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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [_]
Pre-Effective Amendment No. 1 [X]
Post-Effective Amendment No. ___ [_]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_]
Amendment No. 1 [X]
(Check appropriate box or boxes.)
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LEVCO SERIES TRUST
(Exact Name of Registrant as Specified in Charter)
One Rockefeller Plaza, New York, NY 10020
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 332-8400
Norris Nissim, Esq.
John A. Levin & Co., Inc.
One Rockefeller Plaza, 25th Floor
New York, New York 10020
(Name and Address of Agent for Service)
Copy to:
Kenneth S. Gerstein, Esq.
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
Approximate Date of Proposed Public Offering:
As soon as practicable after this Registration Statement is declared effective.
Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant
hereby elects to register an indefinite number of shares of beneficial interest.
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FORM N-1A
LEVCO SERIES TRUST
CROSS REFERENCE SHEET
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PART A
Item Number Caption Prospectus Caption
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<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Prospectus Summary and Summary of Expenses
3. Condensed Financial Information *
4. General Description of Registrant Prospectus Summary; About the Fund; Investment Objective and
Policies; Investment Restrictions; Additional Information
5. Management of Fund Prospectus Summary; Management; Additional Information; Fund
Expenses
5A. Management's Discussion of Fund Performance *
6. Capital Stock and Other Securities Prospectus Summary; Additional Information; Distributions and
Taxes; Shareholder Communications
7. Purchase of Securities Being Offered About Your Investment
8. Redemption or Repurchase About Your Investment
9. Pending Legal Proceedings *
10. Cover Page Cover Page
11. Table of Contents Table of Contents
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<TABLE>
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PART A
Item Number Caption Prospectus Caption
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<S> <C> <C>
12. General Information and History *
13. Investment Objectives and Policies Investment Objective and Policies; Investment Restrictions;
Special Investment Techniques
14. Management of the Fund Trustees and Officers
15. Control Persons and Principal Holders of Securities Additional Information
16. Investment Advisory and Other Services Investment Advisory Agreement; Additional Information
17. Brokerage Allocation and Other Practices Portfolio Transactions and Brokerage
18. Capital Stock and Other Securities *
19. Purchase, Redemption and Pricing of Securities Determination of Net Asset Value; Purchases and Redemptions of
Being Offered Shares
20. Tax Status Taxes
21. Underwriters Distributor, Distribution Plan
22. Calculation of Performance Data Performance Information
23. Financial Statements Because Registrant has no assets, financial statements are omitted
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* Omitted because answer is negative or inapplicable.
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PART C
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Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
STATE.
PRELIMINARY PROSPECTUS -- SUBJECT TO COMPLETION -- May 20, 1997
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Prospectus Dated [ ], 1997
LEVCO EQUITY VALUE FUND
(a series of LEVCO Series Trust)
One Rockefeller Plaza
25th Floor
New York, New York 10020
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LEVCO Equity Value Fund (the "Fund") is a series of LEVCO Series Trust (the
"Trust"), an open-end, diversified, management investment company (commonly
known as a mutual fund). The investment objective of the Fund is to achieve
long-term growth of capital through an emphasis on the preservation of capital
and an attempt to control volatility as measured against the Standard & Poor's
Composite 500 Stock Index (the "S&P 500"). The Fund pursues this objective by
investing its assets primarily in common stocks and other securities having
equity characteristics, which, in the opinion of the Fund's investment adviser,
are currently undervalued in relation to their intrinsic value. In pursuing its
objective, the Fund may utilize a variety of investment techniques. See
"INVESTMENT OBJECTIVE AND POLICIES" and "INVESTMENT DESCRIPTIONS AND PRACTICES."
Options on securities, stock index options and stock index futures and related
options may be used by the Fund for hedging purposes and involve certain risks.
See "HEDGING STRATEGIES."
John A. Levin & Co., Inc. (the "Investment Adviser") serves as the
investment adviser of the Fund.
The shares of the Fund being offered by this Prospectus ("Shares"), which
are Class A Shares, are distributed by LEVCO Securities, Inc. (the
"Distributor"). Shares are sold only to certain life insurance companies
("Participating Companies") and their separate accounts ("Separate Accounts") to
fund benefits under variable annuity contracts ("Contracts") and variable life
insurance policies ("Policies") offered by Participating Companies. The Separate
Accounts invest in Shares in accordance with allocation instructions received
from Contract and Policy owners ("Contract Owners" and "Policy Owners"). These
allocation rights are described in the prospectus for the Separate Account that
accompanies this Prospectus. Shares are redeemed to the extent necessary to
provide benefits under the Contracts and Policies.
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This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. It should be read and
retained for future reference. A Statement of Additional Information containing
more detailed information about the Fund dated [xxxxxxxx, 1997], has been filed
with the Securities and Exchange Commission and is incorporated herein by
reference. The Statement of Additional Information is available, without charge,
upon request by calling 1-800-xxx-xxxx.
____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
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PROSPECTUS SUMMARY............................................................ 4
ABOUT THE FUND................................................................ 7
INVESTMENT OBJECTIVE AND POLICIES............................................. 7
INVESTMENT DESCRIPTIONS AND PRACTICES......................................... 8
INVESTMENT RESTRICTIONS.......................................................11
HEDGING STRATEGIES............................................................12
MANAGEMENT....................................................................14
FUND EXPENSES.................................................................15
ABOUT YOUR INVESTMENT.........................................................15
DISTRIBUTIONS AND TAXES.......................................................16
SHAREHOLDER COMMUNICATIONS....................................................17
PERFORMANCE INFORMATION.......................................................17
ADDITIONAL INFORMATION........................................................18
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed
information appearing elsewhere in this Prospectus and in the Statement of
Additional Information.
The Fund LEVCO Equity Value Fund (the "Fund") is a series of
LEVCO Series Trust, a Delaware business trust which
is an open-end, diversified, management investment
company (commonly known as a mutual fund). The
investment objective of the Fund is to achieve
long- term growth of capital through an emphasis
on the preservation of capital and an attempt to
control volatility as measured against the
Standard & Poor's Composite 500 Stock Index (the
"S&P 500"). The Fund pursues its objective by
investing its assets primarily in common stocks
and other securities having equity characteristics
which, in the opinion of the Fund's investment
adviser, are currently undervalued in relation to
their intrinsic value. See "INVESTMENT OBJECTIVES
AND POLICIES" and "INVESTMENT DESCRIPTIONS AND
PRACTICES." For hedging purposes, the Fund may use
options on securities, stock index options, and
stock index futures and related options. Use of
these instruments involves certain risks. See
"HEDGING STRATEGIES."
Investment Adviser John A. Levin & Co., Inc., serves as the Fund's
investment adviser (the "Investment Adviser").
Together with its predecessor, the Investment
Adviser has provided investment advisory services
to clients since 1982. The Investment Adviser is an
indirect, wholly-owned subsidiary of Baker,
Fentress & Company ("Baker Fentress"), a closed-end
investment company listed on the New York Stock
Exchange. Clients of the Investment Adviser include
U.S. and foreign individuals, trusts, non-profit
organizations, registered investment funds,
investment partnerships, endowments, and pension
and profit-sharing funds. The Investment Adviser
currently manages approximately $7 billion in
assets for its clients. See "MANAGEMENT -
Investment Adviser."
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The Offering The shares of the Fund being offered by this
Prospectus ("Shares") are offered by LEVCO
Securities, Inc., which serves as the distributor
of Shares (the "Distributor"). Shares are sold
only to certain life insurance companies
("Participating Companies") and their separate
accounts (collectively, "Separate Accounts") to
fund benefits under variable annuity contracts
("Contracts") and variable life insurance policies
("Policies") offered by Participating Companies.
The Separate Accounts invest in Shares in
accordance with allocation instructions received
by Participating Companies from Contract and
Policy owners ("Contract Owners" and "Policy
Owners"). These allocation rights are further
described in the prospectus for the Separate
Account that accompanies this Prospectus. Shares
are redeemed to the extent necessary to provide
benefits under the Contracts and Policies and to
reflect the allocation instructions of Contract
and Policy Owners.
Share Price Shares are being offered at net asset value per
share without any sales charge. See "ABOUT YOUR
INVESTMENT - Purchase of Shares." Shares are
redeemable at their then current net asset value
per Share which may be more or less than their
cost. See "ABOUT YOUR INVESTMENT - Redemption of
Shares."
Fees and Expenses The Fund pays a fee to the Investment Adviser
calculated daily and payable monthly at an annual
rate of 0.85% of average daily net assets of the
Fund. The Fund also pays Baker Fentress a monthly
fee currently equal to $2,000 for providing
accounting services to the Fund. This fee will
increase once the Fund's average monthly net assets
exceed $50 million. See "ADDITIONAL INFORMATION--
Transfer Agent and Accounting Services" in the
Statement of Additional Information. In addition,
the Fund bears all of the expenses associated with
its operation. See "FUND EXPENSES".
Dividends and Capital The Fund declares and pays income dividends
Gains Distributions quarterly. Capital gains, if any, are distributed
at least annually. Payment of all dividends and
capital distributions will be made in Shares. See
"DISTRIBUTIONS AND TAXES."
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Risks Considerations The net asset value per Share and dividends of the
Fund will fluctuate and will depend on the changes
in the values of the Fund's investments and the
income and dividends received on those investments.
Policy Owners and Contract Owners should review
carefully the investment objective, policies and
practices of the Fund and consider their ability to
assume the risks associated with an investment in
Shares by the Separate Accounts. Certain of the
investment practices of the Fund involve various
risks. These practices include: the purchase of
non-investment grade debt securities and foreign
securities; lending securities; the use of options
on securities, stock index options, and stock index
futures and related options; and the use of
repurchase agreements. See "INVESTMENT OBJECTIVE
AND POLICIES" and "INVESTMENT DESCRIPTIONS AND
PRACTICES" and "HEDGING STRATEGIES". No assurance
can be given that the investment objective of the
Fund will be achieved.
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ABOUT THE FUND
LEVCO Equity Value Fund (the "Fund") is a series of LEVCO Series Trust (the
"Trust"), a business trust that is registered under the Investment Company Act
of 1940 (the "1940 Act") with the Securities and Exchange Commission ("SEC") as
an open-end, diversified, management investment company. The Trust was organized
on January 2, 1997 under the laws of the State of Delaware. As of the date of
this Prospectus, the Fund is the Trust's sole investment portfolio and has not
yet commenced operations. Shares of the Fund being offered by this Prospectus
("Shares"), which are Class A shares of the Fund, are sold by LEVCO Securities,
Inc. (the "Distributor") only to certain life insurance companies
("Participating Companies") and their separate accounts ("Separate Accounts") to
fund benefits under variable annuity contracts ("Contracts") and variable life
insurance policies ("Policies") offered by Participating Companies. Shares may
in the future be sold to qualified pension and retirement plans ("Plans"). The
Separate Accounts invest in Shares in accordance with allocation instructions
received from the owners of Contracts and Policies ("Contract Owners" and
"Policy Owners"). These allocation rights are described in the prospectus for
the Separate Account that accompanies this Prospectus. Shares are redeemed to
the extent necessary to provide benefits under Contracts and Policies.
Participating Companies may not be affiliated with each other. In addition,
Participating Companies and their Separate Accounts may be subject to insurance
regulation that varies from state to state and may be subject to state insurance
and federal tax or other regulation that varies between Contracts and Policies.
The Trust does not currently foresee any disadvantages to Contract or Policy
Owners arising from these circumstances. However, it is theoretically possible
that the interests of Plans or Contract or Policy Owners participating in the
Fund through the Separate Accounts might at some time be in material and
irreconcilable conflict. In some cases, one or more Separate Accounts might
redeem its investment in the Fund, which could possibly force the Fund to sell
portfolio securities at disadvantageous prices. The Board of Trustees of the
Trust intends to monitor events in order to identify any material irreconcilable
conflicts that may possibly arise and to determine what action, if any, should
be taken in response thereto.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to achieve long-term growth of
capital through an emphasis on the preservation of capital and an attempt to
control volatility as measured against the Standard & Poor's Composite 500 Stock
Index (the "S&P 500"). The Fund pursues this objective by investing its assets
primarily in common stocks and other securities having equity characteristics,
such as convertible debt and convertible preferred securities, preferred stocks,
warrants and rights (collectively, "Equity Securities"). The Fund invests in
Equity Securities which, in the opinion of the Fund's investment adviser, John
A. Levin & Co., Inc. (the "Investment Adviser"), are currently undervalued in
relation to their intrinsic value as indicated by the earnings and cash flow
potential or the asset value of their respective issuers. The Investment
Adviser's determination of value also takes into consideration growth and new
products on a selective basis. In evaluating investments for the Fund,
consideration is given to such factors as: security prices that reflect a market
valuation which is judged to be below the estimated present or future value of
the company; favorable earnings growth prospects; expected above average return
on equity and dividend yield; the financial condition of the issuer; and various
qualitative factors. Although payment of current dividends and income are
considered by the Investment Adviser in selecting investments for the Fund, they
are not primary factors in the selection of investments.
Under normal market conditions, the Fund invests at least 85% of its total
assets in Equity Securities. For hedging purposes, the Fund may use options on
securities, stock index options, and stock
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index futures and related options. These investments involve certain risks. See
"HEDGING STRATEGIES". The Fund may also invest in debt securities, including
U.S. Government securities and corporate debt securities (such as bonds, notes
and debentures). Certain of the Fund's investments in debt securities will be
obligations which, at the time of purchase, are rated "A" or better by Standard
& Poor's Corporation ("S&P") or Moody's Investors Service, Inc. ("Moody's") or,
if unrated, are of comparable quality as determined by the Investment Adviser.
However, the Fund may invest up to 10% of the value of its total assets in
non-convertible, non-investment grade debt securities (commonly known as "high
yield" or "junk" bonds). These investments involve certain risks. See
"INVESTMENT DESCRIPTIONS AND PRACTICES - Non-Investment Grade Debt Securities".
The Fund may also invest in money market instruments (see "INVESTMENT
DESCRIPTIONS AND PRACTICES - Short-Term Investments"), including repurchase
agreements. Investments in debt securities will generally be made to reduce the
Fund's equity exposure. During periods of high market valuations or adverse
market conditions or for liquidity purposes, all or any portion of the Fund's
assets may be invested temporarily in high quality debt securities or money
market instruments, or held as cash.
No assurance can be given that the investment objective of the Fund will be
achieved.
INVESTMENT DESCRIPTIONS AND PRACTICES
The types of securities in which the Fund invests and the investment
practices in which the Fund may engage are summarized below. In addition, the
Fund may use options on securities, stock index options and stock index futures
and related options for hedging purposes. See "HEDGING STRATEGIES".
Common Stock. Common stock are shares of a corporation or other entity that
represent an equity interest and entitle the holder to share in the profits, if
any, of the entity after required payments to holders of preferred stock and
debt securities.
Convertible Securities. A convertible security is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or formula. Before conversion,
convertible securities ordinarily provide a stream of income with generally
higher yields than those of common stocks of the same or similar issuers, but
lower than the yields on non-convertible debt. Convertible securities are
usually subordinated to comparable non-convertible securities, but rank senior
to common stock in a corporation's capital structure.
Warrants and Rights. Among the Equity Securities the Fund may purchase are
warrants and rights to purchase securities. Warrants and rights are derivative
instruments that permit, but do not obligate, the holder to purchase securities
at a specified price during a specified time period. Neither warrants nor rights
carry with them the right to dividends or voting rights with respect to the
securities that they entitle the holder to purchase, and they do not represent
any rights in the assets of the issuer. They involve the risk that they will
decline in value if the price of the related securities declines. If the price
of the related security does not increase to a price higher than the price at
which the warrants or rights may be exercised, the warrant or right may become
worthless. As a result, warrants and rights are more speculative than certain
other types of equity investments. In addition, the value of a warrant or right
does not necessarily change with the value of the underlying securities, and a
warrant or right ceases to have value if it is not exercised prior to its
expiration date.
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Preferred Stock. Preferred stocks generally pay dividends at specified
rates and have a preference over common stock in the payment of dividends and
the liquidation of an issuer's assets. However, preferred stock is junior to the
debt securities of the issuer in those same respects. Unlike interest payments
on debt securities, dividends on preferred stock are generally payable at the
discretion of the issuer's board of directors. The market prices of preferred
stocks will fluctuate based, in part, on changes in interest rates and are more
sensitive to changes in the issuer's creditworthiness than are the prices of
debt securities. Preferred stock may decline in value if dividends are not paid.
Debt Securities. The Fund's investments in debt securities may include
bonds, notes, bills, debentures, bank obligations, loan participations, and
other similar instruments. These securities include U.S. Government securities,
which are debt obligations that are issued or guaranteed by the U.S. Government
or by one of its agencies or instrumentalities, and debt obligations issued by
corporations, banks or other business entities. There are no restrictions on the
maximum maturity and duration of debt securities purchased by the Fund. The
interest rates payable on debt securities may be fixed, floating or variable or
may be zero coupon debt securities.
Non-Investment Grade Debt Securities. The Fund may invest up to 10% of the
value of its total assets in non-convertible, non-investment grade debt
securities. Convertible debt securities purchased by the Fund are not subject to
this limitation because they are purchased based upon their potential for
capital growth. Non-investment grade debt securities (typically called "junk
bonds") are securities that have received a rating from a nationally recognized
statistical rating organization ("NRSRO") of below investment grade or have been
given no rating, and are considered by the NRSRO to be predominantly speculative
with respect to the issuer's capacity to pay interest and repay principal. Non-
investment grade debt securities in the lowest rating categories may involve a
substantial risk of default or may be in default. Changes in economic conditions
or developments regarding the individual issuer are more likely to cause price
volatility and weaken the capacity of the issuers of non-investment grade debt
securities to make principal and interest payments than is the case for higher
grade debt securities. An economic downturn affecting an issuer of non-
investment grade debt securities may result in an increased incidence of
default. In addition, the market for lower grade debt securities may be thinner
and less active than for higher grade debt securities. A debt security will not
be considered non-investment grade for purposes of the percentage limitation set
forth above if it has received an investment grade rating from one or more
NRSRO's, notwithstanding the fact that a lower rating has been given by any
other NRSRO.
Short-Term Investments. The Fund may invest in money market instruments,
which are high quality short-term debt obligations. Money market instruments
generally have remaining maturities of one year or less. Among the types of
money market instruments that may be purchased by the Fund are: short-term U.S.
government securities, certificates of deposit, bankers' acceptances, commercial
paper, short-term corporate obligations and repurchase agreements.
Repurchase Agreements. The Fund may enter into repurchase agreements with
respect to any of the types of debt securities in which it is authorized to
invest. Repurchase agreements will be effected only with banks, savings
institutions and broker-dealers. These agreements involve the purchase by the
Fund of a debt security with the condition that after a stated period of time,
the original seller will buy back the same security at a predetermined price or
yield. Repurchase agreements are used to enhance liquidity and to earn income
for periods as short as overnight. In the event the original seller defaults on
its obligation to repurchase the securities, as a result of its bankruptcy or
otherwise, the Fund will seek to sell the securities. Such action could involve
costs or delays, and the Fund's ability to dispose of the securities may be
restricted. To minimize risk, the securities underlying each repurchase
agreement will be maintained with the Fund's custodian, or a subcustodian, in an
amount at least equal to the repurchase
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price under the agreement (including accrued interest thereunder), and such
agreements will only be effected with parties that meet certain creditworthiness
standards. However, in the event the other party to a repurchase agreement fails
to repurchase the securities subject to the agreement, the Fund could suffer a
loss to the extent it is precluded from selling the securities or if, due to
delays, proceeds from the sale are less than the repurchase price.
Restricted Securities. The Fund may invest up to 10% of its net assets in
securities subject to restrictions on disposition under the Securities Act of
1933, as amended ("restricted securities"). Such investments, however, will be
limited to certain restricted securities that may be sold to institutional
investors pursuant to Rule 144A. In some cases, these securities may be
difficult to value to the extent that they are not publicly traded, and may be
difficult to sell promptly at favorable prices. The Fund's policies are intended
to enable it to invest a limited portion of its assets in investments that are
subject to restrictions on disposition, but which nevertheless are considered to
be attractive by the Investment Adviser. Except as described above, the Fund
does not purchase illiquid securities, including repurchase agreements maturing
in more than seven days.
Foreign Securities. The Fund may invest up to 20% of its total assets in
securities of foreign issuers, including depository receipts, such as American
Depository Receipts ("ADRs"), which represent ownership of specific foreign
securities. Investments in foreign securities involve certain risks. There may
be more limited publicly available information regarding foreign securities than
would be the case with respect to the securities of U.S. issuers, and different
accounting standards may be used by foreign issuers. Foreign securities markets
in which securities purchased by the Fund may trade are in some cases not as
liquid as U.S. markets. Foreign securities also entail certain additional risks
such as the risks of changes in the value of foreign currency relative to the
U.S. dollar, possible imposition of withholding or confiscatory taxes, possible
currency transfer restrictions, expropriation or other adverse political or
economic developments, and the difficulty of enforcing obligations in foreign
jurisdictions. The purchase of securities denominated in foreign currencies will
subject the value of the Fund's investments in those securities to fluctuations
due to changes in foreign exchange rates. Due to these factors, the prices of
securities of foreign issuers may be more volatile than those of comparable
domestic issuers.
To hedge against the effects of changes in foreign exchange rates, the Fund
may enter into forward foreign currency exchange contracts ("forward
contracts"). These contracts represent agreements to exchange an amount of
currency at an agreed upon future time and rate. The Fund will generally use
forward contracts only to "lock in" the price in U.S. dollars of a foreign
security intended to be purchased or sold, but in certain limited cases may use
such contracts to hedge against an anticipated substantial decline in the price
of a foreign currency against the U.S. dollar. Forward contracts will not be
used in all cases and, in any event, cannot protect the Fund against declines in
the prices of the securities; nor do they completely protect against all changes
in the values of foreign securities due to fluctuations in foreign exchange
rates. If anticipated currency movements are not accurately predicted, the Fund
will sustain losses on these contracts.
Lending Securities. In order to earn additional income, the Fund may lend
its portfolio securities to brokers, dealers and other financial institutions,
provided that such loans are callable at any time by the Fund and are at all
times secured by collateral, consisting of cash or U.S. Government securities,
or any combination thereof, equal to not less than 100% of the market value,
determined daily, of the securities loaned. Any cash collateral will be invested
by the Fund in short-term investments. Lending securities involves certain
risks, the most significant of which is the risk that a borrower may fail to
return a portfolio security. The Fund's Board of Trustees has adopted policies
designed to minimize such risks. The Fund may lend securities in an amount not
exceeding one-third of the value of its total assets,
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measured at the time any such loan is made. Securities lending involves a form
of leverage, and the Fund may incur a loss if securities purchased with the
collateral from securities loans decline in value or if the income earned does
not cover the Fund's transaction costs.
When-Issued Securities. In order to help ensure the availability of
suitable securities for investment, the Fund may purchase securities on a "when-
issued" or on a "forward delivery" basis. Securities purchased in this manner
will be delivered to the Fund at a future date beyond the customary settlement
time. It is expected that, in normal circumstances, the Fund will take delivery
of such securities. In general, the Fund does not pay for the securities or
become entitled to dividends or interest until the purchase of the securities is
settled. There are no percentage of asset limitations on this practice. However,
while awaiting delivery of any securities purchased on such a basis, the Fund
will establish a segregated account consisting of cash or liquid securities
equal to the amount of its commitments to purchase securities on a "when-issued"
basis.
PORTFOLIO TURNOVER
There are no fixed limitations regarding portfolio turnover. However, it is
estimated that the Fund's annual portfolio turnover rate will not exceed 100%.
Although the Fund generally does not engage in short-term trading, securities
may be sold without regard to the time they have been held when investment
considerations warrant such action. As a result, under certain market
conditions, the portfolio turnover rate of the Fund may be higher. Brokerage
costs will be commensurate with the rate of the Fund's trading activity, so that
a higher turnover rate will result in higher brokerage costs.
INVESTMENT CHARACTERISTICS
The investment performance of the Fund will vary over time based upon
changes in the values of its investments and the dividends and interest received
on those investments. The value of the Fund's investments will be affected by a
variety of factors, including the perceived financial condition and earnings of
issuers; market and industry trends; economic, social and political
developments; and changes in interest rates. The net asset value per share of
the Fund can be expected to fluctuate daily.
INVESTMENT RESTRICTIONS
The Fund has adopted certain investment policies and restrictions which are
described in this Prospectus and in the Statement of Additional Information.
Except as otherwise noted, these policies and restrictions are not fundamental
and may be changed by the Board of Trustees of the Trust. However, the Fund's
investment objective may not be changed without the vote of the holders of a
majority of the Fund's outstanding shares (a "Majority Shareholder Vote"), which
means the affirmative vote of the lesser of: (1) more than 50% of the
outstanding shares of the Fund (including shares of all classes); or (2) 67% or
more of the shares present at a meeting of shareholders if more than 50% of the
Fund's outstanding shares (including shares of all classes) are represented at
the meeting in person or by proxy. Each Separate Account owning shares will vote
its shares in accordance with instructions received from Contract Owners or
Policy Owners, annuitants and beneficiaries. See "SHAREHOLDER COMMUNICATIONS".
The following investment restrictions, and certain additional investment
restrictions set forth in the Statement of Additional Information, are
fundamental and may not be changed without a Majority Shareholder Vote. Under
these restrictions, the Fund may not:
1. Purchase a security, other than U.S. Government securities, if as a
result of such purchase more than 5% of the value of the Fund's total assets
would be invested in the securities of any one issuer, or the Fund would own
more than 10% of the voting securities, or of any class of securities, of any
one
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<PAGE>
issuer. For purposes of this restriction, all outstanding indebtedness of
an issuer is deemed to be a single class.
2. Purchase a security, other than U.S. Government securities, if as a
result of such purchase 25% or more of the value of the Fund's total assets
would be invested in the securities of issuers in any one industry.
HEDGING STRATEGIES
The Fund may purchase and sell (or write) options on individual stocks,
baskets of stocks, and stock indices, and may purchase and sell stock index
futures and related options, but only for hedging purposes. Use of these
techniques involves certain risks. See "Risks of Futures and Options" below.
The Fund engages in these transactions in order to protect against declines in
the value of securities it holds or increases in the costs of securities to be
acquired. More detailed descriptions of the Fund's use of options and futures
are contained in the Statement of Additional Information.
FUTURES AND OPTIONS TRANSACTIONS
The Fund may use futures contracts and related options for the purpose of
seeking to reduce the overall investment risk that would otherwise be associated
with the securities in which it invests. For example, the Fund may sell a stock
index futures contract in anticipation of a general market or market sector
decline that might adversely affect prices of the Fund's portfolio securities.
To the extent that there is a correlation between the Fund's portfolio and a
particular stock index, the sale of futures contracts on that index could reduce
general market risk and permit the Fund to retain its securities positions.
The Fund may purchase call options on individual stocks and baskets of
stocks, or purchase stock index futures contracts (and call options on such
contracts) to hedge against a market advance that might increase the prices of
securities that the Fund is planning to acquire. Alternatively, the Fund may
purchase put options on individual stocks and baskets of stocks, or sell stock
index futures contracts (or purchase puts on such contracts) to provide
protection against a decline in the price of a security below a specified level
or a sector or general market decline. The Fund may purchase and write options
in combination with each other to adjust the risk and return of its overall
investment positions. For example, the Fund may purchase a put option and write
a call option on the same underlying instrument, in order to synthesize a
position similar to that which would be achieved by selling a futures contract.
By purchasing a put option on an individual stock, the Fund could hedge the
risk of a devaluation of that individual stock. The value of the put option
would be expected to rise as a result of a market decline and thus could offset
all or a portion of losses resulting from declines in the prices of individual
securities held by the Fund. However, option premiums tend to decrease over time
as the expiration date nears. Therefore, because of the cost of the option (in
the form of premium and transaction costs), the Fund would suffer a loss in the
put option if prices do not decline sufficiently to offset the deterioration in
the value of the option premium.
By purchasing a call option on a stock index, the Fund would attempt to
participate in potential price increases of the underlying index, with results
similar to those obtainable from purchasing a futures contract, but with risk
limited to the cost of the option if stock prices fell. At the same time, the
Fund would suffer a loss if stock prices do not rise sufficiently to offset the
cost of the option.
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<PAGE>
The Fund may engage in the writing (selling) of covered call options with
respect to the securities in the Fund's portfolio to supplement the Fund's
income and enhance total returns. The Fund may write (sell) listed or over-the-
counter call options on individual securities held by the Fund, on baskets of
such securities or on the Fund's portfolio as a whole. The Fund will write only
covered call options, that is, the Fund will write call options only when it has
in its portfolio (or has the right to acquire at no cost) the securities subject
to the option. A written option may also be considered to be covered if the Fund
owns an option that entirely or partially offsets its obligations under the
written option. Index options will be considered covered if the pattern of price
fluctuations of the Fund's portfolio or a portion thereof substantially
replicates the pattern of price fluctuations in the index underlying the option.
A call option written by the Fund obligates the Fund to sell specified
securities to the holder of the option at a predetermined price if the option is
exercised on or before its expiration date. An index call option written by the
Fund obligates the Fund to make a cash payment to the holder of the option if
the option is exercised and the value of the index has risen above a
predetermined level on or before the expiration date of the option. The Fund may
terminate its obligations under a call option by purchasing an option identical
to the one written. Writing covered call options provides the Fund with
opportunities to increase the returns earned from portfolio securities through
the receipt of premiums paid by the purchasers of the options. Writing covered
call options may reduce the Fund's returns if the value of the underlying
security or index increases and the option position is exercised or closed out
by the Fund at a loss.
RISKS OF FUTURES AND OPTIONS
The purchase and sale of options, and futures contracts and related
options involve risks different from those involved with direct investments in
securities, and also require different skills from the Investment Adviser in
managing the Fund's portfolio of investments. While utilization of options,
futures contracts and similar instruments may be advantageous to the Fund, if
the Investment Adviser is not successful in employing such instruments in
managing the Fund's investments or in predicting market changes, the Fund's
performance will be worse than if the Fund did not make such investments. It is
possible that there will be imperfect correlation, or even no correlation,
between price movements of the investments being hedged and the options or
futures used. It is also possible that the Fund may be unable to purchase or
sell a portfolio security at a time that otherwise would be favorable for it to
do so, or that the Fund may need to sell a portfolio security at a
disadvantageous time, due to the need for the Fund to maintain "cover" or to
segregate securities in connection with hedging transactions or that the Fund
may be unable to close out or liquidate its hedged position. In addition, the
Fund will pay commissions and other costs in connection with such investments,
which may increase the Fund's expenses and reduce its yield. A more complete
discussion of the possible risks involved in transactions in options and
futures contracts is contained in the Statement of Additional Information. The
Fund's current policy is to limit options and futures transaction to those
described above. The Fund may purchase and write both over-the-counter and
exchange traded options.
The Fund will not enter into any futures contracts or related options if
the sum of the initial margin deposits on futures contracts and premiums paid
for unexpired options on such contracts, other than for bona fide hedging
purposes as defined by the Commodity Futures Trading Commission, would exceed 5%
of the liquidation value of the Fund's assets, after taking into account
unrealized profits and losses on such contracts and options. The in-the-money
amount of an option on a futures contract may be excluded in calculating this 5%
limitation. The Fund may invest up to 5% of the value of its total assets,
represented by the premiums paid, for the purchase of options on securities and
stock index options. The Fund may not write options on securities or stock
indices with aggregate exercise prices in excess of 30% of the value of the
Fund's assets measured at the time an option is written.
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<PAGE>
MANAGEMENT
The business and affairs of the Fund are managed under the general
direction and supervision of the Board of Trustees of the Trust. Responsibility
for management of the Fund's investments has been delegated by the Board of
Trustees to the Investment Adviser. Other matters relating to the Fund's day-to-
day operations are handled by the Trust's officers, each of whom is an officer
or employee of the Investment Adviser.
INVESTMENT ADVISER
The Investment Adviser, John A. Levin & Co., Inc., provides investment
advisory services to the Fund pursuant to an Investment Advisory Agreement with
the Fund (the "Advisory Agreement"). Subject to such policies as the Board of
Trustees may determine, the Investment Adviser makes all investment decisions
for the Fund and places all orders for the purchase and sale of investments by
the Fund. The Investment Adviser also provides administrative services required
by the Trust and the Fund, except for certain accounting related services that
are furnished by an affiliate of the Investment Adviser. Administrative services
may be furnished through the Investment Adviser's affiliates. The Investment
Advisor furnishes, without expense to the Fund, the services of its personnel to
serve as officers and Trustees of the Trust. In consideration of the services
provided by the Investment Adviser, the Fund pays the Investment Adviser a
monthly fee computed at the annual rate of 0.85% of the Fund's average daily net
assets.
Together with its predecessor, the Investment Adviser has provided
investment advisory services to clients since 1982. The Investment Adviser is an
indirect, wholly-owned subsidiary of Baker, Fentress & Company ("Baker
Fentress"), a closed-end investment company listed on the New York Stock
Exchange (the "NYSE"). Clients of the Investment Adviser include U.S. and
foreign individuals, trusts, non-profit organizations, registered investment
funds, investment partnerships, endowments, and pension and profit-sharing
funds. The Investment Adviser currently manages approximately $7 billion in
assets for its clients.
The following persons serve as the portfolio managers of the Fund:
John A. Levin: President of the Investment Adviser (and its
predecessor) since 1982; Director, President and Chief Executive
Officer of Baker Fentress since June, 1996.
Melody L. Prenner Sarnell: Executive Vice President of the Investment
Adviser; securities analyst and portfolio manager of the Investment
Adviser (and its predecessor) since 1984; Director of Baker Fentress
since June, 1996.
Jeffrey A. Kigner: Executive Vice President of the Investment
Adviser; securities analyst and portfolio manager of the Investment
Adviser (and its predecessor) since 1984; Director of Baker Fentress
since June, 1996.
TRANSFER AGENT AND ACCOUNTING SERVICES
The Trust has retained Countrywide Fund Services, Inc. (the "Transfer
Agent"), P.O. Box 5354, Cincinnati, Ohio 45201, to serve as the Fund's transfer
agent and dividend paying agent. The Transfer Agent is an indirect, wholly-owned
subsidiary of Countrywide Credit Industries, Inc., a NYSE listed company
principally engaged in the business of residential mortgage lending.
The Fund also pays Baker Fentress a monthly fee for providing accounting
related services to the Trust, assisting in supervising various other services
and providing other specific services to the Fund including, but not limited to:
internal fund accounting and auditing services, valuing the Trust's assets and
calculating the net asset value of the shares of the Fund, assisting in the
preparation and filing of the Trust's tax returns, accumulating information for
the Trust's financial statements and preparing reports to the shareholders. This
fee is currently equal to $2,000, but will increase when the Fund's average
monthly net assets exceed $50 million. See "ADDITIONAL INFORMATION - Transfer
Agent and Accounting Services" in the Statement of Additional Information.
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<PAGE>
FUND EXPENSES
The Fund pays all of its expenses other than those expressly assumed by the
Investment Adviser or the Distributor. Expenses of the Fund are deducted from
the Fund's total income before dividends are paid. The Fund's expenses include,
but are not limited to: fees paid to the Investment Adviser; fees paid to Baker
Fentress for providing accounting services; fees of the Fund's independent
auditors and custodian and certain related expenses; taxes; organization
costs; interest, costs incident to meetings of the Board of Trustees of the
Trust and meetings of the Fund's shareholders; costs of printing and mailing
prospectuses and reports to shareholders and the filing of reports with
regulatory bodies; legal fees and disbursements; fees payable to federal and
state regulatory authorities; fees and expenses of Trustees who are not
affiliated with the Investment Adviser or the Distributor; and any
extraordinary expenses. Brokerage fees and expenses are also borne by the Fund
and are included in the purchase and sales price of a security.
ABOUT YOUR INVESTMENT
PURCHASE OF SHARES
Shares are offered for sale on a continuous basis directly by the
Distributor to the Separate Accounts at net asset value per share on each day
on which the NYSE is open for business, without any sales charge. Net asset
value per share is calculated once daily at 4:15 p.m., New York time, Monday
through Friday, each day the NYSE is open. Net asset value per share is computed
by subtracting the Fund's liabilities (including accrued expenses and dividends
payable) from the value of the Fund's investments and other assets and dividing
the result by the total number of shares of the Fund outstanding. The
determination of net asset value is made separately for each class of shares of
the Fund.
The Fund effects orders to purchase or redeem Shares, that are based on
premium payments, surrender and transfer requests and any other transaction
requests from Contract Owners and Policy Owners, annuitants and beneficiaries at
the net asset value per share next computed after the Separate Account receives
such transaction request. Any orders to purchase or redeem Shares that are not
based on actions by Contract Owners or Policy Owners, annuitants, and
beneficiaries will be effected at the net asset value per share next computed
after the order is received by the Distributor. The Fund reserves the right to
suspend the sale of Shares in response to conditions in the securities markets
or for other reasons.
Individuals may not place orders to purchase Shares directly. Please refer
to the prospectus for the Separate Account of the Participating Company for more
information on the purchase of Shares.
REDEMPTION OF SHARES
A Separate Account may redeem all or any portion of the Shares that it
holds at any time at the next computed net asset value per share, as described
above. Shares that are redeemed are entitled to any dividends that have been
declared as payable to record owners up to and including the day the redemption
is effected. There is no redemption charge. Payment of the redemption price
will normally be made within seven days after receipt of such tender for
redemption.
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<PAGE>
The right of redemption may be suspended and the date of payment of the
redemption price may be postponed for any period during which the NYSE is closed
(other than customary weekend and holiday closings) or during which the SEC
determines that trading thereon is restricted, or for any period during which an
emergency (as determined by the SEC) exists as a result of which disposal by the
Fund of securities is not reasonably practicable or as a result of which it is
not reasonably practicable for the Fund fairly to determine the value of its net
assets, or for such other periods as the SEC may by order permit for the
protection of shareholders.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
The Fund declares and distributes dividends from net investment income
quarterly and will distribute its net capital gains, if any, at least annually.
Payment of all dividends and capital gains distributions will be made in Shares.
TAX MATTERS
The following discussion is a summary of the federal tax treatment of the
Fund and some of the tax consequences to the Separate Accounts of investing in
the Fund. It does not address the tax treatment of the Contract Owners or Policy
Owners. Contract Owners and Policy Owners should consult the prospectuses of the
Separate Accounts for information concerning the Federal income tax consequences
of owning Contracts or Policies, and should consult their own tax advisors
concerning the federal and state tax consequences of such investments.
The Fund intends to qualify each year as a regulated investment company (a
"RIC") by satisfying the requirements of Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"), concerning the diversification of the
Fund's assets, distribution of its income, and sources of its income. If so
qualified, the Fund will not be subject to Federal income tax to the extent that
it distributes its net income to shareholders as required by the Code. If for
any taxable year the Fund does not qualify as an RIC, then all of its taxable
income will be subjected to federal corporate income tax. Federal income tax
would be imposed on the Fund if it failed to make certain distributions of its
income to shareholders. The Fund intends to make distributions in a manner which
will avoid the imposition of such tax. In addition, a 4% excise tax would be
imposed upon the Fund if, in a particular calendar year, the Fund failed to
distribute substantially all of its ordinary income and net capital gains for a
twelve-month period, generally ending on October 31st. This excise tax will not
apply to the Fund if at all times during the calendar year each Shareholder in
the Fund was a "segregated asset account" (as defined in the Code) or a
qualified plan. The Fund has been informed that the Participating Companies
intend to qualify the separate Accounts as segregated asset accounts.
Section 817(h) of the Code requires that investments of a segregated asset
account of an insurance company be "adequately diversified", in accordance with
Treasury Regulations promulgated thereunder, in order for the holders of
variable annuity contracts or variable life insurance policies investing in the
account to receive the tax-deferred or tax-free treatment generally afforded
holders of annuities or life insurance policies under the Code. The Department
of the Treasury has issued Regulations under section 817(h) which, among other
things, provide the manner in which a segregated asset account will treat
investments in a RIC for purposes of the applicable diversification
requirements. Under the Regulations, if a RIC satisfies certain conditions, that
RIC will not be treated as a single investment for these purposes, but rather
the segregated asset account will be treated as owning its proportionate share
of each of the assets of the RIC. The Fund plans to satisfy these conditions at
all times.
Distributions by the Fund will be taxable, if at all, to the Separate
Accounts, and not to Contract or Policy Owners. A separate Account will include
distributions in its taxable income in the year in which they are received
(notwithstanding the fact that they are reinvested). Distributions by the Fund
of income and the excess of net short-term capital gain over net long-term
capital loss will be treated as ordinary income and distributions by the Fund of
net long-term capital gain over net short-term capital loss will be treated as
long-term capital gain. Redemptions of Shares generally will result in
recognition of capital gain or loss, if any, for federal income tax purposes.
Contract Owners and Policy owners should consult the prospectuses of the
Separate Accounts for information concerning the Federal income tax treatment
of separate Accounts that own Shares.
The foregoing discussion of Federal income tax consequences is based on tax
laws and regulations as in effect on the date of this Prospectus, and is subject
to change by legislative or administrative action.
