, directions, actions or
inactions of or by you or your officers, employees or agents regarding your
responsibilities hereunder or the purchase, redemption, transfer or registration
of Shares (or orders relating to the same). You and your employees will, upon
request, be available during normal business hours to consult with us or our
designees concerning the performance of your responsibilities under this
Agreement.
Section 5. In consideration of the services and facilities provided by
you hereunder, we will pay to you, and you will accept as full payment therefor,
a fee at the annual rate of 0.25% of the average daily net asset value of the
Shares beneficially owned by your Clients for whom you are the dealer of record
or holder of record or with whom you have a servicing relationship (the
"Clients' Shares"), which fee will be computed daily and payable quarterly.
For purposes of determining the fees payable under this Section 5, the average
daily net asset value of the Clients' Shares will be computed in the manner
specified in the Trust's Registration Statement (as the same is in effect from
time to time) in connection with the computation of the net asset value of
Shares for purposes of purchases and redemptions. The fee rate stated above may
be prospectively decreased by us, in our sole discretion, at any time upon
notice to you. Furthermore, we may, in our discretion and without notice,
suspend or withdraw the sale of Shares, including the sale of Shares to you for
the account of any Client or Clients.
Section 6. You will furnish us or our designees with such information
as we or they may reasonably request (including, without limitation, periodic
certifications confirming the provision to Clients of the services described
herein), and will otherwise cooperate with us and our designees (including,
without limitation, any auditors designated by us), in connection with the
preparation of reports to the Trust's Board of Trustees concerning this
Agreement and the monies paid or payable pursuant hereto, as well as any other
reports or filings that may be required by law.
Section 7. We may enter into other similar Agreements with any other
person or persons without your consent.
Section 8. By your written acceptance of this Agreement, you represent,
warrant and agree that: (i) the compensation payable to you hereunder, together
with any other compensation you receive from Clients for services contemplated
by this Agreement, will not be excessive or unreasonable under the laws and
instruments governing your relationships with Clients; (ii) you will provide to
Clients a schedule of any fees that you may charge to them relating to the
investment of their assets in Shares; (iii) you are a member in good standing of
the NASD and registered as a broker-dealer under the federal and all applicable
state securities laws; (iv) you are empowered under applicable law and by your
organizational documents to enter into and perform this Agreement, and all
requisite proceedings have been taken to authorize you to enter into and perform
this Agreement; and (v) you will comply at all times with all applicable laws,
rules and regulations.
Section 9. This Agreement will become effective on the date a fully
executed copy of this Agreement is received and accepted by us or our designee.
Unless sooner terminated, this Agreement will continue for a period of one year
from the date of our acceptance of an executed copy of this agreement, and
thereafter will continue automatically for successive annual periods provided
such continuance is specifically approved at least annually by us. This
Agreement is terminable with respect to the Shares of any Fund, without penalty,
at any time by us or by you, upon notice to the other party hereto.
Section 10. All notices and other communications to either you or us
will be duly given if mailed, telegraphed, telexed or transmitted by similar
telecommunications device to the appropriate address stated herein.
Section 11. This Agreement will be construed in accordance with the laws
of the State of Wisconsin.
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly return it
to us at The Garzarelli Funds, 207 East Buffalo Street, Suite 315, Milwaukee,
Wisconsin 53202, Attention: Richard P. Snyder. This Agreement will be effective
when received and accepted by Sunstone Distribution, LLC.
Very truly yours,
Sunstone Distribution Services, LLC
Date: By:
--------------------- ---------------------------------
(Authorized Officer of Sunstone Distribution
Services, LLC)
----------------------------------
(address)
----------------------------------
ACCEPTED AND AGREED TO:
----------------------------------
(Name of dealer/shareholder organization)
Date: By:
---------------------- --------------------------------
--------------------------------
(Print name)
--------------------------------
(address)
--------------------------------
--------------------------------
(phone number)
CUSTODY AGREEMENT
DATED , 1997
-----------------
BETWEEN
UMB BANK, N.A.
AND
THE GARZARELLI FUNDS
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
1. Appointment of Custodian 1
2. DEFINITIONS 1
(a) Securities 1
(b) Assets 2
(c) Instructions and Special Instructions 2
3. DELIVERY OF CORPORATE DOCUMENTS 2
4. POWERS AND DUTIES OF CUSTODIAN AND DOMESTIC SUBCUSTODIAN 3
(a) Safekeeping 3
(b) Manner of Holding Securities 4
(c) Free Delivery of Assets 5
(d) Exchange of Securities 6
(e) Purchases of Assets 6
(f) Sales of Assets 7
(g) Options 7
(h) Futures Contracts 8
(i) Segregated Accounts 8
(j) Depositary Receipts 9
(k) Corporate Actions, Put Bonds, Called Bonds, Etc. 9
(l) Interest Bearing Deposits 10
(m) Foreign Exchange Transactions 10
(n) Pledges or Loans of Securities 11
(o) Stock Dividends, Rights, Etc. 12
(p) Routine Dealings 12
(q) Collections 12
(r) Bank Accounts 12
(s) Dividends, Distributions and Redemptions 13
(t) Proceeds from Shares Sold 13
(u) Proxies and Notices; Compliance with the Shareholders
Communication Act of 1985 13
(v) Books and Records 14
(w) Opinion of Fund's Independent Certified Public
Accountants 14
(x) Reports by Independent Certified Public Accountants 14
(y) Bills and Others Disbursements 14
5. SUBCUSTODIANS 14
(a) Domestic Subcustodians 15
(b) Foreign Subcustodians 15
(c) Interim Subcustodians 16
(d) Special Subcustodians 17
(e) Termination of a Subcustodian 17
(f) Certification Regarding Foreign Subcustodians 17
6. STANDARD OF CARE 17
(a) General Standard of Care 17
(b) Actions Prohibited by Applicable Law, Events Beyond
Custodian's Control, Armed Conflict, Sovereign
Risk, Etc. 17
(c) Liability for Past Records 18
(d) Advice of Counsel 18
(e) Advice of the Fund and Others 18
(f) Instructions Appearing to be Genuine 18
(g) Exceptions from Liability 19
7. LIABILITY OF THE CUSTODIAN FOR ACTIONS OF OTHERS 19
(a) Domestic Subcustodians 19
(b) Liability for Acts and Omissions of Foreign
Subcustodians 19
(c) Securities Systems, Interim Subcustodians,
Special Subcustodians, Securities Depositories and
Clearing Agencies 19
(d) Defaults or Insolvencies of Brokers, Banks, Etc. 20
(e) Reimbursement of Expenses 20
8. INDEMNIFICATION 20
(a) Indemnification by Fund 20
(b) Indemnification by Custodian 20
9. ADVANCES 21
10. LIENS 21
11. COMPENSATION 22
12. POWERS OF ATTORNEY 22
13. TERMINATION AND ASSIGNMENT 22
14. ADDITIONAL FUNDS 22
15. NOTICES 23
16. MISCELLANEOUS 23
CUSTODY AGREEMENT
-----------------
This agreement made as of this _________ day of ___________, 199_,
between UMB Bank, n.a., a national banking association with its principal place
of business located at Kansas City, Missouri (hereinafter "Custodian"), and each
of the Funds which have executed the signature page hereof together with such
additional Funds which shall be made parties to this Agreement by the execution
of a separate signature page hereto (individually, a "Fund" and collectively,
the "Funds").
WITNESSETH:
WHEREAS, each Fund is a series of a registered open-end management
investment company under the Investment Company Act of 1940, as amended; and
WHEREAS, each Fund desires to appoint Custodian as its custodian for the
custody of Assets (as hereinafter defined) owned by such Fund which Assets are
to be held in such accounts as such Fund may establish from time to time; and
WHEREAS, Custodian is willing to accept such appointment on the terms and
conditions hereof.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties hereto, intending to be legally bound, mutually covenant and agree
as follows:
1. APPOINTMENT OF CUSTODIAN.
------------------------
Each Fund hereby constitutes and appoints the Custodian as custodian of
Assets belonging to each such Fund which have been or may be from time to time
deposited with the Custodian. Custodian accepts such appointment as a custodian
and agrees to perform the duties and responsibilities of Custodian as set forth
herein on the conditions set forth herein.
2. DEFINITIONS.
-----------
For purposes of this Agreement, the following terms shall have the meanings
so indicated:
(a) "Security" or "Securities" shall mean stocks, bonds, bills,
rights, script, warrants, interim certificates and all negotiable or
nonnegotiable paper commonly known as Securities and other instruments or
obligations.
(b) "Assets" shall mean Securities, monies and other property held by
the Custodian for the benefit of a Fund.
(c)(1) "Instructions", as used herein, shall mean: (i) a tested telex,
a written (including, without limitation, facsimile transmission) request,
direction, instruction or certification signed or initialed by or on behalf of a
Fund by an Authorized Person; (ii) a telephonic or other oral communication from
a person the Custodian reasonably believes to be an Authorized Person; or (iii)
a communication effected directly between an electro-mechanical or electronic
device or system (including, without limitation, computers) on behalf of a Fund.
Instructions in the form of oral communications shall be confirmed by the
appropriate Fund by tested telex or in writing in the manner set forth in clause
(i) above, but the lack of such confirmation shall in no way affect any action
taken by the Custodian in reliance upon such oral Instructions prior to the
Custodian's receipt of such confirmation. Each Fund authorizes the Custodian to
record any and all telephonic or other oral Instructions communicated to the
Custodian.
(2) "Special Instructions", as used herein, shall mean Instructions
countersigned or confirmed in writing by the Treasurer or any Assistant
Treasurer of a Fund or any other person designated by the Treasurer of such Fund
in writing, which countersignature or confirmation shall be included on the same
instrument containing the Instructions or on a separate instrument relating
thereto.
(3) Instructions and Special Instructions shall be delivered to the
Custodian at the address and/or telephone, facsimile transmission or telex
number agreed upon from time to time by the Custodian and each Fund.
(4) Where appropriate, Instructions and Special Instructions shall be
continuing instructions.
3. DELIVERY OF CORPORATE DOCUMENTS.
-------------------------------
Each of the parties to this Agreement represents that its execution does not
violate any of the provisions of its respective charter, articles of
incorporation, articles of association or bylaws and all required corporate
action to authorize the execution and delivery of this Agreement has been taken.
Each Fund has furnished the Custodian with copies, properly certified or
authenticated, with all amendments or supplements thereto, of the following
documents:
(a) Certificate of Incorporation (or equivalent document) of the Fund
as in effect on the date hereof;
(b) By-Laws of the Fund as in effect on the date hereof;
(c) Resolutions of the Board of Directors of the Fund appointing the
Custodian and approving the form of this Agreement; and
(d) The Fund's current prospectus and statements of additional
information.
Each Fund shall promptly furnish the Custodian with copies of any updates,
amendments or supplements to the foregoing documents.
In addition, each Fund has delivered or will promptly deliver to the
Custodian, copies of the Resolution(s) of its Board of Directors or Trustees and
all amendments or supplements thereto, properly certified or authenticated,
designating certain officers or employees of each such Fund who will have
continuing authority to certify to the Custodian: (a) the names, titles,
signatures and scope of authority of all persons authorized to give Instructions
or any other notice, request, direction, instruction, certificate or instrument
on behalf of each Fund, and (b) the names, titles and signatures of those
persons authorized to countersign or confirm Special Instructions on behalf of
each Fund (in both cases collectively, the "Authorized Persons" and
individually, an "Authorized Person"). Such Resolutions and certificates may be
accepted and relied upon by the Custodian as conclusive evidence of the facts
set forth therein and shall be considered to be in full force and effect until
delivery to the Custodian of a similar Resolution or certificate to the
contrary. Upon delivery of a certificate which deletes or does not include the
name(s) of a person previously authorized to give Instructions or to countersign
or confirm Special Instructions, such persons shall no longer be considered an
Authorized Person authorized to give Instructions or to countersign or confirm
Special Instructions. Unless the certificate specifically requires that the
approval of anyone else will first have been obtained, the Custodian will be
under no obligation to inquire into the right of the person giving such
Instructions or Special Instructions to do so. Notwithstanding any of the
foregoing, no Instructions or Special Instructions received by the Custodian
from a Fund will be deemed to authorize or permit any director, trustee,
officer, employee, or agent of such Fund to withdraw any of the Assets of such
Fund upon the mere receipt of such authorization, Special Instructions or
Instructions from such director, trustee, officer, employee or agent.
4. POWERS AND DUTIES OF CUSTODIAN AND DOMESTIC SUBCUSTODIAN.
--------------------------------------------------------
Except for Assets held by any Subcustodian appointed pursuant to Sections
5(b), (c), or (d) of this Agreement, the Custodian shall have and perform the
powers and duties hereinafter set forth in this Section 4. For purposes of this
Section 4 all references to powers and duties of the "Custodian" shall also
refer to any Domestic Subcustodian appointed pursuant to Section 5(a).
(a) Safekeeping.
-----------
The Custodian will keep safely the Assets of each Fund which are
delivered to it from time to time. The Custodian shall not be responsible for
any property of a Fund held or received by such Fund and not delivered to the
Custodian.
(b) Manner of Holding Securities.
----------------------------
(1) The Custodian shall at all times hold Securities of each Fund
either: (i) by physical possession of the share certificates or other
instruments representing such Securities in registered or bearer form; or (ii)
in book-entry form by a Securities System (as hereinafter defined) in accordance
with the provisions of sub-paragraph (3) below.
(2) The Custodian may hold registrable portfolio Securities which have
been delivered to it in physical form, by registering the same in the name of
the appropriate Fund or its nominee, or in the name of the Custodian or its
nominee, for whose actions such Fund and Custodian, respectively, shall be fully
responsible. Upon the receipt of Instructions, the Custodian shall hold such
Securities in street certificate form, so called, with or without any indication
of fiduciary capacity. However, unless it receives Instructions to the
contrary, the Custodian will register all such portfolio Securities in the name
of the Custodian's authorized nominee. All such Securities shall be held in an
account of the Custodian containing only assets of the appropriate Fund or only
assets held by the Custodian as a fiduciary, provided that the records of the
Custodian shall indicate at all times the Fund or other customer for which such
Securities are held in such accounts and the respective interests therein.
(3) The Custodian may deposit and/or maintain domestic Securities
owned by a Fund in, and each Fund hereby approves use of: (a) The Depository
Trust Company; (b) The Participants Trust Company; and (c) any book-entry system
as provided in (i) Subpart O of Treasury Circular No. 300, 31 CFR 306.115, (ii)
Subpart B of Treasury Circular Public Debt Series No. 27-76, 31 CFR 350.2, or
(iii) the book-entry regulations of federal agencies substantially in the form
of 31 CFR 306.115. Upon the receipt of Special Instructions, the Custodian may
deposit and/or maintain domestic Securities owned by a Fund in any other
domestic clearing agency registered with the Securities and Exchange Commission
("SEC") under Section 17A of the Securities Exchange Act of 1934 (or as may
otherwise be authorized by the SEC to serve in the capacity of depository or
clearing agent for the Securities or other assets of investment companies) which
acts as a Securities depository. Each of the foregoing shall be referred to in
this Agreement as a "Securities System", and all such Securities Systems shall
be listed on the attached Appendix A. Use of a Securities System shall be in
accordance with applicable Federal Reserve Board and SEC rules and regulations,
if any, and subject to the following provisions:
(i) The Custodian may deposit the Securities directly or through
one or more agents or Subcustodians which are also qualified to act as
custodians for investment companies.
(ii) The Custodian shall deposit and/or maintain the Securities in
a Securities System, provided that such Securities are represented in an account
("Account") of the Custodian in the Securities System that includes only assets
held by the Custodian as a fiduciary, custodian or otherwise for customers.
(iii) The books and records of the Custodian shall at all times
identify those Securities belonging to any one or more Funds which are
maintained in a Securities System.
(iv) The Custodian shall pay for Securities purchased for the
account of a Fund only upon (a) receipt of advice from the Securities System
that such Securities have been transferred to the Account of the Custodian in
accordance with the rules of the Securities System, and (b) the making of an
entry on the records of the Custodian to reflect such payment and transfer for
the account of such Fund. The Custodian shall transfer Securities sold for the
account of a Fund only upon (a) receipt of advice from the Securities System
that payment for such Securities has been transferred to the Account of the
Custodian in accordance with the rules of the Securities System, and (b) the
making of an entry on the records of the Custodian to reflect such transfer
and payment for the account of such Fund. Copies of all advices from the
Securities System relating to transfers of Securities for the account of a
Fund shall be maintained for such Fund by the Custodian. The Custodian shall
deliver to a Fund on the next succeeding business day daily transaction reports
which shall include each day's transactions in the Securities System for the
account of such Fund. Such transaction reports shall be delivered to such Fund
or any agent designated by such Fund pursuant to Instructions, by computer or in
such other manner as such Fund and Custodian may agree.
(v) The Custodian shall, if requested by a Fund pursuant to
Instructions, provide such Fund with reports obtained by the Custodian or any
Subcustodian with respect to a Securities System's accounting system, internal
accounting control and procedures for safeguarding Securities deposited in the
Securities System.
(vi) Upon receipt of Special Instructions, the Custodian shall
terminate the use of any Securities System on behalf of a Fund as promptly as
practicable and shall take all actions reasonably practicable to safeguard the
Securities of such Fund maintained with such Securities System.
(c) Free Delivery of Assets.
-----------------------
Notwithstanding any other provision of this Agreement and except as
provided in Section 3 hereof, the Custodian, upon receipt of Special
Instructions, will undertake to make free delivery of Assets, provided such
Assets are on hand and available, in connection with a Fund's transactions and
to transfer such Assets to such broker, dealer, Subcustodian, bank, agent,
Securities System or otherwise as specified in such Special Instructions.
(d) Exchange of Securities.
----------------------
Upon receipt of Instructions, the Custodian will exchange portfolio
Securities held by it for a Fund for other Securities or cash paid in connection
with any reorganization, recapitalization, merger, consolidation, or conversion
of convertible Securities, and will deposit any such Securities in accordance
with the terms of any reorganization or protective plan.
Without Instructions, the Custodian is authorized to exchange
Securities held by it in temporary form for Securities in definitive form, to
surrender Securities for transfer into a name or nominee name as permitted in
Section 4(b)(2), to effect an exchange of shares in a stock split or when the
par value of the stock is changed, to sell any fractional shares, and, upon
receiving payment therefor, to surrender bonds or other Securities held by it at
maturity or call.
(e) Purchases of Assets.
-------------------
(1) Securities Purchases. In accordance with Instructions, the
--------------------
Custodian shall, with respect to a purchase of Securities, pay for such
Securities out of monies held for a Fund's account for which the purchase was
made, but only insofar as monies are available therein for such purpose, and
receive the portfolio Securities so purchased. Unless the Custodian has
received Special Instructions to the contrary, such payment will be made only
upon receipt of Securities by the Custodian, a clearing corporation of a
national Securities exchange of which the Custodian is a member, or a Securities
System in accordance with the provisions of Section 4(b)(3) hereof.
Notwithstanding the foregoing, upon receipt of Instructions: (i) in connection
with a repurchase agreement, the Custodian may release funds to a Securities
System prior to the receipt of advice from the Securities System that the
Securities underlying such repurchase agreement have been transferred by
book-entry into the Account maintained with such Securities System by the
Custodian, provided that the Custodian's instructions to the Securities System
require that the Securities System may make payment of such funds to the other
party to the repurchase agreement only upon transfer by book-entry of the
Securities underlying the repurchase agreement into such Account; (ii) in the
case of Interest Bearing Deposits, currency deposits, and other deposits,
foreign exchange transactions, futures contracts or options, pursuant to
Sections 4(g), 4(h), 4(l), and 4(m) hereof, the Custodian may make payment
therefor before receipt of an advice of transaction; and (iii) in the case of
Securities as to which payment for the Security and receipt of the instrument
evidencing the Security are under generally accepted trade practice or the terms
of the instrument representing the Security expected to take place in different
locations or through separate parties, such as commercial paper which is indexed
to foreign currency exchange rates, derivatives and similar Securities, the
Custodian may make payment for such Securities prior to delivery thereof in
accordance with such generally accepted trade practice or the terms of the
instrument representing such Security.
(2) Other Assets Purchased. Upon receipt of Instructions and except
----------------------
as otherwise provided herein, the Custodian shall pay for and receive other
Assets for the account of a Fund as provided in Instructions.
(f) Sales of Assets.
---------------
(1) Securities Sold. In accordance with Instructions, the Custodian
---------------
will, with respect to a sale, deliver or cause to be delivered the Securities
thus designated as sold to the broker or other person specified in the
Instructions relating to such sale. Unless the Custodian has received Special
Instructions to the contrary, such delivery shall be made only upon receipt of
payment therefor in the form of: (a) cash, certified check, bank cashier's
check, bank credit, or bank wire transfer; (b) credit to the account of the
Custodian with a clearing corporation of a national Securities exchange of which
the Custodian is a member; or (c) credit to the Account of the Custodian with a
Securities System, in accordance with the provisions of Section 4(b)(3) hereof.
Notwithstanding the foregoing, Securities held in physical form may be delivered
and paid for in accordance with "street delivery custom" to a broker or its
clearing agent, against delivery to the Custodian of a receipt for such
Securities, provided that the Custodian shall have taken reasonable steps to
ensure prompt collection of the payment for, or return of, such Securities by
the broker or its clearing agent, and provided further that the Custodian shall
not be responsible for the selection of or the failure or inability to perform
of such broker or its clearing agent or for any related loss arising from
delivery or custody of such Securities prior to receiving payment therefor.
(2) Other Assets Sold. Upon receipt of Instructions and except as
-----------------
otherwise provided herein, the Custodian shall receive payment for and deliver
other Assets for the account of a Fund as provided in Instructions.
(g) Options.
