SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (X)
Pre-Effective Amendment No. ___ ( )
Post-Effective Amendment No. ___ ( )
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940(X)
Amendment No. ___
PROFUNDS
(Exact Name of Registrant as Specified in Charter)
4600 North Park Avenue, Suite 100, Chevy Chase, Maryland 20815
(Address of Principal Executive Offices) (Zip Code)
(301) 657-0850
(Registrant's Telephone Number, Including Area Code)
Louis M. Mayberg
4600 North Park Avenue
Suite 100
Chevy Chase, Maryland 20815
(Name and Address of Agent for Service of Process)
Approximate Date of Commencement of the Proposed Public Offering of the
Securities:
As soon as practicable after effectiveness.
It is proposed that this filing will become effective (check appropriate box):
( ) immediately upon filing pursuant to paragraph (b) of rule 485.
( ) on (date) pursuant to paragraph (b) (1) (v) of rule 485.
( ) 60 days after filing pursuant to paragraph (a) (1) of rule 485.
( ) on (date) pursuant to paragraph (a) (1) of rule 485.
( ) 75 days after filing pursuant to paragraph (a) (2) of rule 485.
( ) on (date) pursuant to paragraph (a) (2) of rule 485.
If appropriate, check the following box:
( ) This post-effective amendment designates a new effective date for a
previously-filed post-effective amendment.
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.
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.
<PAGE>
PROFUNDS
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
Form N-1A Item No. Location Registration Statement
Part A: Information Required in Prospectus
------------------------------------------
1. Cover Page Outside Front Cover Page of Prospectus
2. Synopsis Overview; Fees and Expenses
3. Condensed Financial Information Not Applicable
4. General Description of General Information about Registrant the
Registrant Trust; Investment Objective and Policies
5. Management of the Fund Management of the Trust
6. Capital Stock and Dividends and
Other Securities Distributions; Taxes
7. Purchase of Securities Shareholders Guide
Being Offered
8. Redemption or Repurchase Shareholders Guide
9. Legal Proceedings Not Applicable
Part B: Information Required in
Statement of Additional Information
-----------------------------------
10. Cover Page Outside Front Cover Page
of Statement
11. Table of Contents Table of Contents
12. General Information Not Applicable
and History
13. Investment Objectives Investment Policies and Techniques
and Policies
<PAGE>
14. Management of the Registrant Management of ProFunds
Registrant
15. Control Persons and Principal Holders of the Trust
Principal Holders of
Securities
16. Investment Advisory Management of the Trust
and Other Services
17. Brokerage Allocation Portfolio Transactions
and Brokerage
18. Capital Stock and Not Applicable
Other Securities
19. Purchase, Redemption, Not Applicable
and Pricing of Securities
Being Offered
20. Tax Status Not Applicable
21. Underwriters Management of the Fund
22. Calculation of Performance Information
Performance Data
23. Financial Statements Financial Statements
<PAGE>
PART A
<PAGE>
PROFUNDS
[Address]
(800) _______ (Registered Investment Advisors Only)
(800) _______ (For All Others)
[A confidential portion of the registration statement has been omitted and
filed separately with the Commission and identified
as Confidential Portion No. 1.]
Investors should read this Prospectus and retain it for future reference. This
Prospectus is designed to set forth concisely the information an investor should
know about the ProFunds before investing. A Statement of Additional Information,
dated ________, 1997, containing additional information about ProFunds has been
filed with the Securities and Exchange Commission and is incorporated herein by
reference. A copy of this Statement of Additional Information is available,
without charge, upon request to the ProFunds at the address above or by
telephoning ProFunds at the telephone numbers above.
These Securities Have Not Been Approved Or Disapproved By The Securities And
Exchange Commission Nor 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.
The date of this Prospectus is ___________, 1997
OVERVIEW
THE PROFUNDS
Each ProFund has its own distinct investment objective. There is, of course, no
guarantee that any mutual fund will achieve its investment objective.
[A confidential portion of the registration statement has been
omitted and filed separately with the Commission and identified
as Confidential Portion No. 2.]
PURCHASES, REDEMPTIONS, AND
EXCHANGES OF TRUST SHARES
The shares of the ProFunds may be purchased and redeemed, without any respective
sales or redemption charge, at the net asset value per share of the ProFund next
determined. Purchases of shares may be made by check or wire.
The minimum initial investment in the ProFunds for investors who have engaged a
registered investment adviser with discretionary authority over the
shareholder's account is $5,000. The minimum is $15,000 for all other
shareholders.
Shares of any ProFunds may be exchanged at any time for shares of any another
ProFund, without any charge, on the basis of their relative net asset values
next computed.
See "Shareholders Guide" for more information about buying, exchanging and
redeeming ProFund shares.
INVESTMENT ADVISER
The investment adviser of ProFunds is ProFund Advisors LLC. (the "Advisor"). The
Advisor is located in Bethesda, Maryland. See "Management of the ProFunds."
SHAREHOLDER SERVICING AND TRANSFER AGENT AND CUSTODIAN
_____________ serves as the shareholder servicing, transfer and dividend
disbursement agent for the ProFunds. ______ Bank serves as the custodian of the
ProFunds' securities and other assets. See "Management of the ProFunds."
FEES AND EXPENSES
The following table illustrates all expenses and fees that a shareholder of the
ProFunds will incur:
Shareholder Transaction Expenses
All ProFunds Money Market
(except Money Market) ProFund
Sales Load Imposed on None None
Purchases
Sales Load Imposed on None None
Reinvested Dividends
Deferred Sales Load None None
Redemption Fees None None
Exchange Fees None None
Annual Fund Operating Expenses
Management Fees 0.70% 0.45%
12b-1 Fees None None
Other Expenses* ___% ____%
Total ProFund Operating
Expenses* ___% ____%
*Estimated
EXAMPLE
Assuming hypothetical investments of $1,000 in each of the ProFunds, a
five-percent annual return, and redemption at the end of each time period, an
investor in each of the ProFunds would pay transaction and operating expenses at
the end of each year as follows:
1 Year 3 Years
Each ProFunds
(except Money Market _____ _____
Government Money
Market ProFund _____ _____
The same level of expenses would be incurred if the investments were held
throughout the period indicated.
The preceding table of fees and expenses is provided to assist investors in
understanding the various costs and expenses which may be borne directly or
indirectly by an investor in each of the ProFunds. The percentages shown above
are based on estimates. The five-percent assumed annual return is for comparison
purposes only. The actual return for a particular ProFund in future periods may
be more or less depending on market conditions, and the actual expenses an
investor incurs in future periods may be more or less than those shown above and
will depend on the amount invested and on the actual growth rate of the
particular ProFund. For a more complete discussion of the fees connected with an
investment in the ProFunds and the services provided to the ProFunds, see
"Management of the ProFunds" in this Prospectus and in the Statement of
Additional Information.
SHAREHOLDERS GUIDE
How To Invest in the ProFunds
General
-------
The shares of each ProFund are offered at the net asset value per share next
computed after receipt of the investor's order. No sales charges are imposed on
initial or subsequent investments in a ProFund.
Minimum Investment
------------------
The minimum initial investment in the ProFunds for investors who have engaged a
registered investment adviser with discretionary authority over the
shareholder's account $5,000. For all other shareholder accounts ("Self-Directed
Accounts"), the minimum initial investment in the ProFunds is $15,000. These
minimums apply to retirement plan accounts and are determined based upon the
total of investment in all of the ProFunds. The ProFunds, at its discretion, may
accept lesser amounts in certain circumstances. There is no minimum amount for
subsequent investments in a ProFund. The ProFunds reserves the right to reject
or refuse, at the ProFunds' discretion, any order for the purchase of a
ProFund's shares in whole or in part.
How to Invest By Mail
----------------------
Fill out an application and make out a check payable to "ProFunds." Mail the
check along with the application to:
ProFunds
[Address]
How to Invest By Wire Transfer
------------------------------
Request a wire transfer to:
ProFunds
[Wire Information]
After instructing your bank to transfer money by wire, please call the ProFunds
and inform the ProFunds as to the amount you have transferred and the name of
the bank sending the transfer. Your bank may charge a fee for such services. If
the purchase is canceled because your wire transfer is not received, you may be
liable for any loss that the ProFunds may incur.
In the interest of economy and convenience, physical certificates representing a
ProFund's shares are not issued. Shares of each ProFund are recorded on a
register by the ProFunds' transfer agent.
Purchase through Securities Dealers
-----------------------------------
Investments in the ProFunds may be made through securities dealers who have the
responsibility to transmit orders promptly and who may charge a processing fee.
How to Exchange Shares of the ProFunds
Shares of any ProFunds may be exchanged, without any charge, for shares of any
other ProFunds on the basis of the respective net asset values of the shares
involved. Exchanges may be made by letter or by telephone at the numbers
indicated on the cover of this Prospectus.
Exchanges with respect to Self-Directed Accounts must be for at least the lesser
of $1,000 or 100% of the account value for the ProFund from which the transfer
is made. Telephone exchanges are subject to the procedures set forth below.
To implement an exchange, shareholders must provide each of the following
information:
-- Account name and number.
-- Taxpayer identification number.
-- Number of or percentage of shares or dollar value of shares to
be exchanged
-- The name the ProFunds from which the Exchange is to be made,
-- The name the ProFunds to which the Exchange is to be made,
Exchanges may be made only if made between identically registered accounts. The
exchange privilege is available only in states where the exchange legally may be
made and may be modified or discontinued at any time. Shares of the Money Market
ProFund received in an exchange for shares of the OTC ProFund are issued on the
third business day following the day on which the ProFund receives the exchange
request.
How to Withdraw Money (Redemptions)
General
-------
An investor may withdraw all or any portion of his investment by redeeming
ProFund shares at the next-determined net asset value per share after receipt of
the order. There are no redemption charges. Redemptions may be made by letter or
by telephone, subject to the procedures set forth below.
The privilege to initiate redemption transactions by telephone will be made
available to ProFund shareholders automatically. Redemptions from Self-Directed
Accounts must be for at least the lesser of $1,000 or 100% of the account value
for the ProFund from which the transfer is made.
Payment for the redemption price will be made within seven days after the
ProFunds' receipt of the request for redemption. For investments that have been
made by check, payment on withdrawal requests may be delayed until the ProFunds'
transfer agent is reasonably satisfied that the purchase payment has been
collected by the ProFunds (which may require up to 10 business days). An
investor may avoid a delay in receiving redemption proceeds by purchasing shares
with a certified check.
Wire of Withdraws
-----------------
Shareholders may wire proceeds of a withdrawal from a ProFund. The ProFunds
charge $15 for each wire transfer of redemption proceeds; this charge may be
waived at the discretion of the ProFunds. If any investor purchases shares of a
ProFund by check, the purchaser may not wire out any proceeds of a redemption of
such shares for the 30 calendar days following the purchase.
Draft Checks
------------
Investors may elect to redeem shares of the Money Market ProFund by draft check
(minimum check - $500) made payable to the order of any person or institution.
Upon the ProFunds' receipt of a completed signature card, investors will be
supplied with draft checks which are drawn on the Money Market ProFund's account
There is a $25 charge for each stop payment request on the draft checks.
Investors are subject to the same rules and regulations that the banks apply to
checking accounts. A Money Market ProFund account may not be closed by draft
check.
Redemptions to Third Party or Other Address
-------------------------------------------
Telephone redemptions are sent only to the address of record of the redeeming
investor or to bank accounts specified by the redeeming investor in his account
application. If the investor desires payment of redemption proceeds to a third
party or to a location other than the investor's address of record or a bank
account specified in the investor's account application, this request must be in
writing and the investor's signature must be guaranteed by a commercial bank; a
broker, dealer, municipal securities dealer, municipal securities broker,
government securities dealer, or government securities broker; a credit union; a
national securities exchange, registered securities association, or clearing
agency; or a savings association.
Procedures For Telephone Redemptions And Exchanges
Written requests for redemptions and exchanges should be sent to the ProFunds,
________________________, and should be signed by the record owner or owners.
Telephone redemption and exchange requests relating to the ProFunds may be made
by calling (800)______, on any day the ProFunds is open for business. Such
requests may be made only between 8:30 A.M. and 3:45 P.M., Eastern Time. If the
primary exchange or market on which a ProFund transacts business closes early,
the above cut-off time will be fifteen minutes prior to the close of such
exchange or market. Telephone redemption and exchange privileges may be
terminated or modified by the ProFunds at any time.
When acting on instructions believed to be genuine, the ProFunds will not be
liable for any loss resulting from a fraudulent telephone transaction request
and the investor would bear the risk of any such loss. The ProFunds will employ
reasonable procedures to confirm that telephone instructions are genuine; and if
the ProFunds does not employ such procedures, then the ProFunds may be liable
for any losses due to unauthorized or fraudulent instructions. The ProFunds
follows specific procedures for transactions initiated by telephone, including,
among others, requiring some form of personal identification prior to acting
upon instructions received by telephone, providing written confirmation not
later than five business days after such transactions, and/or tape recording of
telephone instructions. Investors also should be aware that telephone
redemptions or exchanges may be difficult to implement in a timely manner during
periods of drastic economic or market changes. If such conditions occur,
redemption or exchange orders can be made by mail.