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<PAGE>
SHAREHOLDER COMMUNICATIONS
It is expected that Contract Owners and Policy Owners who have given
instructions for Separate Accounts to invest in Shares will receive from the
Participating Companies reports that will include, among other things, the
Fund's unaudited semi-annual financial statements and year-end financial
statements audited by the Trust's independent auditors. Each report will
show the investments owned by the Fund and will provide other information about
the Fund and its operations. The Fund may pay a portion of the cost of preparing
certain of those reports. Contract Owners and Policy Owners may obtain
information about the performance of the Fund on any business day by calling
toll-free 1-800-[xxx-xxxx] between 8:15 a.m. and 6:00 p.m., New York time.
Each Separate Account owning Shares will vote its shares in accordance with
instructions received from Contract Owners or Policy Owners, annuitants and
beneficiaries. Shares held by a Separate Account as to which no instructions
have been received will be voted for or against any matter, or in abstention, in
the same proportion as the Shares held by that Account as to which instructions
have been received. Shares held by a Separate Account that are not attributable
to Contracts or Policies will also be voted for or against any proposition in
the same proportion as the Shares for which voting instructions are received by
the Separate Account. If a Participating Company determines, however, that it
is permitted to vote any such Shares in its own right, it may elect to do so,
subject to the then current interpretations of the 1940 Act and the rules
thereunder.
PERFORMANCE INFORMATION
From time to time the Fund may advertise or report certain information
about its investment performance. The Fund may present standardized and
nonstandardized total return in advertisements or other material. Standardized
total return is calculated in accordance with a formula prescribed by the SEC.
Under this method, total return is calculated by determining the difference
between the net asset value of all Shares held at the end of the period for
which a quotation is being given and the net asset value per share for each
Share held at the beginning of the period (assuming reinvestment of dividends
and other distributions), and then dividing that difference by the per Share net
asset value at the beginning of the period. (The calculations implicitly
reflect the compounding of dividends and other distributions by assuming
reinvestment.) The average annual compounded rate of return is the yearly rate
of return that, when applied evenly to each annual period and compounded, would
produce the total return for the period quoted. Nonstandardized total return
differs from standardized total return in that it may be related to a
nonstandard period or presented as an aggregate rate of return, rather than as
an annual average. Quotations of total return do not reflect charges imposed at
the Account level.
The performance of the Fund may be compared to the performance of other
mutual funds with similar investment objectives and to other relevant indices or
to rankings prepared by independent services or other financial or industry
publications that monitor the performance of mutual funds. For example,
performance information may be compared with data published by Lipper Analytical
Services, Inc. or to unmanaged indices of stock market performance. The
performance information may also include evaluations of the Fund published by
nationally recognized ranking services and by various national or local
financial publications, such as Business Week, Forbes, Fortune, Institutional
Investor, Money, The Wall Street Journal, Barron's, Changing Times, Morningstar,
Mutual Fund Values, U.S.A. Today, The New York Times, or other industry or
financial publications.
Quotations of performance are historical, and should not be considered as
indicative of future results.
-17-
<PAGE>
ADDITIONAL INFORMATION
Description of Shares. The Trust is a Delaware business trust organized
pursuant to a Certificate of Trust dated January 2, 1997. It is authorized to
issue an unlimited number of shares of beneficial interest, $.001 par value,
and to issue one or more series of such shares, each representing interests in a
separate investment portfolio. As of the date of this Prospectus, the Trust has
established only one series of its shares, representing interests in the Fund.
The Board of Trustees has the power to establish additional series of shares
representing interests in other investment portfolios and, subject to the 1940
Act and other applicable laws and regulations, to issue two or more classes of
shares of each series. Shares are fully paid and non-assessable, and have no
preemptive or conversion rights.
Shares being offered pursuant to this Prospectus are Class A shares of the
Fund. Class B shares of the Fund are offered pursuant to a separate prospectus.
The Class A and Class B shares each represent interests in the Fund, but differ
in that the Class B shares, unlike Class A shares, bear certain expenses
associated with the different investor services and distribution arrangement
that has been implemented for that class.
Shareholders of the Fund, together with shareholders of any other series of
the Trust that may in the future be organized, are entitled to vote on the
election of Trustees and the ratification of the Trust's independent auditors
when those matters are voted upon at a meeting of shareholders. On other matters
affecting the Fund on which shareholders of the Fund are entitled to vote,
shares of the Fund and any other series would generally be voted as a separate
class. Although shares of each class of the Fund will generally vote together on
matters affecting the Fund and the Trust, each class has exclusive voting rights
on matters which relate solely to its distribution or investor services
arrangements and will vote separately on any matter as to which the interests of
shareholders of the classes differ. Each Share (and fractional Share) is
entitled to that number of votes which equals the net asset value of such Share
(or fraction thereof). All shares of the Trust have non-cumulative voting
rights, meaning that shareholders entitled to cast more than 50% of the votes
for the election of Trustees can elect all of the Trustees standing for election
if they choose to do so.
Under Delaware law, shareholders of the Fund could, under certain
circumstances, be held personally liable for the obligations of the Trust but
only to the extent of the shareholder's investment. However, the Declaration of
Trust disclaims liability of the shareholders, Trustees or officers of the Trust
for acts or obligations of the Trust, which are binding only on the assets and
property of the Trust and requires that notice of the disclaimer be given in
each contract or obligation entered into or executed by the Trust or the
Trustees. The risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the Trust itself
would be unable to meet its obligations and should be considered remote.
Annual meetings of shareholders will not be held except as required by the
1940 Act or other applicable law. A meeting will be held on the removal of a
Trustee or Trustees of the Trust if requested in writing by holders of not less
than 10% of the outstanding shares of the Trust.
Custodian. UMB Bank, n.a., P.O. Box 419226, Kansas City, Missouri 64141-
6226, serves as custodian of the assets of the Fund. The custodian maintains
custody of all securities and other assets of the Fund, and is authorized to
hold the Fund's investments in securities depositories and to use sub-custodians
which have been approved by the Trust.
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<PAGE>
Distributor. The Distributor, LEVCO Securities, Inc., One Rockefeller
Plaza, New York, New York 10020, serves as the distributor of Shares. The
Distributor is a wholly-owned subsidiary of the Investment Adviser.
Independent Auditors. Ernst & Young LLP, Sears Tower, 233 South Wacker
Drive, Chicago, Illinois 60606-6301, serves as the independent auditors of
the Fund. Financial Statements of the Fund appearing in the Fund's annual report
will be audited by Ernst & Young LLP.
Counsel. Schulte Roth & Zabel LLP, 900 Third Avenue, New York, New York
10022, serves as counsel to the Fund, and also serves as counsel to the
Investment Adviser and its affiliates on certain matters.
Control Persons. As of the date of this Prospectus, all of the outstanding
shares of the Fund were owned by Mr. Norris Nissim, an interested person of the
Fund. This control relationship will continue to exist until such time as the
above-described share ownership represents 25% or less of the outstanding shares
of the Fund. Through the exercise of voting rights with respect to the shares,
the controlling person set forth above may be able to determine the outcome of
shareholder voting on matters as to which shareholder approval is required.
Additional Information. This Prospectus, including the Statement of
Additional Information which has been incorporated herein by reference, does not
contain all the information set forth in the Registration Statement filed by the
Trust with the SEC. Copies of the Registration Statement may be obtained at a
reasonable charge from the SEC or may be examined, without charge, at the office
of the SEC in Washington, D.C.
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<PAGE>
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LEVCO EQUITY VALUE FUND
- -------------------------------------------------------------------------------
INVESTMENT ADVISER
John A. Levin & Co., Inc.
One Rockefeller Center, 25th Floor
New York, New York 10020
DISTRIBUTOR
LEVCO Securities, Inc.
One Rockefeller Center, 25th Floor
New York, New York 10020
CUSTODIAN
UMB Bank, n.a.
P.O. Box 419226
Kansas City, Missouri 64141-6226
TRANSFER AGENT
Countrywide Financial Services, Inc.
312 Walnut Street
Cincinnati, Ohio 45202
INDEPENDENT AUDITORS
Ernst & Young LLP
Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606-6301
LEGAL COUNSEL
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
SHAREHOLDER INQUIRIES
1 (800) [ ]
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NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN
THOSE CONTAINED IN THIS PROSPECTUS OR IN APPROVED SALES LITERATURE IN CONNECTION
WITH THE OFFER CONTAINED HEREIN, AND IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST
OR THE DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER BY THE TRUST OR
BY THE DISTRIBUTOR TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER.
- -------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
STATE.
PRELIMINARY PROSPECTUS -- SUBJECT TO COMPLETION -- May 20, 1997
- --------------------------------------------------------------------------------
Prospectus Dated [ ], 1997
LEVCO EQUITY VALUE FUND
(a series of LEVCO Series Trust)
One Rockefeller Plaza, 25th Floor
New York, New York 10020
- --------------------------------------------------------------------------------
LEVCO Equity Value Fund (the "Fund") is a series of LEVCO Series Trust (the
"Trust"), an open-end, diversified, management investment company (commonly
known as a mutual fund). The investment objective of the Fund is to achieve
long-term growth of capital through an emphasis on the preservation of capital
and an attempt to control volatility as measured against the Standard & Poor's
Composite 500 Stock Index (the "S&P 500"). The Fund pursues this objective by
investing its assets primarily in common stocks and other securities having
equity characteristics, which, in the opinion of the Fund's investment adviser,
are currently undervalued in relation to their intrinsic value. In pursuing its
objective, the Fund may utilize a variety of investment techniques. See
"INVESTMENT OBJECTIVE AND POLICIES" and "INVESTMENT DESCRIPTIONS AND PRACTICES".
Options on securities, stock index options and stock index futures and related
options may be used by the Fund for hedging purposes and involve certain risks.
See "HEDGING STRATEGIES".
John A. Levin & Co., Inc. (the "Investment Adviser") serves as the
investment adviser of the Fund.
The shares of the Fund being offered by this Prospectus ("Shares"), which
are Class B Shares, are distributed by LEVCO Securities, Inc. (the
"Distributor"). Shares are sold only to certain life insurance companies
("Participating Companies") and their separate accounts ("Separate Accounts") to
fund benefits under variable annuity contracts ("Contracts") and variable life
insurance policies ("Policies") offered by Participating Companies. The Separate
Accounts invest in Shares in accordance with allocation instructions received
from Contract and Policy owners ("Contract Owners" and "Policy Owners"). These
allocation rights are described in the prospectus for the Separate Account that
accompanies this Prospectus. Shares are redeemed to the extent necessary to
provide benefits under the Contracts and Policies.
____________________
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. It should be read and
retained for future reference. A Statement of Additional Information containing
more detailed information about the Fund dated [xxxxxxxx, 1997], has been filed
with the Securities and Exchange Commission and is incorporated herein by
reference. The Statement of Additional Information is available, without charge,
upon request by calling 1-800-xxx-xxxx.
____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUMMARY............................................................3
ABOUT THE FUND................................................................6
INVESTMENT OBJECTIVE AND POLICIES.............................................6
INVESTMENT DESCRIPTIONS AND PRACTICES.........................................7
INVESTMENT RESTRICTIONS......................................................10
HEDGING STRATEGIES...........................................................11
MANAGEMENT...................................................................13
FUND EXPENSES................................................................14
ABOUT YOUR INVESTMENT........................................................14
DISTRIBUTION PLAN............................................................15
DISTRIBUTIONS AND TAXES......................................................15
SHAREHOLDER COMMUNICATIONS...................................................16
PERFORMANCE INFORMATION......................................................17
ADDITIONAL INFORMATION.......................................................17
</TABLE>
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed
information appearing elsewhere in this Prospectus and in the Statement of
Additional Information.
The Fund LEVCO Equity Value Fund (the "Fund") is a series of
LEVCO Series Trust, a Delaware business trust which
is an open-end, diversified, management investment
company (commonly known as a mutual fund). The
investment objective of the Fund is to achieve
long-term growth of capital through an emphasis on
the preservation of capital and an attempt to
control volatility as measured against the
Standard & Poor's Composite 500 Stock Index (the
"S&P 500"). The Fund pursues its objective by
investing its assets primarily in common stocks
and other securities having equity characteristics
which, in the opinion of the Fund's investment
adviser, are currently undervalued in relation to
their intrinsic value. See "INVESTMENT OBJECTIVES
AND POLICIES" and "INVESTMENT DESCRIPTIONS AND
PRACTICES." For hedging purposes, the Fund may use
options on securities, stock index options, and
stock index futures and related options. Use of
these instruments involves certain risks. See
"HEDGING STRATEGIES".
Investment Adviser John A. Levin & Co., Inc., serves as the Fund's
investment adviser (the "Investment Adviser").
Together with its predecessor, the Investment
Adviser has provided investment advisory services
to clients since 1982. The Investment Adviser is an
indirect, wholly-owned subsidiary of Baker,
Fentress & Company ("Baker Fentress"), a closed-end
investment company listed on the New York Stock
Exchange. Clients of the Investment Adviser include
U.S. and foreign individuals, trusts, non-profit
organizations, registered investment funds,
investment partnerships, endowments, and pension
and profit-sharing funds. The Investment Adviser
currently manages approximately $7 billion in
assets for its clients. See "MANAGEMENT -Investment
Adviser".
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<PAGE>
The Offering The shares of the Fund being offered by this
Prospectus ("Shares") are offered by LEVCO
Securities, Inc., which serves as the distributor
of Shares (the "Distributor"). Shares are sold
only to certain life insurance companies
("Participating Companies") and their separate
accounts (collectively, "Separate Accounts") to
fund benefits under variable annuity contracts
("Contracts") and variable life insurance policies
("Policies") offered by Participating Companies.
The Separate Accounts invest in Shares in
accordance with allocation instructions received
by Participating Companies from Contract and
Policy owners ("Contract Owners" and "Policy
Owners"). These allocation rights are further
described in the prospectus for the Separate
Account that accompanies this Prospectus. Shares
are redeemed to the extent necessary to provide
benefits under the Contracts and Policies and to
reflect the allocation instructions of Contract
and Policy Owners.
Share Price Shares are being offered at net asset value per
share without any sales charge. See "ABOUT YOUR
INVESTMENT - Purchase of Shares". Shares are
redeemable at their then current net asset value
per Share which may be more or less than their
cost. See "ABOUT YOUR INVESTMENT - Redemption of
Shares".
Fees and Expenses The Fund pays a fee to the Investment Adviser
calculated daily and payable monthly at an annual
rate of 0.85% of average daily net assets of the
Fund. The Fund also pays Baker Fentress a monthly
fee currently equal to $2,000 for providing
accounting services to the Fund. This fee will
increase once the Fund's average monthly net assets
exceed $50 million. See "ADDITIONAL INFORMATION--
Transfer Agent and Accounting Services" in the
Statement of Additional Information. In addition,
the Fund bears all of the expenses associated with
its operation. See "FUND EXPENSES". These expenses
include payments in an amount up to 0.25% annually
of the Fund's average net assets that are made by
the Fund to reimburse the Distributor for expenses
it incurs in connection with assisting
Participating Companies in providing reports and
information to prospective investors, Policy Owners
and Contract Owners as well as amounts expended to
reimburse Participating Companies for certain of
their costs of training their sales personnel. See
"DISTRIBUTION PLAN".
Dividends and Capital The Fund declares and pays income dividends
Gains Distributions quarterly. Capital gains, if any, are distributed
at least annually. Payment of all dividends and
capital gains distributions will be made in Shares.
See "DISTRIBUTIONS AND TAXES".
4
<PAGE>
Risks Considerations The net asset value per Share and dividends of the
Fund will fluctuate and will depend on the changes
in the values of the Fund's investments and the
income and dividends received on those investments.
Policy Owners and Contract Owners should review
carefully the investment objective, policies and
practices of the Fund and consider their ability to
assume the risks associated with an investment in
Shares by the Separate Accounts. Certain of the
investment practices of the Fund involve various
risks. These practices include: the purchase of
non-investment grade debt securities and foreign
securities; lending securities; the use of options
on securities, stock index options; stock index
futures and related options, and the use of
repurchase agreements. See "INVESTMENT OBJECTIVE
AND POLICIES" and "INVESTMENT DESCRIPTIONS AND
PRACTICES" and "HEDGING STRATEGIES". No assurance
can be given that the investment objective of the
Fund will be achieved.
5
<PAGE>
ABOUT THE FUND
LEVCO Equity Value Fund (the "Fund") is a series of LEVCO Series Trust (the
"Trust"), a business trust that is registered under the Investment Company Act
of 1940 (the "1940 Act") with the Securities and Exchange Commission (the "SEC")
as an open-end, diversified, management investment company. The Trust was
organized on January 2, 1997 under the laws of the State of Delaware. As of the
date of this Prospectus, the Fund is the Trust's sole investment portfolio and
has not yet commenced operations. Shares of the Fund being offered by this
Prospectus ("Shares"), which are Class B shares of the Fund, are sold by LEVCO
Securities, Inc. (the "Distributor") only to certain life insurance companies
("Participating Companies") and their separate accounts ("Separate Accounts") to
fund benefits under variable annuity contracts ("Contracts") and variable life
insurance policies ("Policies") offered by Participating Companies. Shares may
in the future be sold to qualified pension and retirement plans ("Plans"). The
Distributor receives a fee representing reimbursement of its expenses incurred
with respect to the distribution of the Shares offered pursuant to this
Prospectus. The Separate Accounts invest in Shares in accordance with allocation
instructions received from the owners of Contracts and Policies ("Contract
Owners" and "Policy Owners"). These allocation rights are described in the
prospectus for the Separate Account that accompanies this Prospectus. Shares are
redeemed to the extent necessary to provide benefits under Contracts and
Policies.
Participating Companies may not be affiliated with each other. In addition,
Participating Companies and their Separate Accounts may be subject to insurance
regulation that varies from state to state and may be subject to state insurance
and federal tax or other regulation that varies between Contracts and Policies.
The Trust does not currently foresee any disadvantages to Contract or Policy
Owners arising from these circumstances. However, it is theoretically possible
that the interests of Contract or Policy Owners participating in the Fund
through the Separate Accounts or Plans might at some time be in material and
irreconcilable conflict. In some cases, one or more Separate Accounts might
redeem its investment in the Fund, which could possibly force the Fund to sell
portfolio securities at disadvantageous prices. The Board of Trustees of the
Trust intends to monitor events in order to identify any material irreconcilable
conflicts that may possibly arise and to determine what action, if any, should
be taken in response thereto.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to achieve long-term growth of
capital through an emphasis on the preservation of capital and an attempt to
control volatility as measured against the Standard & Poor's Composite 500 Stock
Index (the "S&P 500"). The Fund pursues this objective by investing its assets
primarily in common stocks and other securities having equity characteristics,
such as convertible debt and convertible preferred securities, preferred stocks,
warrants and rights (collectively, "Equity Securities"). The Fund invests in
Equity Securities which, in the opinion of the Fund's investment advisor, John
A. Levin & Co., Inc. (the "Investment Adviser"), are currently undervalued in
relation to their intrinsic value as indicated by the earnings and cash flow
potential or the asset value of their respective issuers. The Investment
Adviser's determination of value also takes into consideration growth and new
products on a selective basis. In evaluating investments for the Fund,
consideration is given to such factors as: security prices that reflect a market
valuation which is judged to be below the estimated present or future value of
the company; favorable earnings growth prospects; expected above average return
on equity and dividend yield; the financial condition of the issuer; and various
qualitative factors. Although payment of current dividends and income are
considered by the Investment Adviser in selecting investments for the Fund, they
are not primary factors in the selection of investments.
6
<PAGE>
Under normal market conditions, the Fund invests at least 85% of its total
assets in Equity Securities. For hedging purposes, the Fund may use options on
securities, stock index options, and stock index futures and related options.
These investments involve certain risks. See "HEDGING STRATEGIES." The Fund
may also invest in debt securities, including U.S. Government securities and
corporate debt securities (such as bonds, notes and debentures). Certain of the
Fund's investments in debt securities will be obligations which, at the time of
purchase, are rated "A" or better by Standard & Poor's Corporation ("S&P") or
Moody's Investors Service, Inc. ("Moody's") or, if unrated, are of comparable
quality as determined by the Investment Adviser. However, the Fund may invest
up to 10% of the value of its total assets in non-convertible, non-investment
grade debt securities (commonly known as "high yield" or "junk" bonds). These
investments involve certain risks. See "INVESTMENT DESCRIPTIONS AND PRACTICES -
Non-Investment Grade Debt Securities". The Fund may also invest in money market
instruments (see "INVESTMENT DESCRIPTIONS AND PRACTICES - Short-Term
Investments"), including repurchase agreements. Investments in debt securities
will generally be made to reduce the Fund's equity exposure. During periods of
high market valuations or adverse market conditions or for liquidity purposes,
all or any portion of the Fund's assets may be invested temporarily in high
quality debt securities or money market instruments, or held as cash.
No assurance can be given that the investment objective of the Fund will be
achieved.
INVESTMENT DESCRIPTIONS AND PRACTICES
The types of securities in which the Fund invests and the investment
practices in which the Fund may engage are summarized below. In addition, the
Fund may use options on securities, stock index options and stock index futures
and related options for hedging purposes. See "HEDGING STRATEGIES."
Common Stock. Common stock are shares of a corporation or other entity
that represent an equity interest and entitle the holder to share in the
profits, if any, of the entity after required payments to holders of preferred
stock and debt securities.
Convertible Securities. A convertible security is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or formula. Before conversion,
convertible securities ordinarily provide a stream of income with generally
higher yields than those of common stocks of the same or similar issuers, but
lower than the yields on non-convertible debt. Convertible securities are
usually subordinated to comparable non-convertible securities, but rank senior
to common stock in a corporation's capital structure.
Warrants and Rights. Among the Equity Securities the Fund may purchase are
warrants and rights to purchase securities. Warrants and rights are derivative
instruments that permit, but do not obligate, the holder to purchase securities
at a specified price during a specified time period. Neither warrants nor
rights carry with them the right to dividends or voting rights with respect to
the securities
7
<PAGE>
that they entitle the holder to purchase, and they do not represent any rights
in the assets of the issuer. They involve the risk that they will decline in
value if the price of the related securities declines. If the price of the
related security does not increase to a price higher than the price at which the
warrants or rights may be exercised, the warrant or right may become worthless.
As a result, warrants and rights are more speculative than certain other types
of equity investments. In addition, the value of a warrant or right does not
necessarily change with the value of the underlying securities, and a warrant or
right ceases to have value if it is not exercised prior to its expiration date.
Preferred Stock. Preferred stocks generally pay dividends at specified
rates and have a preference over common stock in the payment of dividends and
the liquidation of an issuer's assets. However, preferred stock is junior to
the debt securities of the issuer in those same respects. Unlike interest
payments on debt securities, dividends on preferred stock are generally payable
at the discretion of the issuer's board of directors. The market prices of
preferred stocks will fluctuate based, in part, on changes in interest rates and
are more sensitive to changes in the issuer's creditworthiness than are the
prices of debt securities. Preferred stock may decline in value if dividends
are not paid.
Debt Securities. The Fund's investments in debt securities may include
bonds, notes, bills, debentures, bank obligations, loan participations, and
other similar instruments. These securities include U.S. Government securities,
which are debt obligations that are issued or guaranteed by the U.S. Government
or by one of its agencies or instrumentalities, and debt obligations issued by
corporations, banks or other business entities. There are no restrictions on
the maximum maturity and duration of debt securities purchased by the Fund. The
interest rates payable on debt securities may be fixed, floating or variable or
may be zero coupon debt securities.
Non-Investment Grade Debt Securities. The Fund may invest up to 10% of the
value of its total assets in non-convertible, non-investment grade debt
securities. Convertible debt securities purchased by the Fund are not subject
to this limitation because they are purchased based upon their potential for
capital growth. Non-investment grade debt securities (typically called "junk
bonds") are securities that have received a rating from a nationally recognized
statistical rating organization ("NRSRO") of below investment grade or have been
given no rating, and are considered by the NRSRO to be predominantly speculative
with respect to the issuer's capacity to pay interest and repay principal. Non-
investment grade debt securities in the lowest rating categories may involve a
substantial risk of default or may be in default. Changes in economic
conditions or developments regarding the individual issuer are more likely to
cause price volatility and weaken the capacity of the issuers of non-investment
grade debt securities to make principal and interest payments than is the case
for higher grade debt securities. An economic downturn affecting an issuer of
non-investment grade debt securities may result in an increased incidence of
default. In addition, the market for lower grade debt securities may be thinner
and less active than for higher grade debt securities. A debt security will not
be considered non-investment grade for purposes of the percentage limitation set
forth above if it has received an investment grade rating from one or more
NRSRO's, notwithstanding the fact that a lower rating has been given by any
other NRSRO.
Short-Term Investments. The Fund may invest in money market instruments,
which are high quality short-term debt obligations. Money market instruments
generally have remaining maturities of one year or less. Among the types of
money market instruments that may be purchased by the Fund are: short-term U.S.
government securities, certificates of deposit, bankers' acceptances, commercial
paper, short-term corporate obligations and repurchase agreements.
Repurchase Agreements. The Fund may enter into repurchase agreements with
respect to any of the types of debt securities in which it is authorized to
invest. Repurchase agreements will be effected
8
<PAGE>
only with banks, savings institutions and broker-dealers. These agreements
involve the purchase by the Fund of a debt security with the condition that
after a stated period of time, the original seller will buy back the same
security at a predetermined price or yield. Repurchase agreements are used to
enhance liquidity and to earn income for periods as short as overnight. In the
event the original seller defaults on its obligation to repurchase the
securities, as a result of its bankruptcy or otherwise, the Fund will seek to
sell the securities. Such action could involve costs or delays, and the Fund's
ability to dispose of the securities may be restricted. To minimize risk, the
securities underlying each repurchase agreement will be maintained with the
Fund's custodian, or a subcustodian, in an amount at least equal to the
repurchase price under the agreement (including accrued interest thereunder),
and such agreements will only be effected with parties that meet certain
creditworthiness standards. However, in the event the other party to a
repurchase agreement fails to repurchase the securities subject to the
agreement, the Fund could suffer a loss to the extent it is precluded from
selling the securities or, if due to delays, proceeds from the sale are less
than the repurchase price.
Restricted Securities. The Fund may invest up to 10% of its net assets in
securities subject to restrictions on disposition under the Securities Act of
1933, as amended ("restricted securities"). Such investments, however, will be
limited to certain restricted securities that may be sold to institutional
investors pursuant to Rule 144A. In some cases, these securities may be
difficult to value to the extent that they are not publicly traded, and may be
difficult to sell promptly at favorable prices. The Fund's policies are intended
to enable it to invest a limited portion of its assets in investments that are
subject to restrictions on disposition, but which nevertheless are considered to
be attractive by the Investment Adviser. Except as described above, the Fund
does not purchase illiquid securities, including repurchase agreements maturing
in more than seven days.
Foreign Securities. The Fund may invest up to 20% of its total assets in
securities of foreign issuers, including depository receipts, such as American
Depository Receipts ("ADRs"), which represent ownership of specific foreign
securities. Investments in foreign securities involve certain risks. There may
be more limited publicly available information regarding foreign securities than
would be the case with respect to the securities of U.S. issuers, and different
accounting standards may be used by foreign issuers. Foreign securities markets
in which securities purchased by the Fund may trade are in some cases not as
liquid as U.S. markets. Foreign securities also entail certain additional risks
such as the risks of changes in the value of foreign currency relative to the
U.S. dollar, possible imposition of withholding or confiscatory taxes, possible
currency transfer restrictions, expropriation or other adverse political or
economic developments, and the difficulty of enforcing obligations in foreign
jurisdictions. The purchase of securities denominated in foreign currencies
will subject the value of the Fund's investments in those securities to
fluctuations due to changes in foreign exchange rates. Due to these factors,
the prices of securities of foreign issuers may be more volatile than those of
comparable domestic issuers.
To hedge against the effects of changes in foreign exchange rates, the Fund
may enter into forward foreign currency exchange contracts ("forward
contracts"). These contracts represent agreements to exchange an amount of
currency at an agreed upon future time and rate. The Fund will generally use
forward contracts only to "lock in" the price in U.S. dollars of a foreign
security intended to be purchased or sold, but in certain limited cases may use
such contracts to hedge against an anticipated substantial decline in the price
of a foreign currency against the U.S. dollar. Forward contracts will not be
used in all cases and, in any event, cannot protect the Fund against declines in
the prices of the securities; nor do they completely protect against all changes
in the values of foreign securities due to fluctuations in foreign exchange
rates. If anticipated currency movements are not accurately predicted, the Fund
will sustain losses on these contracts.
9
<PAGE>
Lending Securities. In order to earn income, the Fund may lend its
portfolio securities to brokers, dealers and other financial institutions,
provided that such loans are callable at any time by the Fund and are at all
times secured by collateral, consisting of cash or U.S. Government securities,
or any combination thereof, equal to not less than 100% of the market value,
determined daily, of the securities loaned. Any cash collateral will be invested
by the Fund in short-term investments. Lending securities involves certain
risks, the most significant of which is the risk that a borrower may fail to
return a portfolio security. The Fund's Board of Trustees has adopted policies
designed to minimize such risks. The Fund may lend securities in an amount not
exceeding one-third of the value of its total assets, measured at the time any
such loan is made. Securities lending involves a form of leverage, and the Fund
may incur a loss if securities purchased with the collateral from securities
loans decline in value or if the income earned does not cover the Fund's
transaction costs.
When-Issued Securities. In order to help ensure the availability of
suitable securities for investment, the Fund may purchase securities on a "when-
issued" or on a "forward delivery" basis. Securities purchased in this manner
will be delivered to the Fund at a future date beyond the customary settlement
time. It is expected that, in normal circumstances, the Fund will take delivery
of such securities. In general, the Fund does not pay for the securities or
become entitled to dividends or interest until the purchase of the securities is
settled. There are no percentage of asset limitations on this practice.
However, while awaiting delivery of any securities purchased on such a basis,
the Fund will establish a segregated account consisting of cash or liquid
securities equal to the amount of its commitments to purchase securities on a
"when-issued" basis.
PORTFOLIO TURNOVER
There are no fixed limitations regarding portfolio turnover. However, it
is estimated that the Fund's annual portfolio turnover rate will not exceed
100%. Although the Fund generally does not engage in short-term trading,
securities may be sold without regard to the time they have been held when
investment considerations warrant such action. As a result, under certain
market conditions, the portfolio turnover rate of the Fund may be higher.
Brokerage costs will be commensurate with the rate of the Fund's trading
activity so that a higher turnover rate will result in higher brokerage costs.
INVESTMENT CHARACTERISTICS
The investment performance of the Fund will vary over time based upon
changes in the values of its investments and the dividends and interest received
on those investments. The value of the Fund's investments will be affected by a
variety of factors, including the perceived financial condition and earnings of
issuers; market and industry trends; economic, social and political
developments; and changes in interest rates. The net asset value per share of
the Fund can be expected to fluctuate daily.
INVESTMENT RESTRICTIONS
The Fund has adopted certain investment policies and restrictions which are
described in this Prospectus and in the Statement of Additional Information.
Except as otherwise noted, these policies and restrictions are not fundamental
and may be changed by the Board of Trustees of the Trust. However, the Fund's
investment objective may not be changed without the vote of the holders of a
majority of the Fund's outstanding shares (a "Majority Shareholder Vote"), which
means the affirmative vote of the lesser of: (1) more than 50% of the
outstanding shares of the Fund (including shares of all classes); or (2) 67% or
more of the shares present at a meeting of shareholders if more than 50% of the
Fund's outstanding shares (including shares of all classes) are represented at
the meeting in person or by
10
<PAGE>
proxy. Each Separate Account owning shares will vote its shares in accordance
with instructions received from Contract Owners or Policy Owners, annuitants and
beneficiaries. See "SHAREHOLDER COMMUNICATIONS". The following investment
restrictions, and certain additional investment restrictions set forth in the
Statement of Additional Information, are fundamental and may not be changed
without a Majority Shareholder Vote. Under these restrictions, the Fund may
not:
1. Purchase a security, other than U.S. Government securities, if as a
result of such purchase more than 5% of the value of the Fund's total assets
would be invested in the securities of any one issuer, or the Fund would own
more than 10% of the voting securities, or of any class of securities, of any
one issuer. For purposes of this restriction, all outstanding indebtedness of
an issuer is deemed to be a single class.
2. Purchase a security, other than U.S. Government securities, if as a
result of such purchase 25% or more of the value of the Fund's total assets
would be invested in the securities of issuers in any one industry.
HEDGING STRATEGIES
The Fund may purchase and sell (or write) options on individual stocks,
baskets of stocks, and stock indices, and may purchase and sell stock index
futures and related options, but only for hedging purposes. Use of these
techniques involves certain risks. See "Risks of Futures and Options." The Fund
engages in these transactions in order to protect against declines in the value
of securities it holds or increases in the costs of securities to be acquired.
More detailed descriptions of the Fund's use of options and futures are
contained in the Statement of Additional Information.
FUTURES AND OPTIONS TRANSACTIONS
The Fund may use futures contracts and related options for the purpose of
seeking to reduce the overall investment risk that would otherwise be associated
with the securities in which it invests. For example, the Fund may sell a stock
index futures contract in anticipation of a general market or market sector
decline that might adversely affect prices of the Fund's portfolio securities.
To the extent that there is a correlation between the Fund's portfolio and a
particular stock index, the sale of futures contracts on that index could reduce
general market risk and permit the Fund to retain its securities positions.
The Fund may purchase call options on individual stocks and baskets of
stocks, or purchase stock index futures contracts (and call options on such
contracts) to hedge against a market advance that might increase the prices of
securities that the Fund is planning to acquire. Alternatively, the Fund may
purchase put options on individual stocks and baskets of stocks, or sell stock
index futures contracts (or purchase puts on such contracts) to provide
protection against a decline in the price of a security below a specified level
or a sector or general market decline. The Fund may purchase and write options
in combination with each other to adjust the risk and return of its overall
investment positions. For example, the Fund may purchase a put option and write
a call option on the same underlying instrument, in order to synthesize a
position similar to that which would be achieved by selling a futures contract.
By purchasing a put option on an individual stock, the Fund could hedge the
risk of a devaluation of that individual stock. The value of the put option
would be expected to rise as a result of a market decline and thus could offset
all or a portion of losses resulting from declines in the prices of individual
securities held by the Fund. However, option premiums tend to decrease over time
as the expiration date nears. Therefore, because of the cost of the option (in
the form of premium and
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<PAGE>
transaction costs), the Fund would suffer a loss in the put option if prices do
not decline sufficiently to offset the deterioration in the value of the option
premium.
By purchasing a call option on a stock index, the Fund would attempt to
participate in potential price increases of the underlying index, with results
similar to those obtainable from purchasing a futures contract, but with risk
limited to the cost of the option if stock prices fell. At the same time, the
Fund would suffer a loss if stock prices do not rise sufficiently to offset the
cost of the option.
The Fund may engage in the writing (selling) of covered call options with
respect to the securities in the Fund's portfolio to supplement the Fund's
income and enhance total returns. The Fund may write (sell) listed or over-the-
counter call options on individual securities held by the Fund, on baskets of
such securities or on the Fund's portfolio as a whole. The Fund will write only
covered call options, that is, the Fund will write call options only when it
has in its portfolio (or has the right to acquire at no cost) the securities
subject to the option. A written option may also be considered to be covered if
the Fund owns an option that entirely or partially offsets its obligations under
the written option. Index options will be considered covered if the pattern of
price fluctuations of the Fund's portfolio or a portion thereof substantially
replicates the pattern of price fluctuations in the index underlying the option.
A call option written by the Fund obligates the Fund to sell specified
securities to the holder of the option at a predetermined price if the option is
exercised on or before its expiration date. An index call option written by the
Fund obligates the Fund to make a cash payment to the holder of the option if
the option is exercised and the value of the index has risen above a
predetermined level on or before the expiration date of the option. The Fund may
terminate its obligations under a call option by purchasing an option identical
to the one written. Writing covered call options provides the Fund with
opportunities to increase the returns earned from portfolio securities through
the receipt of premiums paid by the purchasers of the options. Writing covered
call options may reduce the Fund's returns if the value of the underlying
security or index increases and the option position is exercised or closed out
by the Fund at a loss.
RISKS OF FUTURES AND OPTIONS
The purchase and sale of options, and futures contracts and related
options, involve risks different from those involved with direct investments in
securities, and also require different skills from the Investment Adviser in
managing the Fund's portfolio of investments. While utilization of options,
futures contracts and similar instruments may be advantageous to the Fund, if
the Investment Adviser is not successful in employing such instruments in
managing the Fund's investments or in predicting market changes, the Fund's
performance will be worse than if the Fund did not make such investments. It is
possible that there will be imperfect correlation, or even no correlation,
between price movements of the investments being hedged and the options or
futures used. It is also possible that the Fund may be unable to purchase or
sell a portfolio security at a time that otherwise would be favorable for it to
do so, or that the Fund may need to sell a portfolio security at a
disadvantageous time, due to the need for the Fund to maintain "cover" or to
segregate securities in connection with hedging transactions or that the Fund
may be unable to close out or liquidate its hedged position. In addition, the
Fund will pay commissions and other costs in connection with such investments,
which may increase the Fund's expenses and reduce its yield. A more complete
discussion of the possible risks involved in transactions in options and futures
contracts is contained in the Statement of Additional Information. The Fund's
current policy is to limit options and futures transaction to those described
above. The Fund may purchase and write both over-the-counter and exchange traded
options.
12
<PAGE>
The Fund will not enter into any futures contracts or related options if
the sum of the initial margin deposits on futures contracts and premiums paid
for unexpired options on such contracts, other than for bona fide hedging
purposes as defined by the Commodity Futures Trading Commission, would exceed 5%
of the liquidation value of the Fund's assets, after taking into account
unrealized profits and losses on such contracts and options. The in-the-money
amount of an option on a futures contract may be excluded in calculating this 5%
limitation. The Fund may invest up to 5% of the value of its total assets,
represented by the premiums paid, for the purchase of options on securities and
stock index options. The Fund may not write options on securities or stock
indices with aggregate exercise prices in excess of 30% of the value of the
Fund's assets measured at the time an option is written.
MANAGEMENT
The business and affairs of the Fund are managed under the general
direction and supervision of the Board of Trustees of the Trust. Responsibility
for management of the Fund's investments has been delegated by the Board of
Trustees to the Investment Adviser. Other matters relating to the Fund's day-to-
day operations are handled by the Trust's officers, each of whom is an officer
or employee of the Investment Adviser.
INVESTMENT ADVISER
The Investment Adviser, John A. Levin & Co., Inc., provides investment
advisory services to the Fund pursuant to an Investment Advisory Agreement with
the Fund (the "Advisory Agreement"). Subject to such policies as the Board of
Trustees may determine, the Investment Adviser makes all investment decisions
for the Fund and places all orders for the purchase and sale of investments by
the Fund. The Investment Adviser also provides administrative services required
by the Trust and the Fund, except for certain accounting related services that
are furnished by an affiliate of the Investment Adviser. Administrative services
may be furnished through the Investment Adviser's affiliates. The Investment
Adviser furnishes, without expense to the Fund, the services of its personnel to
serve as officers and Trustees of the Trust. In consideration of the services
provided by the Investment Adviser, the Fund pays the Investment Adviser a
monthly fee computed at the annual rate of 0.85% of the Fund's average daily net
assets.
Together with its predecessor, the Investment Adviser has provided
investment advisory services to clients since 1982. The Investment Adviser is
an indirect wholly-owned subsidiary of Baker, Fentress & Company ("Baker
Fentress"), a closed-end investment company listed on the New York Stock
Exchange (the "NYSE"). Clients of the Investment Adviser include U.S. and
foreign individuals, trusts, non-profit organizations, registered investment
funds, investment partnerships, endowments, and pension and profit-sharing
funds. The Investment Adviser currently manages approximately $7 billion in
assets for its clients.
The following persons serve as the portfolio managers of the Fund:
John A. Levin: President of the Investment Adviser (and its
predecessor) since 1982; Director, President and Chief Executive
Officer of Baker Fentress since June, 1996.
Melody L. Prenner Sarnell: Executive Vice President of the
Investment Adviser; securities analyst and portfolio manager of the
Investment Adviser (and its predecessor) since 1984; Director of Baker
Fentress since June, 1996.
13
<PAGE>
Jeffrey A. Kigner: Executive Vice President of the Investment Adviser;
securities analyst and portfolio manager of the Investment Adviser
(and its predecessor) since 1984; Director of Baker Fentress since
June, 1996.
TRANSFER AGENT AND ACCOUNTING SERVICES
The Trust has retained Countrywide Fund Services, Inc. (the "Transfer
Agent"), P.O. Box 5354, Cincinnati, Ohio 45201, to serve as the Fund's transfer
agent and dividend paying agent. The Transfer Agent is an indirect, wholly-owned
subsidiary of Countrywide Credit Industries, Inc., a NYSE listed company
principally engaged in the business of residential mortgage lending.
The Fund also pays Baker Fentress a monthly fee for providing accounting
services to the Trust, assisting in supervising various other services and
providing other specific services to the Fund including, but not limited to:
internal fund accounting and auditing services, valuing the Trust's assets and
calculating the net asset value of the shares of the Fund, assisting in the
preparation and filing of the Trust's tax returns, accumulating information for
the Trust's financial statements and preparing reports to the shareholders. This
fee is currently equal to $2,000, but will increase when the Fund's average
monthly net assets exceed $50 million. See "ADDITIONAL INFORMATION - Transfer
Agent and Accounting Services" in the Statement of Additional Information.