-------
(1) Upon receipt of Instructions relating to the purchase of an
option or sale of a covered call option, the Custodian shall: (a) receive and
retain confirmations or other documents, if any, evidencing the purchase or
writing of the option by a Fund; (b) if the transaction involves the sale of a
covered call option, deposit and maintain in a segregated account the Securities
(either physically or by book-entry in a Securities System) subject to the
covered call option written on behalf of such Fund; and (c) pay, release and/or
transfer such Securities, cash or other Assets in accordance with any notices or
other communications evidencing the expiration, termination or exercise of such
options which are furnished to the Custodian by the Options Clearing Corporation
(the "OCC"), the securities or options exchanges on which such options were
traded, or such other organization as may be responsible for handling such
option transactions.
(2) Upon receipt of Instructions relating to the sale of a naked
option (including stock index and commodity options), the Custodian, the
appropriate Fund and the broker-dealer shall enter into an agreement to comply
with the rules of the OCC or of any registered national securities exchange or
similar organizations(s). Pursuant to that agreement and such Fund's
Instructions, the Custodian shall: (a) receive and retain confirmations or
other documents, if any, evidencing the writing of the option; (b) deposit and
maintain in a segregated account, Securities (either physically or by book-entry
in a Securities System), cash and/or other Assets; and (c) pay, release and/or
transfer such Securities, cash or other Assets in accordance with any such
agreement and with any notices or other communications evidencing the
expiration, termination or exercise of such option which are furnished to the
Custodian by the OCC, the securities or options exchanges on which such options
were traded, or such other organization as may be responsible for handling such
option transactions. The appropriate Fund and the broker-dealer shall be
responsible for determining the quality and quantity of assets held in any
segregated account established in compliance with applicable margin maintenance
requirements and the performance of other terms of any option contract.
(h) Futures Contracts.
-----------------
Upon receipt of Instructions, the Custodian shall enter into a futures
margin procedural agreement among the appropriate Fund, the Custodian and the
designated futures commission merchant (a "Procedural Agreement"). Under the
Procedural Agreement the Custodian shall: (a) receive and retain confirmations,
if any, evidencing the purchase or sale of a futures contract or an option on a
futures contract by such Fund; (b) deposit and maintain in a segregated account
cash, Securities and/or other Assets designated as initial, maintenance or
variation "margin" deposits intended to secure such Fund's performance of its
obligations under any futures contracts purchased or sold, or any options on
futures contracts written by such Fund, in accordance with the provisions of any
Procedural Agreement designed to comply with the provisions of the Commodity
Futures Trading Commission and/or any commodity exchange or contract market
(such as the Chicago Board of Trade), or any similar organization(s), regarding
such margin deposits; and (c) release Assets from and/or transfer Assets into
such margin accounts only in accordance with any such Procedural Agreements.
The appropriate Fund and such futures commission merchant shall be responsible
for determining the type and amount of Assets held in the segregated account or
paid to the broker-dealer in compliance with applicable margin maintenance
requirements and the performance of any futures contract or option on a futures
contract in accordance with its terms.
(i) Segregated Accounts.
-------------------
Upon receipt of Instructions, the Custodian shall establish and
maintain on its books a segregated account or accounts for and on behalf of a
Fund, into which account or accounts may be transferred Assets of such Fund,
including Securities maintained by the Custodian in a Securities System
pursuant to Paragraph (b)(3) of this Section 4, said account or accounts to be
maintained (i) for the purposes set forth in Sections 4(g), 4(h) and 4(n) and
(ii) for the purpose of compliance by such Fund with the procedures required by
the SEC Investment Company Act Release Number 10666 or any subsequent release or
releases relating to the maintenance of segregated accounts by registered
investment companies, or (iii) for such other purposes as may be set forth, from
time to time, in Special Instructions. The Custodian shall not be responsible
for the determination of the type or amount of Assets to be held in any
segregated account referred to in this paragraph, or for compliance by the Fund
with required procedures noted in (ii) above.
(j) Depositary Receipts.
-------------------
Upon receipt of Instructions, the Custodian shall surrender or cause to be
surrendered Securities to the depositary used for such Securities by an issuer
of American Depositary Receipts or International Depositary Receipts
(hereinafter referred to, collectively, as "ADRs"), against a written receipt
therefor adequately describing such Securities and written evidence satisfactory
to the organization surrendering the same that the depositary has acknowledged
receipt of instructions to issue ADRs with respect to such Securities in the
name of the Custodian or a nominee of the Custodian, for delivery in accordance
with such instructions.
Upon receipt of Instructions, the Custodian shall surrender or cause to be
surrendered ADRs to the issuer thereof, against a written receipt therefor
adequately describing the ADRs surrendered and written evidence satisfactory to
the organization surrendering the same that the issuer of the ADRs has
acknowledged receipt of instructions to cause its depository to deliver the
Securities underlying such ADRs in accordance with such instructions.
(k) Corporate Actions, Put Bonds, Called Bonds, Etc.
-----------------------------------------------
Upon receipt of Instructions, the Custodian shall: (a) deliver warrants,
puts, calls, rights or similar Securities to the issuer or trustee thereof (or
to the agent of such issuer or trustee) for the purpose of exercise or sale,
provided that the new Securities, cash or other Assets, if any, acquired as a
result of such actions are to be delivered to the Custodian; and (b) deposit
Securities upon invitations for tenders thereof, provided that the consideration
for such Securities is to be paid or delivered to the Custodian, or the tendered
Securities are to be returned to the Custodian.
Notwithstanding any provision of this Agreement to the contrary, the
Custodian shall take all necessary action, unless otherwise directed to the
contrary in Instructions, to comply with the terms of all mandatory or
compulsory exchanges, calls, tenders, redemptions, or similar rights of security
ownership, and shall notify the appropriate Fund of such action in writing by
facsimile transmission or in such other manner as such Fund and Custodian may
agree in writing.
The Fund agrees that if it gives an Instruction for the performance of an
act on the last permissible date of a period established by any optional offer
or on the last permissible date for the performance of such act, the Fund shall
hold the Bank harmless from any adverse consequences in connection with acting
upon or failing to act upon such Instructions.
(l) Interest Bearing Deposits.
-------------------------
Upon receipt of Instructions directing the Custodian to purchase interest
bearing fixed term and call deposits (hereinafter referred to, collectively, as
"Interest Bearing Deposits") for the account of a Fund, the Custodian shall
purchase such Interest Bearing Deposits in the name of such Fund with such banks
or trust companies, including the Custodian, any Subcustodian or any subsidiary
or affiliate of the Custodian (hereinafter referred to as "Banking
Institutions"), and in such amounts as such Fund may direct pursuant to
Instructions. Such Interest Bearing Deposits may be denominated in U.S. dollars
or other currencies, as such Fund may determine and direct pursuant to
Instructions. The responsibilities of the Custodian to a Fund for Interest
Bearing Deposits issued by the Custodian shall be that of a U.S. bank for a
similar deposit. With respect to Interest Bearing Deposits other than those
issued by the Custodian, (a) the Custodian shall be responsible for the
collection of income and the transmission of cash to and from such accounts; and
(b) the Custodian shall have no duty with respect to the selection of the
Banking Institution or for the failure of such Banking Institution to pay upon
demand.
(m) Foreign Exchange Transactions.
-----------------------------
(l) Each Fund hereby appoints the Custodian as its agent in the
execution of all currency exchange transactions. The Custodian agrees to
provide exchange rate and U.S. Dollar information, in writing, to the Funds.
Such information shall be supplied by the Custodian at least by the business day
prior to the value date of the foreign exchange transaction, provided that the
Custodian receives the request for such information at least two business days
prior to the value date of the transaction.
(2) Upon receipt of Instructions, the Custodian shall settle
foreign exchange contracts or options to purchase and sell foreign currencies
for spot and future delivery on behalf of and for the account of a Fund with
such currency brokers or Banking Institutions as such Fund may determine and
direct pursuant to Instructions. If, in its Instructions, a Fund does not
direct the Custodian to utilize a particular currency broker or Banking
Institution, the Custodian is authorized to select such currency broker or
Banking Institution as it deems appropriate to execute the Fund's foreign
currency transaction.
(3) Each Fund accepts full responsibility for its use of third
party foreign exchange brokers and for execution of said foreign exchange
contracts and understands that the Fund shall be responsible for any and all
costs and interest charges which may be incurred as a result of the failure or
delay of its third party broker to deliver foreign exchange. The Custodian
shall have no responsibility or liability with respect to the selection of the
currency brokers or Banking Institutions with which a Fund deals or the
performance of such brokers or Banking Institutions.
(4) Notwithstanding anything to the contrary contained herein,
upon receipt of Instructions the Custodian may, in connection with a foreign
exchange contract, make free outgoing payments of cash in the form of U.S.
Dollars or foreign currency prior to receipt of confirmation of such foreign
exchange contract or confirmation that the countervalue currency completing such
contract has been delivered or received.
(5) The Custodian shall not be obligated to enter into foreign
exchange transactions as principal. However, if the Custodian has made
available to a Fund its services as a principal in foreign exchange transactions
and subject to any separate agreement between the parties relating to such
transactions, the Custodian shall enter into foreign exchange contracts or
options to purchase and sell foreign currencies for spot and future delivery on
behalf of and for the account of the Fund, with the Custodian as principal.
(n) Pledges or Loans of Securities.
------------------------------
(1) Upon receipt of Instructions from a Fund, the Custodian will
release or cause to be released Securities held in custody to the pledgees
designated in such Instructions by way of pledge or hypothecation to secure
loans incurred by such Fund with various lenders including but not limited to
UMB Bank, n.a.; provided, however, that the Securities shall be released only
upon payment to the Custodian of the monies borrowed, except that in cases where
additional collateral is required to secure existing borrowings, further
Securities may be released or delivered, or caused to be released or delivered
for that purpose upon receipt of Instructions. Upon receipt of Instructions,
the Custodian will pay, but only from funds available for such purpose, any such
loan upon re-delivery to it of the Securities pledged or hypothecated therefor
and upon surrender of the note or notes evidencing such loan. In lieu of
delivering collateral to a pledgee, the Custodian, on the receipt of
Instructions, shall transfer the pledged Securities to a segregated account for
the benefit of the pledgee.
(2) Upon receipt of Special Instructions, and execution of a separate
Securities Lending Agreement, the Custodian will release Securities held in
custody to the borrower designated in such Instructions and may, except as
otherwise provided below, deliver such Securities prior to the receipt of
collateral, if any, for such borrowing, provided that, in case of loans of
Securities held by a Securities System that are secured by cash collateral, the
Custodian's instructions to the Securities System shall require that the
Securities System deliver the Securities of the appropriate Fund to the borrower
thereof only upon receipt of the collateral for such borrowing. The Custodian
shall have no responsibility or liability for any loss arising from the delivery
of Securities prior to the receipt of collateral. Upon receipt of Instructions
and the loaned Securities, the Custodian will release the collateral to the
borrower.
(o) Stock Dividends, Rights, Etc.
-----------------------------
The Custodian shall receive and collect all stock dividends, rights,
and other items of like nature and, upon receipt of Instructions, take action
with respect to the same as directed in such Instructions.
(p) Routine Dealings.
----------------
The Custodian will, in general, attend to all routine and mechanical
matters in accordance with industry standards in connection with the sale,
exchange, substitution, purchase, transfer, or other dealings with Securities or
other property of each Fund except as may be otherwise provided in this
Agreement or directed from time to time by Instructions from any particular
Fund. The Custodian may also make payments to itself or others from the Assets
for disbursements and out-of-pocket expenses incidental to handling Securities
or other similar items relating to its duties under this Agreement, provided
that all such payments shall be accounted for to the appropriate Fund.
(q) Collections.
-----------
The Custodian shall (a) collect amounts due and payable to each
Fund with respect to portfolio Securities and other Assets; (b) promptly credit
to the account of each Fund all income and other payments relating to portfolio
Securities and other Assets held by the Custodian hereunder upon Custodian's
receipt of such income or payments or as otherwise agreed in writing by the
Custodian and any particular Fund; (c) promptly endorse and deliver any
instruments required to effect such collection; and (d) promptly execute
ownership and other certificates and affidavits for all federal, state, local
and foreign tax purposes in connection with receipt of income or other payments
with respect to portfolio Securities and other Assets, or in connection with the
transfer of such Securities or other Assets; provided, however, that with
respect to portfolio Securities registered in so-called street name, or physical
Securities with variable interest rates, the Custodian shall use its best
efforts to collect amounts due and payable to any such Fund. The Custodian
shall notify a Fund in writing by facsimile transmission or in such other manner
as such Fund and Custodian may agree in writing if any amount payable with
respect to portfolio Securities or other Assets is not received by the Custodian
when due. The Custodian shall not be responsible for the collection of amounts
due and payable with respect to portfolio Securities or other Assets that are in
default.
(r) Bank Accounts.
-------------
Upon Instructions, the Custodian shall open and operate a bank account
or accounts on the books of the Custodian; provided that such bank account(s)
shall be in the name of the Custodian or a nominee thereof, for the account of
one or more Funds, and shall be subject only to draft or order of the Custodian.
The responsibilities of the Custodian to any one or more such Funds for deposits
accepted on the Custodian's books shall be that of a U.S. bank for a similar
deposit.
(s) Dividends, Distributions and Redemptions.
----------------------------------------
To enable each Fund to pay dividends or other distributions to
shareholders of each such Fund and to make payment to shareholders who have
requested repurchase or redemption of their shares of each such Fund
(collectively, the "Shares"), the Custodian shall release cash or Securities
insofar as available. In the case of cash, the Custodian shall, upon the
receipt of Instructions, transfer such funds by check or wire transfer to any
account at any bank or trust company designated by each such Fund in such
Instructions. In the case of Securities, the Custodian shall, upon the receipt
of Special Instructions, make such transfer to any entity or account designated
by each such Fund in such Special Instructions.
(t) Proceeds from Shares Sold.
-------------------------
The Custodian shall receive funds representing cash payments received
for shares issued or sold from time to time by each Fund, and shall credit such
funds to the account of the appropriate Fund. The Custodian shall notify the
appropriate Fund of Custodian's receipt of cash in payment for shares issued by
such Fund by facsimile transmission or in such other manner as such Fund and the
Custodian shall agree. Upon receipt of Instructions, the Custodian shall: (a)
deliver all federal funds received by the Custodian in payment for shares as may
be set forth in such Instructions and at a time agreed upon between the
Custodian and such Fund; and (b) make federal funds available to a Fund as of
specified times agreed upon from time to time by such Fund and the Custodian, in
the amount of checks received in payment for shares which are deposited to the
accounts of such Fund.
(u) Proxies and Notices; Compliance with the Shareholders
Communication Act of 1985.
-----------------------------------------------------
The Custodian shall deliver or cause to be delivered to the appropriate
Fund all forms of proxies, all notices of meetings, and any other notices or
announcements affecting or relating to Securities owned by such Fund that are
received by the Custodian, any Subcustodian, or any nominee of either of them,
and, upon receipt of Instructions, the Custodian shall execute and deliver, or
cause such Subcustodian or nominee to execute and deliver, such proxies or other
authorizations as may be required. Except as directed pursuant to Instructions,
neither the Custodian nor any Subcustodian or nominee shall vote upon any such
Securities, or execute any proxy to vote thereon, or give any consent or take
any other action with respect thereto.
The Custodian will not release the identity of any Fund to an issuer
which requests such information pursuant to the Shareholder Communications Act
of 1985 for the specific purpose of direct communications between such issuer
and any such Fund unless a particular Fund directs the Custodian otherwise in
writing.
(v) Books and Records.
-----------------
The Custodian shall maintain such records relating to its activities
under this Agreement as are required to be maintained by Rule 31a-1 under the
Investment Company Act of 1940 ("the 1940 Act") and to preserve them for the
periods prescribed in Rule 31a-2 under the 1940 Act. These records shall be
open for inspection by duly authorized officers, employees or agents (including
independent public accountants) of the appropriate Fund during normal business
hours of the Custodian.
The Custodian shall provide accountings relating to its activities
under this Agreement as shall be agreed upon by each Fund and the Custodian.
(w) Opinion of Fund's Independent Certified Public Accountants.
----------------------------------------------------------
The Custodian shall take all reasonable action as each Fund may request
to obtain from year to year favorable opinions from each such Fund's independent
certified public accountants with respect to the Custodian's activities
hereunder and in connection with the preparation of each such Fund's periodic
reports to the SEC and with respect to any other requirements of the SEC.
(x) Reports by Independent Certified Public Accountants.
---------------------------------------------------
At the request of a Fund, the Custodian shall deliver to such Fund a
written report prepared by the Custodian's independent certified public
accountants with respect to the services provided by the Custodian under this
Agreement, including, without limitation, the Custodian's accounting system,
internal accounting control and procedures for safeguarding cash, Securities and
other Assets, including cash, Securities and other Assets deposited and/or
maintained in a Securities System or with a Subcustodian. Such report shall be
of sufficient scope and in sufficient detail as may reasonably be required by
such Fund and as may reasonably be obtained by the Custodian.
(y) Bills and Other Disbursements.
-----------------------------
Upon receipt of Instructions, the Custodian shall pay, or cause to be
paid, all bills, statements, or other obligations of a Fund.
5. SUBCUSTODIANS.
-------------
From time to time, in accordance with the relevant provisions of this
Agreement, the Custodian may appoint one or more Domestic Subcustodians, Foreign
Subcustodians, Special Subcustodians, or Interim Subcustodians (as each are
hereinafter defined) to act on behalf of any one or more Funds. A Domestic
Subcustodian, in accordance with the provisions of this Agreement, may also
appoint a Foreign Subcustodian, Special Subcustodian, or Interim Subcustodian to
act on behalf of any one or more Funds. For purposes of this Agreement, all
Domestic Subcustodians, Foreign Subcustodians, Special Subcustodians and Interim
Subcustodians shall be referred to collectively as "Subcustodians".
(a) Domestic Subcustodians.
----------------------
The Custodian may, at any time and from time to time, appoint any bank
as defined in Section 2(a)(5) of the 1940 Act or any trust company or other
entity, any of which meet the requirements of a custodian under Section 17(f) of
the 1940 Act and the rules and regulations thereunder, to act for the Custodian
on behalf of any one or more Funds as a subcustodian for purposes of holding
Assets of such Fund(s) and performing other functions of the Custodian within
the United States (a "Domestic Subcustodian"). Each Fund shall approve in
writing the appointment of the proposed Domestic Subcustodian; and the
Custodian's appointment of any such Domestic Subcustodian shall not be effective
without such prior written approval of the Fund(s). Each such duly approved
Domestic Subcustodian shall be listed on Appendix A attached hereto, as it may
be amended, from time to time.
(b) Foreign Subcustodians.
---------------------
The Custodian may at any time appoint, or cause a Domestic Subcustodian to
appoint, any bank, trust company or other entity meeting the requirements of an
"eligible foreign custodian" under Section 17(f) of the 1940 Act and the rules
and regulations thereunder to act for the Custodian on behalf of any one or more
Funds as a subcustodian or sub-subcustodian (if appointed by a Domestic
Subcustodian) for purposes of holding Assets of the Fund(s) and performing other
functions of the Custodian in countries other than the United States of America
(hereinafter referred to as a "Foreign Subcustodian" in the context of either a
subcustodian or a sub-subcustodian); provided that the Custodian shall have
obtained written confirmation from each Fund of the approval of the Board of
Directors or other governing body of each such Fund (which approval may be
withheld in the sole discretion of such Board of Directors or other governing
body or entity) with respect to (i) the identity of any proposed Foreign
Subcustodian (including branch designation), (ii) the country or countries in
which, and the securities depositories or clearing agencies (hereinafter
"Securities Depositories and Clearing Agencies"), if any, through which, the
Custodian or any proposed Foreign Subcustodian is authorized to hold Securities
and other Assets of each such Fund, and (iii) the form and terms of the
subcustodian agreement to be entered into with such proposed Foreign
Subcustodian. Each such duly approved Foreign Subcustodian and the countries
where and the Securities Depositories and Clearing Agencies through which they
may hold Securities and other Assets of the Fund(s) shall be listed on Appendix
A attached hereto, as it may be amended, from time to time. Each Fund shall be
responsible for informing the Custodian sufficiently in advance of a proposed
investment which is to be held in a country in which no Foreign Subcustodian is
authorized to act, in order that there shall be sufficient time for the
Custodian, or any Domestic Subcustodian, to effect the appropriate arrangements
with a proposed Foreign Subcustodian, including obtaining approval as provided
in this Section 5(b). In connection with the appointment of any Foreign
Subcustodian, the Custodian shall, or shall cause the Domestic Subcustodian to,
enter into a subcustodian agreement with the Foreign Subcustodian in form and
substance approved by each such Fund. The Custodian shall not consent to the
amendment of, and shall cause any Domestic Subcustodian not to consent to the
amendment of, any agreement entered into with a Foreign Subcustodian, which
materially affects any Fund's rights under such agreement, except upon prior
written approval of such Fund pursuant to Special Instructions.
(c) Interim Subcustodians.
---------------------
Notwithstanding the foregoing, in the event that a Fund shall invest in
an Asset to be held in a country in which no Foreign Subcustodian is
authorized to act, the Custodian shall notify such Fund in writing by facsimile
transmission or in such other manner as such Fund and the Custodian shall agree
in writing of the unavailability of an approved Foreign Subcustodian in such
country; and upon the receipt of Special Instructions from such Fund, the
Custodian shall, or shall cause its Domestic Subcustodian to, appoint or approve
an entity (referred to herein as an "Interim Subcustodian") designated in such
Special Instructions to hold such Security or other Asset.
(d) Special Subcustodians.