Tax-sheltered Retirement Plans
Tax-sheltered retirement plans of the following types will be available to
investors:
-- Individual Retirement Accounts (IRAs)
-- Keogh Accounts - Defined Contribution Plans (Profit-Sharing Plans)
-- Keogh Accounts
-- Money Purchase Plans
-- Pension Plans
-- Internal Revenue Code Section 403(b)Plans
Retirement plans are charged an annual $15.00 maintenance fee. Additional
information regarding these accounts may be obtained by contacting the ProFunds.
Dividends And Distributions
General
-------
All income dividends and capital gains distributions of each ProFund
automatically will be reinvested in additional shares of the ProFund at the net
asset value calculated on the ex-dividend date, unless an investor has requested
otherwise from the ProFunds in writing. Dividends and distributions of a ProFund
are taxable to the shareholders of the ProFund, as discussed below under
"Taxes," whether such dividends and distributions are reinvested in additional
shares of the ProFund or are received in cash. Statements of account will be
sent to the ProFund shareholders at least quarterly.
All ProFunds Except Money Market ProFund
----------------------------------------
The ProFunds other than Money Market ProFund intend to distribute annually any
net investment income and net realized capital gains to shareholders. The
ProFunds may declare a special distribution for any of these ProFunds if the
ProFunds believe that such a distribution would be in the best interests of its
shareholders.
U.S. Government Money Market ProFund
-------------------------------------
The Money Market ProFund ordinarily (i) declares dividends of net investment
income (and net short-term capital gains, if any) for shares of the Money Market
ProFund on a daily basis and (ii) distributes such dividends to shareholders of
the Money Market ProFund on a monthly basis. The Money Market ProFund, however,
may revise this dividend and distribution policy of the, postpone the payment of
dividends thereunder, or take any other action necessary with respect thereto in
order to facilitate, to the extent possible, the maintenance by the Money Market
ProFund of a constant net asset value per share of $1.00.
Miscellaneous
- -------------
Involuntary Redemptions of Small Accounts
-----------------------------------------
Because of the administrative expense of handling small accounts, the ProFunds
reserve the right to redeem involuntarily an investor's account, including a
retirement account, which falls below the applicable minimum investment in total
value in the ProFunds due to redemptions. In addition, both a request for a
partial redemption by an investor whose account balance is below the minimum
investment and a request for a partial redemption by an investor that would
bring the account balance below the minimum investment will be treated as a
request by the investor for a complete redemption of that account. The ProFunds
reserve the right to modify its minimum investment requirements and the
corresponding amounts below which involuntary redemptions may be effected.
Suspension of Redemptions
-------------------------
The right of redemption may be suspended, or the date of payment postponed: (i)
for any period during which the NYSE, the Federal Reserve Bank of New York (the
"New York Fed"), the NASDAQ or the CME, as appropriate, is closed (other than
customary weekend or holiday closings) or trading on the NYSE, the NASDAQ, or
the CME, as appropriate, is restricted; (ii) for any period during which an
emergency exists so that disposal of the ProFund's investments or the
determination of its net asset value is not reasonably practicable; or (iii) for
such other periods as the Commission, by order, may permit for protection of the
ProFund's investors.
Transaction Charges
-------------------
In addition to charges described elsewhere in this Prospectus, the ProFunds also
may make a charge of $25 for items returned for insufficient or uncollectible
funds.
No Certificates
---------------
In the interest of economy and convenience, physical certificates representing a
ProFund's shares are not issued. Shares of each ProFund are recorded on a
register by the ProFunds' transfer agent.
[A confidential portion of the registration statement has been
omitted and filed separately with the Commission and identified
as Confidential Portion No. 3.]
U.S. Government Securities
The ProFunds may invest in U.S. Government Securities in pursuit of their
investment objectives, as "cover" for the investment techniques these ProFunds
employ, or for liquidity purposes.
Yields on U.S. Government Securities are dependent on a variety of factors,
including the general conditions of the money and bond markets, the size of a
particular offering, and the maturity of the obligation. Debt securities with
longer maturities tend to produce higher yields and are generally subject to
potentially greater capital appreciation and depreciation than obligations with
shorter maturities and lower yields. The market value of U.S. Government
Securities generally varies inversely with changes in market interest rates. An
increase in interest rates, therefore, would generally reduce the market value
of a ProFund's portfolio investments in U.S. Government Securities, while a
decline in interest rates would generally increase the market value of a
ProFund's portfolio investments in these securities.
Some obligations issued or guaranteed by agencies or instrumentalities of the
U.S. Government are backed by the full faith and credit of the U.S. Treasury.
Such agencies and instrumentalities may borrow funds from the U.S. Treasury.
However, no assurances can be given that the U.S. Government will provide such
financial support to the obligations of the other U.S. Government agencies or
instrumentalities in which a ProFund invests, since the U.S. Government is not
obligated to do so. These other agencies and instrumentalities are supported by
either the issuer s right to borrow, under certain circumstances, an amount
limited to a specific line of credit from the U.S. Treasury, the discretionary
authority of the U S Government to purchase certain obligations of an agency or
instrumentality, or the credit of the agency or instrumentality itself.
U.S. Government Securities may be purchased at a discount. Such securities, when
held to maturity or retired, may include an element of capital gain. Capital
losses may be realized when such securities purchased at a premium are held to
maturity or are called or redeemed at a price lower than their purchase price.
Capital gains or losses also may be realized upon the sale of securities.
Repurchase Agreements
Under a repurchase agreement, a ProFund purchases a debt security and
simultaneously agrees to sell the security back to the seller at a mutually
agreed-upon future price and date, normally one day or a few days later. The
resale price is greater than the purchase price, reflecting an agreed-upon
market interest rate during the purchaser's holding period. While the maturities
of the underlying securities in repurchase transactions may be more than one
year, the term of each repurchase agreement will always be less than one year. A
ProFund will enter into repurchase agreements only with member banks of the
Federal Reserve System or primary dealers of U.S. Government Securities. The
Advisor will monitor the creditworthiness of each of the firms which is a party
to a repurchase agreement with any of the ProFunds. In the event of a default or
bankruptcy by the seller, the ProFund will liquidate those securities (whose
market value, including accrued interest, must be at least equal to 100% of the
dollar amount invested by the ProFund in each repurchase agreement) held under
the applicable repurchase agreement, which securities constitute collateral for
the seller's obligation to pay. However, liquidation could involve costs or
delays and, to the extent proceeds from the sales of these securities were less
than the agreed-upon repurchase price, the ProFund would suffer a loss. A
ProFund also may experience difficulties and incur certain costs in exercising
its rights to the collateral and may lose the interest the ProFund expected to
receive under the repurchase agreement. Repurchase agreements usually are for
short periods, such as one week or less, but may be longer. It is the current
policy of the ProFunds to treat repurchase agreements that do not mature within
seven days as illiquid for the purposes of their investment policies.
Cash Reserve
As a cash reserve, for liquidity purposes, or as "cover" for positions it has
taken, each ProFund may temporarily invest all or part of the ProFund's assets
in cash or cash equivalents, which include, but are not limited to, short-term
money market instruments, U.S. Government Securities, certificates of deposit,
bankers acceptances, or repurchase agreements secured by U.S. Government
Securities.
Other Investment Policies
The ProFunds also may engage in certain other investment practices described
below, however none of the ProFunds presently intends to invest more than 5% of
the ProFund's net assets in any of these practices. Each of the ProFunds may
purchase securities on a when-issued or delayed-delivery basis, and also may
lend portfolio securities to brokers, dealers, and financial institutions. Each
ProFund (other than Money Market ProFunds) may borrow money for investment
purposes or invest in illiquid securities. Each of the ProFunds (other than
Money Market ProFunds) also may invest in the securities of other investment
companies to the extent that such an investment would be consistent with the
requirements of the 1940 Act. A more-detailed explanation of these investment
practices, including the risks associated with each practice, is included in the
Statement of Additional Information.
TAXES
The Internal Revenue Code provides that each investment portfolio of a series
investment company is to be treated as a separate corporation. Accordingly, each
of the ProFunds will seek to qualify for treatment as a regulated investment
company (a "RIC") under Subchapter M of the Code. Because of the nature of the
investment strategies and the expected turnover of the portfolios of the
ProFunds, there can be no assurance that a ProFund will qualify for such
treatment. If a ProFund qualifies as a RIC and satisfies the distribution
requirements under the Code for any taxable year, the ProFund itself will not be
subject to income tax on the ordinary income and capital gains it has
distributed to its shareholders for that year.
To qualify as a RIC under the Code, a ProFund must satisfy certain requirements,
including the requirements that the ProFund receive at least 90% of the
ProFund's gross income each year from dividends, interest, payments with respect
to securities loans, gains from the sale or other disposition of securities or
foreign currencies, or other income derived with respect to the ProFund's
investments in stock, securities, and foreign currencies (the "90% Test"), and
that the ProFund derive less than 30% of the ProFund's gross income from the
sale or other disposition of any of the following instruments which have been
held for less than three months (the "30% Test"): (i) stock or securities; (ii)
certain options, futures, or forward contracts; or (iii) foreign currencies (or
certain options, futures, or forward contracts on such foreign currencies).
Provided that a ProFund (i) is a RIC and (ii) distributes at least 90% of the
ProFund's net investment income (including, for this purpose, net realized
short-term capital gains), the ProFund itself will not be subject to Federal
income taxes to the extent the ProFund's net investment income and the ProFund's
net realized long-and short-term capital gains, if any, are distributed to the
shareholders of that ProFund. To avoid an excise tax on its undistributed
income, each ProFund generally must distribute at least 98% of its income,
including its net long-term capital gains.
[A confidential portion of the registration statement has been
omitted and filed separately with the Commission and identified
as Confidential Portion No. 4.]
Under current law, dividends derived from interest and dividends received by a
ProFund, together with distributions of any short-term capital gains, if any,
are taxable to the shareholders of the ProFund, as ordinary income at Federal
income tax rates of up to 39.6%, whether or not such dividends and distributions
are reinvested in shares of such ProFund or are received in cash.
Under current law, distributions of net long-term gains, if any, realized by a
ProFund and designated as capital gains distributions will be taxed to the
shareholders of that ProFund as long-term capital gains regardless of the length
of time the shares of that ProFund have been held. Currently, long-term capital
gains of individual investors are taxed at rates of up to 28%. Statements as to
the Federal tax status of shareholders dividends and distributions will be
mailed annually. Shareholders should consult their tax advisors concerning the
tax status of the ProFunds dividends in their own states and localities.
Ordinary dividends paid to corporate or individual residents of foreign
countries generally are subject to a 30% withholding tax. The rate of
withholding tax may be reduced if the United States has an income tax treaty
with the foreign country where the recipient resides. Capital gains
distributions received by foreign investors should, in most cases, be exempt
from U.S. tax. A foreign investor will be required to provide the ProFund with
supporting documentation in order for the ProFund to apply a reduced rate or
exemption from U.S. withholding tax.
Shareholders are required by law to certify that their tax identification number
is correct and that they are not subject to back-up withholding. In the absence
of this certification, the ProFunds is required to withhold taxes at the rate of
31% on dividends, capital gains distributions, and redemptions. Shareholders who
are non-resident aliens may be subject to a withholding tax on dividends earned.
MANAGEMENT OF THE TRUST
Investment Adviser
The ProFunds are provided investment advice and management services by ProFund
Advisor, LLC, a Maryland limited liability company formed on May 8, 1997, with
offices at ____________, Maryland (the "Advisor"). __________owns a controlling
interest in the Advisor.
Under an investment advisory agreement between the ProFunds and the Advisor,
dated ____, 1997, the ProFunds each pay the Advisor a fee at an annualized rate,
based on the average daily net assets for each respective ProFund of 0.70% for
all non-money-market ProFunds and .45% for the U. S. Government Money Market
ProFund. The Advisor manages the investment and the reinvestment of the assets
of each of the ProFunds, in accordance with the investment objectives, policies,
and limitations of the ProFund, subject to the general supervision and control
of the ProFunds and the officers of the ProFunds. The Advisor bears all costs
associated with providing these advisory services and the expenses of the
ProFunds who are affiliated persons of the Advisor. The Advisor, from its own
resources, including profits from advisory fees received from the ProFunds,
provided such fees are legitimate and not excessive, also may make payments to
broker-dealers and other financial institutions for their expenses in connection
with the distribution of ProFund shares, and otherwise currently pays all
distribution costs for ProFund shares.
Service Providers
[To be added by pre-effective amendment.]
Costs and Expenses
The ProFunds bear all expenses of their operations other than those assumed by
the Advisor or the Servicer. Expenses of the ProFunds include, but are not
limited to: the advisory fee; administrative, transfer agent, and shareholder
servicing fees; custodian and accounting fees and expenses; legal and auditing
fees; securities valuation expenses; fidelity bonds and other insurance
premiums; expenses of preparing and printing prospectuses, confirmations, proxy
statements, and shareholder reports and notices; registration fees and expenses;
proxy and annual meeting expenses, if any; all Federal, state, and local taxes
(including, without limitation, stamp, excise, income, and franchise taxes);
organizational costs; and non-interested ProFunds fees and expenses.
Portfolio Trading Practices
The Advisor determines which securities to purchase and sell for each ProFund,
selects brokers and dealers to effect the transactions, and negotiates
commissions. The Advisor expects that the ProFunds may execute brokerage or
other agency transactions through registered broker-dealers, for a commission,
in conformity with the 1940 Act, the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder. In placing orders for
portfolio transactions, the Advisor's policy is to obtain the most favorable
price and efficient execution available. Brokerage commissions are normally paid
on exchange-traded securities transactions and on options and futures
transactions, as well as on common stock transactions. In order to obtain the
brokerage and research services described below, a higher commission may
sometimes be paid. The ability to receive research services may be a factor in
the selection of one dealer acting as a principal over another.