FUND EXPENSES
The Fund pays all of its expenses other than those expressly assumed by the
Investment Adviser or the Distributor. Expenses of the Fund are deducted from
the Fund's total income before dividends are paid. The Fund's expenses include,
but are not limited to: fees paid to the Investment Adviser; fees paid to Baker
Fentress for providing accounting services; payments to the Distributor pursuant
to the Distribution Plan adopted by the Trust; fees of the Fund's independent
auditors and custodian and certain related expenses; taxes; organization costs;
interest, costs incident to meetings of the Board of Trustees of the Trust and
meetings of the Fund's shareholders; costs of printing and mailing prospectuses
and reports to shareholders and the filing of reports with regulatory bodies;
legal fees and disbursements; fees payable to federal and state regulatory
authorities; fees and expenses of Trustees who are not affiliated with the
Investment Adviser or the Distributor; and any extraordinary expenses. Brokerage
fees and expenses are also borne by the Fund and are included in the purchase
and sales price of a security.
ABOUT YOUR INVESTMENT
PURCHASE OF SHARES
Shares are offered for sale on a continuous basis directly by the
Distributor, to the Separate Accounts at net asset value per share on each day
on which the NYSE is open for business, without any sales charge. Net asset
value per share is calculated once daily at 4:15 p.m., New York time, Monday
through Friday, each day the NYSE is open. Net asset value per share is computed
by subtracting the Fund's liabilities (including accrued expenses and dividends
payable) from the value of the Fund's investments and other assets and dividing
the result by the total number of shares of the Fund outstanding. The
determination of net asset value is made separately for each class of shares of
the Fund.
The Fund effects orders to purchase or redeem Shares, that are based on
premium payments, surrender and transfer requests and any other transaction
requests from Contract Owners and Policy Owners, annuitants and beneficiaries at
the net asset value per share next computed after the Separate Account receives
such transaction request. Any orders to purchase or redeem Shares that are not
based on actions by Contract Owners or Policy Owners, annuitants, and
beneficiaries will be effected at the net
14
<PAGE>
asset value per share next computed after the order is received by the
Distributor. The Fund reserves the right to suspend the sale of Shares in
response to conditions in the securities markets or for other reasons.
Individuals may not place orders to purchase Shares directly. Please refer
to the prospectus for the Separate Account of the Participating Company for more
information on the purchase of Shares.
REDEMPTION OF SHARES
A Separate Account may redeem all or any portion of the Shares that it
holds at any time at the next computed net asset value per share, as described
above. Shares that are redeemed are entitled to any dividends that have been
declared as payable to record owners up to and including the day the redemption
is effected. There is no redemption charge. Payment of the redemption price
will normally be made within seven days after receipt of such tender for
redemption.
The right of redemption may be suspended and the date of payment of the
redemption price may be postponed for any period during which the NYSE is closed
(other than customary weekend and holiday closings) or during which the SEC
determines that trading thereon is restricted, or for any period during which an
emergency (as determined by the SEC) exists as a result of which disposal by the
Fund of securities is not reasonably practicable or as a result of which it is
not reasonably practicable for the Fund fairly to determine the value of its net
assets, or for such other periods as the SEC may by order permit for the
protection of shareholders.
DISTRIBUTION PLAN
Under a distribution plan adopted by the Trust in accordance with Rule
12b-1 under the 1940 Act (the "Distribution Plan"), the Fund is authorized to
reimburse the Distributor for: payments made by the Distributor to other
securities dealers, Participating Companies and financial institutions which
engage in efforts to promote the sale of the Shares and which sell such Shares
or to reimburse such organizations for distribution related or shareholder
services related expenses they incur in selling Shares or providing Fund related
services to their customers; and such other activities related to the promotion
of sales of the Shares as may from time to time be specifically authorized by
the Board of Trustees, including a majority of the Trustees who are not
"interested persons" (as defined by the 1940 Act) of the Trust and who have no
direct or indirect financial interest in the operation of the Distribution Plan
or any other agreement in respect of the Distribution Plan. Under the Plan, the
Trust is authorized to expend an amount annually which shall not exceed 0.25%
annually of the average daily net assets of Shares and such expenditures shall
be allocated solely to the holders of Shares and not to the holders of any other
class.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
The Fund declares and distributes dividends from net investment income
quarterly and will distribute its net capital gains, if any, at least annually.
Payment of all dividends and capital gains distributions will be made in Shares.
TAX MATTERS
The following discussion is a summary of the federal tax treatment of the
Fund and some of the tax consequences to the Separate Accounts of investing in
the Fund. It does not address the tax treatment of the Contract Owners or Policy
Owners. Contract Owners and Policy Owners should consult the prospectuses of the
Separate Accounts for information concerning the Federal income tax consequences
of owning Contracts or Policies, and should consult their own tax advisors
concerning federal and state tax consequences of such investments.
The Fund intends to qualify each year as a regulated investment company (a
"RIC") by satisfying the requirements of Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"), concerning the diversification of the
Fund's assets, distribution of its income, and sources of its income. If so
qualified, the Fund will not be subject to Federal income tax to the extent that
it distributes its net income to shareholders as required by the Code. If for
any taxable year the Fund does not qualify as a RIC, then all of its taxable
income will be subject to federal corporate income tax.
Federal income tax would be imposed on the Fund if it failed to make
certain distributions of its income to shareholders. The Fund intends to
15
<PAGE>
make distributions in a manner which will avoid the imposition of such tax.
In addition, a 4% excise tax would be imposed upon the Fund if, in a particular
calendar year, the Fund failed to distribute substantially all of its ordinary
income and net capital gains for a twelve-month period, generally ending on
October 31st. This excise tax will not apply to the Fund if at all times during
the calendar year each shareholder in the Fund was a "segregated asset account"
(as defined in the Code) or a qualified plan. The Fund has been informed that
the Participating Companies intend to qualify the Separate Accounts as
segregated assets accounts.
Section 817(h) of the Code requires that investments of a segregated
asset account of an insurance company be "adequately diversified", in
accordance with Treasury Regulations promulgated thereunder, in order for the
holders of variable annuity contracts or variable life insurance policies
investing in the account to receive the tax-deferred or tax-free treatment
generally afforded holders of annuities or life insurance policies under the
Code. The Department of the Treasury has issued Regulations under section
817(h) which, among other things, provide the manner in which a segregated asset
account will treat investments in a RIC for purposes of the applicable
diversification requirements. Under the Regulations, if a RIC satisfies certain
conditions, that RIC will not be treated as a single investment for these
purposes, but rather the segregated asset account will be treated as owning its
proportionate share of each of the assets of the RIC. The Fund plans to satisfy
these conditions at all times.
Distributions by the Fund will be taxable, if at all, to the Separate
Accounts, and not to Contract or Policy Owners. A Separate Account will include
distributions in its taxable income in the year in which they are received
(notwithstanding the fact that they are reinvested). Distributions by the Fund
of income and the excess of net short-term capital gain over net long-term
capital loss will be treated as ordinary income, and distributions by the Fund
at net long-term capital gain over net short-term capital loss will be treated
as long-term capital gain. Redemptions of Shares generally will result in
recognition of capital gain or loss, if any, for federal income tax purposes.
Contract Owners and Policy Owners should consult the prospectuses of the
Separate Accounts for information concerning the Federal income tax treatment of
Separate Accounts that own shares.
The foregoing discussion of Federal income tax consequences is based on tax
laws and regulations as in effect on the date of this Prospectus, and is subject
to change by legislative or administrative action.
SHAREHOLDER COMMUNICATIONS
It is expected that Contract Owners and Policy Owners who have given
instructions for Separate Accounts to invest in Shares will receive from the
Participating Companies reports that will include, among other things, the
Fund's unaudited semi-annual financial statements and year-end financial
statements audited by the Trust's independent auditors. Each report will show
the investments owned by the Fund and will provide other information about the
Fund and its operations. The Fund may pay a portion of the cost of preparing
certain of those reports. Contract Owners and Policy Owners may obtain
information about the performance of the Fund on any business day by calling
toll-free 1-800-[xxx-xxxx] between 8:15 a.m. and 6:00 p.m., New York time.
Each Separate Account owning Shares will vote its shares in accordance with
instructions received from Contract Owners or Policy Owners, annuitants and
beneficiaries. Shares held by a Separate Account as to which no instructions
have been received will be voted for or against any matter, or in abstention, in
the same proportion as the Shares held by that Account as to which instructions
have been received. Shares held by a Separate Account that are not attributable
to Contracts or Policies will also be voted for or against any proposition in
the same proportion as the Shares for which voting instructions are received by
the Separate Account. If a Participating Company determines, however, that it is
permitted to vote any such Shares in its own right, it may elect to do so,
subject to the then current interpretations of the 1940 Act and the rules
thereunder.
16
<PAGE>
PERFORMANCE INFORMATION
From time to time the Fund may advertise or report certain information
about its investment performance. The Fund may present standardized and
nonstandardized total return in advertisements or other material. Standardized
total return is calculated in accordance with a formula prescribed by the SEC.
Under this method, total return is calculated by determining the difference
between the net asset value of all Shares held at the end of the period for
which a quotation is being given and the net asset value per share for each
Share held at the beginning of the period (assuming reinvestment of dividends
and other distributions), and then dividing that difference by the per Share net
asset value at the beginning of the period. (The calculations implicitly reflect
the compounding of dividends and other distributions by assuming reinvestment.)
The average annual compounded rate of return is the yearly rate of return that,
when applied evenly to each annual period and compounded, would produce the
total return for the period quoted. Nonstandardized total return differs from
standardized total return in that it may be related to a nonstandard period or
presented as an aggregate rate of return, rather than as an annual average.
Quotations of total return do not reflect charges imposed at the Separate
Account level.
The performance of the Fund may be compared to the performance of other
mutual funds with similar investment objectives and to other relevant indices or
to rankings prepared by independent services or other financial or industry
publications that monitor the performance of mutual funds. For example,
performance information may be compared with data published by Lipper Analytical
Services, Inc. or to unmanaged indices of stock market performance. The
performance information may also include evaluations of the Fund published by
nationally recognized ranking services and by various national or local
financial publications, such as Business Week, Forbes, Fortune, Institutional
Investor, Money, The Wall Street Journal, Barron's, Changing Times, Morningstar,
Mutual Fund Values, U.S.A. Today, The New York Times, or other industry or
financial publications.
Quotations of performance are historical, and should not be considered as
indicative of future results.
ADDITIONAL INFORMATION
Description of Shares. The Trust is a Delaware business trust organized
pursuant to a Certificate of Trust dated January 2, 1997. It is authorized to
issue an unlimited number of shares of beneficial interest, $.001 par value,
and to issue one or more series of such shares, each representing interests in a
separate investment portfolio. As of the date of this Prospectus, the Trust has
established only one series of its shares, representing interests in the Fund.
The Board of Trustees has the power to establish additional series of shares
representing interests in other investment portfolios and, subject to the 1940
Act and other applicable laws and regulations, to issue two or more classes of
shares of each series. Shares are fully paid and non-assessable, and have no
preemptive or conversion rights.
Shares being offered pursuant to this Prospectus are Class B shares of the
Fund. Class A shares of the Fund are offered pursuant to a separate prospectus.
The Class A and Class B shares each represent interests in the Fund, but differ
in that the Class B shares, unlike Class A shares, bear certain expenses
associated with the different investor services and distribution arrangement
that has been implemented for that class. See "DISTRIBUTION PLAN".
Shareholders of the Fund, together with shareholders of any other series of
the Trust that may in the future be organized, are entitled to vote on the
election of Trustees and the ratification of the Trust's independent auditors
when those matters are voted upon at a meeting of shareholders. On other
17
<PAGE>
matters affecting the Fund on which shareholders of the Fund are entitled to
vote, shares of the Fund and any other series would generally be voted as a
separate class. Although shares of each class of the Fund will generally vote
together on matters affecting the Fund and the Trust, each class has exclusive
voting rights on matters which relate solely to its distribution or investor
services arrangements and will vote separately on any matter as to which the
interests of shareholders of the classes differ. Each Share (and fractional
Share) is entitled to that number of votes which equals the net asset value of
such Share (or fraction thereof). All shares of the Trust have non-cumulative
voting rights, meaning that shareholders entitled to cast more than 50% of the
votes for the election of Trustees can elect all of the Trustees standing for
election if they choose to do so.
Under Delaware law, shareholders of the Fund could, under certain
circumstances, be held personally liable for the obligations of the Trust but
only to the extent of the shareholder's investment. However, the Declaration of
Trust disclaims liability of the shareholders, trustees or officers of the Trust
for acts or obligations of the Trust, which are binding only on the assets and
property of the Trust and requires that notice of the disclaimer be given in
each contract or obligation entered into or executed by the Trust or the
Trustees. The risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the Trust itself
would be unable to meet its obligations and should be considered remote.
Annual meetings of shareholders will not be held except as required by the
1940 Act or other applicable law. A meeting will be held on the removal of a
trustee or trustees of the Trust if requested in writing by holders of not less
than 10% of the outstanding shares of the Trust.
Custodian. UMB Bank, n.a., P.O. Box 419226, Kansas City, Missouri
64141-6226, serves as custodian of the assets of the Fund. The custodian
maintains custody of all securities and other assets of the Fund, and is
authorized to hold the Fund's investments in securities depositories and to use
sub-custodians which have been approved by the Trust.
Distributor. The Distributor, LEVCO Securities, Inc., One Rockefeller
Plaza, New York, New York 10020, serves as the distributor of Shares. The
Distributor is a wholly-owned subsidiary of the Investment Adviser.
Independent Auditors. Ernst & Young LLP, Sears Tower, 233 South Wacker
Drive, Chicago, Illinois 60606-6301, serves as the independent auditors of
the Fund. Financial Statements of the Fund appearing in the Fund's annual
report will be audited by Ernst & Young LLP.
Counsel. Schulte Roth & Zabel LLP, 900 Third Avenue, New York, New York
10022, serves as counsel to the Fund, and also serves as counsel to the
Investment Adviser and its affiliates on certain matters.
Control Persons. As of the date of this Prospectus, all of the outstanding
shares of the Fund were owned by Mr. Norris Nissim, an interested person of the
Fund. This control relationship will continue to exist until such time as the
above-described share ownership represents 25% or less of the outstanding shares
of the Fund. Through the exercise of voting rights with respect to the shares,
the controlling person set forth above may be able to determine the outcome of
shareholder voting on matters as to which shareholder approval is required.
Additional Information. This Prospectus, including the Statement of
Additional Information which has been incorporated herein by reference, does not
contain all the information set forth in the Registration Statement filed by the
Trust with the SEC. Copies of the Registration Statement may be obtained at a
reasonable charge from the SEC or may be examined, without charge, at the office
of the SEC in Washington, D.C.
18
<PAGE>
- --------------------------------------------------------------------------------
LEVCO EQUITY VALUE FUND
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
John A. Levin & Co., Inc.
One Rockefeller Center, 25th Floor
New York, New York 10020
DISTRIBUTOR
LEVCO Securities, Inc.
One Rockefeller Center, 25th Floor
New York, New York 10020
CUSTODIAN
UMB Bank, n.a.
P.O. Box 419226
Kansas City, Missouri 64141-6226
TRANSFER AGENT
Countrywide Financial Services, Inc.
312 Walnut Street
Cincinnati, Ohio 45202
INDEPENDENT AUDITORS
Ernst & Young LLP
Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606-6301
LEGAL COUNSEL
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
SHAREHOLDER INQUIRIES
1 (800) [ ]
- --------------------------------------------------------------------------------
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS OR IN APPROVED SALES LITERATURE IN CONNECTION WITH THE OFFER
CONTAINED HEREIN, AND IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST
OR THE DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER BY THE TRUST OR
BY THE DISTRIBUTOR TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER.
- --------------------------------------------------------------------------------
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION--SUBJECT TO COMPLETION - MAY 20, 1997
- --------------------------------------------------------------------------------
Statement of Additional Information dated [__________ __], 1997
LEVCO EQUITY VALUE FUND
(a series of LEVCO Series Trust)
One Rockefeller Plaza
25th Floor
New York, New York 10020
- --------------------------------------------------------------------------------
LEVCO Equity Value Fund (the "Fund") is a series of LEVCO Series Trust (the
"Trust"), an open-end, diversified, management investment company (commonly
known as a mutual fund). The investment objective of the Fund is to achieve
long-term growth of capital through an emphasis on the preservation of capital
and an attempt to control volatility as measured against the Standard & Poor's
Composite 500 Stock Index (the "S&P 500"). The Fund pursues this objective by
investing its assets primarily in common stocks and other securities having
equity characteristics, which, in the opinion of the Fund's investment adviser,
are currently undervalued in relation to their intrinsic value. In pursuing its
objective, the Fund may utilize a variety of investment techniques. See
"INVESTMENT OBJECTIVE AND POLICIES." Options on securities, stock index options
and stock index futures and related options may be used by the Fund for hedging
purposes and involve certain risks.
John A. Levin & Co., Inc. (the "Investment Adviser") serves as the
investment adviser of the Fund.
Shares of the Fund, consisting of Class A and Class B shares ("Shares"),
are distributed by LEVCO Securities, Inc. (the "Distributor"). Shares are sold
only to certain life insurance companies ("Participating Companies") and their
separate accounts ("Separate Accounts") to fund benefits under variable annuity
contracts ("Contracts") and variable life insurance policies ("Policies")
offered by Participating Companies. The Separate Accounts invest in Shares in
accordance with allocation instructions received from Contract and Policy owners
("Contract Owners" and "Policy Owners"). These allocation rights are described
in the prospectus for the Separate Account. Shares are redeemed to the extent
necessary to provide benefits under the Contracts and Policies.
-------------------------------------------------------------------
Information about the Fund is set forth in the Prospectus for Class A
shares of the Fund and the Prospectus for Class B Shares of the Fund, each dated
___________________, 1997, which provide the basic information you should know
before investing and may be obtained without charge from the Transfer Agent by
calling: 1 (800) XXX-XXXX. This Statement of Additional Information is not a
Prospectus. It contains information in addition to and more detailed than that
set forth in the Prospectus and is intended to provide you with additional
information regarding the activities and operations of the Fund. This Statement
of Additional Information should be read in conjunction with the applicable
Prospectus.
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
INVESTMENT OBJECTIVE AND POLICIES................................ B-3
INVESTMENT RESTRICTIONS.......................................... B-8
PORTFOLIO TRANSACTIONS AND BROKERAGE............................. B-10
DETERMINATION OF NET ASSET VALUE................................. B-11
TAXES............................................................ B-12
PURCHASES AND REDEMPTIONS OF SHARES.............................. B-13
TRUSTEES AND OFFICERS............................................ B-13
INVESTMENT ADVISORY AGREEMENT.................................... B-15
DISTRIBUTOR...................................................... B-16
DISTRIBUTION PLAN [Applicable to the Class B Shares Only]........ B-16
SPECIAL INVESTMENT TECHNIQUES.................................... B-17
PERFORMANCE INFORMATION.......................................... B-19
ADDITIONAL INFORMATION........................................... B-21
STATEMENT OF ASSETS AND LIABILITIES.............................. B-23
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
---------------------------------
The sections below describe, in greater detail than in the Fund's
Prospectuses, some of the different types of investments which may be made by
the Fund and the different investment practices in which the Fund may engage.
The use of options and futures contracts by the Fund are discussed on page B-18
under "SPECIAL INVESTMENT TECHNIQUES". The general investment policies of the
Fund are set forth in the Prospectuses.
TYPES OF EQUITY SECURITIES
- --------------------------
Equity securities purchased by the Fund may include common and preferred
and convertible preferred stocks, and securities having equity characteristics
such as rights, warrants and convertible debt securities. See "Convertible
Securities". Common stocks and preferred stocks represent equity ownership
interests in a corporation and participate in the corporation's earnings through
dividends which may be declared by the corporation. Unlike common stocks,
preferred stocks are entitled to stated dividends payable from the corporation's
earnings, which in some cases may be "cumulative" if prior stated dividends have
not been paid. Dividends payable on preferred stock have priority over
distributions to holders of common stock, and preferred stocks generally have
preferences on the distribution of assets in the event of the corporation's
liquidation. Preferred stocks may be "participating" which means that they may
be entitled to dividends in excess of the stated dividend in certain cases. The
rights of common and preferred stocks are generally subordinate to rights
associated with a corporation's debt securities. Rights and warrants are
securities which entitle the holder to purchase the securities of a company
(generally, its common stock) at a specified price during a specified time
period. Because of this feature, the values of rights and warrants are affected
by factors similar to those which determine the price of common stocks and
exhibit similar behavior. Rights and warrants may be purchased directly or may
be acquired in connection with a corporate reorganization or exchange offer. The
purchase of rights and warrants is subject to certain limitations.
CONVERTIBLE SECURITIES
- ----------------------
Securities of this type may be purchased by the Fund. They include
convertible debt obligations and convertible preferred stock. A convertible
security entitles the holder to exchange it for a fixed number of shares of
common stock (or other equity security), usually at a fixed price within a
specified period of time. Until conversion, the holder receives the interest
paid on a convertible bond or the dividend preference of a preferred stock.
Convertible securities have an "investment value" which is the theoretical
value determined by the yield they provide in comparison with similar securities
without the conversion feature. The investment value changes based upon
prevailing interest rates and other factors. They also have a "conversion value"
which is the worth in market value if the security were to be exchanged for the
underlying equity security. Conversion value fluctuates directly with the price
of the underlying security. If conversion value is substantially below
investment value, the price of the convertible security is governed principally
by its investment value. If conversion value is near or above investment value,
the price of the convertible security generally will rise above investment value
and may represent a premium over conversion value due to the combination of the
convertible security's right to interest (or dividend preference) and the
possibility of capital appreciation from the conversion feature. A convertible
security's price, when price is influenced primarily by its conversion value,
will generally yield less than a senior non-convertible security of comparable
investment value. Convertible securities
B-3
<PAGE>
may be purchased at varying price levels above their investment values or
conversion values. However, there is no assurance that any premium above
investment value or conversion value will be recovered because prices change
and, as a result, the ability to achieve capital appreciation through conversion
may never be realized.
FOREIGN SECURITIES
- ------------------
The Fund may invest up to 20% of its total assets, at the time of purchase,
in foreign securities, including the securities of certain Canadian issuers and
securities purchased by means of American Depository Receipts ("ADRs").
Investments in foreign securities will be affected by a number of factors which
ordinarily do not affect investments in domestic securities.
Foreign securities may be affected by changes in currency exchange rates,
exchange control regulations, changes in governmental administration or economic
or monetary policy (in the U.S. and abroad), political events, expropriation or
nationalization or confiscatory taxation. Dividends and interest paid on foreign
securities may be subject to foreign withholding and other foreign taxes. In
addition, there may be less publicly available information concerning foreign
issuers than domestic issuers, and foreign issuers may not be subject to uniform
accounting, auditing and financial reporting standards comparable to those of
domestic issuers. Securities of certain foreign issuers and in certain foreign
markets are less liquid and more volatile than those of domestic issuers and
markets, and foreign brokerage commissions are generally higher than in the U.S.
There is also generally less regulation and supervision of exchanges, brokers
and issuers in foreign countries.
Securities denominated in foreign currencies may be affected favorably or
unfavorably by changes in foreign currency exchange rates, and costs will be
incurred in converting one currency to another. Exchange rates are determined by
forces of supply and demand, which forces are affected by a variety of factors
including international balances of payments, economic and financial conditions,
government intervention and speculation. Foreign currency exchange transactions
of the Fund may be effected on a "spot" basis (cash basis) at the prevailing
spot rate for purchasing or selling currency. The Fund may also utilize forward
foreign currency contracts as described below.
SHORT-TERM INVESTMENTS
- ----------------------
As discussed in the Prospectuses, the Fund may invest in a variety of
short-term debt securities ("money market instruments"), including instruments
issued or guaranteed by the U.S. Government or one of its agencies or
instrumentalities ("Government Securities") and repurchase agreements for such
securities. Money market instruments are generally considered to be debt
securities having remaining maturities of approximately one year or less.
Government Securities are obligations guaranteed by the U.S. Government or
issued by its agencies or instrumentalities, including, for example, obligations
of the Export-Import Bank of the United States, the General Services
Administration, Federal Land Banks, Farmers Home Administration and Federal Home
Loan Banks. Some Government Securities, such as U.S. Treasury obligations and
obligations issued by the Export-Import Bank and the Federal Housing
Administration, are backed by the full faith and credit of the U.S. Treasury.
Others, such as those issued by Federal Home Loan Banks, are backed by the
issuer's right to borrow from the U.S. Treasury. Some, such as those issued by
the Federal National Mortgage Association and Federal Farm Credit Banks, are
backed only by the issuer's own credit, with no guarantee of U.S. Treasury
backing. Other types of money market instruments include: certificates of
deposit, bankers' acceptances, commercial paper, letters of credit, short-term
corporate obligations and other obligations discussed below.
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<PAGE>
The short-term investments of the Fund in bank obligations may include
certificates of deposit, bankers' acceptances, time deposits and letters of
credit. These investments will be limited to: (1) obligations of U.S. commercial
banks and savings institutions having total assets of $1 billion or more and
instruments secured by such obligations, including obligations of foreign
branches of U.S. banks and (2) similar obligations of foreign commercial banks
having total assets of $1 billion or more or their U.S. branches which are
denominated in U.S. dollars. Obligations of foreign banks and their U.S.
branches are subject to additional risks of the types generally associated with
investment in foreign securities. See "Foreign Securities". Similar risks may
apply to obligations of foreign branches of U.S. banks. There are currently no
reserve requirements applicable to obligations issued by foreign banks or
foreign branches of U.S. banks. Also, not all of the federal and state banking
laws and regulations applicable to domestic banks relating to maintenance of
reserves, loan limits and promotion of financial soundness apply to foreign
branches of domestic banks and none of them apply to foreign banks.
Commercial paper constituting the short-term investments of the Fund must
be rated within the two highest grades by Standard & Poor's Corporation ("S&P")
or the highest grade by Moody's Investors Service, Inc. ("Moody's") or, if not
rated, must be issued by a company having an outstanding debt issue rated at
least BBB by S&P or Baa by Moody's. Other types of short-term corporate
obligations (including loan participations and master demand notes) must be
rated at least A by S&P or Moody's to qualify as a short-term investment of the
Fund, or, if not rated, must be issued by a company having an outstanding debt
issue rated at least A by Moody's or S&P. The quality standards described above
may be modified by the Fund upon the approval of its Board of Trustees. Short-
term obligations of the types described above, but not meeting applicable
quality standards, may be purchased if they are purchased subject to a
repurchase agreement with (or guaranteed as to principal and interest by) a
domestic or foreign bank, a domestic savings institution or a corporation which
meets those quality standards, or a foreign government having an outstanding
debt security rated at least AA by S&P or Aa by Moody's.
REPURCHASE AGREEMENTS
- ---------------------
As discussed in the Prospectuses, the Fund may enter into repurchase
agreements involving the types of securities which are eligible for purchase by
the Fund. However, there is no limitation upon the maturity of the securities
underlying the repurchase agreements.
Repurchase agreements, which may be viewed as a type of secured lending by
the Fund, typically involve the acquisition of Government Securities or other
securities from a selling financial institution such as a bank, savings and loan
association or broker-dealer. The agreement provides that the Fund will sell
back to the institution and the institution will repurchase the underlying
security ("collateral") at a specified price and at a fixed time in the future,
usually not more than seven days from the date of purchase. The Fund will
receive interest from the institution until the time when the repurchase is to
occur. Although such date is deemed to be the maturity date of a repurchase
agreement, the maturities of securities subject to repurchase agreements are not
subject to any limits and may exceed one year.
While repurchase agreements involve certain risks not associated with
direct investments in debt securities, the Fund follows procedures designed to
minimize such risks. These procedures include the requirement that the
Investment Adviser effect repurchase transactions only with large, well
capitalized United States financial institutions approved by it as creditworthy
based upon periodic review under guidelines established and monitored by the
Trustees of the Fund. In addition, the value of the collateral underlying the
repurchase agreement, which will be held by the Fund's custodian in a segregated
account on behalf of the Fund, will always be at least equal to the repurchase
price, including any accrued interest
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<PAGE>
earned on the repurchase agreement. In the event of a default or bankruptcy by a
selling financial institution, the Fund will seek to liquidate such collateral.
However, the exercise of the Fund's right to liquidate such collateral could
involve certain costs or delays and, to the extent that proceeds from any sale
upon a default of the obligation to repurchase were less than the repurchase
price, the Fund could suffer a loss. The Fund does not invest in repurchase
agreements that do not mature within seven days. Investments in repurchase
agreements may at times be substantial when, in the view of the Investment
Adviser, liquidity or other considerations so warrant.
TYPES OF DEBT SECURITIES
- ------------------------
The types of debt obligations in which the Fund may invest are described in
the Prospectuses. These investments are subject to certain quality limitations
and other restrictions and include money market instruments and other types of
obligations. See "INVESTMENT DESCRIPTIONS AND PRACTICES - Short-Term
Investments" and "Equity Securities" in the Prospectuses. Debt obligations are
subject to various risks as described in the Prospectuses. In addition,
investors should recognize that, although securities ratings issued by a
securities rating service provide a generally useful guide as to credit risks,
they do not offer any criteria to evaluate interest rate risk. Changes in
interest rate levels cause fluctuations in the prices of debt obligations and
will, therefore, cause fluctuations in the net asset values per share of the
Fund.
The Fund's investments in debt securities may include obligations rated
"investment grade" by a nationally recognized statistical rating organization (a
"NRSRO") or unrated obligations which are determined to be of comparable quality
by the Investment Adviser, and may also include non-investment grade
obligations. As discussed in the Prospectuses, non-investment grade obligations
involve certain risks.
Subsequent to the purchase of a debt security by the Fund, the ratings or
credit quality of a debt security may deteriorate. Any such subsequent adverse
changes in the rating or quality of a security held by the Fund would not
require the Fund to sell the security. However, the Investment Adviser will
evaluate and monitor the quality of all investments and will dispose of
investments which have deteriorated in their creditworthiness or ratings as
determined to be necessary to assure that the Fund's overall investments are
constituted in a manner consistent with the investment objective of the Fund.
The economy and interest rates affect lower rated obligations differently
from other securities. For example, the prices of these obligations have been
found to be less sensitive to interest rate changes than higher rated
investments but more sensitive to adverse economic changes or individual
corporate developments. Also, during an economic downturn or substantial period
of rising interest rates, highly leveraged issuers may experience financial
stress which would adversely affect their ability to service their principal and
interest payment obligations, meet projected business goals and obtain
additional financing. To the extent that there is no established retail
secondary market, there may be thin trading of lower rated obligations which may
adversely impact the ability of the Investment Adviser to accurately value such
obligations and the Fund's assets and may also adversely impact the Fund's
ability to dispose of the obligations. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of lower rated obligations, especially in a thinly traded
market.
Zero Coupon Securities. Debt securities purchased by the Fund may include
zero coupon securities. These securities do not pay any interest until maturity
and, for this reason, zero coupon securities of longer maturities may trade at a
deep discount from their face or par values and may be
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<PAGE>
subject to greater fluctuations in market value than ordinary debt obligations
of comparable maturity. Current federal tax law requires that the holder of a
zero coupon security accrue a portion of the discount at which the security was
purchased as income each year, even though the holder receives no interest
payment that year. It is not anticipated that the Fund will invest more than 5%
of its assets in zero coupon securities in the coming year.
Variable Rate Securities. Debt obligations purchased by the Fund may also
include variable and floating rate securities. The interest rates payable on
these securities are adjusted either at predesignated periodic intervals or
whenever there is a change in an established market rate of interest. Other
features may include a right whereby the Fund which holds the security may
demand prepayment of the principal amount prior to the stated maturity (a
"demand feature") and the right of an issuer to prepay the principal amount
prior to maturity. One benefit of variable and floating rate securities is
that, because of interest rate adjustments on the obligation, changes in market
value that would normally result from fluctuations in prevailing interest rates
are reduced. The benefit of a demand feature is enhanced liquidity.
FORWARD FOREIGN CURRENCY CONTRACTS
- ----------------------------------
As discussed in the Prospectuses, the Fund may enter into forward currency
contracts to purchase or sell foreign currencies as a hedge against possible
variations in foreign exchange rates. A forward foreign currency exchange
contract is an agreement between the contracting parties to exchange an amount
of currency at some future time at an agreed upon rate. The rate can be higher
or lower than the spot rate between the currencies that are the subject of the
contract. A forward contract generally has no deposit requirement, and such
transactions do not involve commissions. By entering into a forward contract for
the purchase or sale of the amount of foreign currency invested in a foreign
security, the Fund can hedge against possible variations in the value of the
dollar versus the subject currency either between the date the foreign security
is purchased or sold and the date on which payment is made or received
("transaction hedging"), or during the time the Fund holds the foreign security
("position hedging"). Hedging against a decline in the value of a currency
through the use of forward contracts does not eliminate fluctuations in the
prices of securities or prevent losses if the prices of securities decline.
Hedging transactions preclude the opportunity for gain if the value of the
hedged currency should rise. The Fund will not speculate in forward currency
contracts. If the Fund enters into a "position hedging transaction," which is
the sale of forward non-U.S. currency with respect to a security held by it and
denominated in such foreign currency, the Fund's custodian will place cash or
liquid securities in a separate account in an amount equal to the value of the
Fund's total assets committed to the consummation of such forward contract. If
the value of the securities placed in the account declines, additional cash or
securities will be placed in the account so that the value of cash or securities
in the account will equal the amount of the Fund's commitments with respect to
such contracts. The Fund will not attempt to hedge all of its non-U.S. portfolio
positions and will enter into such transactions only to the extent, if any,
deemed appropriate by the Investment Adviser. The Fund will not enter into
forward contracts for terms of more than one year.
SECURITIES LOANS
- ----------------
Consistent with applicable regulatory requirements, the Fund may lend its
United States portfolio securities to brokers, dealers and other financial
institutions, provided that such loans are callable at any time by the Fund
(subject to the notice provisions described below) and are at all times secured
by cash or cash equivalents maintained in a segregated account pursuant to
applicable regulations and which are equal to at least the market value,
determined daily, of the loaned securities. The advantage of such loans is that
the Fund continues to receive the income on the loaned securities while
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<PAGE>
earning interest on the amounts deposited as collateral, which interest
will be invested in short-term investments.
A loan may be terminated by the borrower on one business day's notice, or
by the Fund on four business days' notice. If the borrower fails to deliver the
loaned securities within four days of receipt of notice, the Fund could use the
collateral to replace the securities while holding the borrower liable for any
excess of replacement cost over the collateral. As with any extensions of
credit, there are risks of delay in recovery and in some cases even loss of
rights in the collateral should the borrower of the securities fail financially.
However, loans of securities will only be made to firms deemed by the Investment
Adviser to be creditworthy (such creditworthiness will be monitored on an
ongoing basis) and when the income which can be earned from such loans justifies
the attendant risks. Upon termination of the loan, the borrower is required to
return the securities. Any gain or loss in the market price during the loan
period would inure to the Fund.
When voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loaned securities, to
be delivered within one day after notice, to permit the exercise of such rights
if the matters involved would have a material effect on the investment in such
loaned securities. The Fund will pay reasonable finder's, administrative and
custodial fees in connection with loans of securities. The Fund will not lend
securities if to do so would cause it to have loaned securities in excess of one
third of the value of the Fund's total assets, measured at the time of such
loan. The Fund may lend foreign securities consistent with the foregoing
requirements, but has no intention of doing so in the foreseeable future.
RESTRICTED SECURITIES
- ---------------------
The Fund may invest up to 10% of its net assets in securities subject to
restrictions on disposition under the Securities Act of 1933, as amended (the
"Securities Act") ("restricted securities"). Such investments, however, will be
limited to certain restricted securities that may be sold to institutional
investors pursuant to Rule 144A. In some cases, these securities may be
difficult to value to the extent that they are not publicly traded, and may be
difficult to sell promptly at favorable prices. The Fund's policies are intended
to enable it to invest a limited portion of its assets in investments subject
to restrictions on disposition, but which nevertheless are considered by the
Investment Adviser to be attractive. Except as described above, the Fund does
not purchase illiquid securities, including repurchase agreements maturing in
more than seven days.
INVESTMENT RESTRICTIONS
-----------------------
The Fund has adopted various investment restrictions on its investment
activities. Certain of these are fundamental policies which cannot be changed
without approval by the holders of a majority, as defined in the Investment
Company Act of 1940 (the "1940 Act"), of the Fund's outstanding voting shares.
For the Fund to alter a fundamental policy requires the affirmative vote of the
lesser of the holders of (a) 67% or more of the shares of the Fund present at a
meeting of shareholders, if the holders of at least 50% of the outstanding
shares (including shares of all classes) of the Fund are present or represented
by proxy or (b) more than 50% of the outstanding shares of the Fund (including
shares of all classes). Each Separate Account owning Shares will vote its shares
in accordance with instructions received from Contract Owners or Policy Owners,
annuitants and beneficiaries. See "SHAREHOLDER COMMUNICATIONS" in the
Prospectuses.
Under its fundamental policies, the Fund may not:
1. Purchase or sell commodities, including futures contracts, except that
the Fund may purchase and sell stock index futures and related options
and, in connection with its investments in foreign securities,
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<PAGE>
may enter into transactions involving foreign currency, options on
foreign currency and forward foreign currency exchange contracts.
2. Purchase or sell real estate or interests therein, or purchase oil,
gas or other mineral leases, rights or royalty contracts or
development programs, except that the Fund may invest in the
securities of issuers engaged in the foregoing activities and may
invest in securities secured by real estate or interests therein.
3. Issue senior securities as defined by the 1940 Act or borrow money,
except that the Fund may borrow from banks for temporary extraordinary
or emergency purposes (but not for investment) in an amount up to 10%
of the value of the Fund's total assets (calculated at the time of the
borrowing). The Fund may not make investments while it has borrowings
exceeding 5% of the value of its total assets outstanding. This
restriction shall not be deemed to prohibit the Fund from purchasing
or selling securities on a when-issued or delayed-delivery basis, or
entering into repurchase agreements, lending portfolio securities,
selling securities short against-the-box, or writing covered put and
call options on securities, stock indices and foreign currencies, in
each case in accordance with such investment policies as may be
adopted by the Board of Trustees.
4. Underwrite the securities of other issuers, except to the extent that
the Fund may be deemed to be an underwriter in connection with the
disposition of portfolio securities.
5. Make loans of money or securities, except that the Fund may lend money
through the purchase of permitted investments, including repurchase
agreements, and may lend its portfolio securities in an amount not
exceeding 33-1/3% of the value of the Fund's total assets.
The Fund has adopted the following additional investment restrictions which
are not fundamental and may be changed by the Board of Trustees. Under these
restrictions, the Fund may not:
1. Make short sales of securities (other than short sales against-the-
box) or purchase securities on margin, but the Fund may make margin
deposits in connection with its permitted investment activities.
2. Invest in the securities of a company for the purpose of exercising
management or control; however, this shall not be deemed to prohibit
the Fund from exercising voting rights with respect to its portfolio
securities.
3. Pledge, mortgage, hypothecate or otherwise encumber its assets, except
to secure permitted borrowings and to implement collateral and similar
arrangements incident to permitted investment practices.
4. Purchase securities which are illiquid, including repurchase
agreements maturing in more than seven days, except the Fund may
invest up to 10% of its net assets in certain restricted securities
that may be sold to institutional investors pursuant to Rule 144A.
5. Purchase securities of other investment companies, except to the
extent permitted under the 1940 Act.
B-9
<PAGE>
Except as otherwise stated, all percentage limitations on the Fund's
investment practices apply at the time of an investment or a transaction. A
later change in any percentage resulting from a change in the value of the
investment or the total value of the Fund's assets will not constitute a
violation of such restriction.
PORTFOLIO TRANSACTIONS AND BROKERAGE
------------------------------------
Subject to the general supervision of the Fund's Board of Trustees, the
Investment Adviser is responsible for decisions to buy and sell securities for
the Fund, the selection of brokers and dealers to effect the transactions and
the negotiation of brokerage commissions, if any. Purchases and sales of
securities on a stock exchange are effected through brokers who charge a
commission for their services. In the over-the-counter market, securities are
generally traded on a "net" basis with non-affiliated dealers acting as
principal for their own accounts without a stated commission, although the price
of the securities usually includes a profit to the dealer. In underwritten
offerings, securities are purchased at a fixed price which includes an amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount. Certain money market instruments may be purchased
directly from an issuer, in which case no commission or discounts are paid. The
Fund anticipates that its transactions involving foreign securities will be
effected primarily on the principal stock exchanges for such securities. Fixed
commissions on such transactions are generally higher than negotiated
commissions on domestic transactions. There is also generally less government
supervision and regulation of foreign stock exchanges and brokers than in the
United States.
The Investment Adviser currently serves as investment adviser to a number
of clients, and may in the future act as investment adviser to other clients,
including other registered investment companies. It is the practice of the
Investment Adviser to cause purchase and sale transactions to be allocated among
the portfolios whose assets it manages in such manner as it deems equitable. In
making such allocations, the main factors considered are the respective
investment objectives, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held and the opinions of the persons
responsible for managing the Fund and the other client accounts. This procedure
may, under certain circumstances, have an adverse effect on the Fund.
The policy of the Fund regarding purchases and sales of securities is that
primary consideration will be given to obtaining the most favorable prices and
efficient executions of transactions. Consistent with this policy, when
securities transactions are effected on a stock exchange, the Fund's policy is
to pay commissions which are considered fair and reasonable without necessarily
determining that the lowest possible commissions are paid in all circumstances.