---------------------
Upon receipt of Special Instructions, the Custodian shall, on behalf of
a Fund, appoint one or more banks, trust companies or other entities designated
in such Special Instructions to act for the Custodian on behalf of such Fund as
a subcustodian for purposes of: (i) effecting third-party repurchase
transactions with banks, brokers, dealers or other entities through the use of a
common custodian or subcustodian; (ii) providing depository and clearing agency
services with respect to certain variable rate demand note Securities, (iii)
providing depository and clearing agency services with respect to dollar
denominated Securities, and (iv) effecting any other transactions designated by
such Fund in such Special Instructions. Each such designated subcustodian
(hereinafter referred to as a "Special Subcustodian") shall be listed on
Appendix A attached hereto, as it may be amended from time to time. In
connection with the appointment of any Special Subcustodian, the Custodian shall
enter into a subcustodian agreement with the Special Subcustodian in form and
substance approved by the appropriate Fund in Special Instructions. The
Custodian shall not amend any subcustodian agreement entered into with a Special
Subcustodian, or waive any rights under such agreement, except upon prior
approval pursuant to Special Instructions.
(e) Termination of a Subcustodian.
-----------------------------
The Custodian may, at any time in its discretion upon notification to
the appropriate Fund(s), terminate any Subcustodian of such Fund(s) in
accordance with the termination provisions under the applicable subcustodian
agreement, and upon the receipt of Special Instructions, the Custodian will
terminate any Subcustodian in accordance with the termination provisions under
the applicable subcustodian agreement.
(f) Certification Regarding Foreign Subcustodians.
---------------------------------------------
Upon request of a Fund, the Custodian shall deliver to such Fund a
certificate stating: (i) the identity of each Foreign Subcustodian then acting
on behalf of the Custodian; (ii) the countries in which and the Securities
Depositories and Clearing Agencies through which each such Foreign Subcustodian
is then holding cash, Securities and other Assets of such Fund; and (iii) such
other information as may be requested by such Fund, and as the Custodian shall
be reasonably able to obtain, to evidence compliance with rules and regulations
under the 1940 Act.
6. STANDARD OF CARE.
---------------
(a) General Standard of Care.
------------------------
The Custodian shall be liable to a Fund for all losses, damages and
reasonable costs and expenses suffered or incurred by such Fund resulting from
the gross negligence or willful misfeasance of the Custodian; provided, however,
in no event shall the Custodian be liable for special, indirect or consequential
damages arising under or in connection with this Agreement.
(b) Actions Prohibited by Applicable Law, Events Beyond Custodian's
Control, Sovereign Risk, Etc.
---------------------------------------------------------------
In no event shall the Custodian or any Domestic Subcustodian incur
liability hereunder (i) if the Custodian or any Subcustodian or Securities
System, or any subcustodian, Securities System, Securities Depository or
Clearing Agency utilized by the Custodian or any such Subcustodian, or any
nominee of the Custodian or any Subcustodian (individually, a "Person") is
prevented, forbidden or delayed from performing, or omits to perform, any act or
thing which this Agreement provides shall be performed or omitted to be
performed, by reason of: (a) any provision of any present or future law or
regulation or order of the United States of America, or any state thereof, or of
any foreign country, or political subdivision thereof or of any court of
competent jurisdiction (and neither the Custodian nor any other Person shall be
obligated to take any action contrary thereto); or (b) any event beyond the
control of the Custodian or other Person such as armed conflict, riots, strikes,
lockouts, labor disputes, equipment or transmission failures, natural disasters,
or failure of the mails, transportation, communications or power supply; or (ii)
for any loss, damage, cost or expense resulting from "Sovereign Risk." A
"Sovereign Risk" shall mean nationalization, expropriation, currency
devaluation, revaluation or fluctuation, confiscation, seizure, cancellation,
destruction or similar action by any governmental authority, de facto or de
jure; or enactment, promulgation, imposition or enforcement by any such
governmental authority of currency restrictions, exchange controls, taxes,
levies or other charges affecting a Fund's Assets; or acts of armed conflict,
terrorism, insurrection or revolution; or any other act or event beyond the
Custodian's or such other Person's control.
(c) Liability for Past Records.
--------------------------
Neither the Custodian nor any Domestic Subcustodian shall have any
liability in respect of any loss, damage or expense suffered by a Fund, insofar
as such loss, damage or expense arises from the performance of the Custodian or
any Domestic Subcustodian in reliance upon records that were maintained for such
Fund by entities other than the Custodian or any Domestic Subcustodian prior to
the Custodian's employment hereunder.
(d) Advice of Counsel.
-----------------
The Custodian and all Domestic Subcustodians shall be entitled to
receive and act upon advice of counsel of its own choosing on all matters. The
Custodian and all Domestic Subcustodians shall be without liability for any
actions taken or omitted in good faith pursuant to the advice of counsel.
(e) Advice of the Fund and Others.
-----------------------------
The Custodian and any Domestic Subcustodian may rely upon the advice of
any Fund and upon statements of such Fund's accountants and other persons
believed by it in good faith to be expert in matters upon which they are
consulted, and neither the Custodian nor any Domestic Subcustodian shall be
liable for any actions taken or omitted, in good faith, pursuant to such advice
or statements.
(f) Instructions Appearing to be Genuine.
------------------------------------
The Custodian and all Domestic Subcustodians shall be fully protected
and indemnified in acting as a custodian hereunder upon any Resolutions of the
Board of Directors or Trustees, Instructions, Special Instructions, advice,
notice, request, consent, certificate, instrument or paper appearing to it to be
genuine and to have been properly executed and shall, unless otherwise
specifically provided herein, be entitled to receive as conclusive proof of any
fact or matter required to be ascertained from any Fund hereunder a certificate
signed by any officer of such Fund authorized to countersign or confirm Special
Instructions.
(g) Exceptions from Liability.
-------------------------
Without limiting the generality of any other provisions hereof, neither
the Custodian nor any Domestic Subcustodian shall be under any duty or
obligation to inquire into, nor be liable for:
(i) the validity of the issue of any Securities purchased by or for
any Fund, the legality of the purchase thereof or evidence of ownership required
to be received by any such Fund, or the propriety of the decision to purchase or
amount paid therefor;
(ii) the legality of the sale of any Securities by or for any Fund, or
the propriety of the amount for which the same were sold; or
(iii) any other expenditures, encumbrances of Securities, borrowings or
similar actions with respect to any Fund's Assets;
and may, until notified to the contrary, presume that all Instructions or
Special Instructions received by it are not in conflict with or in any way
contrary to any provisions of any such Fund's Declaration of Trust, Partnership
Agreement, Articles of Incorporation or By-Laws or votes or proceedings of the
shareholders, trustees, partners or directors of any such Fund, or any such
Fund's currently effective Registration Statement on file with the SEC.
7. LIABILITY OF THE CUSTODIAN FOR ACTIONS OF OTHERS.
------------------------------------------------
(a) Domestic Subcustodians
----------------------
The Custodian shall be liable for the acts or omissions of any Domestic
Subcustodian to the same extent as if such actions or omissions were performed
by the Custodian itself.
(b) Liability for Acts and Omissions of Foreign Subcustodians.
---------------------------------------------------------
The Custodian shall be liable to a Fund for any loss or damage to such
Fund caused by or resulting from the acts or omissions of any Foreign
Subcustodian to the extent that, under the terms set forth in the subcustodian
agreement between the Custodian or a Domestic Subcustodian and such Foreign
Subcustodian, the Foreign Subcustodian has failed to perform in accordance with
the standard of conduct imposed under such subcustodian agreement and the
Custodian or Domestic Subcustodian recovers from the Foreign Subcustodian under
the applicable subcustodian agreement.
(c) Securities Systems, Interim Subcustodians, Special Subcustodians,
Securities Depositories and Clearing Agencies.
----------------------------------------------------------------
The Custodian shall not be liable to any Fund for any loss, damage or
expense suffered or incurred by such Fund resulting from or occasioned by the
actions or omissions of a Securities System, Interim Subcustodian, Special
Subcustodian, or Securities Depository and Clearing Agency unless such loss,
damage or expense is caused by, or results from, the gross negligence or willful
misfeasance of the Custodian.
(d) Defaults or Insolvencies of Brokers, Banks, Etc.
------------------------------------------------
The Custodian shall not be liable for any loss, damage or expense
suffered or incurred by any Fund resulting from or occasioned by the actions,
omissions, neglects, defaults or insolvency of any broker, bank, trust company
or any other person with whom the Custodian may deal (other than any of such
entities acting as a Subcustodian, Securities System or Securities Depository
and Clearing Agency, for whose actions the liability of the Custodian is set out
elsewhere in this Agreement) unless such loss, damage or expense is caused by,
or results from, the gross negligence or willful misfeasance of the Custodian.
(e) Reimbursement of Expenses.
--------------------------
Each Fund agrees to reimburse the Custodian for all out-of-pocket
expenses incurred by the Custodian in connection with this Agreement, but
excluding salaries and usual overhead expenses.
8. INDEMNIFICATION.
---------------
(a) Indemnification by Fund.
------------------------
Subject to the limitations set forth in this Agreement, each Fund
agrees to indemnify and hold harmless the Custodian and its nominees from all
losses, damages and expenses (including attorneys' fees) suffered or incurred by
the Custodian or its nominee caused by or arising from actions taken by the
Custodian, its employees or agents in the performance of its duties and
obligations under this Agreement, including, but not limited to, any
indemnification obligations undertaken by the Custodian under any relevant
subcustodian agreement; provided, however, that such indemnity shall not apply
to the extent the Custodian is liable under Sections 6 or 7 hereof.
If any Fund requires the Custodian to take any action with respect to
Securities, which action involves the payment of money or which may, in the
opinion of the Custodian, result in the Custodian or its nominee assigned to
such Fund being liable for the payment of money or incurring liability of some
other form, such Fund, as a prerequisite to requiring the Custodian to take
such action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
(b) Indemnification by Custodian.
---------------------------
Subject to the limitations set forth in this Agreement and in addition
to the obligations provided in Sections 6 and 7, the Custodian agrees to
indemnify and hold harmless each Fund from all losses, damages and expenses
suffered or incurred by each such Fund caused by the gross negligence or willful
misfeasance of the Custodian.
9. ADVANCES.
--------
In the event that, pursuant to Instructions, the Custodian or any
Subcustodian, Securities System, or Securities Depository or Clearing Agency
acting either directly or indirectly under agreement with the Custodian (each of
which for purposes of this Section 9 shall be referred to as "Custodian"), makes
any payment or transfer of funds on behalf of any Fund as to which there would
be, at the close of business on the date of such payment or transfer,
insufficient funds held by the Custodian on behalf of any such Fund, the
Custodian may, in its discretion without further Instructions, provide an
advance ("Advance") to any such Fund in an amount sufficient to allow the
completion of the transaction by reason of which such payment or transfer of
funds is to be made. In addition, in the event the Custodian is directed by
Instructions to make any payment or transfer of funds on behalf of any Fund as
to which it is subsequently determined that such Fund has overdrawn its cash
account with the Custodian as of the close of business on the date of such
payment or transfer, said overdraft shall constitute an Advance. Any Advance
shall be payable by the Fund on behalf of which the Advance was made on demand
by Custodian, unless otherwise agreed by such Fund and the Custodian, and shall
accrue interest from the date of the Advance to the date of payment by such Fund
to the Custodian at a rate agreed upon in writing from time to time by the
Custodian and such Fund. It is understood that any transaction in respect of
which the Custodian shall have made an Advance, including but not limited to a
foreign exchange contract or transaction in respect of which the Custodian is
not acting as a principal, is for the account of and at the risk of the Fund on
behalf of which the Advance was made, and not, by reason of such Advance, deemed
to be a transaction undertaken by the Custodian for its own account and risk.
The Custodian and each of the Funds which are parties to this Agreement
acknowledge that the purpose of Advances is to finance temporarily the purchase
or sale of Securities for prompt delivery in accordance with the settlement
terms of such transactions or to meet emergency expenses not reasonably
foreseeable by a Fund. The Custodian shall promptly notify the appropriate Fund
of any Advance. Such notification shall be sent by facsimile transmission or in
such other manner as such Fund and the Custodian may agree.
10. LIENS.
-----
The Bank shall have a lien on the Property in the Custody Account to
secure payment of fees and expenses for the services rendered under this
Agreement. If the Bank advances cash or securities to the Fund for any purpose
or in the event that the Bank or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of its duties hereunder, except such as may arise from its or
its nominee's negligent action, negligent failure to act or willful misconduct,
any Property at any time held for the Custody Account shall be security therefor
and the Fund hereby grants a security interest therein to the Bank. The Fund
shall promptly reimburse the Bank for any such advance of cash or securities or
any such taxes, charges, expenses, assessments, claims or liabilities upon
request for payment, but should the Fund fail to so reimburse the Bank, the Bank
shall be entitled to dispose of such Property to the extent necessary to obtain
reimbursement. The Bank shall be entitled to debit any account of the Fund with
the Bank including, without limitation, the Custody Account, in connection with
any such advance and any interest on such advance as the Bank deems reasonable.
11. COMPENSATION.
------------
Each Fund will pay to the Custodian such compensation as is agreed to
in writing by the Custodian and each such Fund from time to time. Such
compensation, together with all amounts for which the Custodian is to be
reimbursed in accordance with Section 7(e), shall be billed to each such Fund
and paid in cash to the Custodian.
12. POWERS OF ATTORNEY.
------------------
Upon request, each Fund shall deliver to the Custodian such proxies,
powers of attorney or other instruments as may be reasonable and necessary or
desirable in connection with the performance by the Custodian or any
Subcustodian of their respective obligations under this Agreement or any
applicable subcustodian agreement.
13. TERMINATION AND ASSIGNMENT.
--------------------------
Any Fund or the Custodian may terminate this Agreement by notice in
writing, delivered or mailed, postage prepaid (certified mail, return receipt
requested) to the other not less than 90 days prior to the date upon which such
termination shall take effect. Upon termination of this Agreement, the
appropriate Fund shall pay to the Custodian such fees as may be due the
Custodian hereunder as well as its reimbursable disbursements, costs and
expenses paid or incurred. Upon termination of this Agreement, the Custodian
shall deliver, at the terminating party's expense, all Assets held by it
hereunder to the appropriate Fund or as otherwise designated by such Fund by
Special Instructions. Upon such delivery, the Custodian shall have no further
obligations or liabilities under this Agreement except as to the final
resolution of matters relating to activity occurring prior to the effective date
of termination.
This Agreement may not be assigned by the Custodian or any Fund without the
respective consent of the other, duly authorized by a resolution by its Board of
Directors or Trustees.
14. ADDITIONAL FUNDS.
----------------
An additional Fund or Funds may become a party to this Agreement after the
date hereof by an instrument in writing to such effect signed by such Fund or
Funds and the Custodian. If this Agreement is terminated as to one or more of
the Funds (but less than all of the Funds) or if an additional Fund or Funds
shall become a party to this Agreement, there shall be delivered to each party
an Appendix B or an amended Appendix B, signed by each of the additional Funds
(if any) and each of the remaining Funds as well as the Custodian, deleting or
adding such Fund or Funds, as the case may be. The termination of this
Agreement as to less than all of the Funds shall not affect the obligations of
the Custodian and the remaining Funds hereunder as set forth on the signature
page hereto and in Appendix B as revised from time to time.
15. NOTICES.
-------
As to each Fund, notices, requests, instructions and other writings
delivered to THE GARZARELLI FUNDS, 207 EAST BUFFALO STREET, SUITE 400,
MILWAUKEE, WISCONSIN 53202, postage prepaid, or to such other address as any
particular Fund may have designated to the Custodian in writing, shall be deemed
to have been properly delivered or given to a Fund.
Notices, requests, instructions and other writings delivered to Cory A.
Williams in the Securities Administration Department of the Custodian at its
office at 928 Grand Boulevard, Kansas City, Missouri, or mailed postage prepaid,
to the Custodian's Securities Administration Department, Post Office Box 419226,
Kansas City, Missouri 64141, or to such other addresses as the Custodian may
have designated to each Fund in writing, shall be deemed to have been properly
delivered or given to the Custodian hereunder; provided, however, that
procedures for the delivery of Instructions and Special Instructions shall be
governed by Section 2(c) hereof.
16. MISCELLANEOUS.
--------------
(a) This Agreement is executed and delivered in the State of Missouri
and shall be governed by the laws of such state.
(b) All of the terms and provisions of this Agreement shall be
binding upon, and inure to the benefit of, and be enforceable by the respective
successors and assigns of the parties hereto.
(c) No provisions of this Agreement may be amended, modified or
waived, in any manner except in writing, properly executed by both parties
hereto; provided, however, Appendix A may be amended from time to time as
Domestic Subcustodians, Foreign Subcustodians, Special Subcustodians, and
Securities Depositories and Clearing Agencies are approved or terminated
according to the terms of this Agreement.
(d) The captions in this Agreement are included for convenience of
reference only, and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
(e) This Agreement shall be effective as of the date of execution
hereof.
(f) This Agreement may be executed simultaneously in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
(g) The following terms are defined terms within the meaning of this
Agreement, and the definitions thereof are found in the following sections of
the Agreement:
Term Section
---- -------
Account 4(b)(3)(ii)
ADR'S 4(j)
Advance 9
Assets 2
Authorized Person 3
Banking Institution 4(1)
Domestic Subcustodian 5(a)
Foreign Subcustodian 5(b)
Instruction 2
Interim Subcustodian 5(c)
Interest Bearing Deposit 4(1)
Liability 10
OCC 4(g)(2)
Person 6(b)
Procedural Agreement 4(h)
SEC 4(b)(3)
Securities 2
Securities Depositories and 5(b)
Clearing Agencies
Securities System 4(b)(3)
Shares 4(s)
Sovereign Risk 6(b)
Special Instruction 2
Special Subcustodian 5(c)
Subcustodian 5
1940 Act 4(v)
(h) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid by any court of competent
jurisdiction, the remaining portion or portions shall be considered severable
and shall not be affected, and the rights and obligations of the parties shall
be construed and enforced as if this Agreement did not contain the particular
part, term or provision held to be illegal or invalid.
(i) This Agreement constitutes the entire understanding and agreement
of the parties hereto with respect to the subject matter hereof, and accordingly
supersedes, as of the effective date of this Agreement, any custodian agreement
heretofore in effect between the Fund and the Custodian.
The Custodian acknowledges that the assets and liabilities of each Fund are
separate and distinct from the assets and liabilities of each other Fund and
agrees that no Fund shall be charged hereunder for any debt of other obligation
of another Fund and that in dealing with a Fund it may enforce claims against
that Fund only against assets belonging to that Fund and not against assets of
any other Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Custody Agreement
to be executed by their respective duly authorized officers.
THE GARZARELLI FUNDS
ATTEST:
- ------------------------------
By:
---------------------------
Name:
---------------------------
Title:
---------------------------
Date:
---------------------------
UMB BANK, N.A.
ATTEST:
Signature Illegible
- ------------------------------
By: /s/ Ralph R. Santoro
---------------------------
Name: Ralph R. Santoro
---------------------------
Title: Vice President
---------------------------
Date:
---------------------------
APPENDIX A
-----------
CUSTODY AGREEMENT
DOMESTIC SUBCUSTODIANS:
United Missouri Trust Company of New York
SECURITIES SYSTEMS:
Federal Book Entry
Depository Trust Company
Participant's Trust Company
The Garzarelli Funds UMB Bank, n.a.
By: By: /s/ Ralph R. Santoro
- ------------------------------ ----------------------------
Name: Name: Ralph R. Santoro
- ------------------------------ ----------------------------
Title: Title: Vice President
- ------------------------------ ----------------------------
Date: Date:
- ------------------------------ ----------------------------
APPENDIX B
-----------
CUSTODY AGREEMENT
The following series of open-end management investment companies ("Funds")
are hereby made parties to the Custody Agreement dated_______________________,
199_, with UMB Bank, n.a. ("Custodian") and The Garzarelli Funds, and agree to
be bound by all the terms and conditions contained in said Agreement:
LIST THE FUNDS
The Garzarelli Balanced Fund
ATTEST:
- --------------------------- THE GARZARELLI FUNDS
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
Date:
--------------------------------
ATTEST:
- --------------------------- UMB BANK, N.A.
By:
--------------------------------
Name: Ralph R. Santoro
--------------------------------
Title: Vice President
--------------------------------
Date:
--------------------------------
UMB BANK, N.A.
INSTITUTIONAL CUSTODY SERVICES - U.S. DOMESTIC
SCHEDULE OF FEES
----------------------------
NET ASSET VALUE CHARGES
- -----------------------
A fee to be computed as of month end and payable on the last day of each month
of the portfolios' fiscal year, at the annual rate of:
1.00 basis point on the portfolio's net assets up to $100,000,000;
.75 basis points on the next $100,000,000 of portfolio net assets;
.50 basis points on the portfolio's net assets in excess of $200,000,000;
subject to a $250.00 per month minimum per portfolio.
PORTFOLIO TRANSACTION FEES
- --------------------------
DTC* $ 5.00
PTC* 12.00
Fed Book Entry* 8.00
Physical* 20.00
Principal & Interest Payments 5.00
Options/Futures 25.00
Corporate Actions/Call/Reorgs 25.00
Third-Party VRDN (Bank Book Entry)* 15.00
UMB Repurchase Agreements 5.00
Tri-Party Repurchase Agreements 6.00
Checks Issued (Non-Settlement Related) 8.00
Outgoing Wires (Non-Settlement Related) 8.00
* A transaction includes buys, sells, maturities, or free security movements.
OUT-OF-POCKET EXPENSES
- ----------------------
Includes, but is not limited to, security transfer fees, certificate fees,
shipping/courier fees or charges, FDIC insurance premiums, specialized
programming charges, and remote system access and connect charges.
THE GARZARELLI FUNDS UMB BANK, N.A.