When selecting broker-dealers to execute portfolio transactions, the Advisor
considers many factors including the rate of commission or size of the
broker-dealer's "spread," the size and difficulty of the order, the nature of
the market for the security, the willingness of the broker-dealer to position,
the reliability, financial condition, general execution and operational
capabilities of the broker-dealer, and the research, statistical and economic
data furnished by the broker-dealer to the Advisor. The Advisor may use these
services in connection with all of the Advisor's investment activities,
including other investment accounts the Advisor advises. Conversely, brokers or
dealers which supply research may be selected for execution of transactions for
such other accounts, while the data may be used by the Advisor in providing
investment advisory services to the ProFunds.
GENERAL INFORMATION ABOUT THE TRUST
Organization and Description of Shares of Beneficial Interest
ProFunds is a registered open-end investment company under the 1940 Act.
ProFunds was organized as a Delaware business trust on April 17, 1997, and has
present authorized capital of unlimited shares of beneficial interest of no par
value which may be issued in more than one class. Currently, ProFunds has issued
shares of six separate classes. Other separate classes may be added in the
future.
All shares of the ProFunds are freely transferable. The ProFund shares do not
have preemptive rights or cumulative voting rights, and none of the shares have
any preference to conversion, exchange, dividends, retirements, liquidation,
redemption, or any other feature. ProFund shares have equal voting rights,
except that, in a matter affecting a particular series in the ProFunds, only
shares of that series may be entitled to vote on the matter.
Under the Delaware law, Profunds is not required to hold an annual shareholders
meeting if the 1940 Act does not require such a meeting. Generally, there will
not be annual meetings of ProFunds shareholders. ProFunds shareholders may
remove Trustees from office by votes cast at a meeting of ProFunds shareholders
or by written consent. If requested by shareholders of at least 10% of the
outstanding shares of the ProFunds, the ProFunds will call a meeting of ProFunds
shareholders for the purpose of voting upon the question of removal of a trustee
of the ProFunds and will assist in communications with other ProFunds
shareholders.
Unlike the stockholder of a corporation, shareholders of a business trust such
as the ProFunds could be held personally liable, under certain circumstances,
for the obligations of the business trust. The Declaration Trust of the
ProFunds, however, disclaims liability of the shareholders or the officers of
the ProFunds for acts or obligations of the ProFunds which are binding only on
the assets and property of the ProFunds. The Declaration of ProFunds provides
for indemnification out of ProFunds property for all loss and expense of any
ProFunds shareholder held personally liable for the obligations of the ProFunds.
The risk of a ProFunds shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the ProFunds itself
would not be able to meet the ProFunds' obligations and this risk, thus, should
be considered remote.
Classification of the ProFunds
Each non-money-market ProFund is a "non-diversified" series of the ProFunds. A
ProFund is considered "non-diversified" because a relatively-high percentage of
the ProFund's assets may be invested in the securities of a limited number of
issuers, primarily within the same industry or economic sector. That ProFund's
portfolio securities, therefore, may be more susceptible to any single economic,
political, or regulatory occurrence than the portfolio securities of a
diversified investment company.
A ProFund's classification as a "non-diversified" investment company means that
the proportion of the ProFund's assets that may be invested in the securities of
a single issuer is not limited by the 1940 Act. The ProFunds, however, intend to
seek to qualify as a "regulated investment company" for purposes of the Internal
Revenue Code, which requires that, at the end of each quarter of the taxable
year, (i) at least 50% of the market value of the ProFund's total assets (a
diversified investment company would be so limited with respect to 75% of such
market value) be invested in cash, U.S. Government Securities, the securities of
other regulated investment companies, and other securities, with such securities
of any one issuer limited for the purposes of this calculation to an amount not
greater than 5% of the value of ProFund's total assets and 10% of the
outstanding voting securities of any one issuer, and (ii) not more than 25% of
the value of the ProFund's total assets be invested in the securities of any one
issuer (other than U.S. Government Securities or the securities of other
regulated investment companies).
Determination Of Net Asset Value
The net asset values of the shares of the ProFunds are determined each day the
New York Stock Exchange (NYSE") is open for business as of the close of normal
trading on the NYSE (generally, 4:00 P.M., Eastern Time). Currently, the NYSE
and the New York Fed are closed on weekends, and the following holiday closings
have been scheduled for 1997: (i) New Year's Day, Martin Luther King Jr.'s
Birthday, Washington's Birthday, Good Friday, Memorial Day, July Fourth, Labor
Day, Columbus Day, Thanksgiving Day, and Christmas Day; and (ii) the preceding
Friday when any of those holidays falls on a Saturday or the subsequent Monday
when any of these holidays falls on a Sunday. To the extent that portfolio
securities of a ProFund are traded in other markets on days when the ProFund's
principal trading market(s) is closed, the ProFund's net asset value may be
affected on days when investors do not have access to the ProFund to purchase or
redeem shares. Although the ProFunds expects the same holiday schedules to be
observed in the future, the NYSE may modify its holiday schedule at any time.
The net asset value of a ProFund serves as the basis for the purchase and
redemption price of that ProFund's shares. The net asset value per share of a
ProFund is calculated by dividing the market value of the ProFund's securities
plus the values of its other assets, less all liabilities, by the number of
outstanding shares of the ProFund. If market quotations are not readily
available, a security will be valued at fair value by the Trustees of ProFunds
or by the Advisor using methods established or ratified by the Trustees of
ProFunds.
The Money Market ProFund will utilize the amortized cost method in valuing that
ProFund's portfolio securities, which method involves valuing a security at its
cost adjusted by a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. The purpose of this method of calculation is to facilitate the
maintenance of a constant net asset value per share for the Money Market ProFund
of $1.00. However, there is no assurance that the $1.00 net asset value will be
maintained.
For purposes of determining net asset value per share of a ProFund, futures
contracts and options thereon will be valued 15 minutes after the 4:00 P.M.,
Eastern Time, close of trading on the NYSE. Options on securities and indices
purchased by a ProFund generally are valued at their last bid price in the case
of exchange-traded options or, in the case of options traded in the OTC market,
the average of the last bid price as obtained from two or more dealers unless
there is only one dealer, in which case that dealer's price is used. The value
of a futures contract equals the unrealized gain or loss on the contract that is
determined by marking the contract to the current settlement price for a like
contract acquired on the day on which the futures contract is being valued. The
value of options on futures contracts is determined based upon the current
settlement price for a like option acquired on the day on which the option is
being valued. A settlement price may not be used for the foregoing purposes if
the market makes a limit move with respect to a particular commodity.
OTC securities held by a ProFund shall be valued at the last sales price or, if
no sales price is reported, the mean of the last bid and asked price is used.
The portfolio securities of a ProFund that are listed on national exchanges or
foreign stock exchanges are taken at the last sales price of such securities on
such exchange; if no sales price is reported, the mean of the last bid and asked
price is used
Illiquid securities, securities for which reliable quotations or pricing
services are not readily available, and all other assets will be valued at their
respective fair value as determined in good faith by, or under procedures
established by, the ProFunds, which procedures may include the delegation of
certain responsibilities regarding valuation to the Advisor or the officers of
the ProFunds. The officers of the ProFunds report, as necessary, to the ProFunds
regarding portfolio valuation determination. The ProFunds, from time to time,
will review these methods of valuation and will recommend changes which may be
necessary to assure that the investments of the ProFunds are valued at fair
value.
Fundamental Policies
The investment objectives (except the specific indexes which are tracked by the
ProFunds) and certain investment restrictions of the ProFunds specifically
identified as fundamental policies may not be changed without the affirmative
vote of at least the majority of the outstanding shares of that ProFund, as
defined in the Investment Company Act of 1940, as amended (the "1940 Act"). All
other investment policies of the ProFunds not specified as fundamental
(including the benchmarks of the ProFunds) may be changed by the trustees of the
ProFunds (the "ProFunds" ) without the approval of shareholders.
The ProFunds may consider changing a ProFund's benchmark if, for example, the
current benchmark becomes unavailable; the ProFunds believe the current
benchmark no longer serves the investment needs of a majority of shareholders or
another benchmark better serves their needs; or the financial or economic
environment makes it difficult for the ProFund's investment results to
correspond sufficiently to its current benchmark. If believed appropriate, the
ProFunds may specify a benchmark for a ProFund that is "leveraged" or
proprietary. Of course, there can be no assurance that a ProFund will achieve
its objective.
Trustees and Officers
The ProFunds has a Board of Trustees which is responsible for the general
supervision of ProFunds' business. The day-to-day operations of the ProFunds are
the responsibility of the ProFunds' officers.
Auditors
___________________ are the auditors of and the independent
public accountants for ProFunds.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
PRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE TRUST IN ANY JURISDICTION
IN WHICH SUCH AN OFFERING MAY NOT LAWFULLY BE MADE.
PART B
<PAGE>
PROFUNDS SERIES TRUST
STATEMENT OF ADDITIONAL INFORMATION
[Address]
(301) ________
(800) _______ (Registered Investment Advisors Only)
(800) _______ (For All Others)
.
[A confidential portion of the registration statement has been
omitted and filed separately with the Commission and identified
as Confidential Portion No. 5.]
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with ProFunds' Prospectus, dated _________, 1997. A copy of the
Prospectus is available, without charge, upon request to at the address above or
by telephoning at the telephone numbers above.
The date of this Statement of Additional Information is ________, 1997.
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Page
THE PROFUNDS
INVESTMENT POLICIES AND TECHNIQUES
INVESTMENT RESTRICTIONS
PORTFOLIO TRANSACTIONS AND BROKERAGE
MANAGEMENT OF PROFUNDS
PERFORMANCE INFORMATION
FINACIAL STATEMENTS
THE PROFUNDS
ProFunds is an open-end management investment company, and currently is composed
of six separate series. Other series may be added in the future. The ProFunds
may be used independently or in combination with each other as part of an
overall investment strategy. Shares of any ProFund may be exchanged, without any
charge, for shares of any other ProFund on the basis of the respective net asset
values of the shares involved; provided, that, in connection with exchanges for
shares of the ProFund, certain minimum investment levels are maintained (see
"Exchanges")
INVESTMENT POLICIES AND TECHNIQUES
General
Reference is made to the sections entitled "Investment Objectives and Policies"
and "Investment Techniques and Other Investment Policies" in ProFund's
Prospectus for a discussion of the investment objectives and policies of the
ProFunds. In addition, set forth below is further information relating to the
ProFunds. The discussion below supplements and should read in conjunction with
the Prospectus. Portfolio management is provided to the ProFunds investment
adviser, ProFund Advisors LLC., a Maryland limited liability company with
offices at ___________________ (the "Advisor").
The investment strategies of the ProFunds discussed below, and as discussed in
its Prospectus, may be used by a ProFund if, in the opinion of the Advisor,
these strategies will be advantageous to the ProFund. The ProFund is free to
reduce or eliminate the ProFund's activity in any of those areas without
changing the ProFund's fundamental investment policies. There is no assurance
that any of these strategies or any other strategies and methods of investment
available to a ProFund will result in the achievement of the ProFund's
objectives.
Certain provisions of the Internal Revenue Code, related regulations, and
rulings of the Internal Revenue Service may have the effect of reducing the
extent to which certain of the following techniques may be used by a ProFund,
either individually or in combination. Furthermore, there is no assurance that
any of these strategies or any other strategies and methods of investment
available to a ProFund will result in the achievement of the ProFund's
objectives.
Futures Contracts
The non-money market ProFunds may purchase and sell futures contracts, index
futures contracts, and options thereon only to the extent that such activities
would be consistent with the requirements of Section 4.5 of the regulations
under the Commodity Exchange Act promulgated by the Commodity Futures Trading
Commission (the "CFTC Regulations"), under which each of these ProFunds would be
excluded from the definition of a "commodity pool operator." Under Section 4.5
of the CFTC Regulations, a ProFund may engage in futures transactions, either
for "bona fide hedging" purposes, as this term is defined in the CFTC
Regulations, or for non-hedging purposes to the extent that the aggregate
initial margins and option premiums required to establish such non-hedging
positions do not exceed 5% of the liquidation value of the ProFund's portfolio.
In the case of an option on futures contracts that is "in-the-money" at the time
of purchase (i.e., the amount by which the exercise price of the put option
exceeds the current market value of the underlying security or the amount by
which the current market value of the underlying security exceeds the exercise
price of the call option), the in-the-money amount may be excluded in
calculating this 5% limitation.
The ProFunds will cover their positions when they write a futures contract or
option on a futures contract. A ProFund may cover its long position in a futures
contract by purchasing a put option on the same futures contract with a strike
price (i.e., an exercise price) as high or higher than the price of the futures
contract, or, if the strike price of the put is less than the price of the
futures contract, the ProFund will maintain in a segregated account cash or
liquid instruments equal in value to the difference between the strike price of
the put and the price of the future. A ProFund may also cover its long position
in a futures contract by taking a short position in the instruments underlying
the futures contract, or by taking positions in instruments the prices of which
are expected to move relatively consistently with the futures contract. A
ProFund may cover its short position in a futures contract by taking a long
position in the instruments underlying the futures contract, or by taking
positions in instruments the prices of which are expected to move relatively
consistently with the futures contract.