The Board of Trustees of the Fund believes that a requirement always to seek the
lowest commission cost could impede effective management and preclude the Fund
and the Investment Adviser from obtaining high quality brokerage and research
services. In seeking to determine the reasonableness of brokerage commissions
paid in any transaction, the Investment Adviser may rely on its experience and
knowledge regarding commissions generally charged by various brokers and on
their judgment in evaluating the brokerage and research services received from
the broker effecting the transaction. Such determinations are necessarily
subjective and imprecise, as in most cases an exact dollar value for those
services is not ascertainable.
In seeking to implement the Fund's policies, the Investment Adviser effects
transactions with those brokers and dealers who it believes provide the most
favorable prices and which are capable of providing efficient executions. If the
Investment Adviser believes such price and execution are obtainable from more
than one broker or dealer, it may give consideration to placing transactions
with
B-10
<PAGE>
those brokers and dealers who also furnish research and other services to the
Fund or the Investment Adviser. Such services may include, but are not limited
to, any one or more of the following: information as to the availability of
securities for purchase or sale; statistical or factual information or opinions
pertaining to investments; wire services; and appraisals or evaluations of
securities. The information and services received by the Investment Adviser from
brokers and dealers may be of benefit in the management of accounts of other
clients and may not in all cases benefit the Fund directly. While such services
are useful and important in supplementing its own research and facilities, the
Investment Adviser believes the value of such services is not determinable and
does not significantly reduce its expenses.
Consistent with the policies described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may be
effected through the Distributor, a registered broker-dealer affiliated with the
Investment Adviser. In order for such transactions to be effected, the
commissions, fees or other remuneration received by the Distributor must be
reasonable and fair compared to the commissions, fees or other remuneration paid
to other brokers in connection with comparable transactions involving similar
securities being purchased or sold on an exchange during a comparable period of
time. This standard would allow the Distributor to receive no more than the
remuneration which would be expected to be received by an unaffiliated broker in
a commensurate arm's-length transaction. In approving the use of an affiliated
broker, the Board of Trustees of the Fund, including a majority of the Trustees
who are not "interested persons" (as defined in the 1940 Act) of the Trust (the
"Independent Trustees"), has adopted procedures which are reasonably designed to
provide that any commissions, fees or other remuneration paid are consistent
with the foregoing standard.
DETERMINATION OF NET ASSET VALUE
--------------------------------
The Prospectuses describe the days on which the net asset values per share
of the Fund are computed for purposes of purchases and redemptions of Shares by
investors, and also sets forth the times as of which such computations are made
and the requirements applicable to the processing of purchase and redemption
orders. Net asset value is computed once daily each day the New York Stock
Exchange (the "NYSE") is open, except that no computation need be made on a day
on which no orders to purchase or redeem Shares have been received. The NYSE
currently observes the following holidays: New Year's Day; Presidents' Day
(third Monday in February); Good Friday (Friday before Easter); Memorial Day
(last Monday in May); Independence Day; Labor Day (first Monday in September);
Thanksgiving Day (last Thursday in November); and Christmas Day.
In valuing the assets of the Fund for purposes of computing net asset
value, securities are appraised at market value as of the close of trading on
each business day when the NYSE is open. Securities, other than stock options,
listed on the NYSE or other exchanges are valued on the basis of the last sale
price on the exchange on which they are primarily traded. However, if the last
sale price on the NYSE is different than the last sale price on any other
exchange, the NYSE price will be used. If there are no sales on that day, the
securities are valued at the bid price on the NYSE or other primary exchange for
that day. Securities traded in the over-the-counter market are valued on the
basis of the last sale price as reported by NASDAQ. If there are no sales on
that day, the securities are valued at the mean between the closing bid and
asked prices as reported by NASDAQ. Stock options traded on national securities
exchanges are valued at the last sale price prior to the time of computation of
net asset value per share. Futures contracts and options thereon, which are
traded on commodities exchanges, are valued at their daily settlement value as
of the close of such commodities exchanges. Securities for which quotations are
not readily available and other assets are appraised at fair value as determined
pursuant to procedures adopted in good faith by the Board of Trustees of the
Fund. Short-
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<PAGE>
term debt securities will be valued at their current market value when available
or fair value, which for securities with remaining maturities of 60 days or less
has been determined in good faith by the Board of Trustees to be represented by
amortized cost value, absent unusual circumstances. A pricing service may be
utilized to determine the fair value of securities held by the Fund. Any such
service might value the investments based on methods which include consideration
of: yields or prices of securities of comparable quality, coupon, maturity and
type; indications as to values from dealers; and general market conditions. The
service may also employ electronic data processing techniques, a matrix system
or both to determine valuation. The Board of Trustees will review and monitor
the methods used by such services to assure itself that securities are valued at
their fair values.
The values of securities held by the Fund and other assets used in
computing net asset value are determined as of the time trading in such
securities is completed each day, which, in the case of foreign securities,
generally occurs at various times prior to the close of the NYSE. Foreign
currency exchange rates are also generally determined prior to the close of the
NYSE. On occasion, the values of such securities and exchange rates may be
affected by events occurring between the time as of which determinations of such
values or exchange rates are made and the close of the NYSE. When such events
materially affect the value of securities held by the Fund or its liabilities,
such securities and liabilities will be valued at fair value in accordance with
procedures adopted in good faith by the Fund's Board of Trustees. The values of
any assets and liabilities initially expressed in foreign currencies will be
converted to U.S. dollars at the mean between the bid and offer prices of the
currencies against U.S. dollars last quoted by any major bank.
TAXES
-----
The following is only a summary of certain additional tax considerations
that are not described in the Prospectuses and generally affect the Fund and its
shareholders. It does not address the tax treatment of the Contract Owners or
Policy Owners. Contract Owners and Policy Owners should consult the prospectuses
of the Separate Accounts for information concerning the federal income tax
consequences of owning Contracts or Policies, and should consult their own tax
advisors concerning federal and state tax consequences of such investments. No
attempt is made to present a detailed explanation of the tax treatment of the
Fund or its shareholders, and the discussions here and in the Prospectuses are
not intended as substitutes for careful tax planning.
The Fund intends to qualify as a "regulated investment company" ("RIC")
under the Internal Revenue Code of 1986 (the "Code"). If so qualified, the Fund
will not be subject to federal income tax on its investment income and net
realized capital gains to the extent that such investment income and net
realized capital gains are distributed in each taxable year to the Separate
Accounts.
Section 817(h) of the Code requires that investments of a segregated asset
account of an insurance company be "adequately diversified", in accordance with
Treasury Regulations promulgated thereunder, in order for the holders of
variable annuity contracts or variable life insurance policies investing in the
account to receive the tax-deferred or tax-free treatment generally afforded
holders of annuities or life insurance policies under the Code. The Department
of the Treasury has issued Regulations under section 817(h) which, among other
things, provide the manner in which a segregated asset account will treat
investments in a RIC for purposes of the applicable diversification
requirements. Under the Regulations, if a RIC satisfies certain conditions,
that RIC will not be treated as a single
B-12
<PAGE>
investment for these purposes, but rather the segregated asset account will be
treated as owning its proportionate share of each of the assets of the RIC. The
Fund plans to satisfy these conditions at all times.
Dividends and interest received by the Fund from foreign investments may
give rise to withholding and other taxes imposed by foreign countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes.
Under present Delaware law, the Trust is not subject to income taxation
during any fiscal year in which the Fund qualifies as a RIC. However,
the Trust might be subject to Delaware income taxes for any taxable year in
which the Fund did not so qualify. Furthermore, the Trust may be subject to tax
in certain states where it does business. In those states which have income tax
laws, the tax treatment of the Trust and its shareholders in respect to
distributions may differ from federal tax treatment.
PURCHASES AND REDEMPTIONS OF SHARES
-----------------------------------
The Fund reserves the right, in its sole discretion, to (i) suspend the
offering of shares of the Fund, and (ii) reject purchase orders when, in the
judgment of the Investment Adviser, such suspension or rejection is in the best
interest of the Fund.
The Fund may suspend redemption privileges or postpone the date of payment
(i) during any period that the NYSE or the bond market is closed or trading on
the NYSE is restricted as determined by the Securities and Exchange Commission
(the "SEC"), (ii) during any period when an emergency exists, as defined by the
rules of the SEC, as a result of which it is not reasonably practicable for the
Fund to dispose of securities owned by it or fairly to determine the value of
its assets and (iii) for such other periods as the SEC may permit.
TRUSTEES AND OFFICERS
---------------------
The Board of Trustees of the Trust has the overall responsibility for
monitoring the operations of the Trust and the Fund and for supervising the
services provided by the Investment Adviser and other organizations. The
officers of the Trust are responsible for managing the day-to-day operations of
the Trust and the Fund.
B-13
<PAGE>
Set forth below is information with respect to each of the Trustees and
officers of the Trust, including their principal occupations during the past
five years.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
NAME, AGE AND ADDRESS POSITION(S) WITH TRUST DURING LAST FIVE YEARS
- --------------------- ---------------------- ----------------------
<S> <C> <C>
John A. Levin, 58* Trustee, Co-Chairman President of the Investment Adviser. Prior to this,
One Rockefeller Plaza and President Mr. Levin was President of the predecessor of the
25th Floor Investment Adviser. Director, President and Chief
New York, NY 10020 Executive Officer of Baker, Fentress and Company
("Baker Fentress"). Director and President of the
Distributor.
Melody L. Prenner Sarnell, 41* Trustee and Co-Chairman Executive Vice President of the
One Rockefeller Plaza Investment Adviser. Prior to this,
25th Floor Ms. Sarnell was a portfolio
New York, NY 10020 manager at the predecessor of the
Investment Adviser. Director of Baker
Fentress. Director and Executive Vice
President of the Distributor.
Jeffrey A. Kigner, 36* Trustee and Co-Chairman Executive Vice President of the
One Rockefeller Plaza Investment Adviser. Prior to this,
25th Floor Mr. Kigner was a portfolio
New York, NY 10020 manager at the predecessor of the
Investment Adviser. Director of Baker
Fentress. Director of the Distributor.
Thomas C. Barry, 53 Trustee Founder and Principal of Zephyr
320 Park Avenue Management, L.P., a firm which
New York, NY 10022 provides financial counsel,
investment research and
management. Founder and
Chairman of CZ
Management/South Africa Capital
Growth Fund, a fund for private
equity investments in South Africa.
Prior to this, Mr. Barry was
President and Chief Executive
Officer of Rockefeller & Co., Inc.
Charles L. Booth, Jr., 64 Trustee Presently retired. Prior to this, Mr.
215 E. 68th Street #28E Booth was Executive Vice
New York, NY 10021 President and Chief Investment
Officer of Bank of New York.
James B. Rogers, Jr., 54 Trustee Visiting Professor at Columbia
352 Riverside Drive University, columnist and
New York, NY 10025 commentator on CNBC, and private
investor.
Edward J. Rosenthal, 63 Trustee Co-founder and Vice Chairman of
707 Westchester Avenue Cramer Rosenthal McGlynn, Inc.,
White Plains, NY 10604 an investment advisory firm.
Glenn A. Aigen, 34 Chief Financial Officer Chief Financial Officer of the
One Rockefeller Plaza and Treasurer Investment Adviser. Prior to this,
25th Floor Mr. Aigen was the Director of
New York, NY 10020 Operations of the predecessor of
the Investment Adviser. Prior to this,
Mr. Aigen was an Audit Manager at
Richard A. Eisner & Company, LLP.
Norris Nissim, 30 Secretary Director of Legal Affairs of the
One Rockefeller Plaza Investment Adviser and
25th Floor Distributor. Prior to this, Mr.
New York, NY 10020 Nissim was an associate at Schulte
Roth & Zabel LLP. Prior to that,
Mr. Nissim was an associate at
Fried Frank Harris Shriver and
Jacobson.
</TABLE>
*Designates a Trustee who is an "interested person" of the Trust as defined
by the 1940 Act.
John A. Levin, Jeffrey A. Kigner and Melody L. Prenner Sarnell are Trustees
who are "interested persons" of the Trust (as defined by the 1940 Act) by virtue
of their affiliations with the Investment Adviser or the Distributor. Trustees
who are not officers or employees of the Investment Adviser, the Distributor or
their affiliated companies, are each paid an annual retainer of $7,500.00.
Officers of the Trust, all of whom are members, officers or employees of the
Investment Adviser, the Distributor or their affiliates, receive no compensation
from the Trust.
B-14
<PAGE>
Annual Trustee compensation from the Trust is estimated as follows:
COMPENSATION TABLE
-------------------
<TABLE>
<CAPTION>
NAME OF AGGREGATE PENSION OR RETIREMENT ESTIMATED TOTAL COMPENSATION
PERSON, COMPENSATION BENEFITS ACCRUED AS BENEFITS UPON FROM FUND COMPLEX
POSITION FROM FUND PART OF FUND EXPENSES RETIREMENT PAID TO TRUSTEES
- ------------ ------------ --------------------- ------------- ------------------
<S> <C> <C> <C> <C>
John A. Levin $0 $0 $0 $0
Jeffrey A. Kigner $0 $0 $0 $0
Melody L. Prenner Sarnell $0 $0 $0 $0
Thomas C. Barry $7,500.00 $0 $0 $15,000.00
Charles L. Booth, Jr. $7,500.00 $0 $0 $15,000.00
James B. Rogers, Jr. $7,500.00 $0 $0 $15,000.00
Edward Rosenthal $7,500.00 $0 $0 $15,000.00
</TABLE>
INVESTMENT ADVISORY AGREEMENT
-----------------------------
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectuses entitled "MANAGEMENT - Investment
Adviser".
The Investment Adviser is a Delaware corporation with offices at One
Rockefeller Plaza, 25th Floor, New York, New York 10020. It is an indirect,
wholly-owned subsidiary of Baker Fentress.
The Investment Adviser provides investment advisory and administrative
services to the Fund pursuant to an Investment Advisory Agreement (the "Advisory
Agreement"), dated [__________ __], 1997 with the Trust. The Advisory Agreement
was approved by the Trust's Board of Trustees, including a majority of the
Trustees who are not "interested persons" (as defined by the 1940 Act) of the
Trust at a meeting held on May 22, 1997, and was also approved on such date by
the vote of the sole shareholder of the Trust on such date. The Advisory
Agreement is terminable without penalty, on 60 days' notice, by the Trust's
Board or by vote of the holders of a majority of the Fund's shares, or, on not
less than 60 days' notice, by the Investment Adviser. The Advisory Agreement has
an initial term expiring on [__________ __], [1999], and may be continued in
effect from year to year thereafter subject to the annual approval thereof by
(i) the Trust's Board or (ii) vote of a majority (as defined by the 1940 Act) of
the outstanding voting securities of the Fund, provided that in either event the
continuance must also be approved by a majority of the Trustees who are not
"interested persons" (as defined by the 1940 Act) of the Trust or the Investment
Adviser, by vote cast in person at a meeting called for the purpose of voting on
such approval. The Advisory Agreement provides that it will terminate
automatically in the event of its "assignment" (as defined by the 1940 Act and
the rules thereunder).
The Investment Adviser manages the Fund's investments in accordance with
the stated policies of the Fund, subject to the supervision of the Trust's
Board. The Investment Adviser is responsible for all investment decisions for
the Fund and for placing orders for the purchase and sale of investments for the
Fund's portfolio. The Investment Adviser also provides such administrative
services
B-15
<PAGE>
as the Trust and the Fund may require, except for certain accounting related
services which are furnished by an affiliate of the Investment Adviser. See
"ADDITIONAL INFORMATION--Transfer Agent and Accounting Services". The Investment
Advisor furnishes, at its own expense, such office space, facilities, equipment,
clerical help, and other personnel and services as may reasonably be necessary
in connection with the operations of the Trust and the Fund. In addition, the
Investment Adviser pays the salaries of officers of the Trust and any fees and
expenses of Trustees of the Trust who are also officers, directors or employees
of the Investment Adviser or who are officers or employees of any company
affiliated with the Investment Adviser and bears the cost of telephone service,
heat, light, power and other utilities associated with the services it provides.
In consideration of the services provided by the Investment Adviser, the
Fund pays the Investment Adviser a monthly fee computed at the annual rate of
.85% of the Fund's average daily net assets.
DISTRIBUTOR
-----------
Shares of the Fund are distributed on a continuous basis at their current
net asset value per share, without imposition of any front-end or contingent
deferred sales charge, by the Distributor. The Distributor provides these
services to the Fund pursuant to a Distribution Agreement (the "Distribution
Agreement"), dated [__________ __], 1997, with the Trust. The Distribution
Agreement was approved by the Board of Trustees, including a majority of the
Trustees who are not parties to the Distribution Agreement or "interested
persons" (as defined by the 1940 Act) of the Investment Adviser or the
Distributor, at a meeting held on May 22, 1997. The Distribution
Agreement is terminable without penalty, on 60 days' notice, by resolution of
the Trustees or by vote of a majority of the outstanding voting securities of
the Fund, or, on not less than 60 days' notice, by the Distributor. The
Distribution Agreement has an initial term of two years from the date of the
Distribution Agreement and may be continued in effect from year-to-year
thereafter, subject to the annual approval by (i) the Trust's Board or (ii) vote
of the holders of a majority of the Fund's outstanding voting securities,
provided that in either event the continuance must also be approved by a
majority of the Trustees who are not "interested persons" (as defined by the
1940 Act) of the Investment Adviser or the Distributor, by vote cast in person
at a meeting called for the purpose of voting on such approval. The Distribution
Agreement provides that it will terminate automatically in the event of its
"assignment" (as defined by the 1940 Act and the rules thereunder).
Under the terms of the Distribution Agreement, the Distributor bears all
the costs associated with distribution of the Shares of the Fund. The Trust
bears all of its costs and expenses, including the expense of preparing,
printing, mailing and otherwise distributing prospectuses, statements of
additional information, annual reports and other periodic reports for
distribution to prospective investors and the costs of preparing, distributing
and publishing sales literature and advertising materials. However, pursuant to
a plan of distribution adopted by the Trust, the Fund makes certain payments to
the Distributor for services provided by the Distributor with respect to the
Class B Shares. These payments are borne solely by holders of the Class B Shares
and are not an expense of Class A Shares. See "DISTRIBUTION PLAN". In the
Distribution Agreement, the Trust has agreed to indemnify the Distributor to the
extent permitted by applicable law against certain liabilities under the
Securities Act.
The offices of the Distributor are located at One Rockefeller Plaza, 25th
Floor, New York, New York 10020. The Distributor is a wholly-owned subsidiary
of the Investment Adviser.
DISTRIBUTION PLAN [APPLICABLE TO THE CLASS B SHARES ONLY]
---------------------------------------------------------
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus for Class B Shares entitled
"Distribution Plan".
B-16
<PAGE>
Distribution Plan. Rule 12b-1 (the "Rule") adopted by the SEC under the
1940 Act provides, among other things, that an investment company may bear
expenses of distributing its shares only pursuant to a plan adopted in
accordance with the Rule. The Fund's Board has adopted such a plan (the
"Distribution Plan") with respect to the Class B Shares, pursuant to which the
Trust is authorized to utilize assets to finance the distribution of the Class B
Shares of the Fund and to reimburse the Distributor for payments it makes to
other securities dealers, insurance companies and financial institutions which
engage in efforts to promote the sale of the Class B Shares and which sell the
Class B Shares or to reimburse such organizations for distribution related or
shareholder services related expenses they incur in selling Class B Shares or
providing Fund related services to their customers. Under the Distribution Plan,
the Trust may expend an amount annually which shall not exceed 0.25% annually of
the average daily net assets of the Class B Shares. Payments to the Distributor
under the Distribution Plan will be made monthly to reimburse the Distributor
for its distribution related expenses. There is no requirement that these
expenses be incurred by the Distributor in the same fiscal year of the Fund as
the fiscal year in which reimbursement to the Distributor will be made. However,
the Distributor will not be entitled to be paid any interest (or carrying
charge) on amounts expended but not yet reimbursed by the Trust.
A quarterly report of the amounts expended under the Distribution Plan, and
the purposes for which such expenditures were incurred, must be made to the
Board for its review. In addition, the Distribution Plan provides that it may
not be amended to increase materially the costs which holders of Class B shares
may bear for distribution pursuant to the Distribution Plan without the approval
of such shareholders and that all material amendments to the Distribution Plan
must be approved by the Board, and by the Independent Trustees who have no
direct or indirect financial interest in the operation of the Distribution Plan
or in any agreements entered into in connection with the Distribution Plan, by
vote cast in person at a meeting called for the purpose of considering such
amendments. The Distribution Plan is subject to annual approval by such vote of
the Board members and the Independent Trustees cast in person at a meeting
called for the purpose of voting on the Distribution Plan. The Distribution Plan
may be terminated at any time by vote of a majority of the Board members who are
Independent Trustees and have no direct or indirect financial interest in the
operation of the Distribution Plan or in any agreements entered into in
connection with the Distribution Plan or by vote of the holders of a majority of
the Class B Shares.
SPECIAL INVESTMENT TECHNIQUES
-----------------------------
As discussed in the Prospectuses, the Fund may engage in certain
transactions in options and futures contracts and options on futures contracts.
The specific transactions in which the Fund may engage are noted and described
in the Prospectuses. The discussion below provides additional information
regarding the use of options on stock indices and stock index futures.
REGULATORY MATTERS
- ------------------
The Fund will comply with and adhere to all limitations on the manner and
extent to which it effects transactions in futures and options on such futures
currently imposed by the rules and policy guidelines of the Commodity Futures
Trading Commission as conditions for the exemption of a mutual fund, or the
investment advisers thereto, from registration as a commodity pool operator. In
accordance with those restrictions, the Fund will not, as to any positions,
whether long, short or a combination thereof, enter into futures and options
thereon for which the aggregate initial margins and premiums exceed 5% of the
fair market value of its assets after taking into account unrealized profits and
losses on the options the Fund has entered into. In the case of an option that
is "in-the-money", the in-the-money amount may be excluded in computing such 5%.
(In general, a call option on a future is "in-the-money" if the value of the
future exceeds the exercise ("strike") price of the call; a put option on a
future is "in-the-money" if the value of the future which is the subject of the
put is exceeded by the strike price of the put.) The Fund may use futures and
options thereon solely for bona fide hedging or for other non-speculative
purposes within the meaning and intent of the applicable provisions of the
Commodities Exchange Act and regulations thereunder. As to long positions which
are used as part of the Fund's investment strategy and are incidental to
its
B-17
<PAGE>
activities in the underlying cash market, the "underlying commodity value" of
the Fund's futures and options thereon must not exceed the sum of (i) cash set
aside in an identifiable manner, or short-term U.S. debt obligations or other
dollar-denominated high-quality, short-term money instruments so set aside, plus
sums deposited on margin; (ii) cash proceeds from existing investments due in 30
days; and (iii) accrued profits held at the futures commission merchant. The
"underlying commodity value" of a future is computed by multiplying the size of
the future by the daily settlement price of the future. For an option on a
future, that value is the underlying commodity value of the future underlying
the option.
RISKS OF OPTIONS ON STOCK INDICES
- ---------------------------------
As discussed in the Prospectuses, the purchase and sale of options on stock
indices will be subject to risks applicable to options transactions generally.
In addition, the distinctive characteristics of options on indices create
certain risks that are not present with stock options. Index prices may be
distorted if trading of certain stocks included in the index is interrupted.
Trading in index options also may be interrupted in certain circumstances, such
as if trading were halted in a substantial number of stocks included in the
index or if dissemination of the current level of an underlying index is
interrupted. If this occurs, the Fund would not be able to close out options
which it had purchased and, if restrictions on exercise were imposed, may be
unable to exercise an option it holds, which could result in losses if the
underlying index moves adversely before trading resumes. However, it is a policy
of the Fund to purchase options only on indices which include a sufficient
number of stocks so that the likelihood of a trading halt in the index is
minimized.
The purchaser of an index option may also be subject to a timing risk. If
an option is exercised by the Fund before final determination of the closing
index value for that day, the risk exists that the level of the underlying index
may subsequently change. If such a change caused the exercised option to fall
out-of-the-money (that is, the exercising of the option would result in a loss,
not a gain), the Fund will be required to pay the difference between the
closing index value and the exercise price of the option (times the applicable
multiplier) to the assigned writer. Although the Fund may be able to minimize
this risk by withholding exercise instructions until just before the daily
cutoff time, it may not be possible to eliminate this risk entirely, because the
exercise cutoff times for index options may be earlier than those fixed for
other types of options and may occur before definitive closing index values are
announced. Alternatively, when the index level is close to the exercise price,
the Fund may sell rather than exercise the option. Although the markets for
certain index option contracts have developed rapidly, the markets for other
index options are not as liquid. The ability to establish and close out
positions on such options will be subject to the development and maintenance of
a liquid secondary market. It is not certain that this market will develop in
all index option contracts. The Fund will not purchase or sell any index option
contract unless and until in the opinion of the Investment Adviser the market
for such options has developed sufficiently that the risk in connection with
such transactions is no greater than the risk in connection with options on
stocks.
STOCK INDEX FUTURES CHARACTERISTICS
- -----------------------------------
Currently, stock index futures contracts can be purchased or sold with
respect to several different stock indices, each based on a different measure of
market performance. A determination as to which of the index contracts would be
appropriate for purchase or sale by the Fund will be based upon, among other
things, the liquidity offered by such contracts and the volatility of the
underlying index.
Unlike when the Fund purchases or sells a security, no price is paid to or
received by the Fund upon the purchase or sale of a futures contract. Instead,
the Fund will be required to deposit in its segregated
B-18
<PAGE>
asset account an amount of cash or qualifying securities (currently U.S.
Treasury bills) currently ranging from approximately 10% to 15% of the contract
amount. This is called "initial margin." Such initial margin is in the nature of
a performance bond or good faith deposit on the contract which is returned to
the Fund upon termination of the futures contract. Gains and losses on open
contracts are required to be reflected in cash in the form of variation margin
payments which the Fund may be required to make during the term of the contracts
to its broker. Such payments would be required where, during the term of a stock
index futures contract purchased by the Fund, the price of the underlying stock
index declined, thereby making the Fund's position less valuable. In all
instances involving the purchase of stock index futures contracts by the Fund,
an amount of cash together with such other securities as permitted by applicable
regulatory authorities to be utilized for such purpose, at least equal to the
market value of the futures contracts, will be deposited in a segregated account
with the Fund's custodian to collateralize the position. At any time prior to
the expiration of a futures contract, the Fund may elect to close its position
by taking an opposite position which will operate to terminate its position in
the futures contract.
Where futures are purchased to hedge against a possible increase in the
price of a security before the Fund is able to fashion its program to invest in
the security or in options on the security, it is possible that the market may
decline. If the Fund, as a result, decided not to make the planned investment at
that time either because of concern as to the possible further market decline or
for other reasons, the Fund would realize a loss on the futures contract that is
not offset by a reduction in the price of securities purchased.
In addition to the possibility that there may be an imperfect correlation
or no correlation at all between movements in the stock index future and the
portion of the portfolio being hedged, the price of stock index futures may not
correlate perfectly with movements in the stock index due to certain market
distortions. All participants in the futures market are subject to margin
deposit and maintenance requirements. Rather than meeting additional margin
deposit requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the index
itself and the value of a future. Moreover, the deposit requirements in the
futures market are less onerous than margin requirements in the securities
market and may therefore cause increased participation by speculators in the
futures market. Such increased participation may also cause temporary price
distortions. Due to the possibility of price distortion in the futures market
and because of the imperfect correlation between movements in stock indices and
movements in the prices of stock index futures, the value of stock index futures
contracts as a hedging device may be reduced. In addition, if the Fund has
insufficient available cash, it may at times have to sell securities to meet
variation margin requirements. Such sales may have to be effected at a time
when it may be disadvantageous to do so.
PERFORMANCE INFORMATION
-----------------------
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectuses entitled "PERFORMANCE
INFORMATION".
GENERALLY
- ---------
As discussed in the Prospectuses, from time to time the Trust may
disseminate quotations of total return and other performance related and
comparative information.
From time to time, the performance of the Fund may be compared to the
performance of other mutual funds following similar objectives or to recognized
market indices. Comparative performance information may be used from time to
time in advertising or marketing the Fund's shares, including data
B-19
<PAGE>
from Lipper Analytical Services, Inc., the S&P 500, the Wilshire 5000 Index, the
Dow Jones Industrial Average, Money Magazine, Morningstar, Inc. and other
industry publications. The Fund's return may also be compared to the cost of
living (measured by the Consumer Price Index) or the return of various
categories of investments (as measured by Ibbotson Associates or others) over
the same period. In addition to performance rankings, the Fund may compare its
total expense ratio to the average total expense ratio of similar funds tracked
by Lipper Analytical Services, Inc.
In advertising materials, the Trust may quote or reprint financial or
business publications and periodicals, including model portfolios or
allocations, as they relate to current economic and political conditions, fund
management, portfolio composition, investment philosophy, investment techniques,
the desirability of owning a particular mutual fund, and the Investment
Adviser's services and products. The Investment Adviser may provide information
designed to clarify investment goals and explore various financial strategies.
Such information may include information about current economic, market, and
political conditions, and may include materials that describe general principles
of investing, such as asset allocation, diversification, risk tolerance, and
goal setting. Materials may also include discussions of other products and
services offered by the Investment Adviser.
The Trust may quote various measures of the volatility and benchmark
correlation of the Fund. In addition, the Trust may compare these
measures to those of other funds. Measures of volatility seek to compare the
Fund's historical share price fluctuations or total returns to those of a
benchmark. Measures of benchmark correlation indicate how valid a comparative
benchmark may also be. All measures of volatility and correlation are calculated
using averages of historical data.
TOTAL RETURN
- ------------
The Fund's quotations of total return will reflect the average annual
compounded rate of return on an assumed investment of $1,000 that equates the
initial amount invested to the ending redeemable value according to the
following formula:
P (1 + T)/n/ = ERV
where "P" represents a hypothetical initial investment of $1,000; "T" represents
average annual total return; "n" represents the number of years; and "ERV"
represents the ending redeemable value of the initial investment. Dividends and
other distributions are assumed to be reinvested in shares at the prices in
effect on the reinvestment dates. ERV will be adjusted to reflect the effect of
the Investment Adviser's agreement to absorb certain expenses as discussed in
the Prospectuses. Quotations of total return will be for one year, five year and
ten year periods ended on the date of the most recent balance sheet included in
the Trust's registration statement at such times as the registration statement
has been in effect for such periods. Until such time as the registration
statement has been effective for the one year, five year and ten year periods,
the Fund's quotations of total return will also include a quotation of total
return for the time period during which the registration statement has been in
effect or the time period since the commencement of operations, whichever period
begins later. The Fund may also provide quotations of total return
B-20
<PAGE>
for other periods and quotations of cumulative total returns, which reflect the
actual performance of the Fund over the entire period for which the quotation is
given.
NET ASSET VALUE
- ---------------
Charts and graphs using benchmark indices and the Fund's net asset values
or adjusted net asset values may be used to exhibit performance. An adjusted net
asset value includes any distributions paid by the Fund and reflects all
elements of its return.
ADDITIONAL INFORMATION
----------------------
CUSTODIAN
- ---------
UMB Bank, n.a., P.O. Box 419226, Kansas City, Missouri 64141-6226 serves as
custodian of the Trust's assets and maintains custody of the Fund's cash and
investments. Cash held by the custodian, which may at times be substantial, is
insured by the Federal Deposit Insurance Corporation up to the amount of
available insurance coverage limits (presently, $100,000).
CONTROL PERSONS AND HOLDERS OF SECURITIES
- -----------------------------------------
As of the date of this Statement of Additional Information, all of the
outstanding shares were owned by Mr. Norris Nissim, an officer of the Investment
Adviser and of the Fund. This control relationship will continue to exist until
such time as the above-described share ownership represents 25% or less of the
outstanding shares of the Fund. Through the exercise of voting rights with
respect to the shares, the controlling person set forth above may be able to
determine the outcome of shareholder voting on matters as to which shareholder
approval is required.
INDEPENDENT AUDITORS
- --------------------
Ernst & Young LLP, Sears Tower, 233 South Wacker Drive, Chicago, Illinois
60606-6301, serves as the independent auditors of the Fund. Financial Statements
of the Fund appearing in the Fund's annual report will be audited by Ernst &
Young LLP.
TRANSFER AGENT AND ACCOUNTING SERVICES
- -------------------------------------
The Trust has retained Countrywide Fund Services, Inc. (the "Transfer
Agent"), P.O. Box 5354, Cincinnati, Ohio 45201, to serve as the Fund's transfer
agent and dividend paying agent. The Transfer Agent is an indirect, wholly-owned
subsidiary of Countrywide Credit Industries, Inc., a NYSE listed company
principally engaged in the business of residential mortgage lending.
The Fund also pays Baker Fentress a monthly fee for providing accounting
related services to the Trust, assisting in supervising various other services
and providing other specific services to the Fund including, but not limited to:
internal fund accounting and auditing services, valuing the Trust's assets and
calculating the net asset value of the shares of the Fund, assisting in the
preparation and filing of the Trust's tax returns, accumulating information for
the Trust's financial statements and preparing reports to the shareholders. This
fee is equal to $2,000 for each month the Fund's average monthly net assets
total $50 million or less, $2,500 for each month average net assets total
$50,000,001 to $100 million, $3,000 for each month average net assets total
$100,000,001 to $200 million, $4,000 for each month average net assets total
$200,000,001 to $300 million and for each month net assets exceed $300 million,
$5,000 plus 0.001% of the Fund's average net assets in excess of $300
million.
B-21
<PAGE>
REPORTS TO SHAREHOLDERS
- -----------------------
Shareholders of the Fund will be kept fully informed through annual and
semi-annual reports showing diversification of investments, securities owned and
other information regarding the Fund's activities. The financial statements of
the Fund must be audited at least once a year by the Fund's independent
auditors.
LEGAL COUNSEL
- -------------
Schulte Roth & Zabel LLP, 900 Third Avenue, New York, New York 10022 serves
as counsel to the Investment Adviser and its affiliates on certain matters.
REGISTRATION STATEMENT
- ----------------------
This Statement of Additional Information and the Prospectuses do not
contain all of the information set forth in the Registration Statement the Fund
has filed with the SEC. The complete Registration Statement may be obtained from
the SEC upon payment of the fee prescribed by the SEC rules and regulations.
B-22
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
-----------------------------------
[*To be filed by post-effective amendment]
B-23
<PAGE>
FORM N-1A EL
LEVCO SERIES TRUST
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
(1) Statement of Assets and Liabilities.**
(2) Report of Independent Accountants.**
(b) Exhibits
(1) (a) Certificate of Trust dated January 2, 1997.
(b) Certificate of Amendment to Certificate of Trust dated
May 9, 1997.
(c) Amended and Restated Declaration of Trust dated
May 1, 1997.
(2) By-Laws.
(3) Not Applicable.
(4) Instruments Defining the Rights of Holders of Securities.**
(5) Investment Advisory Contract.
(6) Underwriting or Distribution Contract.
(7) Not Applicable.
(8) Form of Custodian Agreement.*
(9) Contracts Not Made in the Ordinary Course of Business.
(a) Accounting Services Agreement.
(b) Transfer Agency and Dividend Disbursing Agreement.
(10) Opinion and Consent of Counsel.
(11) Consent of Independent Accountants.**
(12) Not Applicable.
(13) Letter of Investment Intent.
(14) Not Applicable.
(15) Plan Pursuant to Rule 12b-1.
(16) Not Applicable.
(17) Financial Data Schedule.**
(18) Plan Pursuant to Rule 18f-3.
- -------------------
* To be filed by pre-effective amendment.
**To be filed by post-effective amendment.
C-1
<PAGE>
Item 25. Persons Controlled by or Under Common Control with Registrant
LEVCO Equity Value Fund (the "Fund"), the initial series of LEVCO
Investment Trust (the "Trust"), may be deemed to be controlled by Mr. Norris
Nissim, an officer of John A. Levin & Co., Inc. (the "Investment Adviser") and
of the Fund, who owns all of the Fund's outstanding shares.
Item 26. Number of Holders of Securities
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
Shares of Beneficial One
Interest in LEVCO
Equity Value Fund
</TABLE>
Item. 27. Indemnification
A Delaware business trust may provide in its governing instrument for
indemnification of its officers and trustees from and against any and all claims
and demands whatsoever. Article III, Section 7 of the Amended and Restated
Declaration of Trust provides that if any shareholder or former shareholder
shall be exposed to liability by reason of a claim or demand relating to his or
her being or having been a shareholder, and not because of his or her acts or
omissions, the shareholder or former shareholder (or his or her heirs,
executors, administrators, or other legal representatives or in the case of a
corporation or other entity, its corporate or other general successor) shall be
entitled to be held harmless from and indemnified out of the assets of the Trust
against all loss and expense arising from such claim or demand.
Pursuant to Article VII, Section 2 of the Amended and Restated
Declaration of Trust, the trustees of the Trust (the "Trustees") shall not be
responsible or liable in any event for any neglect or wrongdoing of any officer,
agent, employee, investment adviser or principal underwriter of the Trust, nor
shall any Trustee be responsible for the act or omission of any other Trustee,
and the Trust out of its assets shall have the power to indemnify and hold
harmless each and every Trustee from and against any and all claims and demands
whatsoever arising out of or related to each Trustee's performance of his duties
as a Trustee of the Trust to the fullest extent permitted by law, subject to
such limitations and requirements as may be set forth in the By-Laws; provided
that nothing herein contained shall indemnify, hold harmless or protect any
Trustee from or against any liability to the Trust or any shareholder 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.
The Advisory Agreement will provide that John A. Levin & Co., Inc.
(the "Investment Adviser") will use its best efforts in the supervision and
management of the investment activities of the Trust, but in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Investment Adviser shall not be liable to the Trust
or the Fund for any error of judgment or mistake of law or for any act or
omission by the Investment Adviser or for any losses sustained by the Trust, the
Fund or the shareholders.
C-2
<PAGE>
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 such Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in such Act and will
be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
The Investment Adviser is primarily engaged in the business of
providing investment advice. John A. Levin, the President of the Investment
Adviser, serves as a director of the following investment companies: Morgan
Stanley Africa Investment Fund, Inc.; Morgan Stanley Asia-Pacific Fund, Inc.;
Morgan Stanley Emerging Markets Fund, Inc.; Morgan Stanley Emerging Markets Debt
Fund, Inc.; Morgan Stanley Global Opportunity Bond Fund, Inc.; The Morgan
Stanley High Yield Fund, Inc.; Morgan Stanley Russia & New Europe Fund, Inc.;
The Brazilian Investment Fund, Inc.; The Latin American Discovery Fund, Inc.;
The Malaysia Fund, Inc.; The Pakistan Investment Fund, Inc.,; The Thai Fund,
Inc.; The Turkish Investment Fund, Inc.; and The Morgan Stanley India Investment
Fund, Inc.
A description of any other business, profession, vocation, or
employment of a substantial nature in which the Investment Adviser, and each
director, executive officer, or partner of the Investment Adviser, is or has
been, at any time during the past two fiscal years, engaged in for his or her
own account or in the capacity of director, officer, employee, partner or
trustee, is set forth in the Form ADV of John A. Levin & Co., Inc. (File No.
801-52602) as filed with the Securities and Exchange Commission, and is
incorporated herein by reference.
Item 29. Principal Underwriters
LEVCO Securities, Inc., a wholly owned subsidiary of the Investment
Adviser, acts as the sole underwriter distributing securities of the Registrant.
LEVCO Securities, Inc. anticipates that it will also act as principal
distributor for LEVCO Investment Trust.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business with Underwriter with Registrant
<S> <C> <C>
John A. Levin Director and President Trustee, Co-Chairman
One Rockefeller Plaza, 25th floor and President
New York, NY 10020
</TABLE>
C-3
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business with Underwriter with Registrant
<S> <C> <C>
Jeffrey A. Kigner Director Trustee and Co-Chairman
One Rockefeller Plaza, 25th floor
New York, NY 10020
Melody L. Prenner Sarnell Director and Executive Trustee and Co-Chairman
One Rockefeller Plaza, 25th floor Vice President
New York, NY 10020
Glenn A. Aigen Vice President and Chief Financial Officer
One Rockefeller Plaza, 25th floor Chief Financial Officer and Treasurer
New York, NY 10020
Carol L. Novak Vice President and None
One Rockefeller Plaza, 25th floor Secretary
New York, NY 10020
</TABLE>
Item 30. Location of Accounts and Records
All accounting and financial books and records required to be
maintained under Section 31(a) of the Investment Company Act of 1940, as
amended, and the rules promulgated thereunder with respect to the Registrant
will be maintained by Baker, Fentress & Company, an affiliate of the Investment
Adviser, at the following office:
Baker, Fentress & Company
200 West Madison Street
Suite 3510
Chicago, IL 60606
Item 31. Management Services
Other than as set forth in Parts A and B of this Registration
Statement, the Registrant is not a party to any management-related service
contract.
Item 32. Undertakings
Registrant undertakes to file an amendment to this Registration
Statement with certified financial statements showing the initial capital
received before accepting subscriptions from any persons in excess of 25.
Registrant undertakes to file a post-effective amendment, using
financial statements which need not be certified, within four to six months from
the effective date of the Registrant's 1933 Act Registration Statement.
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Registrant has duly caused this Pre-Effective
Amendment No. 1 to its Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of New York, and State of New
York on the 23rd, day of May, 1997.