By: By: /s/ Ralph R. Santoro
- ------------------------- ------------------------
Name: Name: Ralph R. Santoro
- ------------------------- ------------------------
Title: Title: Vice President
- ------------------------- ------------------------
Date: March 3, 1997
------------------------
ADMINISTRATION AND FUND ACCOUNTING AGREEMENT
THIS AGREEMENT is made as of this __ day of April, 1997, by and between The
Garzarelli Funds, a Delaware business trust (the "Trust"), and Sunstone
Financial Group, Inc., a Wisconsin corporation (the "Administrator").
WHEREAS, the Trust is an open-end investment company registered under the
Investment Company Act of 1940, as amended (the "Act") and is authorized to
issue shares of beneficial interests (the "Shares") in separate series with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Trust and the Administrator desire to enter into an agreement
pursuant to which the Administrator shall provide administration and fund
accounting services to such investment portfolios of the Trust as are listed on
Schedule A hereto and any additional investment portfolios the Trust and
Administrator may agree upon and include on Schedule A as such Schedule may be
amended from time to time (such investment portfolios and any additional
investment portfolios are individually referred to as a "Fund" and collectively
the "Funds").
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto, intending to be legally bound, do
hereby agree as follows:
1. APPOINTMENT
-----------
The Trust hereby appoints the Administrator as administrator and fund
accountant of the Funds for the period and on the terms set forth in this
Agreement. The Administrator accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
2. SERVICES AS ADMINISTRATOR
-------------------------
(a) Subject to the direction and control of the Trust's Board of Trustees
and utilizing information provided by the Trust and its agents, the
Administrator will: (1) provide office space, facilities, equipment and
personnel to carry out its services hereunder; (2) compile data for, prepare and
file with respect to the Funds Notices to the Securities and Exchange Commission
(the "Commission") required pursuant to Rule 24f-2 under the Act and Semi-Annual
Reports on Form N-SAR; (3) prepare for execution by the Trust and file all
federal income and excise tax returns and state income tax returns (and such
other required tax filings as may be agreed to by the parties) other than those
required to be made by the Trust's custodian or transfer agent, subject to
review and approval of the Trust and the Trust's independent accountants; (4)
prepare the financial statements for the Annual and Semi-Annual Reports required
pursuant to Section 30(d) under the Act; (5) prepare, with the assistance of the
Trust's legal counsel, the Registration Statement for the Trust (on Form N-1A or
any replacement therefor) and any amendments thereto; (6) determine and
periodically monitor each Fund's income and expense accruals and cause all
appropriate expenses to be paid from Trust assets on proper authorization from
the Trust; (7) calculate daily net asset values and income factors of each Fund;
(8) maintain all general ledger accounts and related subledgers; (9) perform
security valuations; (10) assist in the acquisition of the Trust's fidelity bond
required by the Act, monitor the amount of the bond and make the necessary
Commission filings related thereto; (11) from time to time as the Administrator
deems appropriate, check each Fund's compliance with the policies and
limitations of each Fund relating to the portfolio investments as set forth in
the Prospectus and Statement of Additional Information and monitor each Fund's
status as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (but these functions shall not relieve the
Trust's investment adviser and sub-advisers of their primary day-to-day
responsibility for assuring such compliance); (12) maintain, and/or coordinate
with the other service providers the maintenance of, the accounts, books and
other documents required pursuant to Rule 31a-1(a) and (b) under the Act; (13)
prepare and/or file all documents to be filed with states to register and
maintain the Fund's securities registration, including, without limitation,
sales reports, updated prospectuses, Form U-1s; (14) develop with legal counsel
and the secretary of the Trust an agenda for each board meeting and, if
requested by the Trustees, attend board meetings and prepare minutes; (15)
coordinate the preparation of other matters required to be reported to the
board, including, without limitation, details of Rule 12b-1 payments, code of
ethics compliance and broker commissions; (16) prepare Form 1099s for directors
and other fund vendors; (17) calculate dividend and capital gains distributions,
subject to review and approval by the Trust and its independent accountants; and
(18) generally assist in the Trust's administrative operations as mutually
agreed to by the parties. The duties of the Administrator shall be confined to
those expressly set forth herein, and no implied duties are assumed by or may be
asserted against the Administrator hereunder.
(b) The Trustees of the Trust shall cause the officers, adviser, legal
counsel, independent accountants and custodian for the Funds to cooperate with
the Administrator and to provide the Administrator, upon request, with such
information, documents and advice relating to the Funds and the Trust as is
within the possession or knowledge of such persons, in order to enable the
Administrator to perform its duties hereunder. In connection with its duties
hereunder, the Administrator shall be entitled to rely, and shall be held
harmless by the Trust when acting in reliance, upon the instruction, advice,
information or any documents relating to the Funds provided to the Administrator
by an "Authorized Person" of the Trust (as defined herein) or by any of the
aforementioned persons. Fees charged by such persons shall be an expense of the
Trust. The Administrator shall be entitled to rely on any document which it
reasonably believes to be genuine and to have been signed or presented by the
proper party. "Authorized Persons" of the Trust shall mean those individuals
identified as such in writing to the Administrator. The Administrator shall not
be held to have notice of any change of authority of any officer, agent,
representative or employee of the Trust until receipt of written notice thereof
from the Trust.
(c) In compliance with the requirements of Rule 31a-3 under the Act, the
Administrator hereby agrees that all records which it maintains for the Trust
are the property of the Trust and further agrees to surrender promptly to the
Trust any of such records upon the Trust's request. Subject to the terms of
Section 6, the Administrator further agrees to preserve for the periods
prescribed by Rule 31a-2 under the Act the records described in (a) above which
are maintained by the Administrator for the Trust.
(d) It is understood that in determining security valuations, the
Administrator may employ one or more pricing services approved by the Trust to
determine valuations of portfolio securities for purposes of calculating net
asset values of the Funds. The Administrator is authorized to rely on the prices
provided by such service(s) or by the Funds' investment adviser or other
authorized representative of the Funds, and shall not be liable for losses to
the Trust or its securityholders as a result of its reliance on the valuations
provided by the approved pricing service(s) or the representative.
3. FEES; DELEGATION; EXPENSES
--------------------------
(a) In consideration of the services rendered pursuant to this Agreement,
the Trust will pay the Administrator a fee, computed daily and payable monthly,
as provided in Schedule B hereto, plus out-of-pocket expenses. The Trust shall
also pay the Administrator for organizational start-up services provided on
behalf of the Funds as specified in Schedule B. Out-of-pocket expenses include,
but are not limited to, travel, lodging and meals in connection with travel on
behalf of the Trust, programming and related expenses (previously incurred or to
be incurred by Administrator) in connection with providing electronic
transmission of data between the Administrator and the Funds' other service
providers, brokers, dealers and depositories, fees and expenses of pricing
services, and photocopying, postage and overnight delivery expenses. Fees shall
be paid by each Fund at a rate that would aggregate at least the applicable
minimum fee for each Fund.
(b) For the purpose of determining fees payable to the Administrator, net
asset value shall be computed in accordance with the Trust's Prospectuses and
resolutions of the Trust's Board of Trustees. The fee for the period from the
day of the month this Agreement is entered into until the end of that month
shall be pro-rated according to the proportion which such period bears to the
full monthly period. Upon any termination of this Agreement before the end of
any month, the fee for such part of a month shall be pro-rated according to the
proportion which such period bears to the full monthly period and shall be
payable upon the date of termination of this Agreement. Should the Trust be
liquidated, merged with or acquired by another fund or investment company, any
accrued fees shall be immediately payable. Such fee as is attributable to each
Fund shall be a separate charge to each Fund and shall be the several (and not
joint or joint and several) obligation of each such Fund.
(c) The Administrator will bear all expenses in connection with the
performance of its services under this Agreement except as otherwise provided
herein. Other costs and expenses to be incurred in the operation of the Funds,
including, but not limited to: taxes; interest; brokerage fees and commissions,
if any; salaries, fees and expenses of officers and Trustees; Commission fees
and state Blue Sky fees; advisory fees; charges of custodians, transfer agents,
dividend disbursing and accounting services agents; security pricing services;
insurance premiums; outside auditing and legal expenses; costs of organization
and maintenance of corporate existence; typesetting, printing, proofing and
mailing of prospectuses, statements of additional information, supplements,
notices and proxy materials for regulatory purposes and for distribution to
current shareholders; typesetting, printing, proofing and mailing and other
costs of shareholder reports; expenses incidental to holding meetings of the
Fund's shareholders and Trustees; and any extraordinary expenses; will be borne
by the Funds or their investment adviser. Expenses incurred for distribution of
Fund shares, including the typesetting, printing, proofing and mailing of
prospectuses for persons who are not shareholders of the Trust, will be borne by
the Trust, its distributor or its investment adviser, except for such expenses
permitted to be paid by the Trust under a distribution plan adopted in
accordance with applicable laws.
4. PROPRIETARY AND CONFIDENTIAL INFORMATION
----------------------------------------
The Administrator agrees on behalf of itself and its employees to treat
confidentially and as proprietary information of the Trust all records relative
to the Funds and prior, present or potential shareholders of the Trust (and
clients of said shareholders), and not to use such records and information for
any purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Trust, which
approval may not be withheld where the Administrator may be exposed to civil or
criminal proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, when subject to governmental or
regulatory audit or investigation, or when so requested by the Trust. Records
and information which has become known to the public through no wrongful act of
the Administrator or any of its employees, agents or representatives shall not
be subject to this paragraph.
5. LIMITATION OF LIABILITY
-----------------------
(a) The Administrator shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Funds in connection with the
matters to which this Agreement relates, except for a loss resulting from
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement. Furthermore, the Administrator shall not be
liable for any action taken or omitted to be taken in accordance with
instructions received by the Administrator from an Authorized Person.
(b) The Administrator assumes no responsibility hereunder, and shall not
be liable, for any damage, loss of data, errors, delay or any other loss
whatsoever caused by events beyond its reasonable control. The Administrator
will, however, take all reasonable steps to minimize service interruptions for
any period that such interruption continues beyond the Administrator's control.
6. TERM
----
(a) This Agreement shall become effective as with respect to each Fund
listed on Schedule A hereof as of the date hereof and, with respect to each Fund
not in existence on that date, on the date an amendment to Schedule A to this
Agreement relating to that Fund is executed. Unless terminated as provided
herein, this Agreement shall continue in effect with respect to each Fund until
April __, 1998. Thereafter, if not terminated as provided herein, this Agreement
shall continue automatically in effect as to each Fund for successive annual
periods.
(b) This Agreement may be terminated with respect to any one or more
particular Funds without penalty (i) upon mutual consent of the parties, or (ii)
by either party upon not less than sixty (60) days' written notice to the other
party (which notice may be waived by the party entitled to the notice). The
terms of this Agreement shall not be waived, altered, modified, amended or
supplemented in any manner whatsoever except by a written instrument signed by
the Administrator and the Trust.
(c) Notwithstanding anything herein to the contrary, upon the termination
of this Agreement or the liquidation of a Fund or the Trust, the Administrator
shall deliver the records of the Fund(s) and/or Trust as the case may be to the
Trust or person(s) designated by the Trust and thereafter the Trust or its
designee shall be solely responsible for preserving the records for the periods
required by all applicable laws, rules and regulations. In addition, in the
event of termination of this Agreement, or the proposed liquidation or merger of
the Trust or a Fund(s), and the Trust requests the Administrator to provide
services in connection therewith, the Administrator shall provide such services
and be entitled to such compensation as the parties may mutually agree.
7. NON-EXCLUSIVITY
---------------
The services of the Administrator rendered to the Trust are not deemed to be
exclusive. The Administrator may render such services and any other services to
others, including other investment companies. The Trust recognizes that from
time to time directors, officers and employees of the Administrator may serve as
trustees, directors, officers and employees of other entities (including other
investment companies), that such other entities may include the name of the
Administrator as part of their name and that the Administrator or its affiliates
may enter into investment advisory or other agreements with such other entities.
8. GOVERNING LAW; INVALIDITY
-------------------------
This Agreement shall be governed by Wisconsin law (except as to Section 9
hereof which shall be construed in accordance with Delaware law). To the extent
that the applicable laws of the State of Wisconsin, or any of the provisions
herein, conflict with the applicable provisions of the Act, the latter shall
control, and nothing herein shall be construed in a manner inconsistent with the
Act or any rule or order of the Commission thereunder. Any provision of this
Agreement which may be determined by competent authority to be prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
9. MISCELLANEOUS
-------------
This Agreement is executed by or on behalf of the Trust and the obligations
hereunder are not binding upon any of the Trustees, officers or shareholders of
the Trust individually but are binding only upon the Funds to which such
obligations pertain and the assets and property of such Funds.
10. NOTICES
-------
Any notice required or to be permitted to be given by either party to the
other shall be in writing and shall be deemed to have been given when sent by
registered or certified mail, postage prepaid, return receipt requested, as
follows: Notice to the Administrator shall be sent to Sunstone Financial Group,
Inc., 207 East Buffalo Street, Suite 400, Milwaukee, WI, 53202, Attention Miriam
M. Allison, and notice to the Trust shall be sent to The Garzarelli Funds, 100
South Wacker Drive, Suite 2100, Chicago, Illinois 60606-4002, Attention: Andrew
J. Goodwin III.
11. COUNTERPARTS
------------
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original agreement but such counterparts shall together
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by a duly authorized officer as of the day and year first above
written.
THE GARZARELLI FUNDS
(the "Trust")
By:
------------------------------------
President
SUNSTONE FINANCIAL GROUP, INC.
("Administrator")
By:
-----------------------------------
President
SCHEDULE A
TO THE
ADMINISTRATION AND FUND ACCOUNTING AGREEMENT
BY AND BETWEEN
THE GARZARELLI FUNDS
AND
SUNSTONE FINANCIAL GROUP, INC.
NAME OF FUND
------------
GARZARELLI BALANCED FUND
SCHEDULE B
TO THE
ADMINISTRATION AND FUND ACCOUNTING AGREEMENT
BY AND BETWEEN
THE GARZARELLI FUNDS
AND
SUNSTONE FINANCIAL GROUP, INC.
MINIMUM
NAME OF FUND AVERAGE NET ASSETS ANNUAL FEES ANNUAL
- ------------ ------------------ ----------- -------
Balanced Fund Up to $50 Million 20.0 basis points $65,000
$50 Million to $100 Million 13.0 basis points
Over $100 Million 5.0 basis points
The minimum annual fee is subject to an automatic annual escalation of 5%.
Sunstone will notify the Trust of each such escalation but no amendment of this
Schedule B shall be required. The Trust shall pay the Administrator $35,000 for
its initial start-up services for the Fund. The Trust shall also pay/reimburse
the Administrator's out-of-pocket expenses as described in the Agreement. The
foregoing fee schedule assumes a single class of shares for each Fund.
TRANSFER AGENCY AGREEMENT
-------------------------
THIS AGREEMENT is made as of this day of April, 1997, by and between The
---
Garzarelli Funds, a Delaware business trust (the "Trust"), and Sunstone
Investor Services, LLC, a Wisconsin limited liability company ("Sunstone").
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end management investment company and
is authorized to issue shares of beneficial interests ("Shares") in separate
series with each such series representing the interests in a separate portfolio
of securities and other assets;
WHEREAS, the Trust desires to retain Sunstone to render the transfer agency
and other services contemplated hereby with respect to each of the investment
portfolios of the Trust as are listed on Schedule A hereto and any additional
investment portfolios the Trust and Sunstone may agree upon and include on
Schedule A as such Schedule may be amended from time to time (such investment
portfolios and any additional investment portfolios are individually referred to
as a "Fund" and collectively the "Funds"), and Sunstone is willing to render
such services.
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto, intending to be legally bound, do
hereby agree as follows:
ARTICLE I
----------
APPOINTMENT OF TRANSFER AGENT
A. APPOINTMENT.
-----------
1. The Trust hereby constitutes and appoints Sunstone as transfer agent
and dividend disbursing agent of all the Shares of the Funds during the period
of this Agreement, and Sunstone hereby accepts such appointment as transfer
agent and dividend disbursing agent and agrees to perform the duties thereof as
hereinafter set forth.
2. Sunstone shall perform the transfer agent and dividend disbursing
agent services described on Schedule B hereto. To the extent that the Trust
requests Sunstone to perform any additional services in a manner not consistent
with Sunstone's usual processing procedures, Sunstone and the Trust shall
mutually agree as to the services to be accomplished, the manner of
accomplishment and the compensation to which Sunstone shall be entitled with
respect thereto.
3. Sunstone may, in its discretion, appoint in writing other parties
qualified to perform transfer agency and shareholder services approved by the
Trust (individually, a "Sub-transfer Agent") to carry out some or all of its
responsibilities under this Agreement with respect to a Fund; provided, however,
that unless the Trust shall enter into a written agreement with such Sub-
transfer Agent, the Sub-transfer Agent shall be the agent of Sunstone and not
the agent of the Trust or such Fund and, in such event Sunstone shall be fully
responsible for the acts or omissions of such Sub-transfer Agent and shall not
be relieved of any of its responsibilities hereunder by the appointment of such
Sub-transfer Agent.
4. Sunstone shall have no duties or responsibilities whatsoever
hereunder except such duties and responsibilities as are specifically set forth
in this Agreement, and no covenant or obligation shall be implied in this
Agreement against Sunstone.
B. DOCUMENTS/RECORDS.
-----------------
1. In connection with such appointment, the Trust shall deliver or
cause to be delivered the following documents to Sunstone:
a) A copy of the Agreement and Declaration of Trust and By-laws of
the Trust and all amendments thereto, and a copy of the resolutions of the Board
of Trustees of the Trust appointing Sunstone and authorizing the execution of
this Transfer Agency Agreement on behalf of the Funds, each certified by the
Secretary of the Trust;
b) A certificate signed by the President and Secretary of the Trust
specifying: the number of authorized Shares and the number of such authorized
Shares issued and currently outstanding, if any; the names and specimen
signatures of the officers of the Trust authorized to sign written stock
certificates, and the individuals authorized to provide oral instructions and to
sign written instructions and requests on behalf of the Trust (hereinafter
referred to as "Authorized Person(s)"), and to change the persons authorized
to provide such instructions from time to time, it being understood Sunstone
shall not be held to have notice of any change in the authority of any
Authorized Person until receipt of written notice thereof from the Trust;
c) In the event the Trust issues Share certificates, specimen Share
certificates for each Fund in the form approved by the Board of Trustees of the
Trust (and in a format compatible with Sunstone's operating system), together
with a certificate signed by the Secretary of the Trust as to such approval;
d) Copies of the Trust's Registration Statement, as amended to date,
and the most recently filed Post-Effective Amendment thereto, filed by the Trust
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "1933 Act"), and under the 1940 Act, as amended, together with
any applications filed in connection therewith; and
e) Opinion of counsel for the Trust with respect to the Trust's
organization and existence under the laws of its state of organization, the
validity of the authorized and outstanding Shares, whether such Shares are fully
paid and non-assessable and the status of such Shares under the Securities Act
of 1933, as amended, and any other applicable federal law or regulation (i.e.,
if subject to registration, that they have been registered and that the
Registration Statement has become effective or, if exempt, the specific grounds
therefor.)
2. The Trust agrees to deliver or to cause to be delivered to Sunstone
in Milwaukee, Wisconsin, at the Trust's expense, all of its shareholder account
records relating to the Funds in a format acceptable to Sunstone and all such
other documents, records and information as Sunstone may reasonably request in
order for Sunstone to perform its services hereunder.
ARTICLE II
----------
COMPENSATION & EXPENSES
A. COMPENSATION. In consideration for its services hereunder as transfer
------------
agent and dividend disbursing agent, each Fund will pay to Sunstone such
compensation as shall be set forth in a separate fee schedule to be agreed to by
each Fund and Sunstone from time to time. A copy of the initial fee schedule is
attached hereto as Schedule C.
B. EXPENSES. The Trust on behalf of each Fund also agrees to promptly
--------
reimburse Sunstone for all out-of-pocket expenses or disbursements incurred by
Sunstone in connection with the performance of services under this Agreement
including, but not limited to, expenses for postage, express delivery services,
freight charges, envelopes, checks, drafts, forms (continuous or otherwise),
specially requested reports and statements, bank account service fees and
charges, telephone calls, telegraphs, stationery supplies, outside printing and
mailing firms, magnetic tapes, reels or cartridges (if sent to a Fund or to a
third party at the Trust's request) and magnetic tape handling charges, on-site
and off-site record storage, media for storage of records (e.g., microfilm,
microfiche, optical platters, computer tapes and disks), computer equipment
installed at the Trust's request at the Trust's or a third party's premises,
telecommunications equipment, telephone/telecommunication lines between the
Trust and its agents, on one hand, and Sunstone on the other, proxy soliciting,
processing and/or tabulating costs, transmission of statement data for remote
printing or processing, and transaction fees to the extent any of the foregoing
are paid by Sunstone. If requested by Sunstone, postage and other out-of-pocket
expenses are payable in advance, and in the event requested, postage is due at
least seven days prior to the anticipated mail date. In the event Sunstone
requests advance payment, Sunstone shall not be obligated to incur such expenses
or perform the related service(s) until payment is received.