A ProFund may cover its sale of a call option on a futures contract by taking a
long position in the underlying futures contract at a price less than or equal
to the strike price of the call option, or, if the long position in the
underlying futures contract is established at a price greater than the strike
price of the written (sold) call, the ProFund will maintain in a segregated
account liquid instruments equal in value to the difference between the strike
price of the call and the price of the future. A ProFund may also cover its sale
of a call option by taking positions in instruments the prices of which are
expected to move relatively consistently with the call option. A ProFund may
cover its sale of a put option on a futures contract by taking a short position
in the underlying futures contract at a price greater than or equal to the
strike price of the put option, or, if the short position in the underlying
futures contract is established at a price less than the strike price of the
written put, the ProFund will maintain in a segregated account cash or
high-grade liquid debt securities equal in value to the difference between the
strike price of the put and the price of the future. A ProFund may also cover
its sale of a put option by taking positions in instruments the prices of which
are expected to move relatively consistently with the put option.
Index Options
The ProFunds may engage in transactions in stock index options listed on
national securities exchanges or traded in the over-the-counter market as an
investment vehicle for the purpose of realizing the ProFund's investment
objective. Options on indexes are settled in cash, not in delivery of
securities. The exercising holder of an index option receives, instead of a
security, cash equal to the difference between the closing price of the
securities index and the exercise price of the option.
Some stock index options are based on a broad market index such as the S&P 500
Index, the NYSE Composite Index, or the AMEX Major Market Index, or on a
narrower index such as the Philadelphia Stock Exchange Over-the-Counter Index.
Options currently are traded on the Chicago Board Options Exchange (the "CBOE"),
the AMEX, and other exchanges ("Exchanges"). Purchased over-the-counter options
and the cover for written over-the-counter options will be subject to the
respective ProFund's 15% limitation on investment in illiquid securities.
See "Illiquid Securities."
Each of the Exchanges has established limitations governing the maximum number
of call or put options on the same index which may be bought or written (sold)
by a single investor, whether acting alone or in concert with others (regardless
of whether such options are written on the same or different Exchanges or are
held or written on one or more accounts or through one or more brokers). Under
these limitations, option positions of all investment companies advised by the
same investment adviser are combined for purposes of these limits. Pursuant to
these limitations, an Exchange may order the liquidation of positions and may
impose other sanctions or restrictions. These position limits may restrict the
number of listed options which a ProFund may buy or sell; however, the Advisor
intends to comply with all limitations.
When a ProFund writes an option on an index, the ProFund will be required to
deposit and maintain with a custodian cash or liquid instruments equal in value
to the aggregate exercise price of a put or call option pursuant to the
requirements and the rules of the applicable exchange. If, at the close of
business on any day, the market value of the deposited securities falls below
the contract price, the ProFund will deposit with the custodian cash or liquid
instruments equal in value to the deficiency.
Options on Securities
The non-money-market ProFunds may buy and write (sell) options on securities for
the purpose of realizing their ProFund's investment objective. By writing a call
option on securities, a ProFund becomes obligated during the term of the option
to sell the securities underlying the option at the exercise price if the option
is exercised. By writing a put option, a ProFund becomes obligated during the
term of the option to purchase the securities underlying the option at the
exercise price if the option is exercised. During the term of the option, the
writer may be assigned an exercise notice by the broker-dealer through whom the
option was sold. The exercise notice would require the writer to deliver, in the
case of a call, or take delivery of, in the case of a put, the underlying
security against payment of the exercise price. This obligation terminates upon
expiration of the option, or at such earlier time that the writer effects a
closing purchase transaction by purchasing an option covering the same
underlying security and having the same exercise price and expiration date as
the one previously sold. Once an option has been exercised, the writer may not
execute a closing purchase transaction. To secure the obligation to deliver the
underlying security in the case of a call option, the writer of a call option is
required to deposit in escrow the underlying security or other assets in
accordance with the rules of the Options Clearing Corporation (the "OCC"), an
institution created to interpose itself between buyers and sellers of options.
The OCC assumes the other side of every purchase and sale transaction on an
exchange and, by doing so, gives its guarantee to the transaction.
When writing (selling) call options on securities, a ProFund may cover its
position by owning the underlying security on which the option is written.
Alternatively, the ProFund may cover its position by owning a call option on the
underlying security, on a share for share basis, which is deliverable under the
option contract at a price no higher than the exercise price of the call option
written by the ProFund or, if higher, by owning such call option and depositing
and maintaining in a segregated account cash or liquid instruments equal in
value to the difference between the two exercise prices. In addition, a ProFund
may cover its position by depositing and maintaining in a segregated account
cash or liquid instruments equal in value to the exercise price of the call
option written by the ProFund. When a ProFund writes (sells) a put option, the
ProFund will have and maintain on deposit with its custodian bank cash or liquid
instruments having a value equal to the exercise value of the option. The
principal reason for a ProFund to write (sell) call options on stocks held by
the ProFund is to attempt to realize, through the receipt of premiums, a greater
return than would be realized on the underlying securities alone.
If a ProFund that writes (sells) an option wishes to terminate the ProFund's
obligation, the ProFund may effect a "closing purchase transaction." The ProFund
accomplishes this by buying an option of the same series as the option
previously written by the ProFund. The effect of the purchase is that the
writer's position will be canceled by the Options Clearing Corporation. However,
a writer (seller) may not effect a closing purchase transaction after the writer
has been notified of the exercise of an option. Likewise, a ProFund which is the
holder of an option may liquidate its position by effecting a "closing sale
transaction." The ProFund accomplishes this by selling an option of the same
series as the option previously purchased by the ProFund. There is no guarantee
that either a closing purchase or a closing sale transaction can be effected. If
any call or put option is not exercised or sold, the option will become
worthless on its expiration date. A ProFund will realize a gain (or a loss) on a
closing purchase transaction with respect to a call or a put option previously
written (sold) by the ProFund if the premium, plus commission costs, paid by the
ProFund to purchase the call or put option to close the transaction is less (or
greater) than the premium, less commission costs, received by the ProFund on the
sale of the call or the put option. The ProFund also will realize a gain if a
call or put option which the ProFund has written lapses unexercised, because the
ProFund would retain the premium.
U.S. Government Securities
Each ProFunds also may invest in U.S. Government Securities. U.S Government
Securities include U.S. Treasury securities, which are backed by the full faith
and credit of the U.S. Treasury and which differ only in their interest rates,
maturities, and times of issuance. U.S. Treasury bills have initial maturities
of one year or less; U.S. Treasury notes have initial maturities of one to ten
years; and U.S. Treasury bonds generally have initial maturities of greater than
ten years. Certain U.S. Government Securities are issued or guaranteed by
agencies or instrumentalities of the U.S. Government including, but not limited
to, obligations of U.S. Government agencies or instrumentalities such as the
Federal National Mortgage Association, the Government National Mortgage
Association, the Small Business Administration, the Federal Farm Credit
Administration, the Federal Home Loan Banks, Banks for Cooperatives (including
the Central Bank for Cooperatives), the Federal Land Banks, the Federal
Intermediate Credit Banks, the Tennessee Valley Authority, the Export-Import
Bank of the United States, the Commodity Credit Corporation, the Federal
Financing Bank, the Student Loan Marketing Association, and the National Credit
Union Administration. Some obligations issued or guaranteed by U.S. Government
agencies and instrumentalities, including, for example, Government National
Mortgage Association pass-through certificates, are supported by the full faith
and credit of the U.S. Treasury. Other obligations issued by or guaranteed by
Federal agencies, such as those securities issued by the Federal National
Mortgage Association, are supported by the discretionary authority of the U.S.
Government to purchase certain obligations of the Federal agency, while other
obligations issued by or guaranteed by Federal agencies, such as those of the
Federal Home Loan Banks, are supported by the right of the issuer to borrow from
the U.S. Treasury. While the U.S. Government provides financial support to such
U.S. Government-sponsored Federal agencies, no assurance can be given that the
U.S. Government will always do so, since the U.S. Government is not so obligated
by law. U.S. Treasury notes and bonds typically pay coupon interest
semi-annually and repay the principal at maturity. The Bond ProFund will invest
in such U.S. Government Securities only when the Advisor is satisfied that the
credit risk with respect to the issuer is minimal.
Repurchase Agreements
Each ProFund may enter into repurchase agreements with financial institutions.
The ProFunds follow certain procedures designed to minimize the risks inherent
in such agreements. These procedures include effecting repurchase transactions
only with large, well-capitalized and well-established financial institutions
whose condition will be continually monitored by the Advisor. In addition, the
value of the collateral underlying the repurchase agreement will always be at
least equal to the repurchase price, including any accrued interest earned on
there purchase agreement. In the event of a default or bankruptcy by a selling
financial institution, a ProFund will seek to liquidate such collateral which
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 ProFund could suffer a loss. It is the current policy of
the ProFunds not to invest in repurchase agreements that do not mature within
seven days if any such investment, together with any other illiquid assets held
by the ProFund, amounts to more than 15% (10% with respect to the Money Market
ProFund) of the ProFund's total assets. The investments of each of the ProFunds
in repurchase agreements, at times, may be substantial when, in the view of the
Advisor, liquidity, investment, regulatory, or other considerations so warrant.
Reverse Repurchase Agreements
The ProFunds may use reverse repurchase agreements as part of that ProFund's
investment strategy. Reverse repurchase agreements involve sales by a ProFund of
portfolio assets concurrently with an agreement by the ProFund to repurchase the
same assets at a later date at a fixed price. Generally, the effect of such a
transaction is that the ProFund can recover all or most of the cash invested in
the portfolio securities involved during the term of the reverse repurchase
agreement, while the ProFund will be able to keep the interest income associated
with those portfolio securities. Such transactions are advantageous only if the
interest cost to the ProFund of the reverse repurchase transaction is less than
the cost of obtaining the cash otherwise. Opportunities to achieve this
advantage may not always be available, and the ProFunds intend to use the
reverse repurchase technique only when this will be to the ProFund's advantage
to do so. The ProFunds will establish a segregated account with their custodian
bank in which the ProFund will maintain cash or liquid instruments equal in
value to the ProFund's obligations in respect of reverse repurchase agreements.
Borrowing
The ProFunds (other than Money Market) may borrow money for cash management
purposes or investment purposes. Borrowing for investment is known as
leveraging. Leveraging investments, by purchasing securities with borrowed
money, is a speculative technique which increases investment risk, but also
increases investment opportunity. Since substantially all of a ProFund's assets
will fluctuate in value, whereas the interest obligations on borrowings may be
fixed, the net asset value per share of the ProFund will increase more when the
ProFund's portfolio assets increase in value and decrease more when the
ProFund's portfolio assets decrease in value than would otherwise be the case.
Moreover, interest costs on borrowings may fluctuate with changing market rates
of interest and may partially offset or exceed the returns on the borrowed
funds. Under adverse conditions, a ProFund might have to sell portfolio
securities to meet interest or principal payments at a time investment
considerations would not favor such sales.
As required by the Investment Company Act of 1940, as amended (the "1940 Act"),
a ProFund must maintain continuous asset coverage (total assets, including
assets acquired with borrowed funds, less liabilities exclusive of borrowings)
of 300% of all amounts borrowed. If, at any time, the value of the ProFund's
assets should fail to meet this 300% coverage test, the ProFund, within three
days (not including Sundays and holidays), will reduce the amount of the
ProFund's borrowings to the extent necessary to meet this 300% coverage.
Maintenance of this percentage limitation may result in the sale of portfolio
securities at a time when investment considerations otherwise indicate that it
would be disadvantageous to do so. In addition to the foregoing, the ProFunds
are authorized to borrow money from a bank as a temporary measure for
extraordinary or emergency purposes in amounts not in excess of 5% of the value
of the ProFund's total assets. This borrowing is not subject to the foregoing
300% asset coverage requirement. The ProFunds are authorized to pledge portfolio
securities as the Advisor deems appropriate in connection with any borrowings.
Lending of Portfolio Securities
Subject to the investment restrictions set forth below, each ProFund may lend
portfolio securities to brokers, dealers, and financial institutions, provided
that cash equal to at least 100% of the market value of the securities loaned is
deposited by the borrower with the ProFund and is maintained each business day
in a segregated account pursuant to applicable regulations. While such
securities are on loan, the borrower will pay the lending ProFund any income
accruing thereon, and the ProFund may invest the cash collateral in portfolio
securities, thereby earning additional income. A ProFund will not lend more than
33% of the value of the ProFund's total assets, except that the Money Market
ProFund will not lend more than 10% of the value of the Money Market ProFund's
total assets. Loans would be subject to termination by the lending ProFund on
four business days' notice, or by the borrower on one day's notice. Borrowed
securities must be returned when the loan is terminated. Any gain or loss in the
market price of the borrowed securities which occurs during the term of the loan
inures to the lending ProFund and that ProFund's shareholders. A lending ProFund
may pay reasonable finders, borrowers, administrative, and custodial Trustees in
connection with a loan.