LEVCO SERIES TRUST
By: /s/ John A. Levin
------------------------
Name: John A. Levin
Title: Trustee and President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ John A. Levin Trustee, Co-Chairman and President May 23, 1997
- ---------------------------------------------------------------------------------------------
John A. Levin
/s/ Jeffrey A. Kigner Trustee, Co-Chairman May 23, 1997
- ---------------------------------------------------------------------------------------------
Jeffrey A. Kigner
/s/ Glenn A. Aigen Chief Financial Officer and Treasurer May 23, 1997
- ---------------------------------------------------------------------------------------------
Glenn A. Aigen
/s/ Melody L. Prenner Sarnell Trustee and Co-Chairman May 23, 1997
- ---------------------------------------------------------------------------------------------
Melody L. Prenner Sarnell
/s/ Thomas C. Barry Trustee May 23, 1997
- ---------------------------------------------------------------------------------------------
Thomas C. Barry
/s/ Charles L. Booth, Jr. Trustee May 23, 1997
- ---------------------------------------------------------------------------------------------
Charles L. Booth, Jr.
/s/ James B. Rogers, Jr. Trustee May 23, 1997
- ---------------------------------------------------------------------------------------------
James B. Rogers, Jr.
/s/ Edward J. Rosenthal Trustee May 23, 1997
- ---------------------------------------------------------------------------------------------
Edward J. Rosenthal
</TABLE>
C-5
<PAGE>
FORM N-1A EL/A
LEVCO SERIES TRUST
EXHIBIT INDEX
EXHIBIT NUMBER DOCUMENT DESCRIPTION
(b) Exhibits
(1) (a) Certificate of Trust dated January 2, 1997.
(b) Certificate of Amendment to Certificate of Trust
dated May 9, 1997.
(c) Amended and Restated Declaration of Trust dated
May 1, 1997.
(2) By-Laws.
(5) Investment Advisory Contract
(6) Underwriting or Distribution Contract.
(9) Contracts Not Made in the Ordinary Course of
Business.
(a) Accounting Services Agreement.
(b) Transfer Agency and Dividend Disbursing
Agreement.
(10) Opinion and Consent of Counsel.
(13) Letter of Investment Intent.
(15) Plan Pursuant to Rule 12b-1.
(18) Plan Pursuant to Rule 18f-3.
C-6
<PAGE>
CERTIFICATE OF TRUST
OF
LEVCO SERIES TRUST
This Certificate of Trust of LEVCO SERIES TRUST, a business trust
which will be registered under the Investment Company Act of 1940, as amended
(the "Business Trust"), filed in accordance with the provisions of the Delaware
Business Trust Act (12 Del. Code /S//S/ 3801 et seq.), sets forth the following:
FIRST: The name of the Business Trust is LEVCO SERIES TRUST.
SECOND: As required by 12 Del. Code (S)(S) 3807 and 3810(a)(1)(b),
the name and business address of the Business Trust's Registered Agent for
Service of Process and the address of the Business Trust's Registered Office
are:
Address of Business Trust's
Registered Office and Business
Registered Agent Address of Registered Agent
---------------- ------------------------------
9 East Loockerman Street
National Corporate Research, Ltd. Dover, Delaware 19901
The name and business address of the initial trustees of the Business
Trust are as follows:
Name Business Address
---- ----------------
John A. Levin One Rockefeller Plaza - 25th Floor
New York, N.Y. 10020
Jeffrey A. Kigner One Rockefeller Plaza - 25th Floor
New York, N.Y. 10020
THIRD: The nature of the business or purpose or purposes of the
Business Trust as set forth in its governing instrument is to conduct, operate
and carry on the business of a management investment company registered under
the Investment Company Act of 1940, as amended, through one or more series of
shares of beneficial interest, investing primarily in securities.
FOURTH: The trustees of the business trust, as set forth in its
governing instrument, reserve the right to amend, alter, change or repeal any
provision contained in this Certificate of Trust, in any manner now or hereafter
prescribed by statute.
<PAGE>
FIFTH: This Certificate of Trust shall become effective immediately
upon its filing with the Office of the Secretary of State of the State of
Delaware.
IN WITNESS WHEREOF, the undersigned, being the initial trustees of
LEVCO Series Trust, have duly executed this Certificate of Trust as of this 2
day of January, 1997.
/s/ John A. Levin
-------------------------------------
John A. Levin, as Trustee and not
individually
/s/ Jeffrey A. Kigner
-------------------------------------
Jeffrey A. Kigner, as Trustee and not
individually
<PAGE>
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF TRUST
OF
LEVCO SERIES TRUST
(Pursuant to Section 3810 of the Delaware Business Trust Act)
To the Secretary of State
State of Delaware
It is hereby certified that:
1. The name of the business trust (hereinafter referred to as the
"trust") is LEVCO SERIES TRUST.
2. The following Article is hereby added to the Certificate of Trust
of the trust, as heretofore amended, to read as follows:
"SIXTH: The debts, liabilities, obligations and expenses
incurred, contracted for or otherwise existing with respect to a
particular series of the Business Trust shall be enforceable
against the assets of such series only, and not against the
assets of the Business Trust generally."
3. The undersigned persons are trustees of the trust.
IN WITNESS WHEREOF, the undersigned, being the initial trustees of
LEVCO SERIES TRUST, have duly executed this Certificate of Trust as of this 9th
day of May, 1997.
/s/ Jeffrey A. Kigner
---------------------------------------
Jeffrey A. Kigner, as Trustee and
not individually
/s/ John A. Levin
---------------------------------------
John A. Levin, as Trustee and
not individually
<PAGE>
Effective as of
May 1, 1997
AMENDED AND RESTATED DECLARATION OF TRUST
OF
LEVCO SERIES TRUST
a Delaware Trust
Principal Place of Business:
One Rockefeller Plaza - 25th Floor
New York, N.Y. 10020
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE I NAME AND DEFINITIONS..................................................... 1
Section 1. Name..................................................................... 1
Section 2. Definitions.............................................................. 1
ARTICLE II PURPOSE OF TRUST......................................................... 3
ARTICLE III SHARES OF BENEFICIAL INTEREST............................................ 3
Section 1. Description of Shares.................................................... 3
Section 2. Ownership of Shares...................................................... 4
Section 3. Investments in the Trust; Consideration.................................. 4
Section 4. Status of Shares and Limitation of Personal Liability.................... 4
Section 5. Power of Board of Trustees to Change Provisions Relating to Shares....... 5
Section 6. Establishment and Designation of Series and Classes...................... 5
Section 7. Indemnification of Shareholders.......................................... 7
ARTICLE IV THE BOARD OF TRUSTEES.................................................... 8
Section 1. Number, Election and Tenure.............................................. 8
Section 2. Effect of Death, Resignation, etc. of a Trustee.......................... 8
Section 3. Powers................................................................... 10
Section 4. Payment of Expenses by the Trust......................................... 13
Section 5. Payment of Expenses by Shareholders...................................... 13
Section 6. Ownership of Assets of the Trust......................................... 13
Section 7. Service Contracts........................................................ 15
ARTICLE V SHAREHOLDERS' VOTING POWERS.............................................. 16
ARTICLE VI NET ASSET VALUE, DISTRIBUTIONS AND REDEMPTIONS........................... 16
Section 1. Determination of Net Asset Value, Net Income, Dividends and Distributions 16
Section 2. Redemptions and Repurchases.............................................. 17
ARTICLE VII COMPENSATION AND LIMITATION OF LIABILITY OF TRUSTEES..................... 17
Section 1. Compensation............................................................. 17
Section 2. Indemnification and Limitation of Liability.............................. 17
Section 3. Trustee's Good Faith Action; Expert Advice; No Bond or Surety............ 18
Section 4. Insurance................................................................ 18
ARTICLE VIII MISCELLANEOUS............................................................ 18
Section 1. Liability of Third Persons Dealing with Trustees......................... 18
Section 2 Termination of Trust or Series or Class.................................. 18
Section 3. Merger and Consolidation................................................. 19
Section 4. Amendments............................................................... 19
Section 5. Filing of Copies; References; Headings................................... 20
Section 6. Applicable Law........................................................... 20
Section 7. Provisions in Conflict with Law or Regulations........................... 20
Section 8. Business Trust Only...................................................... 20
Section 9. Use of the Name "LEVCO".................................................. 21
</TABLE>
-i-
<PAGE>
AMENDED AND RESTATED DECLARATION OF TRUST
OF
LEVCO SERIES TRUST
WHEREAS, THIS AMENDED AND RESTATED DECLARATION OF TRUST (the
"Declaration") is made and entered into as of the date set forth below by the
Trustees named hereunder (the "Initial Trustees") to amend and restate the
Declaration of Trust made and entered into by the Initial Trustees as of January
2, 1997 for the purpose of forming a Delaware business trust in accordance with
the provisions hereinafter set forth,
NOW, THEREFORE, the Initial Trustees have filed a Certificate of
Trust with the Office of the Secretary of State of the State of Delaware and
hereby declare that all money and property contributed to the trust established
hereby shall be held and managed in trust for the benefit of the persons who may
from time to time hold beneficial interests issued hereunder and subject to the
provisions hereof, to wit:
ARTICLE I
Name and Definitions
Section 1. Name.
The name of the trust (the "Trust") is LEVCO SERIES TRUST and,
insofar 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 herein used) shall refer to the Trustees as
trustees, and not as individuals, or personally, and shall not refer to the
officers, agents, employees or Shareholders of the Trust. If the Trustees
determine that the Trust's use of such name is not advisable or if the Trust is
required to discontinue the use of such name pursuant to Article VIII, Section 9
hereof, then subject to that section the Trustees may adopt 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.
Section 2. Definitions.
Whenever used herein, unless otherwise required by the context or
specifically provided:
(a) The "Trust" refers to the Delaware business trust
established pursuant to the Declaration of Trust dated January 2, 1997, by
whatever name it be known, inclusive of each and every Series established
hereunder;
(b) The "Trust Property" means any and all assets and
property, real or personal, tangible or intangible, which are owned or held by
or for the account of the Trust or the Trustees, including without limitation
the rights referenced in Article VIII, Section 9 hereof;
<PAGE>
(c) "Trustee" refers to each of the Initial Trustees who have
signed this Declaration, so long as such persons continue in office in
accordance with the terms hereof, and all other individuals who may from time to
time be duly elected or appointed to serve as Trustees hereunder in accordance
with the provisions hereof, so long as such persons continue in office in
accordance with the terms hereof, and all references herein to a Trustee or the
Trustees shall refer to such person or persons in their capacity as trustees
hereunder;
(d) "Shares" means the units of beneficial interest into which
the beneficial interest in the Trust and each Series and each Class thereof of
the Trust shall be divided from time to time and includes fractions of Shares as
well as whole Shares;
(e) "Shareholder" means a record owner of outstanding Shares;
(f) "Person" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures, estates and other entities,
whether or not legal entities, and governments and agencies and political
subdivisions thereof, whether domestic or foreign;
(g) The "1940 Act" refers to the Investment Company Act of
1940 and the rules and regulations thereunder, all as amended from time to time
and any orders thereunder which may from time to time be applicable to the
Trust;
(h) The terms "Commission" and "Principal Underwriter" shall
have the meanings given them in the 1940 Act;
(i) "Declaration" shall mean this Agreement and Declaration of
Trust, as amended and in effect from time to time. Reference in this Declaration
of Trust to "Declaration," "hereof," "herein," "hereby," and "hereunder" shall
be deemed to refer to this Declaration rather than the article or section in
which such words appear;
(j) "By-Laws " shall mean the By-Laws of the Trust referred to
in Article IV, Section 3 hereof, as amended from time to time and incorporated
herein by reference;
(k) The term "Interested Person" has the meaning given it in
the 1940 Act;
(l) "Investment Manager" means a party furnishing services to
the Trust pursuant to any contract described in Article IV, Section 7(a) hereof;
(m) "Series" refers to each Series of the Trust established
and designated under or in accordance with the provisions of Article III hereof;
(n) "Class" means a separately designated class of shares of a
Series established in accordance with the provisions of Article III of this
Declaration, with such varying rights from each other Class of such Series as
may be established in accordance with the provisions of Article III of this
Declaration; and
-2-
<PAGE>
(o) "Board of Trustees" means such individuals who at any
given time constitute the Trustees.
ARTICLE II
Purpose of Trust
The purpose of the Trust is to conduct, operate and carry on the
business of a management investment company registered under the 1940 Act
through one or more Series investing primarily in securities.
ARTICLE III
Shares of Beneficial Interest
Section 1. Description of Shares.
The beneficial interest in the Trust shall at all times be divided
into transferable units to be called Shares of beneficial interest, each with a
par value of one tenth of one cent ($.001). The Trustees may, from time to
time, authorize the division of Shares into separate Series and the division of
any Series into two or more separate classes of Shares, as they deem necessary
and desirable. The different Series shall be established and designated, and
the variations in the relative rights and preferences as between the different
Series shall be fixed and determined, by the Trustees, without the requirement
of Shareholder approval.
Subject to the provisions of Section 6 of this Article III, each
Share shall have voting rights as provided in Article V hereof and in the By-
Laws, and holders of the Shares of any Series shall be entitled to receive
dividends, when, if and as declared with respect thereto in the manner provided
in Article VI, Section 1 hereof. No Shares shall have any priority or preference
over any other Share of the same Series or Class with respect to dividends or
distributions upon termination of the Trust or of such Series or Class made
pursuant to Article VIII, Section 2 hereof. All dividends and distributions
shall be made ratably among all Shareholders of a particular Series or Class
thereof from the assets held with respect to such Series according to the number
of Shares of such Series or Class thereof from the assets held with respect to
such Series according to the number of Shares of such Series or Class held of
record by such Shareholder on the record date for any dividend or distribution
or on the date of termination, as the case may be. Shareholders shall have no
preemptive or other right to subscribe to any additional Shares or other
securities issued by the Trust or any Series or Class. The Trustees may from
time to time divide or combine the Shares of any particular Series or Class
without thereby materially changing the proportionate beneficial interest of the
Shares of that Series or Class in the assets held with respect to that Series or
materially affecting the rights of Shares of any other Series or Class.
The number of authorized Shares and the number of Shares of each
Series and Class that may be issued is unlimited. The Trustees may classify or
reclassify any unissued Shares or any Shares previously issued and reacquired of
any Series or Class into one or more Series or Classes that are now or hereafter
established and designated from time to time. The Trustees may hold as treasury
Shares, reissue for such consideration and on such terms as they
-3-
<PAGE>
may determine, or cancel, at their discretion from time to time, any Shares of
any Series or Class reacquired by the Trust.
Section 2. Ownership of Shares.
The ownership of Shares shall be recorded on the books of the Trust
or of a transfer or similar agent for the Trust, which books shall be maintained
separately for the Shares of each Series or Class. No certificates certifying
the ownership of Shares shall be issued except as the Board of Trustees may
otherwise determine from time to time. The Trustees may make such rules as they
consider appropriate for the transfer of Shares of each Series or Class and
similar matters. The record books of the Trust as kept by the Trust or any
transfer or similar agent, as the case may be, shall be conclusive as to who are
the Shareholders of each Series or Class and as to the number of Shares of each
Series or Class held by each Shareholder.
Section 3. Investments in the Trust; Consideration.
Shares of the Trust shall be offered for sale and sold in such
manner and at such times, and subject to such requirements and for such
consideration, as may be determined from time to time by the Trustees, subject
to applicable requirements of law, including the 1940 Act. To the extent
permitted by applicable law, Shares may be sold subject to imposition of such
sales charges, deferred sales charges, asset-based sales charges and redemption
fees as may be determined by the Trustees. All Shares when issued on the terms
determined by the Trustees shall be fully paid and nonassessable.
Section 4. Status of Shares and Limitation of Personal Liability.
Shares shall be deemed to be personal property giving only the
rights provided in this instrument. Every Shareholder by virtue of having become
a Shareholder shall be held to have expressly assented and agreed to the terms
hereof and to have become a party hereto. The death of a Shareholder shall not
operate to terminate the Trust, and shall not entitle the representative of any
deceased Shareholder to an accounting or to take any action in court or
elsewhere against the Trust or the Trustees, but entitles such representative
only to the rights of said deceased Shareholder under this Trust. Ownership of
Shares shall not entitle the Shareholder to any title in or to the whole or any
part of the Trust Property or to any right to call for a partition or division
of the same or for an accounting, nor shall the ownership of Shares constitute
the Shareholders as partners. Neither the Trust nor the Trustees, nor any
officer, employee or agent of the Trust shall have any power to bind personally
any Shareholders, nor, except as specifically provided herein, to call upon any
Shareholder for the payment of any sum of money or assessment whatsoever other
than such as the Shareholder may at any time personally agree to pay.
Section 5. Power of Board of Trustees to Change Provisions Relating to Shares.
Notwithstanding any other provisions of this Declaration and without
limiting the power of the Board of Trustees to amend the Declaration as provided
elsewhere herein, the Board of Trustees shall have the power to amend this
Declaration, at any time and from time to
-4-
<PAGE>
time, in such manner as the Board of Trustees may determine in its sole
discretion, without the need for Shareholder action, so as to add to, delete,
replace or otherwise modify any provisions relating to the Shares contained in
this Declaration, provided that before adopting any such amendment without
Shareholder approval the Board of Trustees shall determine that it is consistent
with the fair and equitable treatment of all Shareholders or that Shareholder
approval is not otherwise required by the 1940 Act or other applicable law. If
Shares have been issued, Shareholder approval shall be required to adopt any
amendments to this Declaration which would adversely affect to a material degree
the rights and preferences of the Shares of any Series or Class or to increase
or decrease the par value of the Shares of any Series or Class.
Subject to this Section 5, the Board of Trustees may amend the
Declaration of Trust to amend any of the provisions set forth in paragraphs (a)
through (g) of Section 6 of this Article III.
Section 6. Establishment and Designation of Series and Classes.
The sole initial Series of Shares of the Trust (the "Initial Series"),
which Series was established and designated by the Declaration of Trust dated
January 2, 1997, is LEVCO Equity Value Fund. Shares of such Initial Series
shall be of two classes, Class A and Class B.
The establishment and designation of any additional Series or Class
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 the Shares of such Series or Class, or as otherwise
provided in such instrument. Each instrument referred to in this paragraph
shall have the status of an amendment to this Declaration.
Shares of the Initial Series, and Shares of each additional Series
hereafter established pursuant to this Section 6, unless otherwise provided in
the instrument establishing such Series, shall have the following relative
rights and preferences:
(a) Assets Held With Respect to a Particular Series or Class.
All consideration received by the Trust for the issuance or sale of Shares of a
particular Series or Class together with all assets in which such consideration
is invested or reinvested, all income, earnings and profits thereon, and the
proceeds thereof, from whatever source derived, including, without limitation,
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 be held with respect to that Series or
Class for all purposes, subject only to the rights of creditors of such Series,
and shall be so recorded upon the books of account of the Trust. All such
consideration, assets, income, earnings, profits and proceeds thereof of a
Series or Class, are herein referred to as "assets held with respect to" that
Series or Class. In the event that there are any assets, income, earnings,
profits and proceeds thereof, funds or payments which are not readily
identifiable as assets held with respect to any particular Series or Class
(collectively "General Assets"), the Trustees shall allocate such General Assets
to, between or among any one or more of the Series or Classes in such manner and
on such basis as the Trustees, in their sole discretion, deem fair and
equitable, and any General Assets so allocated to a particular Series or Class
shall be assets held with respect to that Series or Class.
-5-
<PAGE>
Each such allocation by the Trustees shall be conclusive and binding upon the
Shareholders of all Series and Classes for all purposes.
(b) Liabilities Attributable to a Particular Series or Class.
The assets of the Trust held with respect to each particular Series and Class
thereof shall be charged with all liabilities, expenses, costs, charges and
reserves attributable to that Series or Class. All such liabilities, expenses,
costs, charges, and reserves so charged to a Series or Class are herein referred
to as "liabilities attributable to" that Series or Class. Any liabilities of the
Trust which are not readily identifiable as being attributable to any particular
Series or Class thereof ("General Liabilities") shall be allocated and charged
by the Trustees to, between or among any one or more of the Series or Classes in
such manner and on such basis as the Trustees, in their sole discretion, deem
fair and equitable, and any General Liabilities so allocated to a particular
Series or Class shall be liabilities attributable to that Series or Class. Each
such allocation of liabilities, expenses, costs, charges and reserves by the
Trustees shall be conclusive and binding upon the holders of all Series and
Classes for all purposes. All Persons who have extended credit which has been
allocated to a particular Series, or who have a claim or contract which has been
allocated to any particular Series, shall look, and shall be required by
contract to look exclusively, to the assets of that particular Series for
payment of such credit, claim or contract. In the absence of an express
contractual agreement so limiting the claims of such creditors, claimants and
contract providers, each creditor, claimant and contract provider will be deemed
nevertheless to have impliedly agreed to such limitation unless an express
provision to the contrary has been incorporated in the written contract or other
document establishing the claimant relationship.
Without limiting the foregoing, but subject to the right of the
Trustees at the direction of the Investment Manager to allocate liabilities 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 belonging to such Series only and not against
the assets of the Trust generally or belonging to any other Series. Notice of
this contractual limitation on liability among Series shall be set forth in the
Trust's Certificate of Trust by amendment as filed or to be filed in the Office
of the Secretary of the State of Delaware pursuant to the Delaware Business
Trust Act, as amended from time to time (the "Delaware Act"), and upon the
giving of such notice in such Certificate of Trust, the statutory provisions of
Section 3804 of the Delaware Act relating to limitations on liabilities among
Series (and the statutory effect under Section 3804 of setting forth such notice
in the certificate of trust) shall become applicable to the Trust and each
Series. Any person extending credit to, contracting with or having any claim
against any Series may look only to the assets of that Series to satisfy or
enforce any debt, with respect to that Series. No beneficial owner or former
beneficial owner of any Series shall have a claim on or any right to any assets
allocated or belonging to any other Series.
(c) Dividends, Distributions, Redemptions and Repurchases.
Notwithstanding any other provisions of this Declaration, including, without
limitation, Article VI: (i) no dividend or distribution, including, without
limitation, any distribution paid upon termination of the Trust or of any Series
or Class with respect to, nor any redemption or
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repurchase of, the Shares of any Series or Class, shall be effected by the Trust
other than from the assets held with respect to such Series or Class, and (ii)
except as specifically provided in Section 7 of this Article III, no Shareholder
of any particular Series or Class shall otherwise have any right or claim
against the assets held with respect to any other Series or Class, except to the
extent that such Shareholder has such a right or claim hereunder as a
Shareholder of such other Series or Class. The Trustees shall have full
discretion, to the extent not inconsistent with the 1940 Act, to determine which
items shall be treated as income or capital gains and which items shall be
treated as capital; and each such determination and allocation shall be
conclusive and binding upon the Shareholders.
(d) Voting. All Shares of the Trust entitled to vote on a
matter shall vote separately by Series and by Class: that is, the Shareholders
of each Series and Class shall have the right to approve or disapprove matters
affecting the Trust and that Series and Class as if the Series or Class were
separate companies. There are, however, two exceptions to voting by separate
Series and Classes. First, if as to any matter the 1940 Act requires or permits
all Shares entitled to vote with respect to such matter to be voted in the
aggregate without differentiation between the separate Series and Classes, then
all Shares entitled to vote on such matter shall vote as a single class. Second,
if any matter affects only the interests of some but not all Series or Classes,
then only the Shareholders of such affected Series or Classes shall be entitled
to vote on the matter.
(e) Equality. All the Shares of each particular Series or
Class shall represent an equal proportionate interest in the assets attributable
to that Series or Class (subject to the liabilities attributable to that Series
or Class and such rights and preferences as may have been established and
designated with respect to such Series or Class), and each Share of any
particular Series or Class shall be equal to each other Share of that Series or
Class.
(f) Fractional Shares. Any fractional Share of a Series or
Class shall carry proportionately all the rights and obligations of a whole
share of that Series or Class, including rights with respect to voting, receipt
of dividends and distributions, redemption of Shares and termination of the
Trust.
(g) Exchange Privilege. The Trustees shall have the authority
to provide that the holders of Shares of any Series or Class shall have the
right to exchange said Shares for Shares of one or more other Series or Classes
of Shares in accordance with such requirements, limitations and procedures as
may be established by the Trustees.
Section 7. Indemnification of Shareholders.
If any Shareholder or former Shareholder shall be exposed to liability
by reason of a claim or demand relating to his or her being or having been a
Shareholder, and not because of his or her acts or omissions, the Shareholder or
former Shareholder (or his or her heirs, executors, administrators, or other
legal representatives or in the case of a corporation or other entity, its
corporate or other general successor) shall be entitled to be held harmless from
and indemnified out of the assets of the Trust against all loss and expense
arising from such claim or demand.
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ARTICLE IV
The Board of Trustees
Section 1. Number, Election and Tenure.
The number of Trustees constituting the Board of Trustees shall be
fixed from time to time by a written instrument signed, or by resolution
approved at a duly constituted meeting, by a majority of the Board of Trustees;
provided, however, that the number of Trustees shall in no event be less than
one (1) nor more than fifteen (15). The Board of Trustees, by action of a
majority of the then Trustees at a duly constituted meeting, may fill vacancies
in the Board of Trustees or remove Trustees with or without cause; except that
if required by the 1940 Act, a vacancy shall be filled only by a person elected
by Shareholders.
Each Trustee shall serve during the continued lifetime of the Trust
until he dies, resigns, is declared bankrupt or incompetent by a court of
appropriate jurisdiction, or is removed, or, if sooner, until the next meeting
of Shareholders called for the purpose of electing Trustees and until the
election and qualification of his successor. Any Trustee may resign at any time
by written instrument signed by him and delivered to any officer of the Trust or
to a meeting of the Trustees. Such resignation shall be effective upon receipt
unless specified to be effective at some other time. Except to the extent
expressly provided in a written agreement with the Trust, no Trustee resigning
and no Trustee removed shall have any right to any compensation for any period
following his resignation or removal, or any right to damages on account of such
removal. The Shareholders may elect Trustees at any meeting of Shareholders
called by the Trustees for that purpose. Any Trustee may be removed at any
meeting of Shareholders by a vote of two-thirds of the outstanding Shares of the
Trust. A meeting of Shareholders for the purpose of electing or removing one or
more Trustees shall be called (i) by the Trustees upon their own vote, or (ii)
upon the demand of a Shareholder or Shareholders owning Shares representing 10%
or more of all votes entitled to be cast by outstanding Shares.
Section 2. Effect of Death, Resignation, etc. of a Trustee.
The death, declination, resignation, retirement, removal or
incapacity of one or more Trustees, or all of them, shall not operate to annul
the Trust or to revoke any existing agency created pursuant to the terms of this
Declaration. Whenever a vacancy in the Board of Trustees shall occur, until such
vacancy is filled as provided in Article IV, Section 1, 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. As conclusive evidence of such vacancy, a written instrument
certifying the existence of such vacancy may be executed by an officer of the
Trust or by a majority of the Board of Trustees. In the event of the death,
declination, resignation, retirement, removal or incapacity of all the then
Trustees within a short period of time and without the opportunity for at least
one Trustee being able to appoint additional Trustees to fill vacancies, the
Trust's Investment Manager is hereby empowered to appoint new Trustees, subject
to the provisions of Section 16(a) of the 1940 Act.
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Section 3. Powers.
Subject to the provisions of this Declaration, the business of the
Trust shall be managed by the Board of Trustees, and such Board shall have all
powers necessary or convenient to carry out that responsibility.
Without limiting the foregoing, the Trustees may: (i) adopt By-Laws
not inconsistent with this Declaration providing for the regulation and
management of the affairs of the Trust and may amend and repeal the By-Laws to
the extent that such By-Laws do not reserve that right to the Shareholders; (ii)
elect persons to serve as Trustees and fill vacancies in the Board of Trustees,
and remove Trustees from such Board in accordance with the provisions of this
Declaration, and may elect and remove such officers and appoint and terminate
such agents as they consider appropriate; (iii) appoint from their own number
and establish and terminate one or more committees consisting of one or more
Trustees which may exercise the powers and authority of the Board of Trustees to
the extent that the Trustees determine; (iv) employ one or more custodians of
the assets of the Trust and may authorize such custodians to employ sub-
custodians and to deposit all or any part of such assets in a system or systems
for the central handling of securities or with a Federal Reserve Bank, retain a
transfer agent or a shareholder servicing agent, or both, and employ such other
Persons as the Trustees may deem desirable for the transaction of business of
the Trust or any Series; (v) provide for the issuance, sale and distribution of
Shares by the Trust directly or through one or more Principal Underwriters or
otherwise; (vi) redeem, repurchase, retire, cancel, acquire, hold, resell,
reissue, classify, reclassify, and transfer and otherwise deal in Shares
pursuant to applicable law; (vii) set record dates for the determination of
Shareholders with respect to various matters; (viii) declare and pay dividends
and distributions to Shareholders of each Series or Class from the assets of
such Series or Class; (ix) collect all property due to the Trust, pay all
claims, including taxes, against the Trust Property, prosecute, defend,
compromise or abandon any claims relating to the Trust Property, foreclose any
security interest securing any obligations by virtue of which any property is
owed to the Trust, and enter into releases, agreements and other instruments;
(x) incur and pay any expenses which, in the opinion of the Trustees, are
necessary or incidental to carry out the purposes of the Trust, and pay
reasonable compensation from the funds of the Trust to themselves as Trustees;
(xi) engage in and prosecute, defend, compromise, abandon, or adjust, by
arbitration or otherwise, any actions, suits, proceedings, disputes, claims and
demands relating to the Trust expenses incurred in connection therewith,
including those of litigation; (xii) indemnify any Person with whom the Trust
has dealings, including the Shareholders, Trustees, officers, employees, agents,
Investment Managers, or Principal Underwriters of the Trust, to the extent
permitted by law and not inconsistent with any applicable provisions of the By-
Laws as the Trustees shall determine; (xiii) determine and change the fiscal
year of the Trust or any Series and the method by which its accounts shall be
kept; (xiv) adopt a seal for the Trust or any Series; and (xv) in general,
delegate such authority as they consider desirable to any officer of the Trust,
to any committee of the Trustees and to any agent or employee of the Trust or to
any custodian, transfer or shareholder servicing agent, Investment Manager or
Principal Underwriter. Any determination made by the Trustees in good faith as
to what is in the interests of the Trust shall be conclusive. In construing the
provisions of this Declaration, the presumption shall be in favor
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of a grant of power to the Trustees. Unless otherwise specified or required by
law, any action by the Board of Trustees shall be deemed effective if approved
or taken by a majority of the Trustees then in office.
Without limiting the foregoing, the Trust shall have power and
authority:
(a) To invest and reinvest cash, to hold cash uninvested, and to
subscribe for, invest in, reinvest in, purchase or otherwise acquire, own, hold,
pledge, sell, assign, transfer, exchange, distribute, write options on, lend or
otherwise deal in or dispose of contracts for the future acquisition or delivery
of securities of every nature and kind, including, without limitation, all types
of stocks, bonds, bills, notes, debentures, options, negotiable or non-
negotiable instruments, obligations, evidences of indebtedness, certificates of
deposit or indebtedness, commercial paper, repurchase agreements, bankers'
acceptances and other securities of any kind, issued, created, guaranteed, or
sponsored by any and all Persons, including, without limitation, states,
territories, and possessions of the United States and the District of Columbia
and any political subdivision, agency, or instrumentality thereof, any political
subdivision of the U.S. Government or any foreign government, or any
international instrumentality, or by any bank or saving institution, or by any
corporation or organization organized under the laws of the United States or of
any state, territory, or possession thereof, or by any corporation or
organization organized under any foreign law, or in "when issued" or "delayed
delivery" contracts for any such securities, to change the investments of the
assets of the Trust; 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,
to exercise any of said rights, powers, and privileges in respect of any of said
instruments;
(b) To enter into futures contracts (including, but not limited to,
interest rate and stock index futures contracts) and options thereon;
(c) To sell, exchange, lend, pledge, mortgage, hypothecate, lease, or
write options with respect to or otherwise deal in any property rights relating
to any or all of the assets of the Trust or any Series;
(d) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
proxies or powers of attorney to such Person or Persons as the Trustees shall
deem proper, granting to such Person or Persons such power and discretion with
relation to securities or property as the Trustees shall deem proper;
(e) To exercise powers and rights to subscription or otherwise which
in any manner arise out of ownership of securities;
(f) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, or in its own
name or in the name of a custodian or sub-custodian or a nominee or nominees or
otherwise;
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(g) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer of any security which is
held in the Trust; to consent to any contract, lease, mortgage, purchase or sale
of property by such corporation or issuer; and to pay calls or subscriptions
with respect to any security held in the Trust;
(h) To join with other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to deposit any
security with, or transfer any security to, any such committee, depositary or
trustee, and to delegate to them such power and authority with relation to any
security (whether or not so deposited or transferred) as the Trustees shall deem
proper, and to agree to pay, and to pay, such portion of the expenses and
compensation of such committee, depositary or trustee as the Trustees shall deem
proper;
(i) To compromise, arbitrate or otherwise adjust claims in favor of or
against the Trust or any matter in controversy, including but not limited to a
claim for taxes;
(j) To enter into joint ventures, general or limited partnerships
and any other combinations or associations;
(k) To borrow funds or other property in the name of the Trust
exclusively for Trust purposes;
(l) To endorse or guarantee the payment of any notes or other
obligations of any Person; to make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof;
(m) To purchase and pay for out of Trust Property such insurance as
the Trustees may deem necessary or appropriate for the conduct of the business,
including, without limitation, insurance policies insuring the assets of the
Trust or payment of distributions and principal on its portfolio investments,
and insurance policies insuring the Shareholders, Trustees, officers, employees,
agents, Investment Managers, Principal Underwriters, or independent contractors
of the Trust, individually against all claims and liabilities of every nature
arising by reason of holding Shares, holding, being or having held any such
office or position, or by reason of any action alleged to have been taken or
omitted by any such Person as Trustee, officer, employee, agent, Investment
Manager, Principal Underwriter, or independent contractor, including any action
taken or omitted that may be determined to constitute negligence, whether or not
the Trust would have the power to indemnify such Person against liability,
subject to such limitations as may be imposed by law;
(n) To adopt, establish and carry out pension, profit-sharing, share
bonus, share purchase, savings, thrift and other retirement, incentive and
benefit plans, trusts and provisions, including the purchasing of life insurance
and annuity contracts as a means of providing such retirement and other
benefits, for any or all of the Trustees, officers, employees and agents of the
Trust; and
(o) To conduct, operate and carry on any other lawful business and
engage in any other lawful business activity which the Trustees, in their sole
and absolute
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discretion, consider to be (i) incidental to the business of the Trust as an
investment company, (ii) conducive to or expedient for the benefit or protection
of the Trust or any Series or the Shareholders, or (iii) calculated in any other
manner to promote the interests of the Trust or any Series or the Shareholders.
The Trust shall not be limited to investing in obligations maturing
before the possible termination of the Trust or one or more of its Series. The
Trust shall not in any way be bound or limited by any present or future law or
custom in regard to investment by fiduciaries. The Trust shall not be required
to obtain any court order to deal with any assets of the Trust or take any other
action hereunder.
Section 4. Payment of Expenses by the Trust.
The Trustees are authorized to pay or cause to be paid out of the
principal or income of the Trust, or partly out of the principal and partly out
of income, as they deem fair, all expenses, fees, charges, taxes and liabilities
incurred or arising in connection with the Trust, or in connection with the
management thereof, including, but not limited to, the Trustees' compensation
and such expenses and charges for the services of the Trust's officers,
employees, Investment Managers, Principal Underwriters, auditors, counsel,
custodian, transfer agent, administrator, Shareholder servicing agent, and such
other agents or independent contractors and such other expenses and charges as
the Trustees may deem necessary or proper to incur.
Section 5. Payment of Expenses by Shareholders.
The Trustees shall have the power, as frequently as they may
determine, to cause each Shareholder, or each Shareholder of any particular
Series, to pay directly, in advance or arrears, for charges of the Trust's
custodian or transfer, Shareholder servicing or similar agent, an amount fixed
from time to time by the Trustees, by setting off such charges due from such
Shareholder from declared but unpaid dividends owed such Shareholder and/or by
reducing the number of Shares in the account of such Shareholder by that number
of full and/or fractional Shares which represents the outstanding amount of such
charges due from such Shareholder.
Section 6. Ownership of Assets of the Trust.
Title to all of the assets of the Trust shall at all times be
considered as vested in the Trust, except that the Trustees shall have 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 the Trust, or in the name of any other
Person as nominee, on such terms as the Trustees may determine. 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 the
resignation, removal or death of a Trustee he 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. Such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered.
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Section 7. Service Contracts.
(a) Subject to such requirements and restrictions as may be set
forth in the By-Laws, the Trustees may, at any time and from time to time,
contract for exclusive or nonexclusive investment advisory, management and
administrative services for the Trust or for any Series with any corporation,
trust, association or other organization; and any such contract may contain such
other terms as the Trustees may determine, including without limitation,
authority for one or more Investment Managers to determine from time to time
without prior consultation with the Trustees what investments shall be
purchased, held, sold or exchanged and what portion, if any, of the assets of
the Trust shall be held uninvested and to make changes in the Trust's
investments, or such other activities as may specifically be delegated to such
party.
(b) The Trustees may also, at any time and from time to time, contract
with any corporation, trust, association or other organization, appointing it
exclusive or nonexclusive distributor or Principal Underwriter for the Shares of
one or more of the Series or Classes or other securities to be issued by the
Trust.
(c) The Trustees are also empowered, at any time and from time to
time, to contract with any corporation, trust, association or other
organization, appointing it the administrator, custodian, transfer agent or
shareholder servicing agent for the Trust or one or more of its Series.
(d) The Trustees are further empowered, at any time and from time to
time, to contract with any entity to provide such other services to the Trust or
any Series or Class, as the Trustees determine to be in the best interests of
the Trust or the Series or Class.
(e) The fact that:
(i) any of the Shareholders, Trustees, or officers of the
Trust is a shareholder, director, officer, partner, trustee, employee,
Investment Manager, Principal Underwriter, distributor, or affiliate
or agent of or for any corporation, trust, association, or other
organization, or for any parent or affiliate of any organization with
which an advisory, management or administration contract, or Principal
Underwriter's or distributor's contract, or transfer agent,
shareholder servicing or other type of service contract may have been
or may hereafter be made, or that any such organization, or any parent
or affiliate thereof, is a Shareholder or has an interest in the
Trust, or that
(ii) any corporation, trust, association or other
organization with which an advisory, management or administration
contract or Principal Underwriter's or distributor's contract, or
transfer agent, shareholder servicing or other type of service
contract may have been or may hereafter be made also has an advisory,
management or administration contract, or principal underwriter's or
distributor's contract, or transfer agent, shareholder servicing or
other service contract with other organizations, or has other business
or interests,
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shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same, or create any liability or accountability to the Trust or its
Shareholders, provided approval of each such contract is made pursuant to the
requirements of the 1940 Act.
ARTICLE V
Shareholders' Voting Powers
Subject to the provisions of Article III, Section 6(d), the
Shareholders shall have power to vote only (i) for the election or removal of
Trustees as provided in Article IV, Section 1, and (ii) with respect to such
additional matters relating to the Trust as may be required by this Declaration,
the By-Laws, the 1940 Act or any registration of the Trust with the Commission
(or any successor agency) or any state, or as the Trustees may consider
necessary or desirable. Each whole Share shall be entitled to one vote as to
any matter on which it is entitled to vote and each fractional Share shall be
entitled to a proportionate fractional vote, except that (i) Shares held in the
Treasury as of the record date, as determined in accordance with the By-Laws,
shall not be voted, and (ii) when Shares of more than one Series or Class vote
together on a matter as a single class, each Share (or fraction thereof) shall
be entitled to that number of votes which is equal to the net asset value of
such Share (or fractional Share) determined as of the applicable record date.
There shall be no cumulative voting in the election of Trustees.
Until Shares are issued, the Trustees may exercise all rights of
Shareholders and may take any action that the law, this Declaration or the By-
Laws require to be taken by Shareholders.
ARTICLE VI
Net Asset Value, Distributions and Redemptions
Section 1. Determination of Net Asset Value, Net Income, Dividends and
Distributions.
Subject to Article III, Section 6 hereof, the Trustees, in their
absolute discretion, may prescribe such bases and times for valuing the net
assets of the Trust and determining the net asset value of Shares, which net
asset value shall be separately determined for each Series and Class, for
determining the net income attributable to the Shares of any Series or Class, or
for declaring and paying dividends and other distributions on Shares of any
Series or Class, as they may deem necessary or desirable.
The Trustees shall, in their sole discretion, consistent with
applicable law, determine whether any cash or property of the Trust or any stock
dividends received by the Shareholders shall be treated as income or as
principal and whether any item of expense shall be charged to the income or the
principal amount, and any such determination made in good faith shall be
conclusive and binding upon the Shareholders.
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Section 2. Redemptions and Repurchases.
The Trust shall purchase such Shares as are offered by any
Shareholder for redemption upon the presentation of a proper instrument of
transfer together with a request directed to the Trust or a Person designated by
the Trust that the Trust purchase such Shares or in accordance with such other
procedures for redemption as the Trustees may from time to time authorize; and
the Trust will pay therefor the net asset value thereof by wire or check, in
accordance with applicable law, less the amount of any deferred sales charge or
redemption fee that is applicable. Payment for said Shares shall be made by the
Trust to the Shareholder within seven days after the date on which the request
is made in proper form, except as may otherwise be permitted by the 1940 Act.