C. PAYMENT PROCEDURES.
------------------
1. Amounts due hereunder shall be due and paid by the Trust on behalf
of the respective Fund on or before the fifteenth (15th) day after the date of
the statement therefor (the "Due Date"). Service fees are billed monthly, and
out-of-pocket expenses are billed as incurred (unless prepayment is requested by
Sunstone). Sunstone may, at its option, arrange to have various service
providers submit invoices directly to the Trust for payment of out-of-pocket
expenses reimbursable hereunder. The Trust is aware that its failure to pay all
amounts in a timely fashion so that they will be received by Sunstone on or
before the Due Date will give rise to costs to Sunstone not contemplated by this
Agreement, including but not limited to carrying, processing and accounting
charges. Accordingly, in the event that any amounts due hereunder are not
received by Sunstone by the Due Date, the Trust shall pay a late charge equal to
one and one-half percent (1.5%) per month or the maximum amount permitted by
law, whichever is less. In addition, the Trust shall pay reasonable attorney's
fees and court costs of Sunstone if any amounts due Sunstone are collected by or
through an attorney. The parties hereby agree that such late charge represents
a fair and reasonable computation of the costs incurred by reason of late
payment or payment of amounts not properly due. Acceptance of such late charge
shall in no event constitute a waiver of the Fund's default or prevent the non-
defaulting party from exercising any other rights and remedies available to it.
2. In the event that any charges are disputed, the Trust shall, on or
before the Due Date, pay all undisputed amounts due hereunder and notify
Sunstone in writing of any disputed charges for out-of-pocket expenses which it
is disputing in good faith. Payment for such disputed charges shall be due on
or before the close of the fifth (5th) business day after the day on which
Sunstone provides to the Trust documentation which an objective observer would
agree reasonably supports the disputed charges (the "Revised Due Date"). Late
charges shall not begin to accrue as to charges disputed in good faith until the
first day after the Revised Due Date.
ARTICLE III
-----------
PROCESSING AND PROCEDURES
A. ISSUANCE, REDEMPTION AND TRANSFER OF SHARES
-------------------------------------------
1. Sunstone acknowledges that it has received a copy of the Trust's
Prospectus (as hereinafter defined), which Prospectus describes how sales and
redemptions of shares of each Fund shall be made and Sunstone agrees to accept
purchase orders and redemption requests with respect to Fund shares on each Fund
Business Day in accordance with such Prospectus. "Fund Business Day" shall be
deemed to be each day on which the New York Stock Exchange is open for trading,
and "Prospectus" shall mean the last Trust prospectus actually received by
Sunstone from the Trust with respect to which the Trust has indicated a
registration statement under the 1933 Act has become effective, including the
Statement of Additional Information, incorporated by reference therein.
2. On each Fund Business Day Sunstone shall, as of the time at which
the net asset value of a Fund is computed, issue to and redeem from the accounts
specified in a purchase order or redemption request, which in accordance with
the Prospectus is effective on such day, the appropriate number of full and
fractional Shares based on the net asset value per Share of such Fund specified
in an advice received on such Fund Business Day from or on behalf of the Fund.
3. Upon the issuance of any Shares in accordance with this Agreement,
Sunstone shall not be responsible for the payment of any original issue or other
taxes required to be paid by the Trust in connection with such issuance of any
Shares.
4. Sunstone shall not be required to issue any Shares after it has
received from an Authorized Person or from an appropriate federal or state
authority written notification that the sale of Shares has been suspended or
discontinued, and Sunstone shall be entitled to rely upon such written
notification.
5. Upon receipt of a redemption request and monies paid to it by the
Custodian in connection with a redemption of Shares, Sunstone shall cancel the
redeemed Shares and after making appropriate deduction for any withholding of
taxes required of it by applicable law, make payment in accordance with the
Trust's redemption and payment procedures described in the Prospectus.
6. (a) Except as otherwise provided in sub-paragraph (b) of this
paragraph, Shares will be transferred or redeemed upon presentation to Sunstone
of Share certificates, if any, or instructions properly endorsed for transfer,
exchange or redemption, accompanied by such documents as Sunstone deems
necessary to evidence the authority of the person making such transfer or
redemption, and bearing satisfactory evidence of the payment of stock transfer
taxes. Sunstone reserves the right to refuse to transfer or redeem Shares until
it is satisfied that the endorsement on the stock certificate, if any, or
instructions is valid and genuine, and for that purpose it will require, unless
otherwise instructed by an Authorized Person or except as provided in sub-
paragraph (b) of this paragraph, a guarantee of signature by an "Eligible
Guarantor Institution" as that term is defined by SEC Rule 17Ad-15. Sunstone
also reserves the right to refuse to transfer or redeem Shares until it is
satisfied that the requested transfer or redemption is legally authorized, and
it shall incur no liability for the refusal, in good faith, to make transfers or
redemptions which Sunstone, in its judgment, deems improper or unauthorized, or
until it is satisfied that there is no basis to any claims adverse to such
transfer or redemption. Sunstone may, in effecting transfers and redemptions of
Shares, rely upon those provisions of the Uniform Act for the Simplification of
Fiduciary Security Transfers or the Uniform Commercial Code, as the same may be
amended from time to time, applicable to the transfer in question, and the Trust
shall indemnify Sunstone for any act done or omitted by it in good faith in
reliance upon such laws.
(b) Notwithstanding the foregoing or any other provision contained in
this Agreement to the contrary, Sunstone shall be fully protected by the Trust
in not requiring any instruments, documents, assurances, endorsements or
guarantees, including, without limitation, any signature guarantees, in
connection with a redemption, exchange or transfer, of Shares whenever Sunstone
reasonably believes that requiring the same would be inconsistent with the
transfer and redemption procedures as described in the Prospectus.
7. Notwithstanding any provision contained in this Agreement to the
contrary, Sunstone shall not be required or expected to require, as a condition
to any transfer or redemption of any Shares pursuant to a computer tape or
electronic data transmission, any documents to evidence the authority of the
person requesting the transfer or redemption and/or the payment of any stock
transfer taxes, and shall be fully protected in acting in accordance with the
applicable provisions of this Article IV.
8. In connection with each purchase and each redemption of Shares,
Sunstone shall send such statements as are prescribed by the Federal securities
laws applicable to transfer agents or as described in the Prospectus. If the
Prospectus indicates that certificates for Shares are available and if
specifically requested in writing by any shareholder, or if otherwise required
hereunder, Sunstone will countersign, issue and mail to such shareholder at the
address set forth in the records of Sunstone a Share certificate for any full
Share requested.
9. On each Fund Business Day Sunstone shall supply the Trust with a
statement specifying with respect to the immediately preceding Fund Business
Day: the total number of Shares of each Fund (including fractional Shares)
issued and outstanding at the opening of business on such day; the total number
of Shares of each Fund sold on such day; the total number of Shares of each Fund
and the dollar amount redeemed from Shareholders by Sunstone on such day; and
the total number of Shares of each Fund issued and outstanding.
10. Procedures for effecting purchase, redemption or transfer
transactions accepted from investors by telephone or other methods shall be
established by mutual agreement between the Trust and Sunstone consistent with
the terms of the Prospectus. Sunstone upon notice to the Trust may establish
such additional procedures, rules and regulations governing the transfer or
registration of Share certificates, if any, or the purchase, redemption or
transfer of Shares, as it may deem advisable and consistent with the Prospectus
and such rules and regulations generally adopted by mutual fund transfer agents.
Sunstone shall not be liable, and shall be held harmless by the Trust, for its
actions or omissions which are consistent with the foregoing procedures.
B. DIVIDENDS AND DISTRIBUTIONS.
---------------------------
1. The Trust shall furnish to Sunstone a copy of a resolution of its
Board of Trustees, certified by an Authorized Person, either (i) setting forth
the date of the declaration of a dividend or distribution, the date of accrual
or payment, as the case may be, thereof, the record date as of which
shareholders entitled to payment, or accrual, as the case may be, shall be
determined, the amount per Share of such dividend or distribution, the payment
date on which all previously accrued and unpaid dividends are to be paid, and
the total amount, if any, payable to Sunstone on such payment date, or (ii)
authorizing the declaration of dividends and distributions on a daily or other
periodic basis and authorizing Sunstone to rely on a certificate of an
Authorized Person setting forth the information described in subsection (i) of
this paragraph.
2. In connection with a reinvestment of a dividend or distribution of
Shares of a Fund, Sunstone shall as of each Fund Business Day, as specified in a
certificate or resolution described in paragraph 1, issue Shares of the Fund
based on the net asset value per Share of such Fund specified in an advice
received from or on behalf of the Fund on such Fund Business Day.
3. Upon the mail date specified in such certificate or resolution, as
the case may be, the Trust shall, in the case of a cash dividend or
distribution, cause the Custodian to deposit in an account in the name of
Sunstone as agent for the Trust, an amount of cash, if any, sufficient for
Sunstone to make the payment, as of the mail date, specified in such Certificate
or resolution, as the case may be, to the Shareholders who were of record on the
record date. Sunstone will, upon receipt of any such cash, make payment of such
cash dividends or distributions to the shareholders of record as of the record
date. Sunstone shall not be liable for any improper payments made in good faith
and in accordance with a certificate or resolution described in the preceding
paragraph. If Sunstone shall not receive from the Custodian sufficient cash to
make payments of any cash dividend or distribution to all shareholders of a Fund
as of the record date, Sunstone shall, upon notifying the Trust, withhold
payment to all shareholders of record as of the record date until sufficient
cash is provided to Sunstone.
4. It is understood that Sunstone in its capacity as transfer agent and
dividend disbursing agent shall in no way be responsible for the determination
of the rate or form of dividends or capital gain distributions due to the
shareholders pursuant to the terms of this Agreement. It is further understood
that Sunstone shall file with the Internal Revenue Service and shareholders such
appropriate federal tax forms concerning the payment of dividend and capital
gain distributions but shall in no way be responsible for the collection or
withholding of taxes due on such dividends or distributions due to shareholders,
except and only to the extent, required by applicable law.
C. AUTHORIZATION AND ISSUANCE OF SHARES; RECAPITALIZATION OR CAPITAL
ADJUSTMENT.
-----------------------------------------------------------------
1. Prior to the effective date of any increase or decrease in the total
number of Shares authorized to be issued, or the issuance of any additional
Shares of a Fund pursuant to stock dividends, stock splits, recapitalizations,
capital adjustments or similar transactions, the Trust agrees to deliver to
Sunstone such documents, certificates, reports and legal opinions as Sunstone
may reasonably request.
2. In the event the Trust issues Share certificates, Sunstone may issue
new Share certificates in place of certificates represented to have been lost,
stolen, or destroyed upon receiving written instructions from the shareholder
accompanied by proof of an indemnity or surety bond issued by a recognized
insurance institution specified by the Trust or Sunstone. If Sunstone receives
written notification from the shareholder or broker dealer that the certificate
issued was never received, and such notification is made within 30 days of the
date of issuance, Sunstone may reissue the certificate without requiring a
surety bond. Sunstone may also reissue certificates which are represented as
lost, stolen, or destroyed without requiring a surety bond provided that the
notification is in writing and accompanied by an indemnification signed on
behalf of a member firm of the New York Stock Exchange and signed by an officer
of said firm with the signature guaranteed. Notwithstanding the foregoing,
Sunstone will reissue a certificate upon written authorization from an
Authorized Person.
D. RECORDS.
-------
1. Sunstone shall keep such records as are specified in Schedule D
hereto in the form and manner, and for such period, as it may deem advisable and
is agreeable to the Trust but not inconsistent with the rules and regulations of
appropriate government authorities, in particular Rules 31a-2 and 31a-3 under
the 1940 Act. Sunstone may deliver to the Trust from time to time at Sunstone's
discretion, for safekeeping or disposition by the Trust in accordance with law,
such records, papers and documents accumulated in the execution of its duties as
such transfer agent, as Sunstone may deem expedient, other than those which
Sunstone is itself required to maintain pursuant to applicable laws and
regulations. The Trust shall assume all responsibility for any failure
thereafter to produce any record, paper, canceled Share certificate, or other
document so returned, if and when required. To the extent required by Section
31 of the 1940 Act and the rules and regulations thereunder, the records
specified in Schedule D hereto maintained by Sunstone, which have not been
previously delivered to the Trust pursuant to the foregoing provisions of this
paragraph, shall be considered to be the property of the Trust, shall be made
available upon request for inspection by the officers, employees, and auditors
of the Trust, and shall be delivered to the Trust promptly upon request and in
any event upon the date of termination of this Agreement, in the form and manner
kept by Sunstone on such date of termination or such earlier date as may be
requested by the Trust.
2. Sunstone agrees to keep all records and other information relative
to the Trust and its shareholders confidential. In case of any requests or
demands for the inspection of the shareholder records of the Trust, Sunstone
will endeavor to notify the Trust promptly and to secure instructions from an
officer as to such inspection. Sunstone reserves the right, however, to exhibit
the shareholder records to any person whenever it receives advice from its
counsel that there is a reasonable likelihood that Sunstone will be held liable
for the failure to exhibit the shareholder records to such person; provided,
however, that in connection with any such disclosure Sunstone shall promptly
notify the Trust that such disclosure has been made or is to be made.
Notwithstanding the foregoing, Sunstone may disclose information when requested
by a shareholder concerning an account as to which such shareholder claims a
legal or beneficial interest or when requested by the Trust, the shareholder or
the dealer of record as to such account.
ARTICLE IV
----------
CONCERNING THE TRUST
A. REPRESENTATIONS. The Trust represents and warrants to Sunstone that:
---------------
(a) It is a business trust duly organized and existing under the laws of
the State of Delaware, it is empowered under applicable laws and by its
Declaration of Trust and By-Laws to enter into and perform this Agreement, and
all requisite corporate proceedings have been taken to authorize it to enter
into and perform this Agreement.
(b) It is an investment company registered under the 1940 Act.
(c) A registration statement under the 1933 Act with respect to the
Shares is effective. The Trust shall notify Sunstone if such registration
statement or any state securities registrations have been terminated, lapse or a
stop order has been entered with respect to the Shares.
B. COVENANTS.
---------
1. The Trust or its agent upon instructions from the Trust will provide
to Sunstone copies of all amendments to its Agreement and Declaration of Trust
and By-laws made after the date of this Agreement. If requested by Sunstone,
each copy of the Agreement and Declaration of Trust and copies of all amendments
thereto shall be certified by the Secretary of the Trust. Each copy of the By-
Laws and copies of all amendments thereto, and copies of resolutions of the
Board of Trustees, shall be certified by the Secretary of the Trust, if
requested by Sunstone.
2. The Trust shall deliver to Sunstone the Trust's currently effective
Prospectus and, for purposes of this Agreement, Sunstone shall not be deemed to
have notice of any information contained in such Prospectus until a reasonable
time after it is actually received by Sunstone.
3. All requisite steps will be taken by the Trust from time to time
when and as necessary to register the Trust's shares for sale in all states in
which the Trust's shares shall at the time be offered for sale and require
registration. If at any time the Trust receives notice of any stop order or
other proceeding in any such state affecting such registration or the sale of
Trust's shares, or of any stop order or other proceeding under the federal
securities laws affecting the sale of the Trust's shares, the Trust will give
prompt notice thereof to Sunstone.
4. The Trust will comply with all applicable requirements of the 1933
Act, the Securities Exchange Act of 1934, as amended, the 1940 Act, blue sky
laws, and any other applicable laws, rules and regulations.
5. The Trust agrees that prior to effecting any change in the
Prospectus which would increase or alter the duties and obligations of Sunstone
hereunder, it shall advise Sunstone of such proposed change at least 30 days
prior to the intended date of the same, and shall proceed with such change only
if it shall have received the written consent of Sunstone thereto, which shall
not be unreasonably withheld.
ARTICLE V
---------
CONCERNING THE TRANSFER AGENT
A. REPRESENTATIONS. Sunstone represents and warrants to the Trust that:
---------------
(a) It is a limited liability company duly organized and existing under
the laws of the State of Wisconsin, is empowered under applicable law and by its
Articles of Organization and Operating Agreement to enter into and perform this
Agreement, and all requisite proceedings have been taken to authorize it to
enter into and perform this Agreement.
(b) It is duly registered as a transfer agent under Section 17A of the
Securities Exchange Act of 1934, as amended, to the extent required. Sunstone
shall promptly give written notice to the Trust in the event that its
registration is revoked or a proceeding is commenced that could result in such
revocation.
B. LIMITATION OF LIABILITY; INDEMNIFICATION.
----------------------------------------
1. Sunstone shall use its best efforts to ensure the accuracy of all
services performed under this Agreement, but shall not be liable for any loss or
damage, including counsel fees, resulting from its actions or omissions to act
or otherwise, in the absence of its bad faith, willful misfeasance, gross
negligence or reckless disregard of its duties under this agreement. Sunstone
shall not be liable in acting upon any writing or document reasonably believed
by it to be genuine and to have been signed or made by an Authorized Person or
verbal instructions which the individual receiving the instructions on behalf of
Sunstone reasonably believes in good faith to have been given by an Authorized
Person, and Sunstone shall not be held to have any notice of any change of
authority of any person until receipt of written notice thereof from the Trust
or such person.
2. The Trust agrees to indemnify and hold harmless Sunstone, its
employees, agents, members, officers and nominees from and against any and all
claims, demands, actions and suits, whether groundless or otherwise, and from
and against any and all judgments, liabilities, losses, damages, costs, charges,
counsel fees and other expenses of every nature and character arising out of or
in any way relating to Sunstone's actions taken or nonactions with respect to
the performance of services under this Agreement or based, if applicable, upon
reliance on information, records, instructions (oral or written) or requests
given or made to Sunstone by the Trust, its officers, trustees, agents or
representatives, or resulting from a breach by the Trust of any representation,
covenant or warranty contained in this Agreement; provided that this
indemnification shall not apply to actions or omissions of Sunstone in cases of
its own willful misfeasance or gross negligence, and further provided that prior
to confessing any claim against it which may be the subject of this
indemnification, Sunstone shall give the Trust written notice of and reasonable
opportunity to defend against said claim in its own name or in the name of
Sunstone. The indemnity and defense provisions provided hereunder shall
indefinitely survive the termination of this Agreement.
3. Sunstone shall indemnify and hold harmless the Trust, its officers,
trustees, employees and agents from and against any and all claims, demands,
actions and suits, whether groundless or otherwise, and from and against any and
all judgments, liabilities, losses, damages, costs, charges, counsel fees and
other expenses of every nature and character that the Trust may sustain or incur
or that may be asserted against the Trust by any person as a result of
Sunstone's gross negligence or willful misfeasance in the performance of its
duties or obligations under this Agreement, or resulting from a breach by
Sunstone of any representation or warranty contained in this Agreement; provided
that this indemnification shall not apply to actions or omissions of the Trust
in cases of its own willful misfeasance or gross negligence, and further
provided that prior to confessing any claim against it which may be the subject
of this indemnification, the Trust shall give Sunstone written notice of and
reasonable opportunity to defend against said claim in its own name or in the
name of the Trust. The indemnity and defense provisions provided hereunder
shall indefinitely survive the termination of this Agreement.
4. Sunstone assumes no responsibility hereunder, and shall not be
liable, for any damage, loss of data, errors, delay or any other loss whatsoever
caused by events beyond its reasonable control. Sunstone will, however, take
all reasonable steps to minimize service interruptions for any period that such
interruption continues beyond Sunstone's control.
5. In no event and under no circumstances shall either party to this
agreement be liable to anyone, including, without limitation to the other party,
for punitive damages for any act or failure to act under any provision of this
agreement even if advised of the possibility thereof.
6. At any time Sunstone may request instructions and/or receive
directions from an Authorized Person with respect to any matter arising in
connection with Sunstone's duties and obligations under this Agreement, and
Sunstone shall not be liable for any action taken or permitted by it in good
faith in accordance with such instructions or directions. Such request for
instructions by Sunstone may set forth any action proposed to be taken or
omitted by Sunstone with respect to its duties or obligations under this
Agreement and the date on and/or which such action shall be taken. Sunstone
shall not be liable for any action taken or omitted in accordance with a
proposal included in any such request on or after the date specified therein
unless, prior to taking or omitting any such action, Sunstone has received
instructions in response to such application specifying the action to be taken
or omitted. Sunstone may consult counsel of the Trust, or upon notice to and
consent of the Trust, its own counsel, at the expense of the Trust and shall be
fully protected with respect to anything done or omitted by it in good faith in
accordance with the advice or opinion of counsel to the Trust or its own
counsel.
7. Notwithstanding any of the provisions of this Agreement, Sunstone
shall be under no duty or obligation under this Agreement to inquire into, and
shall not be liable for:
(a) The legality of the issue or sale of any Shares, the sufficiency
of the amount to be received therefor, or the authority of the Trust, as the
case may be, to request such sale or issuance;
(b) The legality of a transfer or exchange of Shares, or of a
redemption of any Shares, the propriety of the amount to be paid therefor, or
the authority of the Trust, as the case may be, to request such transfer or
redemption;
(c) The legality of the declaration of any dividend by the Trust, or
the legality of the issue of any Shares in payment of any stock dividend, or the
legality of any Recapitalization or readjustment of Shares.
ARTICLE VI
----------
TERM
1. Unless sooner terminated as provided for herein, this Agreement
shall remain in full force and effect for a period of one year from the date
hereof, and thereafter shall automatically extend for additional, successive
twelve (12) month terms unless earlier terminated as provided below.
2. Either of the parties hereto may terminate this Agreement by giving
to the other party a notice in writing specifying the date of such termination,
which shall be not less than sixty (60) days after the date of receipt of such
notice. In the event such notice is given by the Trust, it shall be accompanied
by a copy of a resolution of the Board of Trustees of the Trust, certified by
the Secretary or any Assistant Secretary, electing to terminate this Agreement
and designating the successor transfer agent or transfer agents. In the event
such notice is given by Sunstone, the Trust shall on or before the termination
date, deliver to Sunstone a copy of a resolution of its Board of Trustees
certified by the Secretary or any Assistant Secretary designating a successor
transfer agent or transfer agents. In the absence of such designation by the
Trust, the Trust shall upon the date specified in the notice of termination of
this Agreement and delivery of the records maintained hereunder, be deemed to be
its own transfer agent and Sunstone shall thereby be relieved of all duties and
responsibilities pursuant to this Agreement. Fees and out-of-pocket expenses
incurred by Sunstone, but unpaid by the Trust upon such termination, shall be
immediately due and payable upon and notwithstanding such termination.