When-Issued and Delayed-Delivery Securities
Each ProFund, from time to time, in the ordinary course of business, may
purchase securities on a when-issued or delayed-delivery basis (i.e., delivery
and payment can take place between a month and 120 days after the date of the
transaction). These securities are subject to market fluctuation and no interest
accrues to the purchaser during this period. At the time a ProFund makes the
commitment to purchase securities on a when-issued or delayed-delivery basis,
the ProFund will record the transaction and thereafter reflect the value of the
securities, each day, of such security in determining the ProFund's net asset
value. A ProFund will not purchase securities on a when-issued or
delayed-delivery basis if, as a result, more than 15% (10% with respect to the
Money Market ProFund) of the ProFund's net assets would be so invested. At the
time of delivery of the securities, the value of the securities may be more or
less than the purchase price.
The ProFund will also establish a segregated account with the ProFund's
custodian bank in which the ProFund will maintain liquid instruments equal to
greater in value than the ProFund's purchase commitments for such when-issued or
delayed-delivery securities. ProFunds does not believe that a ProFund's net
asset value or income will be adversely affected by the ProFund's purchase of
securities on a when-issued or delayed delivery basis.
Investments in Other Investment Companies
The ProFunds (other than the Money Market ProFund) may invest in the securities
of other investment companies to the extent that such an investment would be
consistent with the requirements of Section 12(d)(1) of the 1940 Act. If a
ProFund invests in, and, thus, is a shareholder of, another investment company,
the ProFund's shareholders will indirectly bear the ProFund's proportionate
share of the Trustees and expenses paid by such other investment company,
including advisory Trustees, in addition to both the management fees payable
directly by the ProFund to the ProFund's own investment adviser and the other
expenses that the ProFund bears directly in connection with the ProFund's own
operations.
Illiquid Securities
While none of the ProFunds anticipates doing so, each ProFund may purchase
illiquid securities, including securities that are not readily marketable and
securities that are not registered ( restricted securities ) under the
Securities Act of 1933, as amended (the 1933 Act ), but which can be and sold to
qualified institutional buyers under Rule 144A under the 1933 Act. A ProFund
will not invest more than 15% (10% with respect to the Money Market ProFund) of
the ProFund's net assets in illiquid securities. The term illiquid securities
for this purpose means securities that cannot be disposed of within seven days
in the ordinary course of business at approximately the amount at which the
ProFund has valued the securities. Under the current guidelines of the staff of
the Securities and Exchange Commission (the "Commission"), illiquid securities
also are considered to include, among other securities, purchased
over-the-counter options, certain cover for over-the-counter options, repurchase
agreements with maturities in excess of seven days, and certain securities whose
disposition is restricted under the Federal securities laws. The ProFund may not
be able to sell illiquid securities when the Advisor considers it desirable to
do so or may have to sell such securities at a price that is lower than the
price that could be obtained if the securities were more liquid. In addition,
the sale of illiquid securities also may require more time and may result in
higher dealer discounts and other selling expenses than does the sale of
securities that are not illiquid. Illiquid securities also may be more difficult
to value due to the unavailability of reliable market quotations for such
securities, and investment in illiquid securities may have an adverse impact on
net asset value.
Institutional markets for restricted securities have developed as a result of
the promulgation of Rule 144A under the 1933 Act, which provides a safe harbor
from 1933 Act registration requirements for qualifying sales to institutional
investors. When Rule 144A restricted securities present an attractive investment
opportunity and otherwise meet selection criteria, a ProFund may make such
investments. Whether or not such securities are illiquid depends on the market
that exists for the particular security. The Commission staff has taken the
position that the liquidity of Rule 144A restricted securities is a question of
fact for a board of Trustees to determine, such determination to be based on a
consideration of the readily-available trading markets and the review of any
contractual restrictions. The staff also has acknowledged that, while a board of
trustees retains ultimate responsibility, trustees may delegate this function to
an investment adviser. Trustees of ProFunds have delegated this responsibility
for determining the liquidity of Rule 144A restricted securities which may be
invested in by a ProFund to the Advisor. It is not possible to predict with
assurance exactly how the market for Rule 144A restricted securities or any
other security will develop. A security which when purchased enjoyed a fair
degree of marketability may subsequently become illiquid and, accordingly, a
security which was deemed to be liquid at the time of acquisition may
subsequently become illiquid. In such event, appropriate remedies will be
considered to minimize the effect on the ProFund's liquidity.
Portfolio Turnover
[A confidential portion of the registration statement has been
omitted and filed separately with the Commission and identified
as Confidential Portion No. 6.]
INVESTMENT RESTRICTIONS
The ProFunds have adopted certain investment restrictions as fundamental
policies which cannot be changed without the approval of the holders of a
"majority" of the outstanding shares of the ProFund, as that term is defined in
the 1940 Act. The term "majority" is defined in the 1940 Act as the lesser of:
(i) 67% or more of the shares of the series present at a meeting of
shareholders, if the holders of more than 50% of the outstanding shares of the
ProFund are present or represented by proxy; or (ii) more than 50% of the
outstanding shares of the series. (All policies of a ProFund not specifically
identified in this Statement of Additional Information or the Prospectus as
fundamental may be changed without a vote of the shareholders of the ProFund.)
For purposes of the following limitations, all percentage limitations apply
immediately after a purchase or initial investment.
A ProFund may not:
1. Invest more than 25% of its total assets, taken at market value at the
time of each investment, in the securities of issuers in any particular industry
(excluding the U.S. Government and its agencies and instrumentalities).
2. Make investments for the purpose of exercising control or management.
3. Purchase or sell real estate, except that, to the extent permitted by
applicable law, the ProFund may invest in securities directly or indirectly
secured by real estate or interests therein or issued by companies that invest
in real estate or interests therein.
4. Make loans to other persons, except that the acquisition of bonds,
debentures or other corporate debt securities and investment in government
obligations, commercial paper, pass-through instruments, certificates of
deposit, bankers' acceptances and repurchase agreements and purchase and sale
contracts and any similar instruments shall not be deemed to be the making of a
loan, and except further that the ProFund may lend its portfolio securities,
provided that the lending of portfolio securities may be made only in accordance
with applicable law and the guidelines set forth in the Prospectus and this
Statement of Additional Information, as they may be amended from time to time.
5. Issue senior securities to the extent such issuance would violate
applicable law.
6. Borrow money, except that the ProFund (i) may borrow from banks (as
defined in the Investment Company Act) in amounts up to 33 1/3% of its total
assets (including the amount borrowed), (ii) may, to the extent permitted by
applicable law, borrow up to an additional 5% of its total assets for temporary
purposes, (iii) may obtain such short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities and (iv) may purchase
securities on margin to the extent permitted by applicable law. The ProFund may
not pledge its assets other than to secure such borrowings or, to the extent
permitted by the ProFund's investment policies as set forth in the Prospectus
and this Statement of Additional Information, as they may be amended from time
to time, in connection with hedging transactions, short sales, when-issued and
forward commitment transactions and similar investment strategies.
7. Underwrite securities of other issuers, except insofar as the ProFund
technically may be deemed an underwriter under the Securities Act of 1933, as
amended (the "Securities Act"), in selling portfolio securities.
8. Purchase or sell commodities or contracts on commodities, except to the
extent the ProFund may do so in accordance with applicable law and the ProFund's
Prospectus and Statement of Additional Information, as they may be amended from
time to time.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to the general supervision by the Trustees, the Advisor is responsible
for decisions to buy and sell securities for each of the ProFunds, the selection
of brokers and dealers to effect the transactions, and the negotiation of
brokerage commissions, if any. The Advisor expects that the ProFunds may execute
brokerage or other agency transactions through registered broker-dealers, for a
commission, in conformity with the 1940 Act, the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder.
The Advisor may serve as an investment manager to a number of clients, including
other investment companies. It is the practice of the Advisor to cause purchase
and sale transactions to be allocated among the ProFunds and others whose assets
the Advisor manages in such manner as the Advisor deems equitable. The main
factors considered by the Advisor in making such allocations among the ProFunds
and other client accounts of the Advisor 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 person(s) responsible, if
any, for managing the portfolios of the ProFunds and the other client accounts.
The policy of each ProFund regarding purchases and sales of securities for a
ProFund's portfolio 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, each
ProFund'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. Each ProFund believes that a requirement always to seek the
lowest possible commission cost could impede effective portfolio management and
preclude the ProFund and the Advisor from obtaining a high quality of brokerage
and research services. In seeking to determine the reasonableness of brokerage
commissions paid in any transaction, the Advisor relies upon its experience and
knowledge regarding commissions generally charged by various brokers and on its
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.
Purchases and sales of U.S. Government securities are normally transacted
through issuers, underwriters or major dealers in U.S. Government Securities
acting as principals. Such transactions are made on a net basis and do not
involve payment of brokerage commissions. The cost of securities purchased from
an underwriter usually includes a commission paid by the issuer to the
underwriters; transactions with dealers normally reflect the spread between bid
and asked prices.
In seeking to implement a ProFund's policies, the Advisor effects transactions
with those brokers and dealers who the Advisor believes provide the most
favorable prices and are capable of providing efficient executions. If the
Advisor believes such prices and executions are obtainable from more than one
broker or dealer, the Advisor may give consideration to placing portfolio
transactions with those brokers and dealers who also furnish research and other
services to the ProFund or the Advisor. 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 investment; wire services; and appraisals or evaluations
of portfolio securities. If the broker-dealer providing these additional
services is acting as a principal for its own account, no commissions would be
payable. If the broker-dealer is not a principal, a higher commission may be
justified, at the determination of the Advisor, for the additional services.
The information and services received by the Advisor from brokers and dealers
may be of benefit to the Advisor in the management of accounts of some of the
Advisor's other clients and may not in all cases benefit a ProFund directly.
While the receipt of such information and services is useful in varying degree
and would generally reduce the amount of research or services otherwise
performed by the Advisor and thereby reduce the Advisor's expenses, this
information and these services are of indeterminable value and the management
fee paid to the Advisor is not reduced by any amount that may be attributable to
the value of such information and services.
MANAGEMENT OF PROFUNDS
Trustees are responsible for the general supervision of ProFund's business. The
day-to-day operations of ProFunds are the responsibilities of ProFunds'
officers. The names and addresses (and ages) of Trustees and the officers of and
the officers of the Advisor, together within formation as to their principal
business occupations during the past five years, are set forth below. Trustees
and expenses for non-interested Trustees will be paid by _______________.
Trustees
[To be added by pre-effective amendment]
* This Trustee is deemed to be an "interested person" of , within the
meaning of Section 2(a)(19) of the 1940 Act, inasmuch as this person is
affiliated with the Advisor, as described herein.
Under an investment advisory agreement between ProFunds and the Advisor, dated
_____, 1997, each ProFund other than the Money Market ProFund and the Money
Market ProFund pays the Advisor a fee at an annualized rate, based on its
average daily net assets of 0.70%. and 0.45%, respectively. The Advisor manages
the investment and the reinvestment of the assets of each of the Funds, in
accordance with the investment objectives, policies, and limitations of the
ProFund, subject to the general supervision and control of Trustees and the
officers of ProFunds. The Advisor bears all costs associated with providing
these advisory services. The Advisor, from its own resources, including profits
from advisory Trustees received from the Funds, provided such Trustees are
legitimate and not excessive, also may make payments to broker-dealers and other
financial institutions for their expenses in connection with the distribution of
ProFunds' shares, and otherwise currently pays all distribution costs for
ProFunds' shares.
Servicer
General administrative, shareholder, dividend disbursement, transfer agent, and
registrar services are provided to ProFunds by ___________________[address] (the
"Servicer"), subject to the general supervision and control of Trustees and the
officers of ProFunds, pursuant to a service agreement between ProFunds and the
Servicer, date dated ________, 1997. Under this service agreement, the Funds
each pay the Servicer a fee equal to _________________.
The Servicer provides ProFunds and the Funds with all required general
administrative services, including, without limitation, office space, equipment,
and personnel; clerical and general back office services; bookkeeping, internal
accounting, and secretarial services; the determination of net asset values; and
the preparation and filing of all reports, registration statements, proxy
statements, and all other materials required to be filed or furnished by
ProFunds and the Funds under Federal and state securities laws. The Servicer
also maintains the shareholder account records for ProFunds and the Funds,
distributes dividends and distributions payable by the Funds, and produces
statements with respect to account activity for the Funds and their
shareholders. The Servicer pays all Trustees and expenses that are directly
related to the services provided by the Servicer to ProFunds; each ProFund
reimburses the Servicer for all Trustees and expenses incurred by the Servicer
which are not directly related to the services the Servicer provides to the
ProFund under the service agreement.
Costs and Expenses
Each ProFund bears all expenses of its operations other than those assumed by
the Advisor or the Servicer. ProFund expenses include: the management fee; the
servicing fee (including administrative, transfer agent, and shareholder
servicing Trustees); custodian and accounting Trustees and expenses; legal and
auditing Trustees; securities valuation expenses; fidelity bonds and other
insurance premiums; expenses of preparing and printing prospectuses,
confirmations, proxy statements, and shareholder reports and notices;
registration Trustees and expenses; proxy and annual meeting expenses, if any;
all Federal, state, and local taxes (including, without limitation, stamp,
excise, income, and franchise taxes); organizational costs; and non-interested
Trustees and expenses.
Principal Holders of the Trust
[To be added by pre-effective amendment.]
PERFORMANCE INFORMATION
Total Return Calculations
From time to time, each of the non-money market ProFund may advertise the total
return of the ProFund for prior periods. Any such advertisement would include at
least average annual total return quotations for one, five, and ten-year
periods, or for the life of the ProFund. Other total return quotations,
aggregate or average, over other time periods for the ProFund also may be
included.