ARTICLE VII
Compensation and Limitation of Liability of Trustees
Section 1. Compensation.
The Trustees as such shall be entitled to reasonable compensation
from the Trust, and they may fix the amount of such compensation. Nothing herein
shall in any way prevent the employment of any Trustee for advisory, management,
legal, accounting, investment banking or other services and payment for the same
by the Trust.
Section 2. Indemnification and Limitation of Liability.
The Trustees shall not be responsible or liable in any event for any
neglect or wrongdoing of any officer, agent, employee, Investment Manager or
Principal Underwriter of the Trust, nor shall any Trustee be responsible for the
act or omission of any other Trustee, and the Trust out of its assets shall have
the power to indemnify and hold harmless each and every Trustee from and against
any and all claims and demands whatsoever arising out of or related to each
Trustee's performance of his duties as a Trustee of the Trust to the fullest
extent permitted by law, subject to such limitations and requirements as may be
set forth in the By-Laws; provided that nothing herein contained shall
indemnify, hold harmless or protect any Trustee from or against any liability to
the Trust or any Shareholder 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.
Every note, bond, contract, instrument, certificate or undertaking
and every other act or thing whatsoever issued, executed or done by or on behalf
of the Trust or the Trustees or any of them in connection with the Trust shall
be conclusively deemed to have been issued, executed or done only in or with
respect to their or his capacity as Trustees or Trustee, and such Trustees or
Trustee shall not be personally liable thereon.
Section 3. Trustee's Good Faith Action; Expert Advice; No Bond or Surety.
The exercise by the Trustees of their powers and discretions
hereunder shall be binding upon everyone interested. A Trustee shall be liable
to the Trust and to any Shareholder
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solely for his own willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of Trustee, and
shall not be liable for errors of judgment or mistakes of fact or law. The
Trustees may take advice of counsel or other experts with respect to the meaning
and operation of this Declaration, and shall be under no liability for any act
or omission in accordance with such advice nor for failing to follow such
advice. The Trustees shall not be required to give any bond as such, nor any
surety if a bond is required.
Section 4. Insurance.
The Trustees shall be entitled and empowered to the fullest extent
permitted by law to purchase with Trust assets insurance for liability and for
all expenses reasonably incurred or paid or expected to be paid by a Trustee or
officer in connection with any claim, action, suit or proceeding in which he
becomes involved by virtue of his capacity or former capacity with the Trust.
ARTICLE VIII
Miscellaneous
Section 1. Liability of Third Persons Dealing with Trustees.
No Person dealing with the Trustees shall be bound to make any
inquiry concerning the validity of any transaction made or to be made by the
Trustees or to see to the application of any payments made or property
transferred to the Trust or upon its order.
Section 2. Termination of Trust or Series or Class.
Unless terminated as provided herein, the Trust shall continue
without limitation of time. The Trust may be terminated at any time by vote of
the holders of a majority of the outstanding Shares of each Series entitled to
vote, voting separately by Series, or by the Trustees by written notice to the
Shareholders. Any Series or Class may be terminated at any time by vote of the
holders of a majority of the outstanding Shares of that Series or Class
respectively or by the Trustees by written notice to the Shareholders of that
Series or Class.
Upon termination of the Trust (or any Series or Class, as the case
may be), after paying or otherwise providing for all charges, taxes, expenses
and liabilities held, severally, with respect to each Series (or the applicable
Series or Class), whether due or accrued or anticipated as may be determined by
the Trustees, the Trust shall, in accordance with such procedures as the
Trustees consider appropriate, reduce the remaining assets held, severally, with
respect to each Series (or the applicable Series or Class) to distributable form
in cash or shares or other securities, or any combination thereof, and
distribute the proceeds held with respect to each Series (or the applicable
Series or Class) to the Shareholders of that Series or Class, as a Series or
Class, ratably according to the number of Shares of that Series or Class held by
the several Shareholders on the date of termination.
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Section 3. Merger and Consolidation.
The Trustees may cause (i) the Trust or one or more of its Series to
the extent consistent with applicable law to be merged into or consolidated with
another trust or company, (ii) Shares of the Trust or any Series to be converted
into beneficial interests in another business trust (or series thereof) created
pursuant to this Section 3 of Article VIII, (iii) the sale of substantially all
of the assets of the Trust or one or more of its Series to another trust or
company in exchange for the assumption of the liabilities of the Trust or the
Series and the issuance of beneficial interests in such trust or company, or
(iv) Shares to be exchanged under or pursuant to any state or federal statute to
the extent permitted by law. Such merger or consolidation, Share conversion,
sale of assets or Share exchange must be authorized by vote of the holders of a
majority of the outstanding Shares of the affected Series; provided that in all
respects not governed by applicable law, the Trustees shall have the power to
prescribe the procedures necessary or appropriate to accomplish the transaction,
including the power to create one or more separate business trusts to which all
or any part of the assets, liabilities, profits or losses of the Trust may be
transferred and to provide for the conversion of Shares of the Trust or any
Series into beneficial interests in such separate business trust or trusts (or
series thereof). The Trustees may also cause substantially all of the assets of
any Series (the "Acquired Series") to be sold to another Series if authorized by
vote of the holders of a majority of the outstanding Shares of the Acquired
Series, and to the extent not governed by applicable law, the Trustees shall
have the power to prescribe the procedures necessary or appropriate to
accomplish the transaction. Upon consummation of any transaction contemplated
by this Section 3, the Trust or applicable Series, as the case may be, shall
distribute its remaining assets to Shareholders and terminate as provided by
Section 2 of this Article VIII.
Section 4. Amendments.
(a) This Declaration may be restated or amended at any time by an
instrument in writing signed by a majority of the Trustees and, if required by
applicable law or this Declaration or the By-Laws, by approval of such amendment
by Shareholders in accordance with Article V hereof and the By-Laws. Any such
restatement or amendment hereto shall be effective immediately upon execution
and approval. The Certificate of Trust of the Trust may be restated or amended
by a similar procedure, and any such restatement or amendment shall be effective
immediately upon filing with the Office of the Secretary of State of the State
of Delaware or upon such future date as may be stated therein.
(b) Nothing contained in this Declaration shall permit the
amendment of this Declaration to impair the exemption from personal liability of
the Shareholders, Trustees, officers, employees and agents of the Trust or to
permit assessments on Shareholders.
Section 5. Filing of Copies; References; Headings.
The original or a copy of this Declaration and of each restatement
and amendment hereto shall be kept at the office of the Trust where it may be
inspected by any Shareholder. Anyone dealing with the Trust may rely on a
certificate by an officer of the Trust as to whether or not any such
restatements or amendments have been made and as to any matters in connection
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with the Trust hereunder; and, with the same effect as if it were the original,
may rely on a copy certified by an officer of the Trust to be a copy of this
Declaration or of any such restatement or amendment. 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 Declaration.
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. This Declaration may be simultaneously executed in any number of
counterparts, each of which shall be deemed an original, and such counterparts
together shall constitute one and the same instrument, which shall be
sufficiently evidenced by any such original counterpart.
Section 6. Applicable Law.
This Declaration is created under and is to be governed by and
construed and administered according to the laws of the State of Delaware and
the Delaware Business Trust Act, as amended from time to time (the "Delaware
Act"). The Trust shall be a Delaware business trust pursuant to the Delaware
Act, and without limiting the provisions hereof, the Trust may exercise all
powers which are ordinarily exercised by such a business trust.
Section 7. 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 regulated investment company
provisions of the Internal Revenue Code of 1986, as amended, or with other
applicable laws and regulations, the conflicting provision shall be deemed never
to have constituted a part of the Declaration of Trust; provided, however, that
such determination shall not affect any of the remaining provisions of the
Declaration of Trust or render invalid or improper any action taken or omitted
prior to such determination.
(b) If any provision of the 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 the
Declaration in any jurisdiction.
Section 8. Business Trust Only.
The Trustees intended to create a business trust pursuant to the
Delaware Act and thereby to create only the relationship of trustee and
beneficial owners within the meaning of the Delaware Act between the Trustees
and each Shareholder. It was 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 business trust pursuant
to the Delaware Act. Nothing in this Declaration shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or members of
a joint stock association.
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<PAGE>
Section 9. Use of the Name "LEVCO".
The name "LEVCO" and all rights to the use of the name "LEVCO"
belong to John A. Levin & Co., Inc. and its affiliates ("Levin & Co."). Levin &
Co. has consented to the use by the Trust of the word "LEVCO" and has granted to
the Trust a non-exclusive license to use such word as part of the name of the
Trust and the name of any Series. In the event an affiliate of Levin & Co. is
not appointed as the Investment Manager or ceases to be the Investment Manager
of the Trust or of any Series, the non-exclusive license granted herein may be
revoked in whole or in part by Levin & Co. and the Trust shall cease using the
name LEVCO as part of its name or the name of any Series, as soon as reasonably
practicable, unless otherwise consented to by Levin & Co. or any successor to
its interest in such name.
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<PAGE>
IN WITNESS WHEREOF, the Trustees named below do hereby make and
enter into this Amended and Restated Declaration of Trust as of the 1st day of
May, 1997.
/s/ John A. Levin
---------------------------------
John A. Levin, as Trustee and not
individually
/s/ Jeffrey A. Kigner
---------------------------------
Jeffrey A. Kigner, as Trustee and
not individually
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<PAGE>
BY-LAWS
OF
LEVCO SERIES TRUST
a Delaware Business Trust
As adopted January 2, 1997
<PAGE>
TABLE OF CONTENTS
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ARTICLE I OFFICES......................................... 1
SECTION 1. PRINCIPAL OFFICE................................ 1
SECTION 2. DELAWARE OFFICE................................. 1
ARTICLE II MEETINGS OF SHAREHOLDERS........................ 2
SECTION 1. TIME AND PLACE OF MEETINGS...................... 2
SECTION 2. MEETINGS........................................ 2
SECTION 3. NOTICE OF MEETINGS.............................. 2
SECTION 4. QUORUM; ADJOURNMENTS............................ 3
SECTION 5. VOTES REQUIRED.................................. 3
SECTION 6. VOTING.......................................... 3
SECTION 7. PROXIES......................................... 4
SECTION 8. PROCEDURES AT MEETINGS.......................... 4
SECTION 9. INFORMAL ACTION BY SHAREHOLDERS................. 4
ARTICLE III TRUSTEES........................................ 4
SECTION 1. POWERS.......................................... 4
SECTION 2. NUMBER OF TRUSTEES.............................. 5
SECTION 3. ANNUAL MEETINGS OF THE TRUSTEES................. 5
SECTION 4. REGULAR AND SPECIAL MEETINGS OF THE TRUSTEES.... 5
SECTION 5. NOTICE OF SPECIAL MEETING....................... 5
SECTION 6. QUORUM; ADJOURNMENT............................. 5
SECTION 7. VOTING.......................................... 6
SECTION 8. EXECUTIVE AND OTHER COMMITTEES.................. 6
SECTION 9. PARTICIPATION IN MEETINGS BY TELEPHONE.......... 6
SECTION 10. INFORMAL ACTION BY TRUSTEES..................... 7
SECTION 11. COMPENSATION.................................... 7
ARTICLE IV WAIVER OF NOTICE................................ 7
ARTICLE V OFFICERS........................................ 8
SECTION 1. EXECUTIVE OFFICERS.............................. 8
SECTION 2. OTHER OFFICERS AND AGENTS....................... 8
SECTION 3. TENURE, RESIGNATION AND REMOVAL................. 8
SECTION 4. VACANCIES....................................... 9
SECTION 5. COMPENSATION.................................... 9
SECTION 6. AUTHORITY AND DUTIES............................ 9
SECTION 7. CHAIRMAN........................................ 9
SECTION 8. PRESIDENT....................................... 9
SECTION 9. VICE-PRESIDENTS................................. 10
SECTION 10. ASSISTANT VICE-PRESIDENT........................ 10
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 11. SECRETARY............................................. 10
SECTION 12. ASSISTANT SECRETARIES................................. 10
SECTION 13. TREASURER............................................. 11
SECTION 14. ASSISTANT TREASURERS.................................. 11
ARTICLE VI INDEMNIFICATION OF TRUSTEES, OFFICERS, EMPLOYEES
AND OTHER AGENTS...................................... 11
SECTION 1. AGENTS, PROCEEDINGS AND EXPENSES...................... 11
SECTION 2. ACTIONS OTHER THAN BY THE TRUST....................... 12
SECTION 3. ACTIONS BY THE TRUST.................................. 12
SECTION 4. EXCLUSION OF INDEMNIFICATION.......................... 12
SECTION 5. SUCCESSFUL DEFENSE BY AGENT........................... 13
SECTION 6. REQUIRED APPROVAL..................................... 13
SECTION 7. ADVANCE OF EXPENSES................................... 13
SECTION 8. OTHER CONTRACTUAL RIGHTS.............................. 14
SECTION 9. LIMITATIONS........................................... 14
SECTION 10. INSURANCE............................................. 14
SECTION 11. FIDUCIARIES OF EMPLOYEE BENEFIT PLAN.................. 14
ARTICLE VII RECORDS AND REPORTS................................... 15
SECTION 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER.......... 15
SECTION 2. MAINTENANCE AND INSPECTION OF BY-LAWS................. 15
SECTION 3. MAINTENANCE AND INSPECTION OF OTHER RECORDS........... 15
SECTION 4. INSPECTION BY TRUSTEES................................ 15
SECTION 5. FINANCIAL STATEMENTS.................................. 16
ARTICLE VIII CONTRACTS, CHECKS AND DRAFTS.......................... 16
SECTION 1. CHECKS, DRAFTS, AND EVIDENCES OF INDEBTEDNESS......... 16
SECTION 2. CONTRACTS AND INSTRUMENTS; HOW EXECUTED............... 16
ARTICLE IX SHARES OF BENEFICIAL INTEREST......................... 16
SECTION 1. CERTIFICATES OF SHARES................................ 16
SECTION 2. TRANSFERS OF SHARES................................... 17
SECTION 3. LOST CERTIFICATE...................................... 17
SECTION 4. FIXING OF RECORD DATE................................. 17
ARTICLE X FISCAL YEAR........................................... 18
ARTICLE XI SEAL.................................................. 18
ARTICLE XII FEDERAL SUPREMACY..................................... 18
ARTICLE XIII DECLARATION OF TRUST.................................. 19
ARTICLE XIV AMENDMENTS............................................ 19
</TABLE>
<PAGE>
BY-LAWS
OF
LEVCO SERIES TRUST
A Delaware Business Trust
These By-Laws are made and adopted pursuant to Article IV, Section 3, of
the Declaration of Trust establishing LEVCO Series Trust (the "Trust"), dated
January 2, 1997, as from time to time amended (the "Declaration"). All words
capitalized in these By-Laws that are not otherwise defined herein shall have
the meaning or meanings set forth for such words or terms in the Declaration.
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL OFFICE.
The Board of Trustees shall fix and, from time to time, may change the
location of the principal executive office of the Trust at any place within or
without the State of Delaware.
SECTION 2. DELAWARE OFFICE.
The Board of Trustees shall establish a registered office in the State of
Delaware and shall appoint as the Trust's registered agent for service of
process in the State of Delaware an individual resident in the State of Delaware
or a Delaware corporation or a foreign corporation authorized to transact
business in the State of Delaware; provided that, in each case, the business
office of such registered agent for service of process shall be identical with
the registered Delaware office of the Trust.
SECTION 3. OTHER OFFICES.
The Board of Trustees may at any time establish an office or offices in New
York, New York, and at such other places within or without the State of Delaware
as the Trustees may from time to time designate or the business of the Trust may
require.
<PAGE>
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 1. TIME AND PLACE OF MEETINGS.
All meetings of Shareholders shall be held at such time and place, whether
within or without the State of Delaware, as shall be stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
SECTION 2. MEETINGS.
Meetings of Shareholders of the Trust or any Series or Class shall be held
whenever a vote of such Shareholders is required by the Declaration and at such
other times as the Trustees may determine to be necessary, appropriate or
advisable. Meetings of Shareholders to consider any matter as to which a
Shareholder vote is required by the 1940 Act or is permitted to be requested by
Shareholders pursuant to the 1940 Act and as to which the Trustees have not
called a meeting of Shareholders shall be called by the Secretary upon the
written request of the holders of Shares entitled to cast not less than ten
percent (10%) of all the votes then entitled to be cast on such matter at a
meeting of Shareholders. Such request shall state both the purpose or purposes
of such meeting and the matters proposed to be acted on thereat. The Secretary
shall inform such Shareholders of the estimated reasonable cost of preparing and
mailing such notice of the meeting. Upon payment to the Trust of such costs, the
Secretary shall give notice to each Shareholder entitled to vote at such meeting
stating the purpose or purposes of the meeting. Unless requested by Shareholders
entitled to cast a majority of all votes entitled to be cast on such matter, a
meeting need not be called to consider any matter which is substantially the
same as a matter voted on at any meeting of Shareholders held during the
preceding twelve (12) months.
SECTION 3. NOTICE OF MEETINGS.
Written notice of each meeting of Shareholders shall be given to each
Shareholder entitled to vote thereat not less than ten (10) nor more than ninety
(90) days prior to the meeting, either by mail or by presenting it to such
Shareholder personally or by leaving it at his residence or usual place of
business. If mailed, such notice shall be deemed to be given when deposited in
the United States mail, postage prepaid, addressed to the Shareholder at his
post office address as it appears on the records of the Trust.
The notice shall state the place, date and hour of the meeting, and in the
case of a special meeting, shall specify the purpose or purposes thereof. If
action is proposed to be taken at any meeting for approval of (i) a contract or
transaction in which a Trustee has a direct or indirect financial interest, (ii)
an amendment of the Declaration, (iii) a reorganization of the Trust, or (iv) a
voluntary dissolution of the Trust, the notice shall state the general nature of
that proposal.
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SECTION 4. QUORUM; ADJOURNMENTS.
Except as otherwise provided by law, the Declaration or these By-Laws, at
all meetings of Shareholders the holders of Shares representing forty percent
(40%) of the Shares entitled to vote on a matter, present in person or
represented by proxy, shall be requisite and shall constitute a quorum for the
transaction of business as to such matter. This section shall not affect any
applicable requirement of law or the Declaration for the vote necessary for the
adoption of any measure. In the absence of a quorum, the Shareholders present in
person or represented by proxy and entitled to vote on a matter shall have power
to adjourn the meeting with respect to such matter from time to time without
notice other than announcement at the meeting until such quorum shall be
present. The holders of Shares entitled to cast not less than a majority of all
the votes entitled to be cast at such meeting on a matter shall also have the
power to adjourn the meeting. Written notice shall be given as required by
Article II, Section 3, if a meeting is adjourned to a date more than one hundred
twenty (120) days after the record date originally scheduled with respect to the
meeting. At any such adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted had a quorum been
present at the time originally fixed for the meeting.
SECTION 5. VOTES REQUIRED.
Except as otherwise provided by applicable law, the Declaration or these
By-Laws and subject to the provisions of Article III, Section 6(d) of the
Declaration, when a quorum is present at any meeting, a majority of the Shares
voted shall decide all questions and a plurality shall elect a Trustee.
SECTION 6. VOTING.
At any meeting of Shareholders, each Shareholder having the right to vote
shall be entitled to vote in person or by proxy, and each Shareholder of record
shall be entitled to cast such number of votes as specified by Article V of the
Declaration for each Share entitled to vote so registered in his name on the
records of the Trust on the date fixed as the record date for the determination
of Shareholders entitled to vote at such meeting. Shares held by two or more
persons (whether as joint tenants, co-fiduciaries or otherwise) will be voted as
follows, unless a written instrument or court order providing to the contrary
has been filed with the Secretary of the Trust: (1) if only one votes, his vote
will bind all; (2) if more than one votes, the vote of the majority will bind
all; and (3) if more than one votes and the vote is evenly divided, the Shares
will be voted in accordance with the determination of a majority of such persons
and any person appointed to act by a court of competent jurisdiction, or, in the
absence of such appointment, the vote will be cast proportionately.
SECTION 7. PROXIES.
Each proxy shall be executed by the Shareholder giving the proxy or by his
duly authorized attorney in writing. Notwithstanding the foregoing, a
Shareholder may authorize another person or persons to act for him as proxy by
transmitting or authorizing the transmission of a telegram, cablegram, or other
means of electronic transmission to the person
3
<PAGE>
who will be the holder of the proxy or to a proxy solicitation firm, proxy
support service organization or like agent duly authorized by the person who
will be the holder of the proxy to receive such transmission, provided that any
such telegram, cablegram or other means of electronic transmission must either
set forth or be submitted with information from which it can be determined that
the telegram, cablegram or other electronic transmission was authorized by the
Shareholder. No proxy shall be valid after the expiration of eleven (11) months
from its date, unless a longer period is provided for in the proxy.
SECTION 8. PROCEDURES AT MEETINGS.
At all meetings of Shareholders, all questions relating to the
qualification of voters, the validity of proxies, the acceptance or rejection of
votes, the order and manner in which matters are submitted to a vote, and all
other matters relating to questions of procedure shall be decided by the
Chairman of the meeting, in a manner consistent with these By-Laws.
SECTION 9. INFORMAL ACTION BY SHAREHOLDERS.
Any action required or permitted to be taken at a Shareholder meeting may
be taken without a meeting if (i) a consent in writing, setting forth such
action, is signed by the holders of outstanding Shares having not less than the
minimum number of votes that would be necessary to authorize such action at a
meeting of Shareholders at which all Shares issued and outstanding and entitled
to vote thereat were present in person or by proxy, and (ii) such consents are
filed with the records of the Trust.
ARTICLE III
TRUSTEES
SECTION 1. POWERS.
Subject to the applicable provisions of the Declaration and these By-Laws
relating to action required to be approved by the Shareholders or by the
outstanding Shares, the business and affairs of the Trust shall be managed and
all powers shall be exercised by or under the direction of the Board of
Trustees.
SECTION 2. NUMBER OF TRUSTEES.
The exact number of Trustees within the limits specified in the Declaration
shall be fixed from time to time by a written instrument signed, or by
resolution approved at a duly constituted meeting, by a majority of the Board of
Trustees.
SECTION 3. ANNUAL MEETINGS OF THE TRUSTEES.
The Trustees shall hold an annual meeting for the election of officers and
the transaction of other business which may come before the meeting.
4
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SECTION 4. REGULAR AND SPECIAL MEETINGS OF THE TRUSTEES.
The Trustees may, in their discretion, provide for regular or special
meetings of the Trustees. Regular meetings of the Trustees may be held without
further notice, except as otherwise required by the 1940 Act in which case
notice shall be given as prescribed in Section 5 of this Article III, and may be
held at such time and place as shall be fixed in advance by the Trustees.
Special meetings of the Trustees may be called at any time by the President and
shall be called by the President, Vice President or the Secretary upon the
request of any two (2) Trustees or, if there shall be only one (1) Trustee, upon
the request of such sole Trustee.
SECTION 5. NOTICE OF SPECIAL MEETING.
Notice of any special meeting of the Trustees shall be given by oral or
written notice delivered personally, telephoned, telegraphed, mailed or
electronically transmitted to each Trustee at his business or residence address.
Personally delivered, telegram or electronically transmitted notice shall be
given at least twenty-four (24) hours prior to the meeting. Notice by mail shall
be given at least five (5) days prior to the meeting. If mailed, such notice
will be deemed to be given when deposited in the United States mail properly
addressed, with postage thereon prepaid. If notice be given by telegram, such
notice shall be deemed given when the telegram is delivered to the telegraph
company. Neither the business to be transacted at, nor the purpose of, any
special meeting of the Trustees need be stated in the notice, unless
specifically required by the 1940 Act.
SECTION 6. QUORUM; ADJOURNMENT.
A majority of the authorized number of Trustees shall constitute a quorum
for the transaction of business; provided, that if less than a majority of such
number of Trustees is present at any such meeting, a majority of the Trustees
present or the sole Trustee present may adjourn the meeting from time to time
without further notice until a quorum is present.
SECTION 7. VOTING.
The action of a majority of the Trustees present at a meeting at which a
quorum is present shall be the action of the Trustees, unless the concurrence of
a greater proportion or of any specified group of Trustees is required for such
action by law, the Declaration or these By-Laws.
SECTION 8. EXECUTIVE AND OTHER COMMITTEES.
The Trustees may designate one or more committees, each committee to
consist of one (1) or more Trustees and to have such title as the Trustees may
consider to be properly descriptive of its function, except that not more than
one committee shall be designated as the Executive Committee and that the
Executive Committee shall consist of two (2) or more Trustees. Each such
committee shall serve at the pleasure of the Trustees.
5
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In the absence of any member of such committee, the members thereof present
at any meeting, whether or not they constitute a quorum, may appoint a Trustee
to act in the place of such absent member.
The Trustees may delegate to any of the committees appointed under this
Article III, Section 8, any of the powers of the Trustees, except the power to:
(1) amend the Declaration; (2) authorize the merger or consolidation of the
Trust or the sale, lease or exchange of all or substantially all of the Trust
Property belonging to the Trust or any Series or Class; (3) approve the
incorporation of the Trust; (4) approve the termination of the Trust; (5)
declare dividends or distributions on Shares; (6) issue Shares except pursuant
to a general formula or method specified by the Trustees by resolution; (7)
amend these By-Laws; or (8) elect, appoint or remove Trustees.
Each committee, as and when requested by the Trustees, shall keep minutes
or other appropriate written evidence of its meetings or proceedings and shall
report the same to the Trustees and shall observe such other procedures with
respect to its meetings as may be prescribed by the Trustees in the resolution
appointing such committee, or, if and to the extent not so prescribed, as are
prescribed in these By-Laws with respect to meetings of the Trustees.
SECTION 9. PARTICIPATION IN MEETINGS BY TELEPHONE.
Any Trustee may participate in a meeting of the Trustees or of any
committee of the Trustees by means of conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means shall
constitute presence in person at the meeting except where the 1940 Act requires
Trustee action at a meeting held in person.
SECTION 10. INFORMAL ACTION BY TRUSTEES.
Unless an in person meeting is required by the 1940 Act, any action
required or permitted to be taken at any meeting of the Trustees or of any
committee of the Trustees may be taken without a meeting, if (1) a consent in
writing to such action is signed by each Trustee in the case of a meeting of
Trustees, or each Trustee who is a member of the committee, in the case of a
meeting of a committee, and (2) such written consent is filed with the minutes
of proceedings of the Trustees or of the committee. Any such consent may be
executed in counterparts.
SECTION 11. COMPENSATION.
The Trustees shall determine and from time to time fix by resolution the
compensation payable to Trustees for their services to the Trust in that
capacity. Such compensation may, but need not, consist of an annual fee or a fee
for attendance at meetings of the Trustees or of any committee of the Trustees
of which the Trustees receiving such fees are members, or a combination of an
annual fee and a fee for attendance. The Chairman of the Board of Trustees, if
any, and the Chairman, if any, of each committee of Trustees, may be paid
additional amounts for services rendered in such capacities. In addition, the
Trustees may
6
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authorize the reimbursement of Trustees for their expenses for attendance at
meetings of the Trustees and at meetings of any committee of the Trustees of
which they are members. Nothing herein contained shall be construed to preclude
any Trustee from serving the Trust in any other capacity and receiving
compensation therefor.
ARTICLE IV
WAIVER OF NOTICE
Whenever any notice is required to be given pursuant to law, the
Declaration or these By-Laws, a waiver thereof in writing, signed by the person
or persons entitled to such notice, or, in the case of any waiver of notice of
any meeting of Shareholders, signed by the proxy for a person entitled to notice
thereof, whether before or after the time stated therein, shall be deemed
equivalent of the giving of such notice. Neither the business to be transacted
nor the purpose of any meeting need be set forth in the waiver of notice, unless
specifically required by law, the Declaration or these By-Laws. The attendance
by any person at any meeting in person, or in the case of a meeting of
Shareholders, by proxy, shall constitute a waiver of notice of such meeting,
except where such person attends a meeting for the express purpose of objecting
to the transaction of any business on the ground that the meeting is not
lawfully called or convened.
ARTICLE V
OFFICERS
SECTION 1. EXECUTIVE OFFICERS.
The executive officers of the Trust shall be a President, a Secretary and a
Treasurer. If the Trustees shall elect a Chairman pursuant to Section 7 of this
Article V, then the Chairman shall also be an executive officer of the Trust. If
the Trustees shall elect one or more Vice-Presidents, each such Vice-President
shall be an executive officer. The Chairman, if there be one, shall be elected
from among the Trustees, but no other executive officer need be a Trustee. Any
two or more executive offices, except those of President and Vice-President, may
be held by the same person. A person holding more than one office may not act in
more than one capacity to execute, acknowledge or verify on behalf of the Trust
an instrument required by law to be executed, acknowledged and verified by more
than one officer. The executive officers of the Trust shall be elected annually
at a meeting of Trustees.
SECTION 2. OTHER OFFICERS AND AGENTS.
The Trustees may also elect or may delegate to the President, authority to
appoint, remove, or fix the duties, compensation or terms of office of one or
more Assistant Vice-Presidents, Assistant Secretaries and Assistant Treasurers,
and such other officers and agents as the Trustees shall at any time and from
time to time deem to be advisable.
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SECTION 3. TENURE, RESIGNATION AND REMOVAL.
Each officer of the Trust shall hold office until his successor is elected
or appointed or until his earlier displacement from office by resignation,
removal or otherwise; provided, that if the term of office of any officer
elected or appointed pursuant to Section 2 of this Article V shall have been
fixed by the Trustees or by the President acting under authority delegated by
the Trustees, such officer shall cease to hold such office no later than the
date of expiration of such term, regardless of whether any other person shall
have been elected or appointed to succeed him. Any officer of the Trust may
resign at any time by written notice to the Trust. Any officer or agent of the
Trust may be removed at any time by the Trustees or by the President acting
under authority delegated by the Trustees pursuant to Section 2 of this Article
V if in their or his judgment the best interest of the Trust would be served
thereby, but such removal shall be without prejudice to the contract rights, if
any, of the person so removed. Election or appointment of an officer or agent
shall not of itself create contract rights between the Trust and such officer or
agent.
SECTION 4. VACANCIES.
If the office of any officer becomes vacant for any reason, the vacancy may
be filled by the Trustees or by the President acting under authority delegated
by the Trustees pursuant to Section 2 of this Article V. Each officer elected or
appointed to fill a vacancy shall hold office for the balance of the term for
which his predecessor was elected or appointed.
SECTION 5. COMPENSATION.
The compensation, if any, of all officers of the Trust shall be fixed by
the Trustees or by the President acting under authority delegated by the
Trustees pursuant to Section 2 of this Article V.
SECTION 6. AUTHORITY AND DUTIES.
All officers as between themselves and the Trust shall have such powers,
perform such duties and be subject to such restrictions, if any, in the
management of the Trust as may be provided in these By-Laws, or, to the extent
not so provided, as may be prescribed by the Trustees or by the President acting
under authority delegated by the Trustees pursuant to Section 2 of this Article
V.
SECTION 7. CHAIRMAN.
When and if the Trustees deem such action to be necessary or appropriate,
they may elect a Chairman from among the Trustees. The Chairman shall preside at
meetings of the Shareholders and of the Trustees; and he shall have such other
powers and duties as may be prescribed by the Trustees. The Chairman shall in
the absence or disability of the President exercise the powers and perform the
duties of the President.
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SECTION 8. PRESIDENT.
The President shall be the chief executive officer of the Trust. He shall
have responsibility for the general and active management of the business of the
Trust, shall see to it that all orders, policies and resolutions of the Trustees
are carried into effect, and, in connection therewith, shall be authorized to
delegate to any Vice-President of the Trust such of his powers and duties as
President and at such times and in such manner as he shall deem advisable. In
the absence or disability of the Chairman, or if there is no Chairman, the
President shall preside at all meetings of the Shareholders and of the Trustees
and he shall have such other powers and perform such other duties as are
incident to the office of a corporate president and as the Trustees may from
time to time prescribe.
SECTION 9. VICE-PRESIDENTS.
The Vice-President, if any, or, if there is more than one, the Vice-
Presidents, shall assist the President in the management of the business of the
Trust and the implementation of orders, policies and resolutions of the Trustees
at such times and in such manner as the President may deem to be advisable. If
there is more than one Vice-President, the Trustees may designate one as the
executive Vice-President, in which case he shall be first in order of seniority,
and the Trustees may also grant to other Vice-Presidents such titles as shall be
descriptive of their respective functions or indicative of their relative
seniority. In the absence or disability of both the President and the Chairman,
or in the absence or disability of the President if there is no Chairman, the
Vice-President, or, if there is more than one, the Vice-Presidents in the order
of their relative seniority, shall exercise the powers and perform the duties of
those officers; and the Vice-President or Vice-Presidents shall have such other
powers and perform such other duties as from time to time may be prescribed by
the President or the Trustees.
SECTION 10. ASSISTANT VICE-PRESIDENT.
The Assistant Vice-President, if any, or if there is more than one, the
Assistant Vice-Presidents, shall perform such duties as the Trustees or the
President acting under authority delegated by the Trustees pursuant to Section 2
of this Article V may from time to time prescribe.
SECTION 11. SECRETARY.
The Secretary shall (a) keep the minutes of the meetings and proceedings
and any written consents evidencing actions of the Shareholders, the Trustees
and any committees of the Trustees in one or more books provided for that
purpose; (b) see that all notices are duly given in accordance with the
provisions of these By-Laws or as required by law; (c) be custodian of the
corporate records and the seal of the Trust, and, when authorized by the
Trustees, cause the seal of the Trust to be affixed to any document requiring
it, and when so affixed, attested by his signature as Secretary or by the
signature of an Assistant Secretary; and (d) in general, perform such other
duties as the President and Trustees may assign to him from time to time.
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SECTION 12. ASSISTANT SECRETARIES.
The Assistant Secretary, if any, or, if there is more than one, the
Assistant Secretaries in the order determined by the Trustees or by the
President, shall in the absence or disability of the Secretary exercise the
powers and perform the duties of the Secretary, and he or they shall perform
such other duties as the Trustees, the President or the Secretary may from time
to time prescribe.
SECTION 13. TREASURER.
The Treasurer shall be the chief financial officer of the Trust. The
Treasurer shall keep full and accurate accounts of receipts and disbursements in
books belonging to the Trust, shall deposit all moneys and other valuable
effects in the name and to the credit of the Trust in such depositories as may
be designated by the Trustees, and shall render to the Trustees and the
President, at regular meetings of the Trustees or whenever they or the President
may require it, an account of all his transactions as Treasurer and of the
financial condition of the Trust.
If required by the Trustees, the Treasurer shall give the Trust a bond in
such sum and with such surety or sureties as shall be satisfactory to the
Trustees for the faithful performance of the duties of his office and for the
restoration to the Trust, in case of his death, resignation, retirement or
removal from office, all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the Trust.
SECTION 14. ASSISTANT TREASURERS.
The Assistant Treasurer, if any, or, if there is more than one, the
Assistant Treasurers in the order determined by the Trustees or by the
President, shall in the absence or disability of the Treasurer exercise the
powers and perform the duties of the Treasurer, and he or they shall perform
such other duties as the Trustees, the President or the Treasurer may from time
to time prescribe.
ARTICLE VI
INDEMNIFICATION OF TRUSTEES, OFFICERS,
EMPLOYEES AND OTHER AGENTS
SECTION 1. AGENTS, PROCEEDINGS AND EXPENSES.
For purposes of this Article, "agent" means any person who is or was a
Trustee, officer, employee or other agent of the Trust or is or was serving at
the request of the Trust as a Trustee, director, officer, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise or was a Trustee, director, officer, employee or agent of a
foreign or domestic corporation which was a predecessor of another enterprise at
the request of the Trust; "proceeding" means any threatened, pending or
completed action or proceeding, whether civil, criminal, administrative or
investigative; and
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"expenses" includes without limitation attorneys' fees and
any expenses of establishing a right to indemnification under this Article VI.
SECTION 2. ACTIONS OTHER THAN BY THE TRUST.
The Trust shall indemnify any person who was or is a party or is threatened
to be made a party to any proceeding (other than an action by or in the right of
the Trust) by reason of the fact that such person is or was an agent of the
Trust, against expenses, judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with such proceedings, if it is
determined that such person acted in good faith and reasonably believed: (a) in
the case of conduct in his official capacity as a Trustee of the Trust, that his
conduct was in the Trust's best interests and (b) in all other cases, that his
conduct was at least not opposed to the Trust's best interests and (c) in the
case of a criminal proceeding, that he had no reasonable cause to believe the
conduct was unlawful. The termination of any proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent shall
not of itself create a presumption that the person did not act in good faith and
in a manner which the person reasonably believed to be in the best interests of
the Trust or that the person had reasonable cause to believe that the person's
conduct was unlawful.
SECTION 3. ACTIONS BY THE TRUST.
The Trust shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action by or in the
right of the Trust to procure a judgment in its favor by reason of the fact that
such person is or was an agent of the Trust, against expenses actually and
reasonably incurred by that person in connection with the defense or settlement
of that action if that person acted in good faith, in a manner that such person
believed to be in the best interests of the Trust and with such care, including
reasonable inquiry, as an ordinarily prudent person in a like position would use
under similar circumstances.
SECTION 4. EXCLUSION OF INDEMNIFICATION.
Notwithstanding any provision to the contrary contained herein, there shall
be no right to indemnification for any liability arising by reason of willful
misfeasance, bad faith, gross negligence, or the reckless disregard of the
duties involved in the conduct of the agent's office with the Trust.
No indemnification shall be made under Sections 2 or 3 of this
Article VI:
(a) In respect of any claim, issue, or matter as to which that person
shall have been adjudged to be liable on the basis that personal
benefit was improperly received by him, whether or not the benefit
resulted from an action taken in the person's official capacity; or
(b) In respect of any claim, issue or matter as to which that person shall
have been adjudged to be liable in the performance of that person's
duty
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to the Trust, unless and only to the extent that the court in which
that action was brought shall determine upon application that in view
of all the circumstances of the case, that person was not liable by
reason of the disabling conduct set forth in the preceding paragraph
and is fairly and reasonably entitled to indemnity for the expenses
which the court shall determine; or
(c) Of amounts paid in settling or otherwise disposing of a threatened or
pending action, with or without court approval, or of expenses
incurred in defending a threatened or pending action which is settled
or otherwise disposed of with or without court approval, unless the
required approval set forth in Section 6 of this Article VI is
obtained.
SECTION 5. SUCCESSFUL DEFENSE BY AGENT.
To the extent that an agent of the Trust has been successful on the merits
in defense of any proceeding referred to in Sections 2 or 3 of this Article VI
or in defense of any claim, issue or matter therein, before the court or other
body before whom the proceeding was brought, the agent shall be indemnified
against expenses actually and reasonably incurred by the agent in connection
therewith, provided that the Board of Trustees, including a majority who are
disinterested, non-party Trustees, also determines that based upon a review of
the facts, the agent was not liable by reason of the disabling conduct referred
to in Section 4 of this Article VI.
SECTION 6. REQUIRED APPROVAL.
Except as provided in Section 5 of this Article VI, any indemnification
under this Article VI shall be made by the Trust only if authorized in the
specific case on a determination that indemnification of the agent is proper in
the circumstances because the agent has met the applicable standard of conduct
set forth in Sections 2 or 3 of this Article VI and is not prohibited from
indemnification because of the disabling conduct set forth in Section 4 of this
Article VI, by:
(a) A majority vote of a quorum consisting of Trustees who are not parties
to the proceeding and are not interested persons of the Trust (as
defined in the 1940 Act); or
(b) A written opinion by an independent legal counsel.
SECTION 7. ADVANCE OF EXPENSES.
Expenses incurred in defending any proceeding may be advanced by the Trust
before the final disposition of the proceeding upon a written undertaking by or
on behalf of the agent to repay the amount of the advance if it is ultimately
determined that he or she is not entitled to indemnification, together with at
least one of the following as a condition to the advance: (i) security for the
undertaking; or (ii) the existence of insurance protecting the Trust against
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losses arising by reason of any lawful advances; or (iii) a determination by a
majority of a quorum of Trustees who are not parties to the proceeding and are
not interested persons of the Trust (as defined in the 1940 Act), or by an
independent legal counsel in a written opinion, based on a review of readily
available facts that there is reason to believe that the agent ultimately will
be found entitled to indemnification. Determinations and authorizations of
payments under this Section must be made in the manner specified in Section 6 of
this Article VI for determining that the indemnification is permissible.
SECTION 8. OTHER CONTRACTUAL RIGHTS.
Nothing contained in this Article VI shall affect any right to
indemnification to which persons other than Trustees and officers of the Trust
or any subsidiary hereof may be entitled by contract or otherwise.
SECTION 9. LIMITATIONS.
No indemnification or advance shall be made under this Article VI in any
circumstances where it appears:
(a) That it would be inconsistent with a provision of the Declaration, a
resolution of the Shareholders, or an agreement in effect at the time
of accrual or the alleged cause of action asserted in the proceeding
in which the expenses were incurred or other amounts were paid which
prohibits or otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly imposed by
a court in approving a settlement.
SECTION 10. INSURANCE.