3. In the event this Agreement is terminated as provided herein,
Sunstone, upon the written request of the Trust, shall deliver the records of
the Trust to the Trust or its successor transfer agent in the form maintained by
Sunstone. The Trust shall be responsible to Sunstone for all out-of-pocket
expenses and for the reasonable costs and expenses associated with the
preparation and delivery of such media in the form and manner maintained by
Sunstone, including: (a) transportation of forms and other Trust materials used
in connection with the processing of Trust transactions by Sunstone; and (b)
transportation of Trust records and files in the possession of Sunstone. To the
extent the Trust requests, and Sunstone agrees to, any custom programming in
connection with the preparation of such media or the preparation and delivery of
materials in a form different than maintained by Sunstone, the Trust shall be
responsible for all costs and expenses of Sunstone associated therewith.
Sunstone shall not reduce the level of service provided to the Trust following
notice of termination by the Trust.
ARTICLE VII
-----------
MISCELLANEOUS
A. NOTICES. Any notice required or to be permitted to be given by either
-------
party to the other shall be in writing and shall be deemed to have been given
when sent by registered or certified mail, postage prepaid, return receipt
requested, as follows: Notice to Sunstone shall be sent to Sunstone Investor
Services, LLC, 207 East Buffalo Street, Suite 400, Milwaukee, WI, 53202,
Attention Miriam M. Allison, and notice to the Trust shall be sent to The
Garzarelli Funds, 100 South Wacker Drive, Suite 2100, Chicago, Illinois 60606-
4002, Attention: Andrew J. Goodwin III.
B. AMENDMENTS/ASSIGNMENTS.
----------------------
1. This Agreement may not be amended or modified in any manner except
by a written agreement executed by both parties with the formality of this
Agreement.
2. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns. This Agreement shall not
be assignable by either party without the written consent of the other party
except that Sunstone may assign this Agreement to an affiliate with advance
written notice to the Trust.
C. WISCONSIN LAW. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Wisconsin (except as to paragraph I
below which shall be construed in accordance with Delaware law). If any part,
term or provision of this Agreement is determined by the courts or any
regulatory authority having jurisdiction over the issue to be illegal, in
conflict with any law or otherwise invalid, the remaining portion or portions
shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.
D. COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts each of which shall be deemed to be an original; but such
counterparts shall, together, constitute only one instrument.
E. BACK-UP FACILITY. During the terms of this Agreement, Sunstone shall
----------------
provide a facility capable of safeguarding the transfer agency and dividend
disbursing records of the Trust in case of damage to the primary facility
providing those services (the "Back-Up Facility"). Transfer of the transfer
agency and dividend records of the Trust to the Back-Up Facility shall commence
as soon as practicable after damage to the primary facility results in an
inability to provide the transfer agency and dividend disbursing services.
After the primary facility has recovered, Sunstone shall again utilize it to
provide the transfer agency and dividend disbursing services to the Trust.
Sunstone shall use reasonable efforts to provide the services described in this
Agreement from the Back-Up Facility.
F. PRIOR TRANSFER AGENT(S). Sunstone will endeavor to assist in resolving
-----------------------
shareholder inquiries and errors relating to the period during which prior
transfer agents acted as such for the Trust. Any such inquiries or errors which
cannot be expediently resolved by Sunstone will be referred to the Trust.
G. NON-EXCLUSIVE; OTHER AGREEMENTS. The services of Sunstone hereunder are
-------------------------------
not deemed exclusive and Sunstone shall be free to render similar services to
others. Except as specifically provided herein, this Agreement does not in any
way affect any other agreements entered into among the parties hereto and any
actions taken or omitted by any party hereunder shall not affect any rights or
obligations of any other party hereunder.
H. CAPTIONS. The captions in the Agreement are included for convenience of
--------
reference only, and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
I. MISCELLANEOUS. This Agreement is executed by or on behalf of the Trust
-------------
and the obligations hereunder are not binding upon any of the Trustees, officers
or shareholders of the Trust individually but are binding only upon the Funds to
which such obligations pertain and the assets and property of such Funds.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective corporate officer, thereunto duly authorized and
their respective corporate seals to be hereunto affixed, as the day and year
first above written.
SUNSTONE INVESTOR SERVICES, LLC THE GARZARELLI FUNDS
("SUNSTONE") (THE "TRUST")
By: By:
- -------------------------------- --------------------------------
(Signature) (Signature)
- -------------------------------- --------------------------------
(Name) (Name)
- -------------------------------- --------------------------------
(Title) (Title)
- -------------------------------- --------------------------------
(Date Signed) (Date Signed)
SCHEDULE A
TO THE
TRANSFER AGENT AGREEMENT
BY AND BETWEEN
THE GARZARELLI FUNDS
AND
SUNSTONE INVESTOR SERVICES, LLC
NAME OF FUNDS
--------------
GARZARELLI BALANCED FUND
SCHEDULE B
TO THE
TRANSFER AGENT AGREEMENT
BY AND BETWEEN
THE GARZARELLI FUNDS
AND
SUNSTONE INVESTOR SERVICES, LLC
SERVICES
- --MAINTENANCE OF SHAREHOLDER ACCOUNTS
- Maintain records for each shareholder account
- Scan account documents for electronic storage
- Issue customer statements
- Record changes to shareholder account information
- Maintain account documentation files for each shareholder
- Establish and maintain IRA accounts
- --SHAREHOLDER SERVICING AND SHAREHOLDER TRANSACTIONS
- Respond to written and telephone (recorded lines) inquiries from
shareholders for information about their accounts (7:00 a.m. to 7:00 p.m.
Milwaukee time)
- Process shareholder purchase and redemption orders, including those of
automatic investment and systematic withdrawal plans
- Set up account information, including address, dividend options, taxpayer
identification numbers and wire instructions
- Issue transaction confirmations
- Process transfers and exchanges
- Process dividend payments by check, wire or ACH or purchase new shares
through dividend reinvestment
- Shareholder tax withholding and reporting
- --COMPLIANCE REPORTING AND PROXY PROCESSING
- Provide required reports to the Securities and Exchange Commission
- Prepare and distribute required Internal Revenue Service forms relating to
earned income and capital gains to fund and shareholders
- Issue tax withholding reports to the Internal Revenue Service
- Mail, process and tabulate proxies
- --DEALER PROCESSING
- Provide dealer access through NSCC's FundSERV
- Calculate fees due under 12b-1 plans for distribution and marketing
expenses
- --TELEPHONE SERVICE REPRESENTATIVES ON-LINE ACCESS RESPONDING TO SHAREHOLDER OR
DEALER INQUIRIES RELATED TO:
- Account registration
- Share balances
- Account options
- Dividend and capital gain distribution status
- Withholding status
- Transaction dates and types;
- Shares traded
- Social security number/tax ID number
- External account number
- Address
- Customer or account type
- Dealer, branch and rep information
- Dollars available/not available in the account
- Shares purchased/redeemed today
- Dividend accrual, current dividend period; and
- Market value of shares
- --STANDARD REPORTS
- Shareholder base analysis (monthly)
- New account listing (weekly)
- Purchases, redemptions, exchanges (monthly)
- Servicing summary (monthly)
SCHEDULE C
TO THE
TRANSFER AGENT AGREEMENT
BY AND BETWEEN
THE GARZARELLI FUNDS
AND
SUNSTONE INVESTOR SERVICES, LLC
- --FEES FOR THE GARZARELLI FUNDS
Base annual fee:
Balanced Fund $2,500
Annual shareholder account fee: 21.00 open accounts
3.00 closed accounts
16.00 open matrix level three
accounts (broker-dealer
accounts)
Minimum annual fee:
Balanced Fund 21,000
The fee assumes a single class of shares, implementation of a 12b-1 plan;
availability of automatic investment plans and systematic withdrawal plans
(using Sunstone's regular processing date); annual dividend distributions;
annual capital gains distributions; and all standard reports.
The base annual fee plus the greater of the minimum annual fee or annual
shareholder account fee will be charged. In addition, all account
maintenance and processing fees, out-of-pocket expenses, and additional
fees apply to both Garzarelli and Northern Fund accounts.
- --ONE-TIME SET-UP FEES
(per fund family)
NSCC FundSERV set-up $2,500
NSCC networking 1,500
Northern Money Market Fund(s) (per fund) 2,500
Fund set-up (per fund) 2,000
VRU set-up 2,000
Remote access per location 500
- --ACCOUNT MAINTENANCE AND PROCESSING FEES
(per occurrence)
Omnibus account transaction 2.50
Transaction processing - FundSERV .20
Locating lost shareholders 8.00
- --OUT-OF-POCKET EXPENSES
Per check processing (dividend, capital
gains, redemption) .25
Per statement and confirm processing .25
Per tax form processing .15
Per label printing for proxy or
marketing purposes .05
Production of ad hoc reports 100.00 minimum
Bulk mailings/insert handling charge
1 insert .25
2 - 3 inserts (per piece) .20
4 - 5 inserts (per piece) .15
Bank account service fees and any other
bank charges At cost
Statement paper At cost
Envelopes At cost
Tax forms At cost
Postage and express delivery charges At cost
Telephone and long distance charges At cost
Fax charges At cost
P.O. box rental At cost
800-phone number At cost
Inventory and records storage At cost
FundSERV charges At cost
Remote access ID
First user 250.00
Each additional user 100.00
Remote access line charges At cost
- --CUSTOM PROGRAMMING
Additional fees may apply for special programming to meet your servicing
requirements or to create custom reports.
- --ADDITIONAL FEES WHICH WILL BE PASSED ON TO SHAREHOLDERS
Outgoing wire fee Varies by bank
Account transcripts older than 2 years
(per year, per fund) 5.00
Non-sufficient funds Varies by bank
IRA/SEP processing/403(b)
Annual maintenance or custodial
fee (per shareholder) 15.00
Account termination (transfer or rollover) 15.00
Out-of-pocket expenses (e.g., travel, blue sky licenses)At cost
SCHEDULE D
TO THE
TRANSFER AGENT AGREEMENT
BY AND BETWEEN
THE GARZARELLI FUNDS
AND
SUNSTONE INVESTOR SERVICES, LLC
RECORDS MAINTAINED BY SUNSTONE
Account applications
Canceled certificates plus stock powers and supporting documents
Checks including check registers, reconciliation records, any adjustment
records and tax withholding documentation
Indemnity bonds for replacement of lost or missing stock certificates and
checks
Liquidation, redemption, withdrawal and transfer requests including stock
powers, signature guarantees and any supporting documentation
Shareholder correspondence
Shareholder transaction records
Share transaction history of the Funds
Proxy records for shareholder meetings
Tax reports sent to shareholders and the Internal Revenue Service
VEDDER PRICE VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 NORTH LASALLE STREET
CHICAGO, ILLINOIS 60601-1003
312-609-7500
FACSIMILE: 312-609-5005
A PARTNERSHIP INCLUDING VEDDER, PRICE,
KAUFMAN & KAMMHOLZ, P.C. WITH OFFICES IN
CHICAGO AND NEW YORK CITY
March 14, 1997
The Garzarelli Funds
100 South Wacker Drive
Suite 2100
Chicago, Illinois 60606-4002
Board of Trustees:
Reference is being made to the Registration Statement on Form N-1A under
the Securities Act of 1933 being filed by The Garzarelli Funds (the "Trust") in
connection with the proposed public offering of an indefinite number of shares
of beneficial interest, no par value ("Shares"), in the Garzarelli Balanced Fund
(the "Fund"), an authorized series of the Trust.
We have acted as counsel for the Trust since its inception and in such
capacity have assisted in supervising its organization and have counseled the
Trust regarding subsequent legal matters.
Based upon the foregoing, we advise you and opine that (a) the Trust is a
legally organized and validly existing business trust under the laws of the
State of Delaware (commonly known as a Delaware business trust) which, unless
terminated as provided in its Agreement and Declaration of Trust, shall continue
in existence without limitation of time; and (b) the Trust is authorized to
issue an unlimited number of Shares of the Fund and upon the issue of any
thereof for cash at net asset value and receipt by the Trust of the authorized
consideration therefor, the Shares of the Fund so issued will be validly issued,
fully paid, and nonassessable by the Trust.
We hereby consent to the use of this opinion in connection with said
Registration Statement relating to said Shares and to the listing of our name as
legal counsel therein.
Very truly yours,
/s/ Vedder, Price, Kaufman & Kammholz
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
DAS/COK:cj
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Independent
Auditors" and to the use of our report dated March 12, 1997, for the Garzarelli
Balanced Fund in the Registration Statement (Form N-1A) and related Prospectus
of The Garzarelli Funds filed with the Securities and Exchange Commission in
this Post-Effective Amendment No. 1 to the Registration Statement under the
Securities Act of 1933 (Registration No. 333-14855) and in this Amendment No. 3
to the Registration Statement under the Investment Company Act of 1940
(Registration No. 811-7877).
/s/ERNST & YOUNG LLP
ERNST & YOUNG
Chicago, Illinois
September 26, 1997
March 14, 1997
Board of Trustees
The Garzarelli Funds
100 South Wacker Drive
Suite 2100
Chicago, IL 60606-4002
Re: Subscription for Shares of The Garzarelli Balanced Fund (the "Fund")
Dear Trustees:
I hereby offer to purchase from The Garzarelli Funds 10,000 shares of beneficial
interest of the Fund at a price of $10.00 per share for an aggregate purchase
price of $100,000 cash, all such shares to be validly issued, fully paid and
non-assessable upon issuance of such shares and receipt of said payment by The
Garzarelli Funds.
These shares are not being purchased with any present intent of distributing or
reselling the same to the public, and will be held for investment by Elaine M.
Garzarelli.
Sincerely,
Elaine M. Garzarelli
ACCEPTED AND AGREED this
14 day of March, 1997
The Garzarelli Funds
By:
- ------------------------------
Name: H. Steel Bokhof, Jr.
Title: President
IRA DISCLOSURE STATEMENT
& CUSTODIAL AGREEMENT
(LOGO)
GARZARELLI
INVESTMENT
MANAGEMENT
DISCLOSURE STATEMENT 2
Power to Revoke 2
Legal Requirements with
Respect to Your IRA 2
Tax Treatment of Contributions
to Your IRA 3
Tax Treatment of Distributions
from Your IRA 3
Tax Treatment of Your IRA 4
Limits on Contributions to Your Account 4
Spousal IRA 4
Simplified Employee Pension Plan 4
Rollover 5
Rollover Contributions and
Tax-Free Transfers 5
Excess Contributions 6
Use of Your Account as
Security for a Loan 6
Prohibited Transactions 6
Estate Taxation 7
Effect of Divorce 7
Withdrawals Prior to Age 59 1/2 8
Minimum Distributions Required
Starting at Age 70 1/2 8
Excise Tax for Failure to Meet
Minimum Distribution Requirements 9
Excess Distribution Penalty 9
Designation of a Beneficiary
or Beneficiaries 9
Distributions Following Death
of Grantor 10
Trustee to Assume Grantor is Calendar Year
Taxpayer Unless Otherwise Informed 10
Trustee Not Legal Adviser or
Tax Counselor - Grantor Should
Consult Own Adviser 10
Investment of Account 10
Financial Guarantees and Projections 11
Trustee Not Liable 11
Termination of This Account 11
Duty to File Tax Returns 11
Internal Revenue Service Approval 11
Additional Information 11
CUSTODIAL AGREEMENT 12
Article I 12
Article II 12
Article III 12
Article IV 13
Article V 15
Article VI 15
Article VII 15
Article VIII 15
Section 1 - Investment of Account 15
Section 2 - Beneficiary Designations 17
Section 3 - Miscellaneous 19
SCHEDULE OF FEES 22
DISCLOSURE
STATEMENT
- ----------
POWER TO REVOKE
For a period of seven days following the date on which you enter into an IRA or
Custodial Trust Agreement with UMB Bank, n.a. (i.e. "UMB"), you have the right
to revoke the Trust. To effect revocation, please write or call: The Garzarelli
Funds, c/o Sunstone Investor Services, LLC, P.O. Box 674, Milwaukee, WI 53201-
0674 or 1-800-378-1405. If you wish to contact the Fund via an overnight
delivery, send it to: The Garzarelli Funds, 207 East Buffalo Street, Suite 315,
Milwaukee, WI 53202-5712. In the event notice is mailed, the postmark date (or
date of certification or registration, if sent by certified or registered mail)
will be deemed the date of delivery, provided that normal mailing procedures are
followed. If you revoke your account, you are entitled to a return of the entire
amount deposited to your account without reduction for any fees, expenses or
commissions and without any adjustment for any investment gain or loss.
LEGAL REQUIREMENTS WITH RESPECT TO YOUR IRA
Current tax law requires that your trust agreement be in writing and that it
contain the following provisions.
1. All contributions must be in the form of cash and cannot be in excess of the
lesser of your compensation or $2,000 per year, unless the contribution is a
rollover contribution as defined in the Internal Revenue Code. Employer
contributions to a Simplified Employee Pension (SEP) plan may exceed the
limitations applicable to individuals.
2. The Trustee must be a bank such as UMB, or other institution (or person)
that has satisfied the Secretary of the Treasury that it is able to administer
your account in accordance with tax laws.
3. None of the funds of your account may be invested in life insurance
contracts.
4. Your interest in the balance of the account cannot be forfeited.
5. With the exception of investments in a common trust fund or common
investment fund such as a mutual fund, none of your account assets may be
commingled.
6. Distribution of your interest in the account must begin no later than the
April 1 next following the year in which you attain age 70 1/2. Any balance in
the account at that time must be distributed to you in a lump sum or commence to
be paid in a series of payments which do not exceed your life (or life
expectancy) or the joint lives (or joint and survivor life expectancies) of
yourself and your designated beneficiary. However, annual distributions from
your account may exceed the minimum amounts required under these rules. If you
should die prior to receiving the entire account, the balance must be
distributed to your beneficiary in accordance with Treasury Department
regulations (unless the beneficiary is your spouse and elects to treat the
account as his or her own IRA).
TAX TREATMENT OF CONTRIBUTIONS TO YOUR IRA
Without regard to qualifying rollover contributions or to contributions made by
your employer to a SEP plan under present tax law you are permitted to make an
annual contribution to your account in any amount up to the lesser of your
compensation or $2,000. Such annual contributions may be made anytime during the
year (and up to your tax return due date for the taxable year, not including
extensions). If you are not covered by an employer-sponsored retirement plan
(e.g., a profit-sharing plan, ESOP, 401(k) plan, pension plan, SEP plan, etc.)
and (if you file a joint return) your spouse is not covered by such a plan, you
may deduct your full contribution. If you or your spouse (if a joint return is
filed) are covered by such a plan you may still be entitled to deduct either all
or a portion of your contribution, depending upon the amount of your Adjusted
Gross Income ("AGI"). If you are married and filing a joint return you may
deduct the full contribution if your AGI is under $40,000. If you are single the
full deduction is available if your AGI is under $25,000. No deduction at all is
available if you are married (if a joint return is filed) and your AGI is
$50,000 or more or if you are unmarried and your AGI is $35,000 or more.
(Special rules apply if you are married but you and your spouse are filing
separate returns.) If your AGI is above the amount where a full deduction
applies but less than the amount where no deduction is available a partial
deduction can be taken. The amount of the partial deduction can be approximately
determined by taking 20% of the difference between your AGI and the applicable
dollar amount ($25,000 if single; $40,000 if married) and subtracting the result
from $2,000. For example, assume an unmarried individual has AGI of $30,000 and
contributes $2,000 to his IRA. 20% of the difference between his AGI ($30,000)
and the applicable dollar amount ($25,000) is $1,000. $1,000 subtracted from
$2,000 is $1,000. Therefore, he is entitled to deduct $1,000 of his $2,000
contribution. He may, of course, limit his contribution to the amount deductible
if he wishes to do so. Even if your contribution is only partially deductible -
or not deductible at all - there is still a tax advantage for making it. As long
as contributions remain in your IRA they may grow and increase in value without
the braking effect of current taxation of earnings.
TAX TREATMENT OF DISTRIBUTIONS FROM YOUR IRA
Amounts distributed to you from the account (except for refunds of certain
excess contributions and non-deductible contributions which are discussed below)
will be taxable as ordinary income in the year received. The benefits of capital
gain treatment and 5-year and 10-year forward averaging (now being phased out)
which may apply to distributions from your employer's qualified plan, are not
available with respect to distributions from your account. Distributions of non-
deductible contributions are not taxable. If you have made non-deductible
contributions to an IRA, then distributions from the IRA will be excluded from
tax in the proportion that all non-deductible contributions to your IRAs bear to
the aggregate balances of all your IRAs at the end of the year of distribution.
All distributions are subject to federal income tax withholding requirements
unless the recipient elects not to have withholding apply by written notice to
the Trustee at the time such distribution is requested.
TAX TREATMENT OF YOUR IRA
The funds in your IRA are not subject to income tax until distributed to you.
The earnings accumulate on a tax-deferred basis to compound the growth of your
account.
LIMITS ON CONTRIBUTIONS TO YOUR ACCOUNT
Except in the case of a rollover contribution, during any year the maximum
contribution you can make is $2,000 or 100% of your compensation, whichever is
less. For purposes of determining the amount of your contributions,
"compensation" means wages, commissions, salaries, tips, professional fees,
bonuses and other amounts you receive for providing personal services. Alimony
is also treated as compensation which you may contribute to your IRA. No con-
tributions can be made in the year that you attain age 70 1/2 or subsequent
years.