The total return of a ProFund for a particular period represents the increase
(or decrease) in the value of a hypothetical investment in the ProFund from the
beginning to the end of the period. Total return is calculated by subtracting
the value of the initial investment from the ending value and showing the
difference as a percentage of the initial investment; this calculation assumes
that the initial investment is made at the current net asset value and that all
income dividends or capital gains distributions during the period are reinvested
in shares of the ProFund at net asset value. Total return is based on historical
earnings and asset value fluctuations and is not intended to indicate future
performance. No adjustments are made to reflect any income taxes payable by
shareholders on dividends and distributions paid by the ProFund.
Average annual total return quotations for periods of two or more years are
computed by finding the average annual compounded rate of return over the period
that would equal the initial amount invested to the ending redeemable value. A
more-detailed description of the method by which the total return of a ProFund
is calculated is contained in the Statement of Additional Information under
"Calculation of Return Quotations."
Yield Calculations
From time to time, the Money Market ProFund advertises its "yield" and
"effective yield." Both yield figures are based on historical earnings and are
not intended to indicate future performance. The "yield" of the Money Market
ProFund refers to the income generated by an investment in the Money Market
ProFund over a seven-day period (which period will be stated in the
advertisement). This income is then "annualized." That is, the amount of income
generated by the investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment. The
"effective yield" is calculated similarly, but, when annualized, the income
earned by an investment in the Money Market ProFund is assumed to be reinvested.
The "effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment
Since yield fluctuates, yield data cannot necessarily be used to compare an
investment in the Money Market ProFund's shares with bank deposits, savings
accounts, and similar investment alternatives which often provide an agreed or
guaranteed fixed yield for a stated period of time. Shareholders of the Money
Market ProFund should remember that yield generally is a function of the kind
and quality of the instrument held in portfolio, portfolio maturity, operating
expenses, and market conditions.
Comparisons of Investment Performance
[A confidential portion of the registration statement has been
omitted and filed separately with the Commission and identified
as Confidential Portion No. 7.]
Further information about the performance of the ProFunds will be contained in
the ProFunds' annual reports to shareholders, which may be obtained without
charge by writing to the ProFunds at the address or telephoning the ProFunds at
telephone number set forth on the cover page of this Prospectus.
FINANCIAL STATEMENTS
[Seed capital financial statements to be added by pre-effective amendment.]
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THE PROSPECTUS, OR IN THIS STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
PRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY PROFUNDS.
THIS STATEMENT OF INFORMATION DOES NOT CONSTITUTE AN OFFERING BY PROFUNDS IN ANY
JURISDICTION IN WHICH SUCH AN OFFERING MAY NOT LAWFULLY BE MADE.
<PAGE>
PART C
<PAGE>
PART C
------
OTHER INFORMATION
-----------------
ITEM 24. Financial Statements and Exhibits
- ---------------------------------------------
List all financial statements and exhibits filed as part of the Registration
Statement.
(a) Financial Statements:
In Part A:None.
In Part B:None.
In Part C:None.
(b) Exhibits
(1) (a) Certificate of Trust of ProFunds (the "Registrant").
(1) (b) Declaration of Trust of the Registrant.
(2) By-laws of Registrant. (1)
(3) Not Applicable.
(4) Not Applicable.
(5) Form of Investment Advisory Agreement. (1)
(6) Form of Administrative Agreement. (1)
(7) Not Applicable. (1)
(8) Form of Custody Agreement. (1)
(9) (a) Form of Transfer Agency Agreement. (1)
(9) (b) Directors and Officers Liability Insurance and Comprehensive
Blanket Bond Insurance Policy. (1)
(10) Opinion and Consent of Counsel to the Registrant. (1)
(11) Not Applicable.
(12) Not Applicable.
(13) Not Applicable.
(14) Not Applicable.
(15) Not Applicable.
(16) Not Applicable.
- ------------------------
(1) To be filed by amendment.
ITEM 25. Persons Controlled By or Under Common Control With Registrant.
- ------------------------------------------------------------------------------
None.
ITEM 26. Number of Holders of Securities
- ------------------------------------------
The following information is given as of the date indicated:
Title of Class: Common Stock, no par value Number of Record Holders as of
______, 1997,
- -------------
To be filed by amendment.
ITEM 27. Indemnification
- --------------------------
The Registrant is organized as a Delaware business trust and is operated
pursuant to a Declaration of Trust, dated as of April 17, 1997 (the "Declaration
of Trust"), that permits the Registrant to indemnify its trustees and officers
under certain circumstances. Such indemnification, however, is subject to the
limitations imposed by the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended. The Declaration of Trust of the
Registrant provides that officers and trustees of the Trust shall be indemnified
by the Trust against liabilities and expenses of defense in proceedings against
them by reason of the fact that they each serve as an officer or trustee of the
Trust or as an officer or trustee of another entity at the request of the
entity. This indemnification is subject to the following conditions:
(a) no trustee or officer of the Trust is indemnified against any
liability to the Trust or its security holders which was the result
of any willful misconduct, bad faith, gross negligence, or reckless
disregard of his duties;
(b) officers and trustees of the Trust are indemnified only for
actions taken in good faith which the officers and trustees believed
were in or not opposed to the best interests of the Trust; and
(c) expenses of any suit or proceeding will paid in advance only if
the persons who will benefit by such advance undertake to repay the
expenses unless it subsequently is determined that such persons are
entitled to indemnification.
The Declaration of Trust of the Registrant provides that if indemnification is
not ordered by a court, indemnification may be authorized upon determination by
shareholders, or by a majority vote of a quorum of the trustees who were not
parties to the proceedings or, if this quorum is not obtainable, if directed by
a quorum of disinterested trustees, or by independent legal counsel in a written
opinion, that the persons to be indemnified have met the applicable standard.
ITEM 28. Business and Other Connections of Investment Advisory
- ----------------------------------------------------------------
ProFunds Advisors LLC (the "Advisor"), a limited liability company formed under
the laws of the State of Maryland on May 8, 1997.
ITEM 29. Principal Underwriter
- --------------------------------
Not applicable.
ITEM 30. Location of Accounts and Records
- -------------------------------------------
All accounts, books, and records required to be maintained and preserved by
Section 31(a) of the Investment Company Act of 1940, as amended, and Rules 31a-1
and 31a-2 thereunder, will be kept by the Registrant at ____________________ .
[To be added by pre-effective amendment.]
ITEM 31. Management Services
- ------------------------------
There are no management-related service contracts not discussed in
Parts A and B.
ITEM 32. Undertakings
- -----------------------
The Registrant agrees 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 Securities Act of 1933 Registration
Statement.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
Chevy Chase in the State of Maryland on the 3rd day of June, 1997.
PROFUNDS
/s/ Michael L. Sapir
--------------------
Michael L. Sapir
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.
Signatures Title Date
/s/ Michael L. Sapir Trustee, President June 3, 1997
- ----------------------------------------------------------------
Michael L. Sapir
/s/ Louis Mayberg Trustee June 3, 1997
- -----------------------------------------------------------------
Louis Mayberg
EXHIBIT 1(A)
CERTIFICATE OF TRUST
of
ProFunds
This Certificate of Trust, a business trust to be registered under the
Investment Company Act of 1940, is filed in accordance with the provisions of
the Delaware Business Trust Act (12 Del. C Section 3801 et seq.) and sets forth
the following:
1. The name of the trust is:
ProFunds
2. As required by 12 Del. C. Section 2807 and 3810 (a)(1)b, the ProFunds
business address of the registered office of the Trust and of the
registered agent of the Trust for service of process is: The
Corporation Trust Company
1209 Orange Street
Wilmington, DE 19801
3. This certificate shall be effective upon filing.
4. Notice is hereby given that the Trust is a series Trust. The debts,
liabilities, obligations and expenses incurred, contracted for or
otherwise existing with respect to a particular series of the Trust
shall be enforceable against the assets of such series only and not
against the assets of the Trust generally.
This certificate is executed this 16th day of April, 1997 in Chevy Chase,
Maryland, upon the penalties of perjury and constitutes the oath or affirmation
that the facts seated above are true to the undersigned trustees' belief or
knowledge.
/s/ Michael L. Sapir
- --------------------
Michael L. Sapir
/s/ Louis M. Mayberg
- --------------------
Louis M. Mayberg
EXHIBIT 1(B)
DECLARATION OF TRUST
OF
PROFUNDS
This DECLARATION OF TRUST is made as of this day, April 17, 1997 by the Trustees
hereunder.
WHEREAS, the Trustees desire to establish a trust for the purpose of carrying on
the business of an open-end management investment company; and
WHEREAS, in furtherance of such purpose, the Trustees and any successor Trustees
elected in accordance with Article 5 hereof are acquiring and may hereafter
acquire assets which they will hold and manage as trustees of a Delaware
business trust in accordance with the provisions hereinafter set forth; and
WHEREAS, this Trust is authorized to issue its shares of beneficial interest in
one or more separate series, all in accordance with the provisions set forth in
this Declaration of Trust.
NOW, THEREFORE, the Trustees hereby declare that they will hold in trust all
cash, securities, and other assets which they may from time to time acquire in
any manner as Trustees hereunder, and that they will manage and dispose of the
same upon the following terms and conditions for the benefit of the holders of
shares of beneficial interest in this Trust as hereinafter set forth.
ARTICLE 1
Name and Definitions
Section 1.1. Name. This Trust shall be known as the "ProFunds" and the Trustees
shall conduct the business of the Trust under that name or any other name or
names as they may from time to time determine.
Section 1.2. Definitions. Whenever used herein, unless otherwise
required by the context or specifically provided below:
(a) The "Trust" shall mean the Delaware business trust established by this
Declaration of Trust, as amended from time to time;
(b) "Trustee" or "Trustees" shall mean each signatory to this Declaration
of Trust so long as such signatory shall continue in office in accordance with
the terms hereof, and all other individuals who at the time in question have
been duly elected or appointed and qualified in accordance with Article 5 hereof
and are then in office;
(c) "Shares" shall mean the shares of beneficial interest in the Trust
described in Article 4 hereof and shall include fractional and whole Shares;
(d) "Shareholder" shall mean a record owner of Shares;
(e) The "1940 Act" refers to the Investment Company Act of 1940 (and any
successor statute) and the rules and regulations thereunder, all as amended from
time to time;
(f) The terms "Person," "Interested Person," and "Principal Underwriter"
shall have the meanings given them in the 1940 Act;
(g) The term "Commission" shall mean the United States Securities and
Exchange Commission (or any successor agency thereto);
(h) "Declaration of Trust" or "Declaration" shall mean this Declaration of
Trust as amended or restated from time to time;
(i) "By-Laws" shall mean the By-Laws of the Trust as amended from time to
time;
(j) "Series" shall mean any of the separate series of Shares established
and designated under or in accordance with the provisions of Article 4 hereof
and to which the Trustees have allocated assets and liabilities of the Trust in
accordance with Article 4;
(k) The "DBTA" refers to the Delaware Business Trust Act, Chapter 38 of
Title 12 of the Delaware Code (and any successor statute), as amended from time
to time; and
(l) The "Code" refers to the Internal Revenue Code of 1986 (and any
successor statute) and the rules and regulations thereunder, all as amended from
time to time.
ARTICLE 2
Nature and Purpose of Trust
Section 2.1. Nature of Trust. The Trust is a business trust of the type referred
to in the DBTA. The Trustees shall file a certificate of trust in accordance
with Section 3810 of the DBTA. The Trust is not intended to be, shall not be
deemed to be, and shall not be treated as, a general or a limited partnership,
joint venture, corporation or joint stock company, nor shall the Trustees or
Shareholders or any of them for any purpose be deemed to be, or be treated in
any way whatsoever as though they were, liable or responsible hereunder as
partners or joint venturers.
Section 2.2. Purpose of Trust. The purpose of the Trust is to engage in, operate
and carry on the business of an open-end management investment company and to do
any and all acts or things as are necessary, convenient, appropriate, incidental
or customary in connection therewith.
Section 2.3. Interpretation of Declaration of Trust.
Section 2.3.1. Governing Instrument. This Declaration of Trust shall be the
governing instrument of the Trust and shall be governed by and construed
according to the laws of the State of Delaware.
Section 2.3.2. No Waiver of Compliance with Applicable Law. No provision of this
Declaration shall be effective to require a waiver of compliance with any
provision of the Securities Act of 1933, as amended, or the 1940 Act, or of any
valid rule, regulation or order of the Commission thereunder.
Section 2.3.3. Power of the Trustees Generally. Except as otherwise set forth
herein, the Trustees may exercise all powers of trustees under the DBTA on
behalf of the Trust.
ARTICLE 3
Registered Agent; Principal Place of Business
Section 3.1. Registered Agent. The name of the registered agent of the Trust is
The Corporation Trust Company and the registered agent's business address in
Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware
19801.
Section 3.2. Principal Place of Business. The principal place of business of the
Trust is 4600 N. Park Avenue, Suite 100, Chevy Chase, Maryland 20815.
ARTICLE 4
Beneficial Interest
Section 4.1. Shares of Beneficial Interest. The beneficial interests in the
Trust shall be divided into Shares, all without par value and of one class, but
the Trustees shall have the authority from time to time to divide the class of
Shares into two (2) or more separate and distinct series of Shares ("Series") as
provided in Section 4.9 of this Article 4.