Upon the approval of the Board of Trustees, the Trust may purchase and
maintain insurance protecting any agent of the Trust against any liability
asserted against or incurred by the agent in such capacity or arising out of the
agent's status as such, but the portion of the cost of such insurance protecting
the agent against liabilities as to which the Trust would not have the power to
indemnify the agent under the provisions of this Article VI and the Declaration
shall not be borne by the Trust.
SECTION 11. FIDUCIARIES OF EMPLOYEE BENEFIT PLAN.
This Article does not apply to any proceeding against any Trustee,
Investment Manager or other fiduciary of an employee benefit plan in that
person's capacity as such, even though that person may also be an agent of the
Trust as defined in Section 1 of this Article VI. Nothing contained in this
Article VI shall limit any right to indemnification to which such a Trustee,
Investment Manager, or other fiduciary may be entitled by contract or otherwise
which shall be enforceable to the extent permitted by applicable law other than
this Article VI.
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ARTICLE VII
RECORDS AND REPORTS
SECTION 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER.
The Trust shall keep at its principal executive office or at the office of
its transfer agent, a record of its Shareholders, giving the names and addresses
of all Shareholders and the number and Series and Class of Shares held by each
Shareholder.
SECTION 2. MAINTENANCE AND INSPECTION OF BY-LAWS.
The Trust shall keep at its principal executive office the original or a
copy of these By-Laws as amended to date, which shall be open to inspection by
the Shareholders at all reasonable times during office hours.
SECTION 3. MAINTENANCE AND INSPECTION OF OTHER RECORDS.
The accounting books and records of the Trust and minutes of proceedings of
the Shareholders and the Board of Trustees and any committee or committees of
the Board of Trustees shall be kept at such place or places designated by the
Board of Trustees or in the absence of such designation, at the principal
executive office of the Trust. The minutes shall be kept in written form and
the accounting books and records shall be kept either in written form or in any
other form capable of being converted into written form. The minutes and
accounting books and records shall be open to inspection upon the written demand
of any Shareholder at any reasonable time during usual business hours for a
purpose reasonably related to the holder's interests as a Shareholder. The
inspection may be made in person or by an agent or attorney and shall include
the right to copy and make extracts. Inspection by any Shareholder of the
Trust's Shareholder list shall be at the discretion of the Trustees.
SECTION 4. INSPECTION BY TRUSTEES.
Every Trustee shall have the absolute right at any reasonable time to
inspect all books, records and documents of every kind and the physical
properties of the Trust. This inspection by a Trustee may be made in person or
by an agent or attorney and the right of inspection includes the right to copy
and make extracts of documents.
SECTION 5. FINANCIAL STATEMENTS.
The Trustees shall submit to the Shareholders such written financial
reports as are required by the 1940 Act.
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ARTICLE VIII
CONTRACTS, CHECKS AND DRAFTS
SECTION 1. CHECKS, DRAFTS, AND EVIDENCES OF INDEBTEDNESS.
All checks, drafts, or other orders for payment of money, notes or other
evidences of indebtedness issued in the name of or payable to the Trust shall be
signed or endorsed in such manner and by such person or persons as shall be
designated from time to time in accordance with the resolution of the Board of
Trustees.
SECTION 2. CONTRACTS AND INSTRUMENTS; HOW EXECUTED.
The Board of Trustees, except as otherwise provided in these By-Laws, may
authorize any officer or officers, agent or agents, to enter into any contract
or execute any instrument in the name of and on behalf of the Trust, and this
authority may be general or confined to specific instances; and unless so
authorized or ratified by the Board of Trustees or within the agency power of an
officer, no officer, agent, or employee shall have any power or authority to
bind the Trust by any contract or engagement or to pledge its credit or to
render it liable for any purpose or for any amount.
ARTICLE IX
SHARES OF BENEFICIAL INTEREST
SECTION 1. CERTIFICATES OF SHARES.
The Trust shall not be obligated to issue certificates representing Shares
of the Trust or any Series or Class, except that the Trustees may determine to
authorize the issuance of certificates for Shares of any Series or Class, and in
such case, certificates shall be issued in accordance with such procedures as
the Trustees may establish. If certificates for Shares are issued, each such
certificate shall be signed by the Chairman, if there is one, or by the
President or a Vice-President and countersigned by the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer. Certificates may be
sealed with the seal of the Trust. The signatures and seal, if any, on a
certificate may be either manual or facsimile. A certificate is valid and may
be issued whether or not an officer who signed it is still an officer when it is
issued. A full record of the issuance of each certificate and the identifying
number assigned thereto shall be made on the books and records of the Trust
usually kept for the purpose or required by statute.
SECTION 2. TRANSFERS OF SHARES.
Upon surrender to the Trust or its transfer agent of a certificate duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, the Trust shall issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction upon its
books. Shares of the Trust or any Series or Class not represented by
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certificates shall be transferred by recording the transaction on the books of
the Trust upon presentation of proper evidence of succession, assignment or
authority to transfer.
The Trust shall be entitled to treat the holder of record of any Share or
Shares as the holder in fact thereof and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such Shares on the part
of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by applicable law.
SECTION 3. LOST CERTIFICATE.
The Trustees may by resolution establish procedures pursuant to which a new
certificate or certificates may be issued in place of any certificate or
certificates theretofore issued by the Trust which have been mutilated or which
are alleged to have been lost, stolen or destroyed, upon presentation of each
such mutilated certificate, or the making of an affidavit by the person claiming
any such certificate to have been lost, stolen or destroyed as to the fact and
circumstances of the loss, theft or destruction. The Trustees, in their
discretion and as a condition precedent to the issuance of any new certificate,
may include among such procedures a requirement that the owner of any
certificate alleged to have been lost, stolen or destroyed, or the owner's legal
representative, furnish the Trust with a bond, in such sum and with such surety
or sureties as the Trustees may direct, as indemnity against any claim that may
be made against the Trust in respect of such lost, stolen or destroyed
certificate.
SECTION 4. FIXING OF RECORD DATE.
For purposes of determining the Shareholders entitled to notice of, or to
vote at, any meeting of Shareholders or at any adjournment thereof in respect of
which a new record date is not fixed, or entitled to express written consent to
or dissent from the taking of action by Shareholders without a meeting, or for
the purpose of determining the Shareholders entitled to receive payment of any
dividend or other distribution or allotment of any rights, or to exercise any
rights in respect of any change, conversion or exchange of Shares, or for the
purpose of any other lawful action, the Trustees may fix, in advance, a date as
the record date for any such determination of Shareholders. Such date shall not
be more than ninety (90) days, and in case of a meeting of Shareholders not less
than ten (10) days, before the date on which the meeting or particular action
requiring such determination of Shareholders is to be held or taken. If no
record date is fixed, (a) the record date for the determination of Shareholders
entitled to notice of or to vote at a meeting of Shareholders shall be the later
of: (i) the close of business on the day on which the notice of meeting is first
mailed to any Shareholder; or (ii) the thirtieth (30th) day before the meeting;
(b) the record date for determining the Shareholders entitled to express written
consent to the taking of any action without a meeting, when no prior action by
the Trustees is necessary, shall be the day on which the first written consent
is expressed; and (c) the record date for the determination of Shareholders
entitled to receive payment of a dividend or other distribution or an allotment
of any other rights shall be at the close of business on the day on which the
resolution of the Trustees, declaring the dividend, distribution or allotment of
rights, is adopted.
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ARTICLE X
FISCAL YEAR
The fiscal year of the Trust or any Series shall be fixed and may from time
to time be changed by resolution of the Trustees.
ARTICLE XI
SEAL
The Trustees may adopt a seal, which shall be in such form and shall have
such inscription thereon as the Trustees may from time to time provide. The
seal of the Trust may be affixed to any document, and the seal and its
attestation may be lithographed, engraved or otherwise printed on any document.
ARTICLE XII
FEDERAL SUPREMACY
If at any time when the Trust is registered as an investment company under
the 1940 Act, any of the foregoing provisions of these By-Laws or the law of the
State of Delaware relating to business trusts shall conflict or be inconsistent
with any applicable provision of the 1940 Act, the applicable provision of the
1940 Act shall be controlling and the Trust shall not take any action which is
in conflict or inconsistent therewith.
ARTICLE XIII
DECLARATION OF TRUST
The Declaration of Trust establishing the Trust, dated January 2, 1997, and
all amendments thereto, provides that the name "LEVCO Series Trust" refers to
the Trustees under the Declaration collectively as Trustees, but not as
individuals or personally; and that no Trustee, Shareholder, officer, employee
or agent of the Trust shall be held personally liable, 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 Trust, but the Trust Property
only shall be liable.
ARTICLE XIV
AMENDMENTS
These By-Laws may be amended, altered or repealed, and the Trustees may
adopt new By-Laws. The Trustees shall in no event adopt By-Laws that conflict
with the Declaration, and, subject to Article XII of these By-Laws, any apparent
inconsistency shall be construed in favor of the related provisions in the
Declaration.
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SR&Z DRAFT
5/6/97
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made the ____ day of ____________, 1997 by and between
LEVCO Series Trust, a Delaware business trust (hereinafter called the "Trust"),
and John A. Levin & Co., Inc., a Delaware corporation (hereinafter called the
"Adviser"):
WHEREAS, the Trust intends to engage in business as an open-end
management investment company and is registered as such under the Investment
Company Act of 1940, as amended (the "Act"); and
WHEREAS, the Adviser engages in the business of acting as investment
adviser; and
WHEREAS, the Trust desires to retain the Adviser to render investment
advisory and certain other services in the manner and on the terms and
conditions hereinafter set forth; and
WHEREAS, the Adviser desires to be retained to perform such services
on said terms and conditions:
NOW, THEREFORE, in consideration of the promises and the mutual
covenants contained in this Agreement, the Trust and the Adviser agree as
follows:
1. The Trust hereby retains the Adviser to act as investment adviser
of each of the series of the Trust (the "Funds") and, subject to the supervision
of the Board of Trustees of the Trust, to manage the investment activities of
the Funds and to provide certain other services as hereinafter set forth.
Without limiting the generality of the foregoing, the Adviser shall: obtain and
evaluate such information and advice relating to the economy, securities and
commodities markets, and securities and commodities as it deems necessary or
useful to discharge its duties hereunder; continuously manage the assets of the
Funds in a manner consistent with the investment objectives, policies and
restrictions of each Fund and applicable laws and regulations; determine the
securities and commodities to be purchased, sold or otherwise disposed of by the
Funds and the timing of such purchases, sales and dispositions; and take such
further action, including the placing of purchase and sale orders and the voting
of securities on behalf of the Funds, as the Adviser shall deem necessary or
appropriate. The Adviser shall furnish to or place at the disposal of the Trust
such of the information, evaluations, analyses and opinions formulated or
obtained by the Adviser in the discharge of its duties as the Trust may, from
time to time, reasonably request.
2. The Adviser shall assist in the selection of and the negotiation
of agreements with, and monitor the quality of services provided by, the Trust's
custodian, transfer agent, and other organizations which may provide services to
the Trust (but the Trust shall pay the fees and expenses of the custodian,
accounting agent and transfer agent and such other organizations and the Adviser
shall not be responsible for the acts or omissions of such service providers).
The Adviser shall provide administrative services to the Trust. (It being
understood that certain other services will be provided by the Trust's transfer
agent, accounting agent,
<PAGE>
registrar, custodian and other agencies.) Any books and records maintained by
the Adviser in connection with the rendering of such administrative services
shall be the property of the Trust and, upon request therefor, the Adviser shall
surrender to the Trust such of the books and records so requested. All services
to be furnished by the Adviser under this Agreement (except for investment
advisory services) may be furnished through the Adviser's, or its affiliates',
directors, officers or employees. However, the investment policies, the
administration of its business and affairs, and all other acts of the Trust are
and shall at all times be subject to the approval and direction of the Board of
Trustees of the Trust.
3. The Adviser shall, at its own expense, maintain such staff and
employ or retain such personnel and consult with such other persons as may be
necessary to render the services required to be provided by the Adviser or
furnished to the Trust under this Agreement. Without limiting the generality of
the foregoing, the staff and personnel of the Adviser shall be deemed to include
persons employed or otherwise retained by the Adviser to furnish statistical and
other factual data, advice regarding economic factors and trends, information
with respect to technical and scientific developments, and such other
information, advice and assistance as the Adviser may desire.
4. The Trust will, from time to time, furnish or otherwise make
available to the Adviser such financial reports, proxy statements, policies and
procedures and other information relating to the business and affairs of the
Trust as the Adviser may reasonably require in order to discharge its duties and
obligations hereunder.
5. The Adviser shall bear the cost of rendering the services to be
performed by it under this Agreement, and shall provide the Trust with such
office space, facilities, equipment, clerical help, and other personnel and
services as the Trust shall reasonably require in the conduct of its business.
In addition, the Adviser may reimburse its affiliates for the costs and expenses
incurred in connection with providing administrative services for the Trust. The
Adviser shall also bear the cost of telephone service, heat, light, power and
other utilities provided to the Trust. The salaries of officers of the Trust,
and the fees and expenses of Trustees of the Trust, who are also directors,
officers or employees of the Adviser, or who are officers or employees of any
company affiliated with the Adviser, shall be paid and borne by the Adviser or
such affiliated company.
6. The Trust assumes and shall pay or cause to be paid all expenses
of the Trust not expressly assumed by the Adviser under this Agreement,
including without limitation: any payments pursuant to any plan of distribution
adopted by the Trust on behalf of any of the Funds (or any class of shares
thereof); the fees, charges and expenses of any registrar, custodian, accounting
agent, stock transfer and dividend disbursing agent; brokerage commissions;
taxes; expenses and costs of registering or qualifying the Trust and its shares
under federal and state securities laws; the costs and expenses of engraving and
printing stock certificates; the costs and expenses of preparing, printing,
including typesetting, and distributing prospectuses and statements of
additional information of the Trust and the Funds and supplements thereto to the
Trust's shareholders; all expenses of shareholders' and Trustees' meetings and
of preparing, printing and mailing proxy statements and reports to shareholders;
fees and travel expenses of
-2-
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Trustees and members of any advisory board or committee who are not also
officers, directors or employees of the Adviser or who are not officers or
employees of any company affiliated with the Adviser; all expenses incident to
any dividend, withdrawal or redemption options; charges and expenses of any
outside service used for pricing of the Trust's shares; fees and expenses of
legal counsel to the Trust and its Trustees; fees and expenses of the Trust's
independent accountants; membership dues of industry associations; interest
payable on Trust borrowings; postage; insurance premiums on property or
personnel (including officers and Trustees) of the Trust which inure to its
benefit; and extraordinary expenses (including but not limited to, legal claims
and liabilities and litigation costs and any indemnification related thereto).
7. As full compensation for the services and facilities furnished to
the Trust and the expenses assumed by the Adviser under this Agreement, each
Fund shall pay to the Adviser a fee with respect to such Fund, as calculated in
accordance with Schedule A hereto. This fee shall be paid monthly. Subject to
the provisions of paragraph 8 hereof, payment of the Adviser's compensation for
the preceding month shall be made as promptly as possible after completion of
the computations contemplated by paragraph 8 hereof.
8. In the event the operating expenses of a Fund, including amounts
payable to the Adviser pursuant to paragraph 7 hereof, for any fiscal year
ending on a date on which this Agreement is in effect, exceed any expense
limitation arising under any state securities laws or regulations (as such
limitations may be raised or lowered or waived upon application of the Trust or
the Adviser from time to time) which are not pre-empted by Federal law, the
Adviser shall reduce its fee to the extent of such excess and, if required
pursuant to any such laws or regulations, will reimburse the Fund for annual
operating expenses in excess of such expense limitation; provided, however, that
there shall be excluded from expenses the amount of any interest, taxes,
brokerage commissions, distribution fees and extraordinary expenses (including
but not limited to legal claims and liabilities and litigation costs and any
indemnification relating thereto) paid or payable by the Fund to the extent
permissible under applicable laws and regulations. The amount of any such
reduction in fee or reimbursement of expenses shall be calculated and accrued
daily and settled on a monthly basis, based upon the expense limitation
applicable to the Fund as at the end of the last business day of the month.
Should two or more such expense limitations be applicable as at the end of the
last business day of the month, that expense limitation which results in the
largest reduction in the Adviser's fee shall be applicable.
For purposes of this provision, should any applicable expense
limitation be based upon the gross income of a Fund, such gross income shall
include, but not be limited to, interest on debt securities held by the Fund
accrued to and including the last day of the Fund's fiscal year, and dividends
declared on equity securities held by the Fund, the record dates for which fall
on or prior to the last day of such fiscal year, but shall not include gains
from the sale of securities.
9. The Adviser will use its best efforts in the supervision and
management of the investment activities of the Trust and in providing services
hereunder, but in the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations hereunder, the Adviser shall
not be liable to the Trust or any Fund for any error of judgment or mistake of
-3-
<PAGE>
law or for any act or omission by the Adviser or for any losses sustained by the
Trust, any Fund or its shareholders.
10. Nothing contained in this Agreement shall prevent the Adviser or
any affiliated person of the Adviser from acting as investment adviser or
manager for any other person, firm or corporation and shall not in any way bind
or restrict the Adviser or any such affiliated person from buying, selling or
trading any securities or commodities for their own accounts or for the account
of others for whom they may be acting. Nothing in this Agreement shall limit or
restrict the right of any director, officer or employee of the Adviser to engage
in any other business or to devote his time and attention in part to the
management or other aspects of any other business whether of a similar or
dissimilar nature.
11. The Trust acknowledges and agrees, in accordance with the
provisions of Article VIII, Section 9 of the Trust's Amended and Restated
Declaration of Trust dated May 1, 1997 that the name "LEVCO" and the LEVCO logo
and all rights to the use of such name or logo as part of the name of the Trust
and the Funds belong to John A. Levin & Co., Inc.
12. This Agreement shall remain in effect as to each Fund until
[___________], 1999 and shall continue in effect for each Fund from year to year
thereafter provided such continuance as to such Fund is approved at least
annually by the vote of a majority of the outstanding voting securities of the
Trust, as defined by the Act and the rules thereunder, or by the Board of
Trustees of the Trust; provided that in either event such continuance is also
approved by a majority of the Trustees of the Trust who are not parties to this
Agreement or "interested persons" (as defined in the Act) of any such party (the
"Independent Trustees"), by vote cast in person at a meeting called for the
purpose of voting on such approval; provided, however, that (a) the Trust may at
any time, without payment of any penalty, terminate this Agreement as to the
Trust (or any Fund) upon sixty days' written notice to the Adviser, either by
majority vote of the Trustees of the Trust or by the vote of a majority of the
outstanding voting securities of the Trust (or such Fund) (as defined in the Act
and the rules thereunder); (b) this Agreement shall immediately terminate in the
event of its assignment (to the extent required by the Act and the rules
thereunder) unless such automatic termination shall be prevented by an exemptive
order of the Securities and Exchange Commission; and (c) the Adviser may
terminate this Agreement as to the Trust or any of the Funds without payment of
any penalty on sixty days' written notice to the Trust. The failure to approve a
continuance of this Agreement as to any Fund, or any termination of this
Agreement as to any Fund, shall not affect the continuation of the Agreement as
to the Trust or any other Funds which have approved a continuance or not
terminated this Agreement, as the case may be.
13. Any notice under this Agreement shall be given in writing,
addressed and delivered, or mailed post-paid, to the other party at the
principal office of such party.
14. This Agreement may be amended only by the written agreement of
the parties. Any amendment shall be required to be approved by the Trustees of
the Trust and by a majority of the Independent Trustees in accordance with the
provisions of Section 15(c) of the Act and the rules thereunder. Any amendment
shall also be required to be approved by a vote of
-4-
<PAGE>
shareholders as, and to the extent, required by the Act and the rules
thereunder. Subject to the foregoing, an amendment may be effected without the
vote of shareholders: to reduce the fees payable hereunder by any Fund; to amend
Schedule A to specify initially the fee payable hereunder by any Fund which is
formed after the date of the effectiveness of this Agreement; to supply any
omission; to cure, correct or supplement any ambiguous, defective or
inconsistent provision hereof; or if necessary, to conform this Agreement to the
requirements of applicable laws or regulations, but neither the Trust nor the
Adviser shall be liable for failing to do so.
15. This Agreement shall be construed in accordance with the laws of
the State of New York and the applicable provisions of the Act. To the extent
the applicable law of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the Act, the latter shall control.
16. The Trust represents that this Agreement has been duly approved
by the Trustees, including a majority of the Independent Trustees, and
shareholders of the Trust in accordance with the requirements of the Act and the
rules thereunder.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement on the day and year first above written.
LEVCO SERIES TRUST
By:
-----------------------------------
Title:
Name:
Attest:
---------------------
JOHN A. LEVIN & CO., INC.
By:
-----------------------------------
Title:
Name:
Attest:
---------------------
-5-
<PAGE>
SCHEDULE A
LEVCO Equity Value Fund shall pay to the Adviser monthly compensation
calculated daily at the annual rate of 0.85% of such Fund's average daily net
assets. Such calculations shall be made by applying 1/365th of the annual rate
to the Fund's net assets each day determined as of the close of business on that
day or the last previous business day. If this Agreement becomes effective
subsequent to the first day of a month or shall terminate before the last day of
a month, compensation for that part of the month this Agreement is in effect
shall be prorated in a manner consistent with the calculation of the fees as set
forth above.
-6-
<PAGE>
DISTRIBUTION AGREEMENT
This Agreement is made as of May ___, 1997, between LEVCO Series
Trust, a Delaware business trust (the "Trust"), and LEVCO Securities, Inc., a
Delaware corporation (the "Distributor").
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end, diversified management investment
company and has established one, and may establish several additional, separate
series of shares (each, a "Series"), with each Series having its own assets and
investment policies, the initial Series being LEVCO Equity Value Fund;
WHEREAS, the Series propose to issue and sell their shares of beneficial
interest ("Shares") to separate accounts of life insurance companies (the
"Participating Companies") and may in the future issue and sell to qualified
pension and retirement plans (the "Qualified Plans"), and each Series currently
issues two classes of Shares designated as Class A and Class B Shares; and
WHEREAS, the Trust desires to retain the Distributor to furnish
distribution services to each Series listed in Schedule A attached hereto, and
to such other Series of the Trust hereinafter established as agreed to from time
to time by the parties, evidenced by an addendum to Schedule A (hereinafter
"Series" shall refer to each Series which is subject to this Agreement, and all
agreements and actions described herein to be made or taken by a Series shall be
made or taken by the Trust on behalf of the Series), and the Distributor is
willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties agree as follows:
1. The Trust hereby appoints the Distributor, as agent, to sell
Shares to separate accounts of the Participating Companies and to the Qualified
Plans as may be permitted by law, and the Distributor hereby accepts such
appointment. All sales by the Distributor shall be expressly subject to
acceptance by the Trust.
2. (a) The Distributor agrees that (i) all Shares sold by the
Distributor shall be sold at the net asset value thereof, as described in
Section 3 hereof (the "NAV"), and (ii) the Series shall receive 100% of such
NAV.
(b) The Shares will be sold in accordance with sales agreements
between the Trust and the Participating Companies.
3. The Trust agrees to supply to the Distributor, promptly after the
time or times at which the NAV is determined, on each day on which the New York
Stock Exchange is
<PAGE>
open for business and on such other days as the Board of Trustees of the Trust
(the "Trustees") may from time to time determine (each such day being
hereinafter called a "business day"), a statement of the NAV of each Series
having been determined in the manner set forth in the then-current Prospectus
and Statement of Additional Information (the "SAI") of such Series. Each
determination of NAV shall take effect as of such time or times on each business
day as set forth in the then-current Prospectus of the relevant Series and shall
prevail until the time as of which the next determination is made.
4. Upon receipt by the Trust at its principal place of business of a
written order from the Distributor, together with delivery instructions, the
Trust shall, if it elects to accept such order, as promptly as practicable,
cause the Shares purchased by such order to be delivered in such amounts and in
such names as the Distributor shall specify, against payment therefor in such
manner as may be acceptable to the Trust. The Trust may, in its discretion,
refuse to accept any order for the purchase of Shares that the Distributor may
tender to it.
5. (a) All sales literature and advertisements used by the
Distributor in connection with sales of Shares shall be subject to approval by
the Trust. The Trust authorizes the Distributor, in connection with the sale or
arranging for the sale of Shares of any Series, to provide only such information
and to make only such statements or representations as are contained in the
Series' then-current Prospectus and SAI or in such financial and other
statements furnished to the Distributor pursuant to the next paragraph or as may
properly be included in sales literature or advertisements in accordance with
the provisions of the Securities Act of 1933, as amended (the "1933 Act"), the
1940 Act and applicable rules of self-regulatory organizations. Neither the
Trust nor any Series shall be responsible in any way for any information
provided or statements or representations made by the Distributor or its
representatives or agents other than the information, statements and
representations described in the preceding sentence.
(b) Each Series shall keep the Distributor fully informed with
regard to its affairs, shall furnish the Distributor with a certified copy of
all of its financial statements and a signed copy of each report prepared for it
by its independent auditors, and shall cooperate fully in the efforts of the
Distributor to negotiate and sell the Shares of such Series and to perform its
duties under this Agreement.
6. Any of the outstanding Shares may be tendered for redemption at
any time, and the Trust agrees to redeem Shares so tendered in accordance with
their terms and the procedures and requirements set forth in the Prospectus and
the SAI. The price to be paid upon redemption of Shares shall be equal to the
NAV per Share of such Series next determined after proper tender and acceptance.
7. The Distributor shall not be paid any compensation by the Trust
pursuant to this Agreement. However, the Trust may, with respect to Class B
shares, pay such compensation and make other payments to the Distributor as may
be permitted by a separate Plan of Distribution adopted by the Trust pursuant to
Rule 12b-1 under the 1940 Act (the "Rule 12b-1 Plan"). The Distributor may pay
such concessions or reallowances as the Distributor, in its discretion, may from
time to time determine. The Trust and the Distributor agree, however, that
2
<PAGE>
no concessions or reallowances shall be paid except in compliance with
applicable laws and regulations, including the rules of the National Association
of Securities Dealers, Inc.
8. (a) Except as provided in this Agreement and in accordance with
the Rule 12b-1 Plan, the Distributor shall pay all its own costs and expenses
incurred in connection with the sale of Shares.
(b) The Trust shall bear all of its costs and expenses, including
fees and disbursements of its counsel and auditors, in connection with: (i) the
preparation and filing of its Registration Statement on Form N-1A ("Registration
Statement"), the Prospectus and the SAI, and supplements to the foregoing; and
(ii) the expense of preparing, printing, mailing and otherwise distributing
Prospectuses and SAIs (including supplements), annual and interim reports and
proxy materials for use by shareholders.
(c) The Trust shall bear the cost and expenses of qualification of
Shares for sale, and, if necessary or advisable in connection therewith, of
qualifying the Trust as a broker or dealer, in all relevant states of the United
States or other jurisdictions, and the cost and expenses payable to each such
state for continuing qualification therein until the Trust decides to
discontinue such qualification.
9. Each Series shall maintain a currently effective Registration Statement
with respect to such Series and shall file with the Securities and Exchange
Commission (the "SEC") such reports and other documents as may be required under
the 1933 Act and the 1940 Act, or the rules and regulations of the SEC
thereunder.
10. (a) This Agreement shall become effective on the date hereof and
remain in effect for an initial term of two years from the date hereof and from
year to year thereafter; provided, that such continuance shall be specifically
approved each year by the Trustees or by a majority of the outstanding voting
securities of the Series, and, in either case, by a majority of the Trustees who
are not interested persons of the Trust or the Distributor (the "Disinterested
Trustees"), which vote must be cast in person at a meeting called for the
purpose of voting on such approval. This Agreement may be amended as to any
Series with the approval of the Trustees or of a majority of the outstanding
voting securities of such Series; provided, that in either case, such amendment
also shall be approved by a majority of the Disinterested Trustees.
(b) The Trust may, at any time and without the payment of any penalty,
terminate this Agreement upon sixty days' written notice to the Distributor.
This Agreement shall immediately terminate in the event of its assignment (to
the extent required by
3
<PAGE>
the 1940 Act and the rules thereunder) unless such automatic termination shall
be prevented by an exemptive order of the SEC. The Distributor may terminate
this Agreement without payment of any penalty on sixty days' written notice to
the Trust.
(c) Any question of interpretation of any term or provision of
this Agreement having a counterpart in or otherwise derived from a term or
provision of the 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretation thereof, if any, by the United
States courts or, in the absence of any controlling decision of any such court,
by rules, regulations or orders of the SEC validly issued pursuant to the 1940
Act. Specifically, the terms "interested persons", "assignment" and "vote of a
majority of the outstanding voting securities", as used in this Agreement, shall
have the meanings assigned to them by Section 2(a) of the 1940 Act. In addition,
when the effect of a requirement of the 1940 Act reflected in any provision of
this Agreement is modified, interpreted or relaxed by a rule, regulation or
order of the SEC, whether of special or of general application, such provision
shall be deemed to incorporate the effect of such rule, regulation or order. The
Trust and the Distributor may from time to time agree on such provisions
interpreting or clarifying the provisions of this Agreement as, in their joint
opinion, are consistent with the general tenor of this Agreement and with the
specific provisions of this Section 10(c). Any such interpretations or
clarifications shall be in writing signed by the parties and annexed hereto, but
no such interpretation or clarification shall be effective if in contravention
of any applicable federal or state law or regulations, and no such
interpretation or clarification shall be deemed to be an amendment of this
Agreement.
No term or provision of this Agreement shall be construed to
require the Distributor to provide distribution services to any series of the
Trust other than the Series, or to require any Series to pay any compensation or
expenses that are properly allocable to a series of the Trust other than such
Series, as determined by the Trustees.
(d) This Agreement shall be construed in accordance with the laws
of the State of New York and the applicable provisions of the 1940 Act. To the
extent the applicable laws of the State of New York, or any of the provisions
herein, conflict with the applicable provisions of the 1940 Act, the latter
shall control.
11. (a) The Trust shall indemnify and hold harmless the Distributor
and each person, if any, who controls the Distributor against any loss,
liability, claim, damage or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, claim, damage or expense
and reasonable counsel fees incurred in connection therewith) arising by reason
of any person acquiring any Shares, which may be based upon the 1933 Act, or on
any other statute or at common law, on the ground that the Registration
Statement, the Prospectus or the SAI, or any annual or interim report to
shareholders, includes an untrue statement of material fact or omits to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, unless such statement or omission was made in
reliance upon, and in conformity with, information furnished to the Trust in
connection therewith by or on behalf of the Distributor; provided, however, that
in no case (i) is the indemnity of the Trust in favor of the Distributor and any
such controlling persons to be deemed to protect such
4
<PAGE>
Distributor or any such controlling persons thereof against any liability to the
Trust or its shareholders to which the Distributor or any such controlling
persons would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of its duties or by reason of reckless
disregard of its obligations and duties under this Agreement; or (ii) is the
Trust to be liable under its indemnity agreement contained in this paragraph
with respect to any claim made against the Distributor or any such controlling
persons, unless the Distributor or such controlling persons, as the case may be,
shall have notified the Trust in writing 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 controlling persons
(or after the Distributor or such controlling persons shall have received notice
of such service on any designated agent), but failure to notify the Trust of any
such claim shall not relieve it from any liability which it may have to the
person against whom such action is brought otherwise than on account of its
indemnity agreement contained in this paragraph. The Trust will 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 liability, but if the Trust
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and satisfactory to the Distributor or such controlling person or persons,
defendant or defendants in the suit. In the event the Trust elects to assume the
defense of any such suit and retain such counsel, the Distributor or such
controlling person or persons, defendant or defendants in the suit, shall bear
the fees and the expenses of any additional counsel retained by them, but, in
case the Trust does not elect to assume the defense of any such suit, it will
reimburse the Distributor or such controlling person or persons, defendant or
defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Trust shall promptly notify the Distributor of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Shares.
(b) The Distributor shall indemnify and hold harmless the Trust
and each of its trustees and officers and each person, if any, who controls the
Trust against any loss, liability, claim, damage, or expense described in the
foregoing indemnity contained in subsection (a) of this Section, but only with
respect to statements or omissions made in reliance upon, and in conformity
with, information furnished to the Trust in writing by or on behalf of the
Distributor for use in connection with the Registration Statement, the
Prospectus or the SAI, or the annual or interim reports to shareholders. In case
any action shall be brought against the Trust or any person so indemnified, in
respect of which indemnity may be sought against the Distributor, the
Distributor shall have the rights and duties given to the Trust, and the Trust
and each person so indemnified shall have the rights and duties given to the
Distributor by the provisions of subsection (a) of this Section 11.
12. The Amended and Restated Declaration of Trust states and notice
is hereby given that this Agreement is not executed on behalf of the Trustees of
the Trust as individuals, and that the obligations of this Agreement are not
binding upon any of the Trustees, officers or shareholders or partners of the
Trust individually, but are binding only upon the assets and property of the
Trust.
13. Any notice under this Agreement shall be given to the other party
at the principal office of such party (or such other address as a party may
hereafter specify that notices hereunder be sent).
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed by their fully authorized officers and under their respective
seals.
LEVCO SERIES TRUST
By:
-------------------------
Title:
----------------------
LEVCO SECURITIES, INC.
By:
-------------------------
Title:
----------------------
6
<PAGE>
DISTRIBUTION AGREEMENT
SCHEDULE A
The Series of LEVCO Series Trust currently subject to this Agreement are as
follows:
LEVCO Equity Value Fund
<PAGE>
ACCOUNTING SERVICES AGREEMENT
AGREEMENT made as of the _____ day of __________, 1997 by and between
Baker Fentress & Company, a [Delaware corporation] ("BFK"), and LEVCO Series
Trust, a Delaware business trust (the "Trust").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Trust desires to retain BFK to render certain accounting
services to those series of the Trust described in Schedule A hereto, (each a
"Fund" and, collectively, the "Funds"), and BFK is willing to render such
services;
W I T N E S S E T H:
--------------------
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints BFK to act as accounting
agent for the Trust on the terms set forth in this Agreement. BFK accepts such
appointment and agrees to render the services herein set forth for the
compensation provided for in Schedule B, annexed hereto and incorporated herein.
In the event that the Trust establishes additional series with respect
to which the Trust decides to retain BFK to act as accounting agent, the Trust
shall so notify BFK in writing. If BFK is willing to render such services, BFK
shall notify the Trust in writing whereupon such portfolio shall be deemed to be
a Fund hereunder and shall be subject to the provisions of this Agreement except
to the extent that said provisions (including those relating to the compensation
payable by the Funds to BFK) are modified with respect to such Fund in writing
by the Trust and BFK at the time. Without limiting the foregoing, it is
understood that the Trust will from time to time issue separate series or
classes of shares and may classify and reclassify shares of any such series or
class. BFK shall identify to each such series or class property belonging to
such series or class and in such reports, confirmations and notices to the Trust
called for under this Agreement shall identify the series or class to which such
report, confirmation or notice pertains.
2. Delivery of Documents. The Trust will provide BFK with any
documents that BFK may reasonably request and will notify BFK as soon as
possible of any matter materially affecting the performance by BFK of its
services under this Agreement.
<PAGE>
3. Duties. Subject to the supervision and direction of the Board of
Trustees of the Trust, BFK, as accounting agent, will provide accounting related
services to the Trust and assist in supervising various other services and
undertakes to perform the following specific services (including the maintenance
of such accounts, books and records relating to such services as may be required
by Section 31(a) of the 1940 Act and the rules thereunder):
(a) Internal fund accounting and auditing services;
(b) Valuing the Trust's assets and calculating the net asset
value of the shares of the Fund on each business day as set forth in the Trust's
Prospectuses in accordance with such procedures as may be adopted by the Board
of Trustees of the Trust;
(c) Accumulating information for and, subject to approval by the
Trust's Treasurer, preparing all required financial statements for the Trust and
preparing reports to the Trust's shareholders of record and the Securities and
Exchange Commission including, but not necessarily limited to, Annual and Semi-
Annual Reports to shareholders, Semi-Annual Reports on Form N-SAR and Notices
pursuant to Rule 24f-2; and
(d) Assisting in the preparation and filing of the Trust's tax
returns.
In performing its duties as accounting agent for the Trust, BFK will
act in accordance with the Declaration of Trust, By-Laws, and Prospectuses of
the Trust and with the instructions and directions of the Board of Trustees of
the Trust and will conform to and comply with the requirements of the 1940 Act
and the rules thereunder and all other applicable federal or state laws and
regulations.
4. Allocation of Expenses. BFK shall bear all expenses in connection
with the performance of its services under this Agreement, except as noted
below.
(a) BFK shall not be required to pay any of the following
expenses incurred by the Trust: costs of printing and mailing prospectuses,
reports and notices; taxes and fees payable to federal, state and other
governmental agencies; outside auditing expenses; outside legal expenses; or
other expenses not specified in this Section 4 which may be properly payable by
the Trust.
(b) For the services to be rendered, the facilities to be
furnished and the payments to be made to BFK, as provided for in this Agreement,
the Trust shall compensate BFK for its services rendered pursuant to this
Agreement in accordance with the fees set forth in Schedule B, annexed hereto
and incorporated herein. Such fees do not include out-of-pocket disbursements of
BFK for which BFK will be entitled to bill
-2-
<PAGE>
separately. Out-of-pocket disbursements shall include the items specified in
Schedule C, annexed hereto and incorporated herein.
(c) BFK will bill the Trust as soon as practicable after the
end of each calendar quarter, and said billings will be detailed in accordance
with the out-of-pocket schedule. The Trust will promptly pay to BFK the
amount of such billing.
5. Limitation of Liability.
(a) BFK shall not be liable to the Trust for any error of
judgment or mistake of law or for any loss suffered by the Trust in connection
with the performance of its obligations and duties under this Agreement, except
a loss resulting from BFK's willful misfeasance, bad faith or negligence in the
performance of such obligations and duties, or by reason of its reckless
disregard thereof. The Trust will indemnify BFK against and hold it harmless
from any and all losses, claims, damages, liabilities or expenses (including
reasonable counsel fees and expenses) resulting from any claim, demand, action
or suit not resulting from the willful misfeasance, bad faith or negligence of
BFK in the performance of such obligations and duties or by reason of its
reckless disregard thereof. The Trust and BFK agree that the obligations of the
Trust under this Agreement shall not be binding upon any of the members of the
Trust's Board of Trustees, shareholders, nominees, officers, employees or
agents, whether past, present or future, of the Trust, individually, but are
binding only upon the assets and property of the Trust, as provided in the
Declaration of Trust. The execution and delivery of this Agreement have been
authorized by the Board of Trustees and signed by an authorized officer of the
Trust, acting as such, and neither such authorization by such members of the
Board of Trustees nor such execution and delivery by such officer shall be
deemed to have been made by any of them individually or to impose any liability
on any of them personally, but shall bind only the assets and property of the
Trust as provided in the Declaration of Trust.
(b) In no event and under no circumstances shall either party to
this Agreement be liable to the other party for consequential or indirect loss
of profits, reputation or business or any other special damages under any
provision of this Agreement or for any act or failure to act hereunder.
6. Term and Termination.
(a) This Agreement shall remain in effect for an initial term of
two years from the date hereof and from year to year thereafter provided such
continuance is approved at least annually by the Board of Trustees of the Trust,
and such continuance is also approved annually by the vote of a majority of the
trustees of the Trust who are not parties to this agreement or "interested
persons" (as defined in the 1940 Act) of any such party; and provided, however,
that: (a) the Trust may, at any time and without the payment of any penalty,
terminate this Agreement upon sixty days' written notice to BFK; (b) this
agreement shall immediately terminate in the event of its assignment (as such
term is used by the 1940 Act and the rules thereunder); and (c) BFK may
terminate this agreement without payment of any penalty on sixty day's written
notice to the Trust.
-3-
<PAGE>
(b) In the event a termination notice is given by the Trust, all
reasonable out-of-pocket expenses associated with movement of records and
materials and conversion thereof will be borne by the Trust.
7. Amendment to this Agreement. No provision of this Agreement may
be changed, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, discharge
or termination is sought.
8. Miscellaneous.
(a) Any notice or other instrument authorized or required by
this Agreement to be given in writing to the Trust or BFK shall be sufficiently
given if addressed to the party and received by it at its office set forth below
or at such other place as it may from time to time designate in writing.
To the Trust:
LEVCO Series Trust
One Rockefeller Plaza
25th Floor
New York, New York 10020
Attention: Glenn Aigen
To BFK:
200 West Madison Street
Suite 3510
Chicago, Illinois 60606
Attn: James P. Koneman
(b) This Agreement shall extend to and shall be binding upon the
parties hereto and their respective successors and permitted assigns.
(c) This Agreement shall be construed in accordance with the laws
of the State of New York.
(d) This Agreement may be executed in any number of counterparts
each of which shall be deemed to be an original and which collectively shall be
deemed to constitute only one instrument.
(e) The captions of 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.
(f) This Agreement and the schedules hereto constitute the entire
agreement between the parties hereto with respect to the matters described
herein.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed and delivered by their duly authorized officers as of the date
first written above.
BAKER FENTRESS & COMPANY
By:
---------------------
LEVCO SERIES TRUST
By:
---------------------
-5-
<PAGE>
SCHEDULE A
SERIES OF THE TRUST
The series of LEVCO Series Trust currently subject to this Agreement are as
follows:
LEVCO Equity Value Fund
-6-
<PAGE>
SCHEDULE B
FEE SCHEDULE
In consideration of the services provided under this Agreement, BKF shall be
entitled to receive a monthly fee, equal to the following:
Average Monthly Net Assets Monthly Fee
-------------------------- -----------
$ 0 - 50,000,000 $2,000
50 - 100,000,000 $2,500
100 - 200,000,000 $3,000
200 - 300,000,000 $4,000
over 300,000,000 $5,000 plus
0.001%
Monthly fees shall be pro-rated for any month as to which this Agreement is not
in effect for the entire month.