SPOUSAL IRA
If your spouse is employed, he or she can establish his or her own IRA subject
to the same rules as are applicable to your IRA. If you file a joint return with
a spouse who either has no compensation for the taxable year or elects to be
treated as having none, the maximum contribution amount is the lesser of $4,000
or 100% of the total compensation of you and your spouse for the year. In such
case the amount contributed can be divided between your IRA and the spousal IRA
in any manner you desire, provided that no more than $2,000 can be contributed
to either IRA. No contributions may be made to a spousal IRA during or after the
year in which he or she reaches age 70 1/2. However, if you are ineligible to
make contributions to your own IRA because of age, you may (if you have
sufficient compensation) nevertheless make contributions of up to $2,000 to an
IRA for your non-earning spouse if he or she has not reached age 70 1/2.
SIMPLIFIED EMPLOYEE PENSION PLAN
An IRA may also be used in connection with a SEP plan established by your
employer (or by you if you are self-employed). Under a SEP plan, your employer
may make a contribution to your IRA and the IRA of each other eligible employee,
of up to 15% of compensation (limited to $160,000 for 1997 and adjusted
periodically for inflation) or $30,000, whichever is less. It is your
responsibility and that of your employer to see that contributions are made
under and in accordance with a valid SEP plan.
ROLLOVER
If your account represents a rollover from a pension or profit-sharing plan
qualified under Section 401(a) of the Internal Revenue Code, you should not make
non-rollover additional contributions to the same account if you desire to
preserve its eligibility for future rollover to another qualified plan.
Similarly, if your account represents a rollover from a Section 403(b) annuity
or custodial account, you should not make non-rollover additional contributions
to the same account if you desire to preserve its eligibility for future
rollover to another Section 403(b) annuity or custodial account. A rollover IRA
is eligible to accept future rollover contributions. In addition, you may
establish another IRA to which non-rollover annual cash contributions may be
made.
ROLLOVER CONTRIBUTIONS AND TAX-FREE TRANSFERS
A rollover contribution is a contribution to your IRA of cash and/or property
other than cash which you received as a distribution from another IRA or as a
qualified distribution from a Section 403(b) annuity, or a qualified employer-
sponsored retirement plan, such as a profit-sharing plan, 401(k) plan, an ESOP,
etc. In the case of a tax-free transfer, the transfer is made directly between
the fiduciaries, that is the trustees, custodians, etc. of the IRAs and/or the
qualified plan, as the case may be. If you receive a distribution from another
IRA you may make a tax-free rollover contribution of all or part of the assets
you receive to your UMB IRA, provided that you complete the rollover within 60
days of the date you receive the distribution. You may make only one such
rollover during any 12-month period. A direct transfer from the trustee or
custodian of another IRA to your UMB IRA may be made without regard to the 12-
month limitation applicable to IRA rollovers.
If you receive a distribution from your employer's qualified retirement plan, or
a Section 403(b) annuity, you may be eligible to make a rollover contribution to
your UMB IRA of all or part of the distribution, less the amount of any non-
deductible contributions to the plan. Most distributions, with the notable
exception of installments paid over a ten or more year period, are eligible for
rollover. The rollover contribution must be made within 60 days of the date you
receive the distribution. If the distribution included property other than cash,
the property itself (or the proceeds from its sale) must be included in the
rollover contribution to the extent possible, before any cash received in the
distribution may be included.
In order to avoid 20% federal income tax withholding on the amount distributed
from the qualified retirement plan or Section 403(b) annuity, you should direct
that the distribution be transferred to your UMB IRA in a "direct rollover."
You should receive information about the "direct rollover" option from your
plan administrator prior to distribution of your account.
You may not roll over any minimum distribution amounts you are required to
receive after age 70 1/2.
EXCESS CONTRIBUTIONS
An excess contribution is any contribution amount which exceeds your
contribution limit, excluding rollover and direct transfer amounts and SEP
contributions. In addition, any contributions that are made to an IRA for the
year in which the IRA owner reaches age 70 1/2, or for any later year, are
considered excess contributions. If excess contributions are made to your
account in any year and the excess (including income attributed to that excess)
is withdrawn prior to the due date for your tax return for that year (including
extensions), no excise tax will be imposed on the amount contributed. Income
attributed to such excess contributions refunded is taxable, and may be subject
to a 10% additional excise tax.
If the withdrawal of excess contributions occurs after the due date for your tax
return (including extensions), a 6% cumulative excise tax will be imposed on the
excess. A further 10% additional excise tax will be imposed upon the withdrawn
excess amount if a deduction was allowed for the excess contribution and the
total contributions for the year exceeded the maximum deductible amount, unless
you have reached age 59 1/2 or are disabled by the time of the withdrawal. If
excess contributions have been made, you can correct the situation by reducing
your contributions in subsequent years. Excess contributions left in the account
and applied to a later tax year's contributions are still subject to the 6%
excise tax and will continue to remain so until the excess has been corrected.
USE OF YOUR ACCOUNT AS SECURITY FOR A LOAN
You may not pledge any part of your account as security for a loan. If you use
all or any part of your account as security for a loan, the portion used for
that purpose is treated as though it were distributed to you and you must
include that amount in your gross income for the year in which that transaction
takes place. If the pledge occurs prior to your attaining age 59 1/2, an
additional excise tax equal to 10% of the amount included in your taxable income
may be added to your tax liability.
PROHIBITED TRANSACTIONS
Tax laws also prohibit certain other transactions between a "Disqualified
Person" and your account. A "Disqualified Person" includes UMB, you, a
beneficiary of your account, members of your family or of a beneficiary's family
or any business or trust in which a controlling interest is held by any of these
individuals. The prohibited transactions are as follows:
1. sale, exchange or leasing of property between your account and a
Disqualified Person;
2. lending of money or other extension of credit between your account and a
Disqualified Person;
3. furnishing of goods, services or facilities between your account and a
Disqualified Person;
4. transfer to or use by or for the benefit of a Disqualified Person of the
income or assets of your account;
5. any act by a Disqualified Person who is a fiduciary whereby he or she deals
with the income or assets of your account in his or her own interest or for his
or her own account; or
6. receipt of any consideration for his or her own personal account by any
Disqualified Person who is a fiduciary from any party dealing with your account
in connection with a transaction involving the income or assets of the account.
If either you or your beneficiary engages in a prohibited transaction, your IRA
will lose its tax exemption, and its full value will be added to your other
taxable income for the year in which the transaction takes place. If any of
these transactions occur prior to your attaining age 59 1/2, you may also be
subject to the 10% excise tax on early distributions.
ESTATE TAXATION
If there is a balance in your account at the time of your death, that balance
will be included in your estate for federal estate tax purposes. Your estate
will have to pay an additional 15% federal estate tax on any excess retirement
accumulation at your death. An excess retirement accumulation exists if, at the
time of your death, the value of all your interests in qualified plans, tax-
sheltered annuities and IRAs exceeds the present value of an annuity with annual
payments of $160,000 (for 1997 and adjusted periodically for inflation) payable
over your life expectancy immediately before your death. An exception to the
excess retirement accumulations tax may apply if your spouse is the designated
beneficiary. Please consult your tax adviser.
EFFECT OF DIVORCE
The general rule is that the Grantor will be liable for income tax and any
penalties on any amount distributed from his or her IRA to meet the obligation
specified in a divorce decree. The transfer may be structured so as to avoid
taxation to the Grantor if the requirements of Code Section 408(d)(6) are met.
Those requirements are:
1. a written court order clearly specifying the amount to be transferred into
an IRA of the spouse or former spouse, and
2. (a)a direct transfer of the funds to the IRA of the spouse or former spouse;
(b)changing the name on the IRA from your name to the name of your spouse or
former spouse; or
(c)moving a rollover of IRA assets from your IRA to your spouse or former
spouse.
WITHDRAWALS PRIOR TO AGE 59 1/2
You may make withdrawals from your IRA at any time. However, amounts withdrawn
(except for the return of non-deductible contributions) are includible in your
taxable income for the year of withdrawal. If you have not yet reached age 59
1/2 when a withdrawal is made, a 10% additional excise tax may be payable on the
amount withdrawn. After age 59 1/2 you may make such withdrawals as you wish,
free of any excise tax. Until you reach age 70 1/2 you are not required to make
a withdrawal. A withdrawal from your IRA before you reach age 59 1/2 will not be
subject to the excise tax if it is made on account of your permanent and total
disability, death, a qualifying rollover, a direct transfer, the timely
withdrawal of an excess contribution, to pay for medical expenses incurred by
you, your spouse or your dependent to the extent that the medical expenses
exceed 7.5% of your adjusted gross income, in certain situations, to pay for
medical insurance premiums if you are unemployed, or if the distribution is a
part of a series of substantially equal periodic payments (at least annually)
made over your life (or life expectancy) or the joint lives (or joint life
expectancies) of you and your beneficiary.
MINIMUM DISTRIBUTIONS REQUIRED STARTING AT AGE 70 1/2
You must begin withdrawals from your IRA by April 1 of the year following the
year in which you reach age 70 1/2. With respect to the year during which age 70
1/2 is reached and each subsequent year you must withdraw at least an amount
sufficient to cause the entire balance of your IRA to be distributed over your
remaining life (or life expectancy) or the joint lives (or joint life
expectancies) of you and your designated beneficiary, determined by actuarial
tables. If you elect to receive your first required distribution between January
1 and April 1 following the year in which you reach age 70 1/2, you must receive
a second required distribution prior to the end of that year.
You may choose (within the limits set forth in the IRS distribution rules) how
you want your required minimum distributions structured. You must make your
payment election no later than April 1 following your 70 1/2 year. If you do not
make an election by that date, we will determine your required minimum
distribution each year based on your single life expectancy (if a beneficiary is
not named) or joint life expectancies (if there is a designated beneficiary) -
and pay those distributions to you. For this purpose, all life expectancies,
except that of a non-spouse beneficiary, will be recalculated.
If you name someone other than your spouse as your beneficiary, and your
beneficiary is more than ten years younger than you, your required minimum
distributions must satisfy the Minimum Distribution Incidental Benefit rule
(which calculates your distributions as if your beneficiary were exactly ten
years younger than you).
EXCISE TAX FOR FAILURE TO MEET MINIMUM DISTRIBUTION REQUIREMENTS
If the amount distributed to you with respect to any year in which you are at
least age 70 1/2 is less than the minimum required distribution, an excise tax
of 50% of the difference between the actual distribution and the minimum
required distribution will be imposed.
EXCESS DISTRIBUTION PENALTY
You will be taxed an additional 15% on any amount received and included in your
income during a calendar year from qualified retirement plans, tax-sheltered
annuities and IRAs which exceeds $160,000 (for 1997 and adjusted periodically
for inflation). Certain exceptions may apply. Consult your tax adviser if you
receive an excess distribution. This tax is suspended for distributions in 1997,
1998 and 1999.
DESIGNATION OF A BENEFICIARY OR BENEFICIARIES
You have the right to designate one or more beneficiaries to whom your account,
or any undistributed portion thereof, is to be paid in the event of your death.
You may also at any time revoke a prior beneficiary designation and, if desired,
designate different individuals as beneficiaries.
You may designate your beneficiary(ies) on the IRA Application, or in a form
acceptable to the Trustee, by writing to: The Garzarelli Funds, c/o Sunstone
Investor Services, LLC, P.O. Box 674, Milwaukee, WI 53201-0674. If you wish to
contact the Fund via an overnight delivery, sent it to: The Garzarelli Funds,
207 East Buffalo Street, Suite 315, Milwaukee, WI 53202-5712.
In the absence of a valid beneficiary designation, the Trustee will make
distribution of any death benefit to your surviving legal spouse; but, if none,
then to your surviving natural and adoptive children in equal shares, but if
none, then to your personal representative. Notwithstanding the foregoing
sentence, the Trustee may, in any case where reasonable doubt exists as to the
proper course of action, request instructions from a court of competent
jurisdiction. All costs and expenses (including time expended by the Trustee) in
such cases will be charged against your account.
DISTRIBUTIONS FOLLOWING DEATH OF GRANTOR
As a general rule, the entire balance of the IRA must be distributed to
beneficiaries by December 31 of the year in which the 5th anniversary of the
Grantor's death falls. If this rule is violated, a penalty tax equal to 50% of
the undistributed balance will be imposed. There are three exceptions to the
general rule: (1) if the Grantor's designated beneficiary is the surviving
spouse of the Grantor, such spouse may elect to treat the Grantor's IRA as his
or her own IRA (in that case the five-year limitation will not apply); (2) where
installment payments have commenced over the life expectancies of the Grantor
and designated beneficiary before the Grantor's death then payments will
continue to the surviving beneficiary at a rate at least as rapidly as in effect
at the time of the Grantor's death, and the five-year limitation does not apply,
(in such case, the surviving beneficiary has the same right to designate
beneficiaries as the Grantor had while living, the five-year limitation will
apply to distributions to any such second-level beneficiaries); (3) if the
Grantor dies before his or her required beginning date, and the designated
beneficiary elects that the account balance be distributed in substantially
equal payments over his or her life expectancy, the beneficiary must make this
election and commence distributions by December 31 of the year following the
year of the Grantor's death (distributions need not commence for a surviving
spouse beneficiary until December 31 of the year the Grantor would have attained
age 70 1/2).
TRUSTEE TO ASSUME GRANTOR IS CALENDAR YEAR TAXPAYER
UNLESS OTHERWISE INFORMED
Unless and until specifically notified that you make your federal income tax
returns on another basis, the Trustee will assume for all purposes, including
the preparation and furnishing of accounting statements, reports, etc., that
such tax returns are made on the basis of calendar years.
TRUSTEE NOT LEGAL ADVISER OR TAX COUNSELOR - GRANTOR
SHOULD CONSULT OWN ADVISER
UMB expressly disclaims any right, duty, authority or responsibility to furnish
legal or tax advice respecting any matter or matters concerning or relating to
your account including present or future federal income tax consequences to you
or others which may arise or result from the establishment or maintenance of
your account, the selection of payment options, beneficiaries and any other
matter whatsoever. You are advised and encouraged to consult with professional
counsel of your own selection respecting all such matters.
INVESTMENT OF ACCOUNT
Your account may be invested only in accordance with your direction in
Garzarelli Funds or any other mutual fund designated by Garzarelli Funds as a
permissible investment alternative. None of the funds held in your account may
be used to purchase life insurance.
FINANCIAL GUARANTEES AND PROJECTIONS
The value of your account at any point in time will, of course, depend upon the
then current market value of the investments, retained investment earnings, if
any, etc. No guarantees or projections of any nature concerning earnings rates
or future security values are made.
TRUSTEE NOT LIABLE
The Trustee has no responsibility or liability for any losses or expenses
relating to any investment or to the sale or exchange of any asset of your
account.
TERMINATION OF THIS ACCOUNT
The Trustee may resign at any time upon 60 days' notice in writing to you, and
may be removed by you at any time upon 60 days' written notice. In either such
event you must appoint a qualified successor trustee or qualified custodian to
whom the Trustee, upon receipt of written acceptance of the appointment, shall
transfer the assets (less any amounts deemed necessary for payment of fees,
costs or expenses) and records of your account.
DUTY TO FILE TAX RETURNS
In any year in which you incur liability for a penalty tax by reason of making
excess contributions, by making early withdrawals (premature distributions), or
by failure to withdraw the minimum amount from your account, you are obligated
to file Internal Revenue Service Form 5329 "Return for Individual Retirement
Arrangement Taxes" with your Form 1040 at the time it is filed. Deductible
contributions in any year are reported on your Form 1040. Non-deductible
contributions must be reported on Form 8606.
INTERNAL REVENUE SERVICE APPROVAL
The Individual Retirement Trust Agreement is comprised of eight articles. The
first seven articles constitute Internal Revenue Service Form 5305 (REV.
OCTOBER, 1992) "Individual Retirement Trust Account." Under Treasury
Department regulations prototype trusts which use the provisions of this Form
are considered to meet the requirements of the Internal Revenue Code. The
addition of Article VIII by UMB does not negate the approval status of the
prototype. The Individual Retirement Trust Agreement, on IRS Form 5305, has been
approved as to form by the Internal Revenue Service. However, in approving the
form, the IRS does not consider the investment merits of the program.
ADDITIONAL INFORMATION
Additional information about individual retirement accounts is contained in IRS
Publication 590, which can be obtained from the office of the District Director
of Internal Revenue.
CUSTODIAL
AGREEMENT
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This Agreement is made between UMB Bank, n.a., as trustee or its successor
(hereinafter referred to as "Trustee") and the individual whose name appears
on the IRA Application or other Adoption Agreement (hereinafter referred to as
"Grantor"). If the Grantor has previously adopted this Individual Retirement
Trust Account ("IRA") in any earlier form, by signature to the IRA Appli-
cation, he or she adopts the amended IRA in the form as hereby restated.
The Grantor is establishing (or adopting an amendment to) an individual
retirement account (under Section 408(a) of the Internal Revenue Code) to
provide for his or her retirement, and for the support of his or her
beneficiaries after death. The Trustee has given the Grantor the disclosure
statement required under the Income Tax Regulations under Section 408(i) of the
Code. Unless this Agreement is adopted for an existing IRA, the Grantor has made
an initial cash contribution to the IRA concurrently with the execution of the
IRA Application or other Adoption Agreement. The Grantor and Trustee make the
following agreement:
ARTICLE I
The Trustee may accept additional cash contributions on behalf of the Grantor
for a tax year of the Grantor. The total cash contributions are limited to
$2,000 for the tax year unless the contribution is a rollover contribution
described in Section 402(c) (but only after December 31, 1992), 403(a)(4),
403(b)(8), or 408(d)(3) of the Code or an employer contribution to a Simplified
Employee Pension plan as described in Section 408(k). Rollover contributions
before January 1, 1993 include rollovers described in Section 402(a)(5),
402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8) or 408(d)(3) of the Code or an
employer contribution to a Simplified Employee Pension plan as described in
Section 408(k).
ARTICLE II
The Grantor's interest in the balance of the trust account is nonforfeitable.
ARTICLE III
1. No part of the trust funds may be invested in life insurance contracts; nor
may the assets of the trust account be commingled with other property except in
a common trust fund or a common investment fund (within the meaning of Section
408(a)(5) of the Code).
2. No part of the trust funds may be invested in collectibles (within the
meaning of Section 408(m) of the Code), except as otherwise permitted by Section
408(m)(3) which provides an exception for certain gold and silver coins issued
under the laws of any state or the U.S. government.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Grantor's interest in the trust account shall be made in
accordance with the following requirements and shall otherwise comply with
Section 408(a)(6) and Proposed Regulations Section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations Section 1.401(a)(9)-
2, the provisions of which are incorporated by reference.
2. Unless otherwise elected by the time distributions are required to begin to
the Grantor under paragraph 3, or to the surviving spouse under paragraph 4,
other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the Grantor and
the surviving spouse and shall apply to all subsequent years. The life
expectancy of a non-spouse beneficiary may not be recalculated.
3. The Grantor's entire interest in the trust account must be, or begin to be,
distributed by the Grantor's required beginning date, the April 1 following the
calendar year in which the Grantor reaches age 70 1/2. By that date, the Grantor
may elect, in a manner acceptable to the Trustee, to have the balance in the
trust account distributed in:
(a) a single sum payment.
(b) an annuity contract that provides equal or substantially equal monthly,
quarterly or annual payments over the life of the Grantor.
(c) an annuity contract that provides equal or substantially equal monthly,
quarterly or annual payments over the joint and last survivor lives of the
Grantor and his or her designated beneficiary.
(d) equal or substantially equal annual payments over a specified period
that may not be longer than the Grantor's life expectancy.
(e) equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor expectancy of the
Grantor and his or her designated beneficiary.
4. If the Grantor dies before his or her entire interest is distributed to him
or her, the entire remaining interest will be distributed as follows:
(a) If the Grantor dies on or after distribution of his or her interest has
begun, distribution must continue to be made in accordance with paragraph 3.
(b) If the Grantor dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the Grantor, or if
the Grantor has not so elected, at the election of the beneficiary or
beneficiaries, either:
(i) be distributed by December 31 of the year containing the fifth
anniversary of the Grantor's death, or
(ii) be distributed in equal or substantially equal payments over the
life expectancy of the designated beneficiary or beneficiaries starting by
December 31 of the year following the year of the Grantor's death. If, however,
the beneficiary is the Grantor's surviving spouse, then this distribution is not
required to begin before December 31 of the year in which the Grantor would have
turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of Section 408(b)(3) and its related regulations has irrevocably
commenced, distributions are treated as having begun on the Grantor's required
beginning date, even though payments may actually have been made before that
date.
(d) If the Grantor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse, no
additional cash contributions or rollover contributions may be accepted in the
account.
5. In the case of distribution over life expectancy in equal or substantially
equal annual payments, to determine the minimum annual payment of each year,
divide the Grantor's entire interest in the trust as of the close of business on
December 31 of the preceding year by the life expectancy of the Grantor (or the
joint life and last survivor expectancy of the Grantor and the Grantor's
designated beneficiary, or the life expectancy of the designated beneficiary,
whichever applies). In the case of distributions under paragraph 3, determine
the initial life expectancy (or joint life and last survivor expectancy) using
the attained ages of the Grantor and designated beneficiary as of their
birthdays in the year the Grantor reaches age 70 1/2. In the case of
distribution in accordance with paragraph 4(b)(ii), determine life expectancy
using the attained age of the designated beneficiary as of the beneficiary's
birthday in the year distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternate method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy the
minimum distribution requirements described above. This method permits an
individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement of another.
ARTICLE V
1. The Grantor agrees to provide the Trustee with information necessary for the
Trustee to prepare any reports required under Section 408(i) of the Code and
Regulations Sections 1.408-5 and 1.408-6.
2. The Trustee agrees to submit reports to the Internal Revenue Service and the
Grantor as prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with Section 408(a) of the Code and
related regulations will be invalid.
ARTICLE VII
This agreement will be amended, from time to time, to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signatures appear below.