Section 4.2. Number of Authorized Shares. The Trustees are authorized to issue
an unlimited number of Shares. The Trustees may issue Shares for such
consideration and on such terms as they may determine (or for no consideration
if pursuant to a Share dividend or split), all without action or approval of the
Shareholders.
Section 4.3. Ownership and Certification of Shares. The Secretary of the Trust,
or the Trust's transfer or similar agent, shall record the ownership and
transfer of Shares of each Series separately on the record books of the Trust.
The record books of the Trust, as kept by the Secretary of the Trust or any
transfer or similar agent, shall contain the name and address of and the number
of Shares held by each Shareholder, and such record books shall be conclusive as
to who are the holders of Shares and as to the number of Shares held from time
to time by such Shareholders. No certificates certifying the ownership of Shares
shall be issued except as the Trustees may otherwise determine from time to
time. The Trustees may make such rules as they consider appropriate for the
issuance of share certificates, transfer of Shares, and similar matters for the
Trust or any Series.
Section 4.4. Status of Shares.
Section 4.4.1. Fully Paid and Non-assessable. All Shares when issued on the
terms determined by the Trustees shall be fully paid and non-assessable. Section
4.4.2. Personal Property. Shares shall be deemed to be personal property giving
only the rights provided in this Declaration of Trust.
Section 4.4.3. Party to Declaration of Trust. Every Person by virtue of having
become registered as a Shareholder shall be held to have expressly assented and
agreed to the terms of this Declaration of Trust and to have become a party
thereto.
Section 4.4.4. Death of Shareholder. The death of a Shareholder during the
continuance of the Trust shall not operate to terminate the Trust nor entitle
the representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees. The
representative shall be entitled to the same rights as the decedent under this
Trust.
Section 4.4.5. Title to Trust; Right to Accounting. Ownership of Shares shall
not entitle the Shareholder to any title in or to the whole or any part of the
Trust property or right to call for a partition or division of the same or for
an accounting.
Section 4.5. Determination of Shareholders. The Trustees may from time to time
close the transfer books or establish record dates and times for the purposes of
determining the Shareholders entitled to be treated as such, to the extent
provided or referred to in Section 7.3.
Section 4.6. Shares Held by Trust. The Trustees may hold as treasury shares,
reissue for such consideration and on such terms as they may determine, or
cancel, at their discretion from time to time, any Shares of any Series
reacquired by the Trust.
Section 4.7. Shares Held by Persons Related to Trust. Any Trustee, officer or
other agent of the Trust, and any organization in which any such person is
interested may acquire, own, hold and dispose of Shares of the Trust to the same
extent as if such person were not a Trustee, officer or other agent of the
Trust; and the Trust may issue and sell or cause to be issued and sold and may
purchase Shares from any such person or any such organization subject only to
the general limitations, restrictions or other provisions applicable to the sale
or purchase of such Shares generally.
Section 4.8. Preemptive and Appraisal Rights. Shareholders shall not, as
Shareholders, have any right to acquire, purchase or subscribe for any Shares or
other securities of the Trust which it may hereafter issue or sell, other than
such right, if any, as the Trustees in their discretion may determine.
Shareholders shall have no appraisal rights with respect to their Shares and,
except as otherwise determined by resolution of the Trustees in their sole
discretion, shall have no exchange or conversion rights with respect to their
Shares. No action may be brought by a Shareholder on behalf of the Trust unless
Shareholders owning no less than a majority of the then outstanding Shares, or
Series thereof, join in the bringing of such action. A Shareholder of Shares in
a particular Series of the Trust shall not be entitled to participate in a
derivative or class action lawsuit on behalf of any other Series or on behalf of
the Shareholders in any other Series of the Trust.
Section 4.9. Series of Shares.
Section 4.9.1. Classification of Shares. The Trustees may classify or reclassify
any unissued Shares or any Shares previously issued and reacquired of any Series
into one or more Series that may be established and designated from time to
time.
Section 4.9.2. Establishment and Designation. The Trustees shall have exclusive
power without the requirement of Shareholder approval to establish and designate
separate and distinct Series of Shares. The establishment and designation of any
Series (in addition to those established and designated in this Section below)
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 as otherwise provided in
such instrument. Each such instrument shall have the status of an amendment to
this Declaration of Trust. Without limiting the authority of the Trustees to
establish and designate any further Series, the Trustees hereby establish and
designate the following six initial Series:
Bull ProFund;
MegaBull ProFund;
Bear ProFund;
Mega Bear ProFund;
OTC ProFund; and
U.S. Government Money Market ProFund
Section 4.9.3. Separate and Distinct Nature. Each Series, including without
limitation Series specifically established and designated in Section 4.9.2,
shall be separate and distinct from any other Series and shall maintain separate
and distinct records on the books of the Trust, and the assets belonging to any
such Series shall be held and accounted for separately from the assets of the
Trust or any other Series.
Section 4.9.4. Conversion Rights. Subject to compliance with the requirements of
the 1940 Act, the Trustees shall have the authority to provide that holders of
Shares of any Series shall have the right to convert said Shares into Shares of
one or more other Series in accordance with such requirements and procedures as
may be established by the Trustees.
Section 4.9.5. Rights and Preferences. The Trustees shall have exclusive power
without the requirement of Shareholder approval to fix and determine the
relative rights and preferences as between the Shares of the separate Series.
The initial Series and any further Series that may from time to time be
established and designated by the Trustees shall (unless the Trustees otherwise
determine with respect to some further Series at the time of establishing and
designating the same) have relative rights and preferences as set forth in this
Section 4.9.5.
Section 4.9.5.1. Assets and Liabilities "Belonging" to a Series. All
consideration received by the Trust for the issue or sale of Shares of a
particular Series, together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment of such proceeds
in whatever form the same may be, shall be held and accounted for separately
from the other assets of the Trust and of every other Series and may be referred
to herein as "assets belonging to" that Series. The assets belonging to a
particular Series shall belong to that Series for all purposes, and to no other
Series, subject only to the rights of creditors of that Series. Such
consideration, assets, income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments which are not readily identifiable as
belonging to any particular Series (collectively "General Items"), the Trustees
shall allocate to and among any one or more of the Series in such manner and on
such basis as they, in their sole discretion, deem fair and equitable. Any
General Items so allocated to a particular Series shall belong to that Series.
Each such allocation by the Trustees shall be conclusive and binding upon all
Shareholders for all purposes. The assets belonging to each particular Series
shall be charged with the liabilities in respect of that Series and all
expenses, costs, charges and reserves attributable to that Series, and any
general liabilities, expenses, costs, charges or reserves of the Trust which are
not readily identifiable as belonging to any particular Series shall be
allocated and charged by the Trustees to and among any one or more of the Series
established and designated from time to time in such manner and on such basis as
the Trustees in their sole discretion deem fair and equitable. Each allocation
of liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon all Shareholders for all purposes.
Section 4.9.5.2. Treatment of Particular Items. The Trustees shall have full
discretion, to the extent consistent with the 1940 Act and consistent with
generally accepted accounting principles, to determine which items shall be
treated as income and which items as capital; and each such determination and
allocation shall be conclusive and binding upon the Shareholders.
Section 4.9.5.3. Limitation on Interseries Liabilities. Subject to the right of
the Trustees in their discretion to allocate general liabilities, expenses,
costs, charges or reserves as provided in Section 4.9.5.1, the debts,
liabilities, obligations and expenses incurred, contracted for or otherwise
existing with respect to a particular Series shall be enforceable against the
assets of such Series only, and not against the assets of any other Series.
Notice of this limitation on liabilities between and among Series shall be set
forth in the certificate of trust of the Trust (whether originally or by
amendment) as filed or to be filed in the Office of the Secretary of State of
the State of Delaware pursuant to the DBTA, and upon the giving of such notice
in the certificate of trust, the statutory provisions of Section 3804 of the
DBTA relating to limitations on liabilities between and 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.
Section 4.9.5.4. Dividends. Dividends and capital gains distributions on Shares
of a particular Series may be paid with such frequency, in such form, and in
such amount as the Trustees may determine by resolution adopted from time to
time, or pursuant to a standing resolution or resolutions adopted only once or
with such frequency as the Trustees may determine. All dividends and
distributions on Shares of a particular Series shall be distributed pro rata to
the holders of Shares of that Series in proportion to the number of Shares of
that Series held by such holders at the date and time of record established for
the payment of such dividends or distributions. Such dividends and distributions
may be paid in cash, property or additional Shares of that Series, or a
combination thereof, as determined by the Trustees or pursuant to any program
that the Trustees may have in effect at the time for the election by each
Shareholder of the form in which dividends or distributions are to be paid to
that Shareholder. Any such dividend or distribution paid in Shares shall be paid
at the net asset value thereof as determined in accordance with Section 4.9.5.8.
Section 4.9.5.5. Redemption by Shareholder. Each Shareholder shall have the
right at such times as may be permitted by the Trust and as otherwise required
by the 1940 Act to require the Trust to redeem all or any part of such
Shareholder's Shares of a Series at a redemption price per Share equal to the
net asset value per Share of such Series next determined in accordance with
Section 4.9.5.8 after the Shares are properly tendered for redemption, less any
charge which may be imposed by the Trust in connection with such redemption and
described in the Trust's then current prospectus. Payment of the redemption
price shall be in cash; provided, however, that if the Trustees determine, which
determination shall be conclusive, that conditions exist which make payment
wholly in cash unwise or undesirable, the Trust may, subject to the requirements
of the 1940 Act, make payment wholly or partly in securities or other assets
belonging to the Series of which the Shares being redeemed are part at the value
of such securities or assets used in such determination of net asset value.
Notwithstanding the foregoing, the Trust may postpone payment of the redemption
price and may suspend the right of the holders of Shares of any Series to
require the Trust to redeem Shares of that Series during any period or at any
time when and to the extent permissible under any applicable provision of the
1940 Act.
Section 4.9.5.6. Redemption by Trust. The Trustees may cause the Trust to redeem
at net asset value the Shares of any Series held by a Shareholder upon such
conditions as may from time to time be determined by the Trustees. Upon
redemption of Shares pursuant to this Section 4.9.5.6, the Trust shall promptly
cause payment of the full redemption price to be made to such Shareholder for
Shares so redeemed.
Section 4.9.5.7. Prevention of Personal Holding Company Status. The Trust may
reject any purchase order, refuse to transfer any Shares, and compel the
redemption of Shares if, in its opinion, any such rejection, refusal, or
redemption would prevent the Trust from becoming a personal holding company as
defined by the Code.
Section 4.9.5.8. Net Asset Value. The net asset value per Share of any Series
shall be determined in accordance with the methods and procedures established by
the Trustees from time to time and, to the extent required by applicable law, as
disclosed in the then current prospectus or statement of additional information
for the Series.
Section 4.9.5.9. Maintenance of Stable Net Asset Value. The Trustees may
determine to maintain the net asset value per Share of any Series at a
designated constant dollar amount and in connection therewith may adopt
procedures not inconsistent with the 1940 Act for the continuing declarations of
income attributable to that Series as dividends payable in additional Shares of
that Series at the designated constant dollar amount and for the handling of any
losses attributable to that Series. Such procedures may provide that in the
event of any loss each Shareholder shall be deemed to have contributed to the
capital of the Trust attributable to that Series his or her pro rata portion of
the total number of Shares required to be canceled in order to permit the net
asset value per Share of that Series to be maintained, after reflecting such
loss, at the designated constant dollar amount. Each Shareholder of the Trust
shall be deemed to have agreed, by his investment in any Series with respect to
which the Trustees shall have adopted any such procedure, to make the
contribution referred to in the preceding sentence in the event of any such
loss. The Trustees may delegate any of their powers and duties under this
Section 4.9.5.9 with respect to appraisal of assets and liabilities in the
determination of net asset value or with respect to a suspension of the
determination of net asset value to an officer or officers or agent or agents of
the Trust designated from time to time by the Trustees.
Section 4.9.5.10. Transfer of Shares. Except to the extent that transferability
is limited by applicable law or such procedures as may be developed from time to
time by the Trustees or the appropriate officers of the Trust, Shares shall be
transferable on the records of the Trust only by the record holder thereof or by
his agent thereunto duly authorized in writing, upon delivery to the Trustees or
the Trust's transfer agent of a duly executed instrument of transfer, together
with a Share certificate, if one is outstanding, and such evidence of the
genuineness of each such execution and authorization and of such other matters
as may be required by the Trustees. Upon such delivery the transfer shall be
recorded on the register of the Trust.
Section 4.9.5.11. Equality of Shares. All Shares of each particular Series shall
represent an equal proportionate interest in the assets belonging to that Series
(subject to the liabilities belonging to that Series), and each Share of any
particular Series shall be equal in this respect to each other Share of that
Series.
Section 4.9.5.12. Fractional Shares. Any fractional Share of any Series, if any
such fractional Share is outstanding, shall carry proportionately all the rights
and obligations of a whole Share of that Series, including rights and
obligations with respect to voting, receipt of dividends and distributions,
redemption of Shares, and liquidation of the Trust or any Series.
ARTICLE 5
Trustees
Section 5.1. Management of the Trust. The business and affairs of the Trust
shall be managed by the Trustees, and they shall have all powers necessary and
desirable to carry out that responsibility, including those specifically set
forth in Sections 5.10 and 5.11 herein.
Section 5.2. Qualification. Each Trustee shall be a natural person. A Trustee
need not be a Shareholder, a citizen of the United States, or a resident of the
State of Delaware.