-7-
<PAGE>
SCHEDULE C
OUT-OF-POCKET EXPENSES
Out-of-pocket expenses are limited to the following items:
- - Postage (including overnight or other courier services)
- - Telephone
- - Telecommunications charges (including FAX)
- - Duplicating charges
- - Pricing services
- - Forms and supplies
- - Such other expenses as are agreed to by BFK and the Trust
-8-
<PAGE>
TRANSFER AGENCY AND DIVIDEND DISBURSING AGREEMENT
-------------------------------------------------
AGREEMENT dated as of __________, 1997 between LEVCO Series Trust (the
"Trust"), a Delaware business trust, and Countrywide Fund Services, Inc.
("Countrywide"), an Ohio corporation.
WHEREAS, the Trust is an investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust wishes to employ the services of Countrywide to serve as
its transfer agent and dividend disbursing agent; and
WHEREAS, Countrywide wishes to provide such services under the conditions
set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Trust and Countrywide agree as follows:
1. APPOINTMENT.
-----------
The Trust hereby appoints and employs Countrywide as agent to perform those
services described in this Agreement for the Trust. Countrywide shall act under
such appointment and perform the obligations thereof upon the terms and
conditions hereinafter set forth.
2. DOCUMENTATION.
-------------
The Trust will furnish from time to time the following documents:
A. Each resolution of the Board of Trustees of the Trust authorizing the
original issue of its shares;
B. Each Registration Statement filed with the Securities and Exchange
Commission (the "SEC") and amendments thereof;
C. A certified copy of each amendment to the Agreement and Declaration of
Trust and the Bylaws of the Trust;
D. Certified copies of each resolution of the Board of Trustees
authorizing officers to give instructions to Countrywide;
E. Specimens of all new forms of share certificates accompanied by Board
of Trustees' resolutions approving such forms;
F. Such other certificates, documents or opinions which Countrywide may,
in its discretion, deem necessary or appropriate in the proper
performance of its duties;
<PAGE>
G. Copies of all Underwriting and Dealer Agreements in effect;
H. Copies of all Investment Advisory Agreements in effect; and
I. Copies of all documents relating to special investment or withdrawal
plans which are offered or may be offered in the future by the Trust
and for which Countrywide is to act as plan agent.
3. COUNTRYWIDE TO RECORD SHARES.
----------------------------
Countrywide shall record the issuance of shares of the Trust and
maintain pursuant to applicable rules of the SEC a record of the total number of
shares of the Trust which are authorized, issued and outstanding, based upon
data provided to it by the Trust. Countrywide shall also provide the Trust on a
regular basis or upon reasonable request the total number of shares which are
authorized, issued and outstanding, but shall have no obligation when recording
the issuance of the Trust's shares, except as otherwise set forth herein, to
monitor the issuance of such shares or to take cognizance of any laws relating
to the issue or sale of such shares, which functions shall be the sole
responsibility of the Trust.
4. COUNTRYWIDE TO VALIDATE TRANSFERS.
---------------------------------
Upon receipt of a proper request for transfer and upon surrender to
Countrywide of certificates, if any, in proper form for transfer, Countrywide
shall approve such transfer and shall take all necessary steps to effectuate the
transfer as indicated in the transfer request. Upon approval of the transfer,
Countrywide shall notify the Trust in writing of each such transaction and shall
make appropriate entries on the shareholder records maintained by Countrywide.
5. SHARE CERTIFICATES.
------------------
If the Trust authorizes the issuance of share certificates and an
investor requests a share certificate, Countrywide will countersign and mail, by
insured first class mail, a share certificate to the investor at his address as
set forth on the transfer books of the Trust, subject to any other instructions
for delivery of certificates representing newly purchased shares and subject to
the limitation that no certificates representing newly purchased shares shall be
mailed to the investor until the cash purchase price of such shares has been
collected and credited to the account of the Trust maintained by the Custodian.
The Trust shall supply Countrywide with a sufficient supply of blank share
certificates and from time to time shall renew such supply upon request of
Countrywide. Such blank share certificates shall be properly signed, manually
or, if authorized by the Trust, by facsimile; and notwithstanding
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<PAGE>
the death, resignation or removal of any officers of the Trust authorized to
sign share certificates, Countrywide may continue to countersign certificates
which bear the manual or facsimile signature of such officer until otherwise
directed by the Trust. In case of the alleged loss or destruction of any share
certificate, no new certificates shall be issued in lieu thereof, unless there
shall first be furnished an appropriate bond satisfactory to Countrywide and the
Trust, and issued by a surety company satisfactory to Countrywide and the Trust.
6. RECEIPT OF FUNDS.
----------------
Upon receipt of any check or other instrument drawn or endorsed to it
as agent for, or identified as being for the account of, the Trust, Countrywide
shall stamp the check or instrument with the date of receipt, determine the
amount thereof due the Trust and shall forthwith process the same for
collection. Upon receipt of notification of receipt of funds eligible for share
purchases in accordance with the Trust's then current prospectus and statement
of additional information, Countrywide shall notify the Trust, at the close of
each business day, in writing of the amount of said funds credited to the Trust
and deposited in its account with the Custodian.
7. PURCHASE ORDERS.
---------------
Upon receipt of an order for the purchase of shares of the Trust,
accompanied by sufficient information to enable Countrywide to establish a
shareholder account, Countrywide shall, as of the next determination of net
asset value after receipt of such order in accordance with the Trust's then
current prospectus and statement of additional information, compute the number
of shares due to the shareholder, credit the share account of the shareholder,
subject to collection of the funds, with the number of shares so purchased,
shall notify the Trust in writing or by computer report at the close of each
business day of such transactions and shall mail to the shareholder and/or
dealer of record a notice of such credit when requested to do so by the Trust.
8. RETURNED CHECKS.
---------------
In the event that Countrywide is notified by the Trust's Custodian
that any check or other order for the payment of money is returned unpaid for
any reason, Countrywide will:
A. Give prompt notification to the Trust and the Underwriter of the
non-payment of said check;
B. In the absence of other instructions from the Trust, take such
steps as may be necessary to redeem any shares purchased on the basis of such
returned check and cause the
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<PAGE>
proceeds of such redemption plus any dividends declared with respect to such
shares to be credited to the account of the Trust and to request the Trust's
Custodian to forward such returned check to the person who originally submitted
the check; and
C. Notify the Trust of such actions and correct the Trust's records
maintained by Countrywide pursuant to this Agreement.
9. SALES CHARGE.
------------
In computing the number of shares to credit to the account of a
shareholder, Countrywide will calculate the total of the applicable sales
charges, if any, with respect to each purchase as set forth in the Trust's
current prospectus and statement of additional information and in accordance
with any notification filed with respect to combined and accumulated purchases.
Countrywide will also determine the portion of each sales charge payable to the
dealer of record participating in the sale in accordance with such schedules as
are from time to time delivered by the Trust to Countrywide; provided, however,
Countrywide shall have no liability hereunder arising from the incorrect
selection by Countrywide of the gross rate of sales charges except that this
exculpation shall not apply in the event the rate is specified by the Trust and
Countrywide fails to select the rate specified.
10. DIVIDENDS AND DISTRIBUTIONS.
---------------------------
The Trust shall furnish Countrywide with appropriate evidence of
trustee action authorizing the declaration of dividends and other distributions.
Countrywide shall establish procedures in accordance with the Trust's then
current prospectus and statement of additional information and with other
authorized actions of the Trust's Board of Trustees under which it will have
available from the Custodian or the Trust any required information for each
dividend and other distribution. Countrywide shall invest the dividends and
other distributions in full and fractional shares in accordance with the Trust's
then current prospectus and statement of additional information. Countrywide
shall mail to the shareholders periodic statements, as requested by the Trust,
showing the number of full and fractional shares and the net asset value per
share of shares so credited. When requested by the Trust, Countrywide shall
prepare and file with the Internal Revenue Service, and when required, shall
address and mail to shareholders, such returns and information relating to
dividends and distributions paid by the Trust as are required to be so prepared,
filed and mailed by applicable laws, rules and regulations.
-4-
<PAGE>
11. REDEMPTIONS.
-----------
A. Countrywide shall process, in accordance with the Trust's then
current prospectus and statement of additional information, each order for the
redemption of shares accepted by Countrywide. Upon its approval of such
redemption transactions, Countrywide shall mail to the shareholder and/or dealer
of record a confirmation showing trade date, number of full and fractional
shares redeemed, the price per share and the total redemption proceeds. For
each such redemption, Countrywide shall effectuate such redemption procedures
which are authorized by the Trust's Board of Trustees or its then current
prospectus and statement of additional information. The requirements as to
instruments of transfer and other documentation, the applicable redemption price
and the time of payment shall be as provided in the then current prospectus and
statement of additional information, subject to such supplemental instructions
as may be furnished by the Trust and accepted by Countrywide. If Countrywide or
the Trust determines that a request for redemption does not comply with the
requirements for redemptions, Countrywide shall promptly notify the shareholder
indicating the reason therefor.
B. Countrywide shall notify the Trust and the Custodian on each
business day of the amount of cash required to meet payments made pursuant to
the provisions of this Paragraph 11, and, on the basis of such notice, the Trust
shall instruct the Custodian to make available from time to time sufficient
funds therefor in the appropriate account of the Trust. Procedures for
effecting redemption orders accepted by telephone or other methods shall be
established by mutual agreement between Countrywide and the Trust consistent
with the Trust's then current prospectus and statement of additional
information.
C. The authority of Countrywide to perform its responsibilities
under Paragraph 7, Paragraph 10, and this Paragraph 11 shall be suspended with
respect to any series of the Trust upon receipt of notification by it of the
suspension of the determination of such series' net asset value.
12. WIRE-ORDER PURCHASES.
--------------------
Countrywide will send written confirmations to the dealers of record
containing all details of the wire-order purchases placed by each such dealer by
the close of business on the business day following receipt of such orders by
Countrywide. Upon receipt of any check drawn or endorsed to the Trust (or
Countrywide, as agent) or otherwise identified as being payment of an
outstanding wire-order, Countrywide will stamp said check with the date of its
receipt and deposit the amount represented by such check to Countrywide's
deposit accounts maintained with the Custodian. Countrywide will compute the
respective portions
-5-
<PAGE>
of such deposit which represent the sales charge and the net asset value of the
shares so purchased, will cause the Custodian to transfer federal funds in an
amount equal to the net asset value of the shares so purchased to the Trust's
account with the Custodian, and will notify the Trust and the Underwriter before
noon of each business day of the total amount deposited in the Trust's deposit
accounts, and in the event that payment for a purchase order is not received by
Countrywide or the Custodian on the tenth business day following receipt of the
order, prepare an NASD "notice of failure of dealer to make payment" and forward
such notification to the Underwriter.
13. RECORDKEEPING AND OTHER INFORMATION.
-----------------------------------
Countrywide shall create and maintain all records required by
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act and the rules thereunder, as the same
may be amended from time to time, pertaining to the various functions performed
by it and not otherwise created and maintained by another party pursuant to
contract with the Trust. All such records shall be the property of the Trust at
all times and shall be available for inspection and use by the Trust. Where
applicable, such records shall be maintained by Countrywide for the periods and
in the places required by Rule 31a-2 under the 1940 Act. Countrywide shall make
available during regular business hours all records and other data created and
maintained pursuant to this Agreement for reasonable audit and inspection by the
Trust or any regulatory agency having authority over the Trust. In the event
this Agreement is terminated, all such records shall be delivered to the Trust
or any person designated by the Trust.
14. SHAREHOLDER RECORDS.
-------------------
Countrywide shall maintain records for each shareholder account
showing the following:
A. Names, addresses and tax identifying numbers;
B. Name of the dealer of record, if any;
C. Number of shares held of each series;
D. Historical information regarding the account of each shareholder,
including dividends and distributions invested in shares;
E. Information with respect to the source of all dividends and
distributions allocated among income, realized short-term gains and
realized long-term gains;
-6-
<PAGE>
F. Any instructions from a shareholder including all forms furnished by
the Trust and executed by a shareholder;
G. Any correspondence relating to the current maintenance of a
shareholder's account;
H. Certificate numbers and denominations for any shareholder holding
certificates;
I. Any stop or restraining order placed against a shareholder's account;
J. Information with respect to withholding in the case of a foreign
account or any other account for which withholding is required by the
Internal Revenue Code of 1986, as amended; and
K. Any information required in order for Countrywide to perform the
calculations contemplated under this Agreement.
15. TAX RETURNS AND REPORTS.
-----------------------
Countrywide will prepare in the appropriate form, file with the
Internal Revenue Service and appropriate state agencies and, if required, mail
to shareholders of the Trust such returns for reporting dividends and
distributions paid by the Trust as are required to be so prepared, filed and
mailed and shall withhold such sums as are required to be withheld under
applicable federal and state income tax laws, rules and regulations.
16. OTHER INFORMATION TO THE TRUST.
------------------------------
Subject to such instructions, verification and approval of the
Custodian and the Trust as shall be required by any agreement or applicable law,
Countrywide will also maintain such records as shall be necessary to furnish to
the Trust the following: annual shareholder meeting lists, proxy lists and
mailing materials, shareholder reports and confirmations and checks for
disbursing redemption proceeds or expense disbursements.
17. ACCESS TO SHAREHOLDER INFORMATION.
---------------------------------
Upon request, Countrywide shall arrange for the Trust's investment
adviser to have direct access to shareholder information contained in
Countrywide's computer system, including account balances, performance
information and such other information which is available to Countrywide with
respect to shareholder accounts.
-7-
<PAGE>
18. COOPERATION WITH ACCOUNTANTS.
----------------------------
Countrywide shall cooperate with the Trust's independent public
accountants and shall take all reasonable action in the performance of its
obligations under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their unqualified
opinion where required for any document for the Trust.
19. PROXIES.
-------
Countrywide shall assist the Trust in the mailing of proxy cards and
other material in connection with shareholder meetings of the Trust, shall
receive, examine and tabulate returned proxies and shall, if requested by the
Trust, provide at least one inspector of election to attend and participate as
required by law in shareholder meetings of the Trust.
20. FURTHER ACTIONS.
---------------
Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof.
21. COMPENSATION.
------------
For the performance of Countrywide's obligations under this Agreement,
each series of the Trust shall pay Countrywide, on the first business day
following the end of each month, a monthly fee in accordance with the schedule
attached hereto as Schedule A. The Trust shall promptly reimburse Countrywide
for any out-of-pocket expenses and advances which are to be paid by the Trust in
accordance with Paragraph 22.
22. EXPENSES.
--------
Countrywide shall furnish, at its expense and without cost to the
Trust (i) the services of its personnel to the extent that such services are
required to carry out its obligations under this Agreement and (ii) use of data
processing equipment. All costs and expenses not expressly assumed by
Countrywide under this Paragraph 22 shall be paid by the Trust, including, but
not limited to, costs and expenses of officers and employees of Countrywide in
attending meetings of the Board of Trustees and shareholders of the Trust, as
well as costs and expenses for postage, envelopes, checks, drafts, continuous
forms, reports, communications, statements and other materials, telephone,
telegraph and remote transmission lines, use of outside pricing services, use of
outside mailing firms, necessary outside record storage, media for storage of
records (e.g., microfilm, microfiche, computer tapes), printing, confirmations
and any
-8-
<PAGE>
other shareholder correspondence and any and all assessments, taxes or levies
assessed on Countrywide for services provided under this Agreement. Postage for
mailings of proxies, reports and other mailings to all shareholders shall be
advanced to Countrywide three business days prior to the mailing date of such
materials.
23. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
--------------------------------------------------
The parties hereto acknowledge and agree that nothing contained herein
shall be construed to require Countrywide to perform any services for the Trust
which services could cause Countrywide to be deemed an "investment advisor" of
the Trust within the meaning of Section 2(a)(20) of the 1940 Act or to supersede
or contravene the Trust's prospectus or statement of additional information or
any provisions of the 1940 Act and the rules thereunder. In providing services
hereunder, Countrywide shall comply with all applicable rules and regulations of
governmental authorities having jurisdiction over its activities. Except as
otherwise provided in this Agreement and except for the accuracy of information
furnished to it by Countrywide, the Trust assumes full responsibility for
complying with all applicable requirements of the 1940 Act, the Securities Act
of 1933, as amended, and any other laws, rules and regulations of governmental
authorities having jurisdiction over the Trust.
24. REFERENCES TO COUNTRYWIDE.
-------------------------
The Trust shall not circulate any printed matter which contains any
reference to Countrywide without the prior written approval of Countrywide,
excepting solely such printed matter as merely identifies Countrywide as
Administrative Services Agent, Transfer, Shareholder Servicing and Dividend
Disbursing Agent and Accounting Services Agent. The Trust will submit printed
matter requiring approval to Countrywide in draft form, allowing sufficient time
for review by Countrywide and its counsel prior to any deadline for printing.
25. EQUIPMENT FAILURES.
------------------
Countrywide shall take all steps necessary to minimize or avoid
service interruptions, and has entered into one or more agreements making
provision for emergency use of electronic data processing equipment.
Countrywide shall have no liability with respect to equipment failures beyond
its control.
26. INDEMNIFICATION OF COUNTRYWIDE.
------------------------------
A. Countrywide shall exercise due care in the performance of its duties
hereunder, and may rely on information reasonably believed by it to be accurate
and reliable. Except as may otherwise be required by the 1940 Act and the rules
thereunder, neither Countrywide nor its shareholders, officers, directors,
-9-
<PAGE>
employees, agents, control persons or affiliates of any thereof shall be subject
to any liability for, or any damages, expenses or losses incurred by the Trust
in connection with, any error of judgment, mistake of law, any act or omission
connected with or arising out of any services rendered under or payments made
pursuant to this Agreement or any other matter to which this Agreement relates,
except by reason of willful misfeasance, bad faith or negligence on the part of
any such persons in the performance of the duties of Countrywide under this
Agreement or by reason of reckless disregard by any of such persons of the
obligations and duties of Countrywide under this Agreement.
B. Any person, even though also a director, officer, employee,
shareholder or agent of Countrywide, or any of its affiliates, who may be or
become an officer, trustee, employee or agent of the Trust, shall be deemed,
when rendering services to the Trust or acting on any business of the Trust, to
be rendering such services to or acting solely as an officer, trustee, employee
or agent of the Trust and not as a director, officer, employee, shareholder or
agent of or one under the control or direction of Countrywide or any of its
affiliates, even though paid by one of these entities.
C. Notwithstanding any other provision of this Agreement, the Trust
shall indemnify and hold harmless Countrywide, its directors, officers,
employees, shareholders, agents, control persons and affiliates from and against
any and all claims, demands, expenses and liabilities (whether with or without
basis in fact or law) of any and every nature which Countrywide may sustain or
incur or which may be asserted against Countrywide by any person by reason of,
or as a result of: (i) any action taken or omitted to be taken by Countrywide
in good faith in reliance upon any certificate, instrument, order or share
certificate reasonably believed by it to be genuine and to be signed,
countersigned or executed by any duly authorized person, upon the oral
instructions or written instructions of an authorized person of the Trust or
upon the opinion of legal counsel for the Trust or its own counsel; or (ii) any
action taken or omitted to be taken by Countrywide in connection with its
appointment in good faith in reliance upon any law, act, regulation or
interpretation of the same even though the same may thereafter have been
altered, changed, amended or repealed. However, indemnification under this
subparagraph shall not apply to actions or omissions of Countrywide or its
directors, officers, employees, shareholders or agents in cases of its or their
own negligence, willful misconduct, bad faith, or reckless disregard of its or
their own duties hereunder.
27. TERMINATION
-----------
A. Either party may terminate this Agreement on any date by giving
the other party at least sixty (60) days' prior
-10-
<PAGE>
written notice of such termination specifying the date fixed therefor. Upon
termination of this Agreement, the Trust shall pay to Countrywide such
compensation as may be due as of the date of such termination, and shall
likewise reimburse Countrywide for any out-of-pocket expenses and disbursements
reasonably incurred by Countrywide to such date.
B. In the event that in connection with the termination of this
Agreement a successor to any of Countrywide's duties or responsibilities under
this Agreement is designated by the Trust by written notice to Countrywide,
Countrywide shall, promptly upon such termination and at the expense of the
Trust, transfer all records maintained by Countrywide under this Agreement and
shall cooperate in the transfer of such duties and responsibilities, including
provision for assistance from Countrywide's cognizant personnel in the
establishment of books, records and other data by such successor.
C. Countrywide may not assign this Agreement without the prior
consent of the Trust.
28. SERVICES FOR OTHERS.
-------------------
Nothing in this Agreement shall prevent Countrywide or any affiliated
person (as defined in the 1940 Act) of Countrywide from providing services for
any other person, firm or corporation (including other investment companies);
provided, however, that Countrywide expressly represents that it will undertake
no activities which, in its judgment, will adversely affect the performance of
its obligations to the Trust under this Agreement.
29. LIMITATION OF LIABILITY.
-----------------------
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust, personally, but bind only the trust property
of the Trust. The execution and delivery of this Agreement have been authorized
by the Trustees of the Trust and signed by an officer of the Trust, acting as
such, and neither such authorization by such Trustees nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but shall
bind only the trust property of the Trust.
30. SEVERABILITY.
------------
In the event any provision of this Agreement is determined to be void
or unenforceable, such determination shall not affect the remainder of this
Agreement, which shall continue to be in force.
-11-
<PAGE>
31. QUESTIONS OF INTERPRETATION.
---------------------------
This Agreement shall be governed by the laws of the State of Ohio.
Any question of interpretation of any term or provision of this Agreement having
a counterpart in or otherwise derived from a term or provision of the 1940 Act
shall be resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States Courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the SEC issued pursuant to said 1940 Act. In addition, where the effect of a
requirement of the 1940 Act, reflected in any provision of this Agreement, is
revised by rule, regulation or order of the SEC, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
32. NOTICES.
-------
All notices, requests, consents and other communications required or
permitted under this Agreement shall be in writing (including telex and
telegraphic communication) and shall be (as elected by the person giving such
notice) hand delivered by messenger or courier service, telecommunicated, or
mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, addressed to:
To the Trust: LEVCO Series Trust
One Rockefeller Plaza, 25th Floor
New York, New York 10020
Attention:
To Countrywide: Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attention: Robert G. Dorsey
or to such other address as any party may designate by notice complying with the
terms of this Section 32. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery; (b) on the date telecommunicated if by
telegraph; (c) on the date of transmission with confirmed answer back if by
telex, telefax or other telegraphic method; and (d) on the date upon which the
return receipt is signed or delivery is refused or the notice is designated by
the postal authorities as not deliverable, as the case may be, if mailed.
33. AMENDMENT.
---------
This Agreement may not be amended or modified except by a written
agreement executed by both parties.
-12-
<PAGE>
34. BINDING EFFECT.
--------------
Each of the undersigned expressly warrants and represents that he has
the full power and authority to sign this Agreement on behalf of the party
indicated, and that his signature will operate to bind the party indicated to
the foregoing terms.
35. COUNTERPARTS.
------------
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
36. FORCE MAJEURE.
-------------
If Countrywide shall be delayed in its performance of services or
prevented entirely or in part from performing services due to causes or events
beyond its control, including and without limitation, acts of God, interruption
of power or other utility, transportation or communication services, acts of
civil or military authority, sabotages, national emergencies, explosion, flood,
accident, earthquake or other catastrophe, fire, strike or other labor problems,
legal action, present or future law, governmental order, rule or regulation, or
shortages of suitable parts, materials, labor or transportation, such delay or
non-performance shall be excused and a reasonable time for performance in
connection with this Agreement shall be extended to include the period of such
delay or non-performance.
37. MISCELLANEOUS.
-------------
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
LEVCO SERIES TRUST
By: ____________________________
Its: President
COUNTRYWIDE FUND SERVICES, INC.
By: __________________________
Its: President
-13-
<PAGE>
Schedule A
----------
COMPENSATION
------------
Services FEE
- -------- ---
As Transfer Agent:
LEVCO Equity Value Fund $1,000 per month
-14-
<PAGE>
MORRIS, NICHOLS, ARSHT & TUNNELL
1201 North Market Street
P.O. Box 1347
Wilmington, Delaware 19899-1347
----
Telephone (302) 658-9200
Telecopy (302) 658-3989
RICHARD L. SUTTON RACHEL A. DWARES
JOHANNES R. KRAHMER KAREN JACOBS LOUDEN
O. FRANCIS BIONDI KAREN L. PASCALE
LEWIS S. BLACK, JR. ELAINE C. REILLY
PAUL P. WELSCH DONNA L. CULVER
WILLIAM O. LAMOTTE, III JULIA HEANEY
DOUGLAS E. WHITNEY JONATHAN I. LESSNER
WILLIAM H. SUDELL, JR. LISA B. BAEURLE
MARTIN P. TULLY ROBERT J. DEHNEY*
THOMAS REED HUNT, JR. JEFFREY R. WOLTERS
A. GILCHRIST SPARKS, III MARYELLEN NOREIKA
RICHARD D. ALLEN DAVID J. TEKLITS
DAVID LEY HAMILTON S. MARK HURD
JOHN F. JOHNSTON LUCINDA C. CUCUZZELLA
WALTER C. TUTHILL LISA K. W. CROSSLAND
DONALD F. PARSONS, JR. STANFORD L. STEVENSON, III
JACK B. BLUMENFELD J. ANDREW HUFFMAN**
DONALD NELSON ISKEN DEREK C. ABBOTT
DONALD E. REID JESSICA ZELDIN
DENISON H. HATCH, JR. RODNEY B. CARROLL***
THOMAS C. GRIMM BRADLEY JAMES ENNA
KENNETH J. NACHBAR DAVID A. HARRIS
ANDREW M. JOHNSTON
MARY B. GRAHAM S. SAMUEL ARSHT
MICHAEL HOUGHTON ANDREW B. KIRKPATRICK, JR.
MATTHEW B. LEHR DAVID A. DREXLER
THOMAS R. PULSIFER WALTER L. PEPPERMAN, II
JON E. ABRAMCZYK S. MAYNARD TURK
ALAN J. STONE
LOUIS G. HERING OF COUNSEL
FREDERICK H. ALEXANDER
R. JUDSON SCAGGS, JR.
WILLIAM M. LAFFERTY
*ADMITTED IN NY AND CT ONLY
**ADMITTED IN NY ONLY
***ADMITTED IN TX ONLY
May 19, 1997
LEVCO Series Trust
One Rockefeller Plaza
25th Floor
New York, NY 10020
Re: LEVCO Series Trust
------------------
Ladies and Gentlemen:
We have acted as special Delaware counsel to LEVCO Series Trust, a
Delaware business trust (the "Trust"), in connection with certain matters
relating to the issuance of Shares of beneficial interest in the Trust.
Capitalized terms used herein and not otherwise herein defined are used as
defined in the Amended and Restated Declaration of Trust of the Trust dated as
of May 1, 1997 (the "Governing Instrument").
In rendering this opinion, we have examined copies of the following
documents, each in the form provided to us: the Certificate of Trust of the
Trust as filed in the Office of the Secretary of State of the State of Delaware
(the "Recording Office") on January 2, 1997 (the "Certificate"), as amended by a
Certificate of Amendment thereto as filed in the Recording Office on May 13,
1997; the Declaration of Trust of the Trust dated as of January 2, 1997 (the
"Original Governing Instrument"); the Governing Instrument; the By-laws of the
Trust; certain resolutions of the Trustees of the Trust; the Trust's
Notification of Registration Filed Pursuant to Section 8(a) of the Investment
Company Act of 1940 on Form N-8A as filed with the Securities and Exchange
Commission on January 6, 1997; the Trust's Registration Statement on Form N-1A
as filed with the Securities and Exchange Commission on January 6, 1997 (the
"Registration Statement"); and a certification of good standing of the Trust
obtained as of a recent date from the Recording Office. In such examinations,
we have assumed the genuineness of all signatures, the conformity to original
documents of all documents submitted to us as copies or drafts of documents to
be executed, and the legal capacity of natural persons to complete the execution
of documents. We have further assumed
<PAGE>
LEVOC Series Trust
May 19, 1997
Page 2
for the purpose of this opinion: (i) the due authorization, execution and
delivery by, or on behalf of, each of the parties thereto of the above-
referenced instruments, certificates and other documents, and of all documents
contemplated by the Governing Instrument, the By-laws and applicable resolutions
of the Trustees to be executed by investors desiring to become Shareholders;
(ii) the payment of consideration for Shares, and the application of such
consideration, as provided in the Governing Instrument, and compliance with the
other terms, conditions and restrictions set forth in the Governing Instrument
and all applicable resolutions of the Trustees of the Trust in connection with
the issuance of Shares (including, without limitation, the taking of all
appropriate action by the Trustees to designate Series of Shares and the rights
and preferences attributable thereto as contemplated by the Governing
Instrument); (iii) that appropriate notation of the names and addresses of, the
number of Shares held by, and the consideration paid by, Shareholders will be
maintained in the appropriate registers and other books and records of the Trust
in connection with the issuance, redemption or transfer of Shares; (iv) that no
event has occurred subsequent to the filing of the Certificate that would cause
a termination or a merger, consolidation, conversion or other reorganization of
the Trust under Section 2 or Section 3 of Article VIII of the Governing
Instrument or Original Governing Instrument; (v) that the activities of the
Trust have been and will be conducted in accordance with the terms of the
Governing Instrument and the Delaware Business Trust Act, 12 Del. C. (S)(S) 3801
et seq. (the "Delaware Act"); and (vi) that each of the documents examined by us
is in full force and effect and has not been modified, supplemented or otherwise
amended. No opinion is expressed herein with respect to the requirements of, or
compliance with, federal or state securities or blue sky laws. Further, we
express no opinion on the sufficiency or accuracy of any registration or
offering documentation relating to the Trust or the Shares. As to any facts
material to our opinion, other than those assumed, we have relied without
independent investigation on the above-referenced documents and on the accuracy,
as of the date hereof, of the matters therein contained.
Based on and subject to the foregoing, and limited in all respects to
matters of Delaware law, it is our opinion that:
1. The Trust is a duly created and validly existing business trust
in good standing under the laws of the State of Delaware.
2. The Shares of the Trust, when issued to Shareholders in
accordance with the terms, conditions, requirements and procedures set forth in
the Governing Instrument, will constitute legally issued, fully paid and non-
assessable Shares of beneficial interest in the Trust.
<PAGE>
LEVCO Series Trust
May 19, 1997
Page 3
Notwithstanding the foregoing, we note that, pursuant to Section 5 of
Article IV of the Governing Instrument, the Trustees have the power to cause
Shareholders, or Shareholders of a particular Series, to pay certain custodian,
transfer, servicing or similar agent charges by setting off the same against
declared but unpaid dividends or by reducing Share ownership (or by both means)
and that, pursuant to Section 3 of Article III of the Governing Instrument,
Shares may be sold subject to imposition of sales charges, deferred sales
charges, asset-based sales charges and redemption fees.
We understand that the Trust is currently in the process of
registering or qualifying Shares in various states, and we hereby consent to the
filing of a copy of this opinion with the securities administrators of such
states and with the Securities and Exchange Commission as an exhibit to Pre-
Effective Amendment No. 1 to the Registration Statement. In giving this consent,
we do not thereby admit that we come within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder. The opinion set forth above is expressed solely for the benefit of
the addressee hereof in connection with the matters contemplated hereby and may
not be relied upon for any other purpose or by any other person or entity
without our prior written consent.
Sincerely,
MORRIS, NICHOLS, ARSHT & TUNNELL
/s/ MORRIS, NICHOLS, ARSHT & TUNNELL
<PAGE>
SUBSCRIPTION AGREEMENT WITHOUT CASH ESCROW
For and in consideration of the mutual agreements herein contained,
_______________ (the "Subscriber") hereby agrees to purchase from LEVCO Series
Trust (the "Trust") a Delaware business trust, and the Trust agrees to sell to
Subscriber, shares of beneficial interest ("Shares"), $0.001 par value, of the
Trust, representing interests in LEVCO Equity Value Fund (the "Fund"), having an
aggregate net asset value of $_________ dollars a Share, upon the following
terms and conditions:
The Subscriber agrees to pay $______ dollars to the Fund upon demand
for the purchase of Shares.
The Fund will not issue any securities or receive any of the proceeds
of this subscription until subscriptions identical in form to this one have been
made by not more than 25 persons (which persons shall include the Subscriber) to
purchase from the Fund securities for an aggregate net amount which, plus the
Fund's then net worth, will equal at least $100,000.
Unless such aggregate net amount is paid to the Fund and the Fund then
has $100,000 of net worth on or within 90 days after the date on which the
registration statement filed under the Securities Act of 1933, as amended, with
respect to the Trust's capital stock becomes effective (the "Effective Date"),
this subscription shall become null and void and the full amount paid in by the
Subscriber will be refunded to the Subscriber on demand without any deduction.
In the event that such aggregate net amount of cash has been paid in
and the Fund has a net worth of at least $100,000 on or within 90 days after
the Effective Date, then this subscription shall be in full force and effect and
the Fund may retain all funds tendered to it.
The Subscriber agrees that the Shares are being purchased for
investment and has no present intention of reselling or redeeming the Shares.
It is understood that said aggregate net amount will be paid in to the
Fund before any subscriptions for Shares will be accepted from any persons in
excess of 25.
[Name of Subscriber]
By:
---------------------
Name:
Title:
LEVCO Series Trust
By:
---------------------
Name:
Title:
<PAGE>
12b-1 DISTRIBUTION PLAN
for Class B Shares
of LEVCO Series Trust
1. This Distribution Plan (the "Plan"), when effective in accordance with
its terms, shall be the written plan contemplated by Rule 12b-1 under the
Investment Company Act of 1940 (the "1940 Act") for the Class B Shares (the
"Shares") of LEVCO Equity Value Fund (the "Fund"), the sole series of LEVCO
Series Trust (the "Trust").
2. The Shares are offered solely to certain life insurance companies (the
"Participating Companies") for allocation to certain of their variable separate
accounts established for the purpose of funding variable annuity contracts and
variable life insurance policies and may also in the future be offered directly
to qualified pension and retirement plans outside of the separate account
context.
3. The Trust has entered into a Distribution Agreement with LEVCO
Securities, Inc. (the "Distributor"), under which the Distributor serves as a
distributor of shares of beneficial interest of the Trust representing interests
in the Fund.
4. The Trust is hereby authorized to utilize assets to finance the
distribution of the Shares. All payments under the Plan shall be used to
reimburse the distributor for: payments made by the Distributor to other
securities dealers, Participating Companies and financial institutions which
engage in efforts to promote the sale of the Shares and which sell such Shares
or to reimburse such organizations for distribution related or shareholder
services related expenses they incur in selling Shares or providing Fund
related services to their customers; and such other activities related to the
promotion of sales of the Shares as may from time to time be specifically
authorized by the Board of Trustees, including a majority of the trustees who
are not "interested persons" (as defined by the 1940 Act) of the Trust and who
have no direct or indirect financial interest in the operation of the 12b-1 Plan
or any other agreement in respect of the 12b-1 Plan (the "Disinterested
Trustees")
5. Under the Plan, the Trust is authorized to expend an amount annually
which shall not exceed 0.25% annually of the average daily net assets of the
Shares and such expenditures shall be allocated solely to the holders of the
Shares and not to the holders of any other class.
6. Payments to the Distributor under this Plan shall be made monthly to
reimburse the Distributor for expenses of the type described in Section 4 which
have previously been incurred by the Distributor. There shall be no requirement
that such expenses be incurred by the Distributor in the same fiscal year of the
Fund as the fiscal year in which reimbursements to the
<PAGE>
Distributor are made. The Distributor shall not be entitled to be paid any
interest (or carrying charge) on amounts expended but not yet reimbursed by the
Trust.
7. This Plan shall become effective on the date of its initial approval by
the Board of Trustees and shall remain in effect for one year from such date.
The Plan may be continued in effect from year to year thereafter if such
continuance is approved annually by the Board of Trustees of the Trust,
including a majority of the Disinterested Trustees, by a vote cast in person at
a meeting called for the purpose of voting on such continuance, and provided
that the Disinterested Trustees have concluded, in the exercise of their
reasonable business judgment and in light of their fiduciary duties under state
law and under Sections 36(a) and 36(b) of the 1940 Act, that there is a
reasonable likelihood that continuation of the Plan will benefit the Fund and
its shareholders. The Plan may not be amended to increase materially the amount
to be spent for distribution by the Fund hereunder without the approval of a
majority of the outstanding Shares. All material amendments to the Plan must be
approved by the Board of Trustees of the Trust, including a majority of the
Disinterested Trustees, by vote cast in person at a meeting called for the
purpose of voting on such amendment.
8. The Plan may be terminated at any time, without penalty, by the vote of
a majority of the Disinterested Trustees or by the vote of a majority of the
outstanding voting securities of the Fund.
9. So long as this Plan shall be in effect, the selection and nomination of
the Disinterested Trustees of the Trust shall be committed to the discretion of
the Disinterested Trustees then in office.
10. During the existence of this Plan, the Distributor shall provide the
Trust, for review by the Board of Trustees, and the Trustees shall review, at
least quarterly, a written report setting forth the amount expended pursuant to
the Plan in the sale of the Shares (making estimates of such costs where
necessary or desirable) and describing the purposes for which such expenditures
were made, including such reasonable detail to permit the Trustees to monitor
compliance with the Plan and to assess its benefit to the Fund and the holders
of Shares.
11. This Plan shall be construed in accordance with the laws of the State
of New York and applicable provisions of the 1940 Act. To the extent the
applicable law of the State of New York conflicts with the applicable provisions
of the 1940 Act, the latter shall control.
12. If any provision of the Plan shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Plan shall not be
affected thereby.
13. The Trust shall preserve copies of this Plan and any related agreements
and all reports made pursuant to Section 10 hereof, together with minutes of all
meetings of its Board of
2
<PAGE>
Trustees at which the adoption, amendment or continuance of the Plan or any
related agreement were considered (describing the factors considered and the
basis for decision) in the manner and for the periods specified by Rule 12b-1
and other applicable rules adopted under the 1940 Act.
The plan was approved by the Board of Trustees, including a majority of the
Disinterested Trustees, at a meeting held in person on May 22, 1997.
--------------------------
Secretary
3
<PAGE>
LEVCO Series Trust
Rule 18f-3 Plan
This plan (the "Plan") is the written plan setting forth the separate
arrangements and expense allocations for those series of LEVCO Series Trust (the
"Trust") listed on Schedule A (each a "Fund", and together the "Funds"), as such
Schedule may be amended from time to time, as required by Rule 18f-3 under the
Investment Company Act of 1940, as amended (the "1940 Act").
A. General Description of the Classes Offered
1. Class A shares are offered without any front-end sales charge,
deferred sales charge or redemption fee, and no fees or expenses payable under
any Rule 12b-1 or similar plan shall be payable with respect to the Class A
shares.
2. Class B shares shall similarly not be subject to sales charges or
any redemption fee, but shall be subject to charge for distribution related
expenses that are incurred by the Trust in connection with the sales of Class B
shares in an amount not exceeding such amount as is specified from time to time
by any plan adopted by the Trust pursuant to Rule 12b-1 under the 1940 Act.
B. Expense Allocation
The following expenses shall be allocated among the classes, to the extent
practicable, on a class-by-class basis: (a) amounts payable under any
distribution plans; (b) printing and postage expenses related to preparing and
distributing materials, such as shareholder reports, prospectuses and proxies,
to current shareholders of a specific class of shares; (c) Securities and
Exchange Commission and Blue Sky registration and qualification fees incurred by
a specific class of shares; (d) [the expense of administrative personnel and
services as required
<PAGE>
to support the shareholders of a specific class of shares;] (e) auditor's fees,
litigation expenses and/or legal fees and expenses, if any, relating to a
specific class of shares; (f) transfer agent fees identified as being
attributable to a specific class of shares; (g) fees or expenses of the Board of
Trustees of the Trust ("Trustees") incurred as a result of issues relating to a
specific class of shares; (h) [accounting expenses relating solely to a specific
class of shares]; and (i) expenses incurred in connection with shareholders'
meetings as a result of issues relating to a specific class of shares.
C. Additional Information
----------------------
Each Fund's prospectus contains additional information about the
classes and the multiple class structure. This Plan is subject to the terms of
the then-current prospectus for the applicable classes; provided, however, that
none of the terms set forth in any such prospectus shall be inconsistent with
the terms of the classes contained in this Plan.
D. Date of Effectiveness
---------------------
This Plan is effective as of the date set forth below, provided that
the Plan shall not become effective with respect to any Fund unless the Trustees
of the Trust have found that the Plan is in the best interests of each class
individually and each Fund as a whole, and further provided that the Plan has
first been approved by the vote of a majority of the Trustees and by a vote of a
majority of the Trustees who are not "interested persons" of the Trust as
defined by the 1940 Act and the rules thereunder (the "Independent Trustees").
This Plan was approved on May __, 1997, by the Board of Trustees of
the Trust, including a majority of the Independent Trustees.
------------------------
Norris Nissim, Secretary
-2-
<PAGE>
SCHEDULE A
The Plan pursuant to Rule 18f-3 applies to the following Funds:
LEVCO Equity Value Fund
A-1