ARTICLE VIII
SECTION 1 - INVESTMENT OF ACCOUNT
1. The Grantor has the sole authority and discretion, fully and completely, to
select and to direct the investment of all assets in the trust account, but only
in Garzarelli Funds portfolios or any other mutual fund designated by Garzarelli
Funds as a permissible investment alternative.
2. Subject to the right and duty of the Grantor to direct the investments of
his or her trust account, the Trustee shall have full authority and power:
(a) to invest and reinvest the trust account in such Mutual Funds as
described in paragraph 1 of this article;
(b) to sell, assign, exchange, convey or otherwise transfer any part or all
of the securities or other property of the trust account, upon such terms and
conditions as the Grantor shall direct, and no person dealing with the Trustee
shall be bound to see to the application of the purchase money or inquire into
the validity, expediency or propriety of such transaction;
(c) to sue or defend any suit or legal proceeding by or against the trust
account and to compromise, settle, submit to arbitration or adjust any suit or
legal proceeding, claim, debt, damage or undertaking due or owing from or to the
trust account but the Trustee shall not be obligated to take any action which
would subject it to expense or liability unless it be first indemnified in an
amount and manner satisfactory to it or be furnished with funds sufficient, in
its sole judgment, to cover the same;
(d) to acquire and hold any securities or other property of the trust
account without disclosing its fiduciary capacity, or in the name of any other
person, with or without a power of attorney for transfer thereto attached;
(e) to employ attorneys, accountants and others as it may deem advisable for
the best interest of the trust account, and to pay their reasonable expenses and
compensation out of the trust account;
(f) to make, execute and deliver, as Trustee, any and all instruments in
writing necessary or proper for the effective exercise of any of the Trustee's
powers as stated herein or otherwise necessary to accomplish the purpose of the
trust account.
3. The following shall constitute charges upon the trust account and shall be
paid by the Trustee out of the trust account unless, and to the extent, paid by
the Grantor:
(a) all taxes of whatever kind or character that may be imposed, levied or
assessed under existing or future laws upon or in respect of the trust account,
or upon the Trustee in its capacity as such, or upon the assets or income of the
trust account;
(b) all expenses incurred by the Trustee in the performance of its duties
hereunder, including the fees of attorneys, accountants and other persons
engaged by the Trustee for services in connection with the trust account; and
(c) the fees and other compensation of the Trustee for its services
hereunder in the amounts agreed upon from time to time by the Grantor and
Trustee.
4. The Grantor shall not borrow any money from the trust account nor pledge any
part thereof as security for a loan. Furthermore, neither the Grantor nor the
Trustee shall engage, either directly or indirectly, in any of the following
transactions:
(a) the sale or exchange, or leasing, of any property between the trust
account and a Disqualified Person;
(b) the lending of money or other extension of credit between the trust
account and a Disqualified Person;
(c) the furnishing of goods, services or facilities between the trust
account and a Disqualified Person;
(d) the transfer to, or use by or for the benefit of, a Disqualified Person
of the income or assets of the Trust Account;
(e) an act by a Disqualified Person who is a fiduciary whereby he or she
deals with the income or assets of the trust account in his or her own interest
or for his or her own account; or
(f) receipt of any consideration for his or her own personal account by any
Disqualified Person who is a fiduciary from any party dealing with the trust
account in connection with a transaction involving the income or assets of the
trust account.
For purposes of this paragraph, "Disqualified Person" shall have the meaning
ascribed to that term under Section 4975(e)(2) of the Code.
SECTION 2 - BENEFICIARY DESIGNATIONS
1. At any time and from time to time the Grantor shall have the right to
designate one or more beneficiaries to whom distribution of his or her trust
account, or the previously undistributed portion thereof, shall be made in the
event of his or her death prior to the complete distribution of his or her trust
account. This right shall extend to the Grantor's surviving spouse in the event
he or she dies while receiving distributions under the provisions of Sections
3(e) or 4(b) of Article IV. Any such beneficiary designation shall be deemed
legally valid only when submitted fully complete, duly executed and on a form
provided by or acceptable to the Trustee. Subject to the foregoing sentence, any
such beneficiary designation shall be effective upon receipt by the Trustee. Any
such beneficiary designation may be revoked by the Grantor at any time, and
shall be automatically revoked upon receipt by the Trustee of a subsequent
beneficiary designation or beneficiary designations in valid form bearing a
later execution date.
2. In the absence of a valid beneficiary designation on file with the Trustee
at the time of the Grantor's death, the Trustee shall, upon receipt of notice of
the death of the Grantor supported by a certified copy of the death certificate
or other appropriate evidence of the fact of death satisfactory to the Trustee,
make distribution of the Grantor's trust account to the beneficiary or
beneficiaries of the Grantor in the following order of preference:
(a) to the Grantor's legal spouse; but if no such legal spouse shall survive
the Grantor, then to
(b) the surviving natural and adoptive children of the Grantor in equal
shares per capita and not per stirpes; but if there shall be no such surviving
child or children then to
(c) the personal representative of the Grantor, provided, however, that the
Trustee shall have no duty, obligation or responsibility to make any inquiry or
conduct any investigation concerning the identification, address or legal status
of any individual or individuals alleging the status of beneficiary (designated
or otherwise) nor to make inquiry or investigation concerning the possible
existence of any beneficiary not reported to the Trustee within a reasonable
period after the notification of the Grantor's death (or that of his or her
surviving spouse) and previous to the distribution of the trust account. The
Trustee may conclusively rely upon the veracity and accuracy of all matters
reported to it by any source ordinarily presumed to be knowledgeable respecting
the matters so reported. With respect to any distribution made by reason of the
death of the Grantor (or his or her surviving spouse) the Trustee shall have no
higher duty than the exercise of good faith, shall incur no liability by reason
of any action taken in reliance upon erroneous, inaccurate or fraudulent
information reported by any source assumed to be reliable, or by reason of
incomplete information in its possession at the time of such distribution. Upon
full and complete distribution of the trust account pursuant to the provisions
of this Section, the Trustee shall be fully and forever discharged from all
liability respecting such trust account.
3. Any distribution pursuant to the provisions of this Section may be made in
cash or in kind or partly in both, at the sole discretion of the Trustee, and
shall be made within 30 days following receipt by the Trustee of information
deemed by it sufficient upon which to base such distribution; provided, however,
that the Trustee shall incur no liability respecting fluctuations in the value
of the trust account in the event of a delay occasioned by Trustee's good faith
decision to await additional evidence or information bearing on the beneficiary
or beneficiaries.
4. Whenever any distribution hereunder is payable to a minor or to a person
known by the Trustee to be under a legal disability, the Trustee in its absolute
discretion may make all or any part of such distribution to (a) a legal guardian
or conservator for such person, (b) a custodian under the Uniform Transfers or
Gift to Minors Act, (c) a parent of such person, or (d) such person directly.
5. Anything to the contrary herein notwithstanding, in the event of reasonable
doubt respecting the proper course of action to be taken, the Trustee may in its
sole and absolute discretion resolve such doubt by judicial determination which
shall be binding on all parties claiming any interest in the trust account. In
such event all court costs, legal expenses, reasonable compensation for the time
expended by the Trustee in the performance of its duties and other appropriate
and pertinent expenses and costs, shall be collected by the Trustee from the
trust account.
SECTION 3 - MISCELLANEOUS
1. The Trustee may make further amendments to this Agreement, in order to make
said Agreement acceptable in form to the Secretary of the Treasury and the
Secretary of Labor, or for any other purpose. Any such amendments shall be
effective without the signature of the Grantor to a new Adoption Agreement or
IRA Application and shall, if for the purpose of initially qualifying the trust
account pursuant to the Code, be retroactively effective to the date of the
captioned Agreement. The Trustee will mail a copy of any such amendment to the
Grantor.
2. The Trustee shall deliver, or cause to be executed and delivered, to the
Grantor all proxies, prospectuses and notices pertaining to securities held in
the account. The Trustee shall not vote any such securities except pursuant to
written instructions from the Grantor. Any notice sent from the Trustee to the
Grantor shall be effective, if sent by mail to the Grantor's last address of
record.
3. The Trustee, within 30 days after the close of each calendar year, shall
provide the Grantor a record of activity in the trust account during such year,
including the date and the dollar amount of contributions, any earnings on such
contributions, the date and dollar amount of any distributions, a beginning
balance and an ending balance. The Trustee may meet its recordkeeping and
reporting requirements by adopting the records of any investment facility
permitted by this Agreement, and it may delegate ministerial duties of keeping
such records to such facilities or their managers.
4. Confirmation of transactions and records or statements of activity in the
Grantor's account shall be conclusive if the Grantor does not object within ten
days after mailing to the Grantor. In such case, the Trustee and its officers
and employees shall be forever released and discharged from any liability with
respect to any claim arising out of any action or omission reflected on such
confirmation or record.
5. The Trustee does not guarantee the trust account from loss or depreciation.
The liability of the Trustee to make any payment from the trust account at any
time is limited to the then available assets of the trust account.
6. Subject to the limitations contained in paragraph 1 of Section 1 of this
Article VIII, the Grantor shall have the sole power, right and duty to direct
the Trustee from time to time with respect to the investment and reinvestment of
the assets of the trust account. The Trustee shall comply promptly with all such
directions, providing such directions are clearly stated in writing executed by
the Grantor, and in form acceptable to the Trustee. The Trustee shall not have
any duty to inquire into the propriety of any such direction nor into its effect
upon the trust account or the beneficiary or beneficiaries thereof, nor to apply
to a court for instructions notwithstanding the fact that the Trustee has, or
with reasonable inquiry should have, actual or constructive notice that any
action taken or omitted pursuant to, or as a result of, the exercise of such
directive power constitutes, or may constitute, a breach of the terms of the
trust account or a violation of any law applicable to the investment of the
funds held hereunder. Any such direction so given the Trustee shall be deemed to
be continuing until revoked or modified by a subsequent direction in writing,
notwithstanding the occurrence of any event or other development of which the
Trustee has or should have knowledge. The Trustee shall not be liable or
responsible for any loss resulting to the trust account or to any present or
future beneficiary thereof by reason of:
(a) any sale or investment made or other action taken pursuant to and
in accordance with the direction of the Grantor; or
(b) the retention of any asset, including cash, the acquisition or
retention of which has been directed by the Grantor.
7. This Agreement shall be binding upon all persons entitled to benefits under
the trust account, their respective heirs and legal representative, and upon the
Trustee and its successors.
8. Words used in the masculine shall apply to the feminine where applicable,
and wherever the context of the Agreement dictates, the plural shall be read as
the singular and the singular as the plural.
9. As the context requires, the term "Grantor" shall be deemed to include
any beneficiary of this Account following the death of the Grantor.
10. All questions arising with respect to the provisions of this Agreement shall
be determined by application of the laws of the State of Missouri except to the
extent federal statutes supersede Missouri law. To the extent permitted by law,
none of the creditors of the Grantor or any beneficiary shall have any power to
execute any levy, lien, assignment, garnishment, alienation, attachment or other
voluntary or involuntary transfer on any of the assets of the IRA; and all sums
payable to the Grantor or any beneficiary shall be free and clear of all
liabilities for debts, levies, attachments and proceedings of any kind, at law
or in equity.
11. The Trustee shall receive reasonable annual compensation as may be agreed
upon from time to time between the Grantor and Trustee. The Trustee shall pay
all expenses reasonably incurred by it in its administration from the trust
account unless the Grantor pays the expenses.
12. The Trustee may resign at any time for any reason, including but not
limited to, the determination in the Trustee's sole discretion that the account
cannot be managed on a profitable basis, upon 60 days' notice in writing to the
Grantor. Garzarelli Funds may remove the Trustee upon 60 days' notice in writing
to the Trustee. Such notice must include the designation of a successor Trustee.
Upon such resignation or removal, the Grantor delegates to Garzarelli Funds the
authority to appoint a successor Trustee or Custodian under this agreement,
which successor shall be a bank or other qualified person as required by the
Internal Revenue Code so as to permit the trust account to continue as qualified
under the Internal Revenue Code. Upon receipt by the Trustee of written
acceptance of such appointment by the successor Trustee, the Trustee shall
transfer and pay over to such successor Trustee the assets of the trust account
and all records pertaining thereto. The Trustee is authorized, however, to
retain from the assets of the trust account such amounts as it may deem
advisable for payment of all its fees, compensation, costs and expenses, or for
payment of any other liabilities constituting a charge on or against the assets
of the trust account or on or against the Trustee, with any balance of such
reserve remaining after the payment of all such items to be paid over to the
successor Trustee. The successor Trustee shall hold the assets paid over to it
under terms similar to those of this Agreement that qualify under the Internal
Revenue Code. If, within 60 days after the Trustee's resignation or removal, a
successor Trustee has not been appointed, which has accepted such appointment,
the Trustee may pay the Grantor's interest to the Grantor.
13. The Trustee shall not be responsible for determining the permissible amount
of contributions to the account, or for the amount or timing of distributions
from the account, or for any other actions taken at the request of the Grantor.
The Grantor shall indemnify and hold the Trustee harmless from any and all
liability, claims and expenses arising from any actions taken at the Grantor's
request or in connection with this Agreement, except for any liability, claims,
or expenses caused by the negligence of the Trustee.
14. The Grantor agrees to pay to the Trustee fees for services performed under
this Agreement in an amount specified from time to time by the Trustee. Such
fees may include, but are not limited to, a fee to establish the Custodial
Account and the annual maintenance fee. The Trustee shall have the right to
change such fees at any time without prior written notice to the Grantor. As
soon as practicable after any change in fees, the Trustee shall make available
to the Grantor a new fee schedule. All fees may be billed to the Grantor or
deducted from the Custodial Account, at the discretion of the Grantor. The
Trustee shall also be entitled to reimbursement for all reasonable and necessary
costs, expenses and disbursements incurred by it in the performance of services.
Such fees and reimbursement shall be paid from the Account if not paid directly
by the Grantor and shall constitute a lien upon the Account until paid.
SCHEDULE
OF
FEES
- --------
The Trustee will charge the following fees for servicing your IRA account:
Annual maintenance fee $15 per SSN, per Retirement Plan type
- -------------------------------------------------------------------------------
Distribution (including direct rollovers or transfers) $15 each
- -------------------------------------------------------------------------------
Refund of excess contribution $15 each
- -------------------------------------------------------------------------------
Any outgoing wire transfer $10 each
- -------------------------------------------------------------------------------
The annual maintenance fee will be deducted from your account unless otherwise
paid by you. The charge for refund of excess contribution will be deducted from
your account at the time of the refund. These fees are subject to change.
FOR FUND INFORMATION AND
SHAREHOLDER SERVICES, CALL
1-800-378-1405
THE GARZARELLI FUNDS
P.O. BOX 674
MILWAUKEE, WI 53201-0674
THE GARZARELLI FUNDS
SERVICE AND DISTRIBUTION PLAN
WHEREAS, The Garzarelli Funds (the "Trust") is organized to engage in the
business of an open-end management investment company and is registered as such
under the Investment Company Act of 1940, as amended (the "Act");
WHEREAS, the Trust is authorized to issue shares of beneficial interest in
separate series with each such series representing interests in a separate
portfolio of securities and other assets (the "Funds");
WHEREAS, the Trust desires to adopt the following plan according to Rule
12b-1 under the Act.
NOW, THEREFORE, the Trust hereby adopts on behalf of the Funds, a Service
and Distribution Plan on the following terms and conditions (the "Plan"):
1. The Trust on behalf of each Fund may pay a distribution and service
fee on an annualized basis of up to 0.25% of the Fund's average daily net
assets. Such fee shall be calculated and accrued daily and paid at such
intervals as the Board of Trustees of the Trust shall determine, subject to any
applicable restriction imposed by rules of the National Association of
Securities Dealers, Inc.
2. The amount set forth in paragraph 1 of this Plan shall be paid for:
(a) services and expenses in connection with any activities primarily intended
to result in the sale of shares of the Funds including, but not limited to,
compensation to the Trust's distributor and reimbursement of such distributor's
expenses; (b) payments made to securities dealers, financial institutions or any
other persons (the "Shareholder Organization(s)") who render personal service
to shareholders, assist in the maintenance of shareholder accounts or who render
assistance in distributing or promoting the sale of the Funds' shares; (c) the
cost of preparing, printing and distributing Prospectuses and Statements of
Additional Information to prospective investors and of implementing and
operating the Plan as well as payment of capital or other expenses of associated
equipment, rent, salaries, bonuses, interest and other overhead costs. Payments
under this Plan are not tied exclusively to actual distribution and service
expenses and the payments may exceed distribution and service expenses actually
incurred.
3. The Plan shall not take effect with respect to a Fund until it has
been approved by a vote of at least a majority of the outstanding voting
securities of such Fund if the Plan is adopted after any public offering of such
Fund or the sale of such securities of such Fund to persons who are not
affiliated persons of the Trust, affiliated persons of such persons, promoters
of the company, or affiliated persons of such promoters.
4. This Plan shall not take effect with respect to a Fund until it,
together with any related agreements, has been approved by votes of a majority
of both (a) the Trustees of the Trust and (b) those Trustees of the Trust who
are not "interested persons" of the Trust (as defined in the Act) and who have
no direct or indirect financial interest in the operation of this Plan or any
agreements related to it (the "Rule 12b-1 Trustees"), cast in person at a
meeting (or meetings) called for the purpose of voting on this Plan and such
related agreements.
5. After taking effect in accordance with paragraphs 3 and 4, this Plan
shall continue in full force and effect as to each respective Fund for so long
as such continuance is specifically approved at least annually in the manner
provided for approval of this Plan in paragraph 4.
6. All persons authorized to direct the disposition of monies paid or
payable by a Fund pursuant to the Plan or any related agreement shall provide to
the Trustees of the Trust, and the Trustees shall review, at least quarterly, a
written report of the amounts so expended and the purposes for which such
expenditures were made.
7. This Plan may be terminated as to a Fund at any time, without payment
of any penalty, by vote of the Trustees of the Trust, by a vote of a majority of
the Rule 12b-1 Trustees, or by a vote of a majority of the outstanding shares of
the Fund.
8. This Plan may not be amended for a Fund to increase materially the
amounts provided for in paragraph 1 hereof unless such amendment is approved by
a vote of a majority of the outstanding shares of the Fund, and no material
amendment to the Plan shall be made unless approved in the manner provided for
approval and annual renewal in paragraph 4 hereof.
9. While this Plan is in effect, the selection and nomination of Trustees
who are not interested persons (as defined in the Act) of the Trust shall be
committed to the discretion of the Trustees who are not such interested persons.
10. The Trust shall preserve copies of this Plan and any related
agreements and all reports made pursuant to paragraph 6 hereof, for a period of
not less than six years from the date of this Plan, any such agreement or any
such report, as the case may be, the first two years in an easily accessible
place.
IN WITNESS WHEREOF, the Trust has adopted this Service and Distribution
Plan as of the day of March, 1997.
---
<TABLE>
THE GARZARELLI FUNDS
COMPUTATION OF ONE YEAR HYPOTHETICAL AVERAGE ANNUAL TOTAL RETURN
FORM N-1A PART C ITEM 16
<CAPTION>
BALANCED FUND
Initial Shares Reinvested Dividend Record Reinvest
Investment NAV Outstanding Shares Amount Date Ex-Date Rate Price
---------- ---- ----------- ------- ------- ------ ------- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3/31/97 1,000.00 10.00 100.000
3/31/98 1,057.00 10.07 104.965 4.965 50.00 12/30/96 12/31/96 0.50 10.07
HYPOTHETICAL TOTAL RETURN CALCULATION
P(1+T)^n = ERV
1,000(1+T)^1 = 1,057.00
T = 5.70%
</TABLE>
LIMITED POWER OF ATTORNEY
-------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints H. Steel Bokhof, Jr., Andrew J. Goodwin, III, or either of them, his or
her true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him or her and in his or her name, place and stead, in
any and all capacities to sign the Registration Statement of The Garzarelli
Funds, a Delaware business trust, on Form N-1A under the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended, and any or all
amendments thereto, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully as all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all said attorney-in-fact
and agent may lawfully do or cause to be done by virtue hereof.
DATED: March 14, 1997
/s/ Elaine M. Garzarelli
------------------------
Elaine M. Garzarelli
/s/ H. Steel Bokhof, Jr.
------------------------
H. Steel Bokhof, Jr.
/S/ Idelle A. Howitt
------------------------
Idelle A. Howitt
/s/ Margaret E. Leak
------------------------
Margaret E. Leak
/s/ Pamela J. Maraldo
------------------------
Pamela J. Maraldo
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001025740
<NAME> GARZARELLI BALANCED FUND
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> MAR-31-1997
<PERIOD-END> JUL-31-1997
<INVESTMENTS-AT-COST> 1,143,081
<INVESTMENTS-AT-VALUE> 1,248,765
<RECEIVABLES> 11,662
<ASSETS-OTHER> 122,684
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,383,111
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 87,297
<TOTAL-LIABILITIES> 87,297
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,178,926
<SHARES-COMMON-STOCK> 109,256
<SHARES-COMMON-PRIOR> 10,000
<ACCUMULATED-NII-CURRENT> 13
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 11,191
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 105,684
<NET-ASSETS> 1,295,814
<DIVIDEND-INCOME> 2,190
<INTEREST-INCOME> 4,143
<OTHER-INCOME> 0
<EXPENSES-NET> (2,545)
<NET-INVESTMENT-INCOME> 3,788
<REALIZED-GAINS-CURRENT> 11,191
<APPREC-INCREASE-CURRENT> 105,684
<NET-CHANGE-FROM-OPS> 120,663
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,775)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 99,450
<NUMBER-OF-SHARES-REDEEMED> (194)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,195,814
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,527
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (106,739)
<AVERAGE-NET-ASSETS> 604,100
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 1.86
<PER-SHARE-DIVIDEND> (.03)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.86
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