Section 5.3. Number. By the vote or consent of a majority of the Trustees then
in office, the Trustees may fix the number of Trustees at a number not less than
two (2) nor more than twenty-five (25). No decrease in the number of Trustees
shall have the effect of removing any Trustee from office prior to the
expiration of his or her term, but the number of Trustees may be decreased in
conjunction with the removal of a Trustee pursuant to Section 5.7.
Section 5.4. Term and Election. Each Trustee shall hold office until the next
meeting of Shareholders called for the purpose of considering the election or
re-election of such Trustee or of a successor to such Trustee, and until his or
her successor is elected and qualified, and any Trustee who is appointed by the
Trustees in the interim to fill a vacancy as provided hereunder shall have the
same remaining term as that of his or her predecessor, if any, or such term as
the Trustees may determine.
Section 5.5. Composition of the Board of Trustees. No election or appointment of
any Trustee shall take effect if such election or appointment would cause the
number of Trustees who are Interested Persons to exceed the number permitted by
Section 10 of the 1940 Act.
Section 5.6. Resignation and Retirement. Any Trustee may resign or retire as a
Trustee (without need for prior or subsequent accounting) by an instrument in
writing signed by such Trustee and delivered or mailed to the Chairman, if any,
the President, or the Secretary of the Trust. Such resignation or retirement
shall be effective upon such delivery, or at a later date according to the terms
of the instrument.
Section 5.7. Removal. Any Trustee may be removed with or without cause at any
time: (1) by written instrument signed by two-thirds (2/3) of the number of
Trustees in office prior to such removal, specifying the date upon which such
removal shall become effective, or (2) by the affirmative vote of Shareholders
holding not less than two-thirds (2/3) of Shares outstanding, cast in person or
by proxy at any meeting called for that purpose.
Section 5.8. Vacancies. Any vacancy or anticipated vacancy resulting for any
reason, including without limitation the death, resignation, retirement,
removal, or incapacity of any of the Trustees, or resulting from an increase in
the number of Trustees may (but need not unless required by the 1940 Act) be
filled by a majority of the Trustees then in office, subject to the provisions
of Section 16 of the 1940 Act, through the appointment in writing of such other
person as such remaining Trustees in their discretion shall determine. The
appointment shall be effective upon the acceptance of the person named therein
to serve as a trustee, except that any such appointment in anticipation of a
vacancy occurring by reason of the resignation, retirement, or increase in
number of Trustees to be effective at a later date shall become effective only
at or after the effective date of such resignation, retirement, or increase in
number of Trustees.
Section 5.9. Ownership of Assets of the Trust. The assets of the Trust shall be
held separate and apart from any assets now or hereafter held in any capacity
other than as Trustee hereunder by the Trustees or any successor Trustees. Legal
title to all the Trust property shall be vested in the Trust as a separate legal
entity under the DBTA, except that the Trustees shall have the power to cause
legal title to any Trust property to be held by or in the name of one or more of
the Trustees or in the name of any other Person on behalf of the Trust on such
terms as the Trustees may determine. In the event that title to any part of the
Trust property is vested in one or more Trustees, the right, title and interest
of the Trustees in the Trust property shall vest automatically in each person
who may hereafter become a Trustee upon his or her due election and
qualification. Upon the resignation, removal or death of a Trustee he or she
shall automatically cease to have any right, title or interest in any of the
Trust property, and the right, title and interest of such Trustee in the Trust
property shall vest automatically in the remaining Trustees. To the extent
permitted by law, such vesting and cessation of title shall be effective whether
or not conveyancing documents have been executed and delivered. No Shareholder
shall be deemed to have a severable ownership in any individual asset of the
Trust or any right of partition or possession thereof.
Section 5.10. Powers. Subject to the provisions of this Declaration of Trust,
the business of the Trust shall be managed by the Trustees, and they shall have
all powers necessary or convenient to carry out that responsibility and the
purpose of the Trust including, but not limited to, those enumerated in this
Section 5.10.
Section 5.10.1. Bylaws. The Trustees may adopt By-Laws not in consistent with
this Declaration of Trust providing for the conduct of the business and affairs
of the Trust and may amend and repeal them to the extent that such By-Laws do
not reserve that right to the Shareholders.
Section 5.10.2. Officers, Agents, and Employees. The Trustees may, as they
consider appropriate, elect and remove officers and appoint and terminate agents
and consultants and hire and terminate employees, any one or more of the
foregoing of whom may be a Trustee, and may provide for the compensation of all
of the foregoing.
Section 5.10.3. Committees. The Trustees may appoint from their own number, and
terminate, any one or more committees consisting of two or more Trustees,
including without implied limitation an executive committee, which may, when the
Trustees are not in session (but subject to the 1940 Act), exercise some or all
of the power and authority of the Trustees as the Trustees may determine.
Section 5.10.4. Advisers, Administrators, Depositories, and Custodians. The
Trustees may, in accordance with Article 6, employ one or more advisers,
administrators, depositories, custodians, and other persons and may authorize
any depository or custodian to employ sub custodians or agents and to deposit
all or any part of such assets in a system or systems for the central handling
of securities and debt instruments, retain transfer, dividend, accounting or
Shareholder servicing agents or any of the foregoing, provide for the
distribution of Shares by the Trust through one or more distributors, principal
underwriters or otherwise, and set record dates or times for the determination
of Shareholders.
Section 5.10.5. Compensation. The Trustees may compensate or provide for the
compensation of the Trustees, officers, advisers, administrators, custodians,
other agents, consultants and employees of the Trust or the Trustees on such
terms as they deem appropriate.
Section 5.10.6. Delegation of Authority. In general, the Trustees may delegate
to any officer of the Trust, to any committee of the Trustees and to any
employee, adviser, administrator, distributor, depository, custodian, transfer
and dividend disbursing agent, or any other agent or consultant of the Trust
such authority, powers, functions and duties as they consider desirable or
appropriate for the conduct of the business and affairs of the Trust, including
without implied limitation, the power and authority to act in the name of the
Trust and of the Trustees, to sign documents and to act as attorney-in-fact for
the Trustees.
Section 5.10.7. Suspension of Sales. The Trustees shall have the authority to
suspend or terminate the sales of Shares of any Series at any time or for such
periods as the Trustees may from time to time decide.
Section 5.11. Certain Additional Powers. Without limiting the foregoing and to
the extent not inconsistent with the 1940 Act, other applicable law, and the
fundamental policies and limitations of the applicable Series, the Trustees
shall have power and authority for and on behalf of the Trust and each separate
Series as enumerated in this Section 5.11.
Section 5.11.1. Investments. The Trustees shall have the power to invest and
reinvest cash and other property, and to hold cash or other property uninvested
without in any event being bound or limited by any present or future law or
custom in regard to investments by trustees.
Section 5.11.2. Disposition of Assets. The Trustees shall have the power to
sell, exchange, lend, pledge, mortgage, hypothecate, write options on and lease
any or all of the assets of the Trust.
Section 5.11.3. Ownership. The Trustees shall have the power to vote, give
assent, or exercise any rights of ownership with respect to securities or other
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 other property
as the Trustees shall deem proper.
Section 5.11.4. Subscription. The Trustees shall have the power to exercise
powers and rights of subscription or otherwise which in any manner arise out of
ownership of securities.
Section 5.11.5. Payment of Expenses. The Trustees shall have the power to pay or
cause to be paid all expenses, fees, charges, taxes and liabilities incurred or
arising in connection with the Trust or any Series, or in connection with the
management thereof, including, but not limited to, the Trustees' compensation
and such expenses and charges for the Trust's officers, employees, investment
advisers, administrator, distributor, principal underwriter, auditor, counsel,
depository, custodian, transfer agent, dividend disbursing agent, accounting
agent, shareholder servicing agent, and such other agents, consultants, and
independent contractors and such other expenses and charges as the Trustees may
deem necessary or proper to incur.
Section 5.11.6. Form of Holding. The Trustees shall have the power to hold any
securities or other property in a form not indicating any trust, whether in
bearer, unregistered or other negotiable form, or in the name of the Trustees or
of the Trust or of any Series or in the name of a custodian, subcustodian or
other depositary or a nominee or nominees or otherwise.
Section 5.11.7. Reorganization, Consolidation, or Merger. The Trustees shall
have the power to consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer, any security of which is
or was held in the Trust, and 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.
Section 5.11.8. Compromise. The Trustees shall have the power to arbitrate or
otherwise adjust claims in favor of or against the Trust or any Series on any
matter in controversy, including but not limited to claims for taxes.
Section 5.11.9. Partnerships. The Trustees shall have the power to enter into
joint ventures, general or limited partnerships and any other combinations or
associations.
Section 5.11.10. Borrowing. The Trustees shall have the power to borrow funds
and to mortgage and pledge the assets of the Trust or any Series or any part
thereof to secure obligations arising in connection with such borrowing,
consistent with the provisions of the 1940 Act.
Section 5.11.11. Guarantees. The Trustees shall have the power to endorse or
guarantee the payment of any notes or other obligations of any person; to make
contracts of guaranty or suretyship, or otherwise assume liability for payment
thereof; and to mortgage and pledge the Trust property (or Series property) or
any part thereof to secure any of or all such obligations.
Section 5.11.12. Insurance. The Trustees shall have the power to purchase and
pay for entirely out of Trust property such insurance as they may deem necessary
or appropriate for the conduct of the business, including, without limitation,
insurance policies insuring the assets of the Trust and payment of distributions
and principal on its portfolio investments, and insurance policies insuring the
Shareholders, Trustees, officers, employees, agents, consultants, investment
advisers, managers, administrators, distributors, principal underwriters, or
independent contractors, or any thereof (or any person connected therewith), of
the Trust individually against all claims and liabilities of every nature
arising by reason of holding, being or having held any such office or position,
or by reason of any action alleged to have been taken or omitted by any such
person in any such capacity, including any action taken or omitted that may be
determined to constitute negligence, whether or not the Trust would have the
power to indemnify such person against such liability.
Section 5.11.13. Pensions. The Trustees shall have the power to pay pensions for
faithful service, as deemed appropriate by the Trustees, and to adopt, establish
and carry out pension, profit-sharing, share bonus, share purchase, savings,
thrift and other retirement, incentive and benefit plans, 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.
Section 5.12. Vote of Trustees.
Section 5.12.1. Quorum. A majority of the Trustees then in office being present
in person or by proxy shall constitute a quorum.
Section 5.12.2. Required Vote. Except as otherwise provided by the 1940 Act or
other applicable law, this Declaration of Trust, or the By-Laws, any action to
be taken by the Trustees on behalf of the Trust or any Series may be taken by a
majority of the Trustees present at a meeting of Trustees at which a quorum is
present, including any meeting held by means of a conference telephone or other
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time.
Section 5.12.3. Consent in Lieu of a Meeting. Except as otherwise provided by
the 1940 Act or other applicable law, the Trustees may, by written consent of a
majority of the Trustees then in office, take any action which may have been
taken at a meeting of the Trustees.
ARTICLE 6
Service Providers
Section 6.1. Investment Adviser. The Trust may enter into written contracts with
one or more persons to act as investment adviser or investment subadviser to
each of the Series, and as such, to perform such functions as the Trustees may
deem reasonable and proper, including, without limitation, investment advisory,
management, research, valuation of assets, clerical and administrative
functions, under such terms and conditions, and for such compensation, as the
Trustees may in their discretion deem advisable. Section 6.2. Underwriter and
Transfer Agent. The Trust may enter into written contracts with one or more
persons to act as underwriter or distributor whereby the Trust may either agree
to sell Shares to the other party or parties to the contract or appoint such
other party or parties its sales agent or agents for such Shares and with such
other provisions as the Trustees may deem reasonable and proper, and the
Trustees may in their discretion from time to time enter into transfer agency
and/or shareholder service contract(s), in each case with such terms and
conditions, and providing for such compensation, as the Trustees may in their
discretion deem advisable.
Section 6.3. Custodians. The Trust may enter into written contracts with one or
more persons to act as custodian to perform such functions as the Trustees may
deem reasonable and proper, under such terms and conditions, and for such
compensation, as the Trustees may in their discretion deem advisable. Each such
custodian shall be a bank or trust company having an aggregate capital, surplus,
and undivided profits of at least one million dollars ($1,000,000).
Section 6.4. Administrator. The Trust may enter into written contracts with one
or more persons to act as an administrator to perform such functions as the
Trustees may deem reasonable and proper, under such terms and conditions, and
for such compensation, as the Trustees may in their discretion deem advisable.
Section 6.5. Parties to Contracts. Any contract of the character described in
Sections 6.1, 6.2, 6.3, and 6.4 or in Article 8 hereof may be entered into with
any corporation, firm, partnership, trust or association, including, without
limitation, the investment adviser, any investment subadviser, or any affiliated
person of the investment adviser or investment subadviser, although one or more
of the Trustees or officers of the Trust may be an officer, director, trustee,
shareholder, or member of such other party to the contract, or may otherwise be
interested in such contract, and no such contract shall be invalidated or
rendered voidable by reason of the existence of any such relationship, nor shall
any person holding such relationship be liable merely by reason of such
relationship for any loss or expense to the Trust under or by reason of said
contract or be accountable for any profit realized directly or indirectly
therefrom; provided, however, that the contract when entered into was not
inconsistent with the provisions of this Article 6, Article 8, or the Bylaws.
The same person (including a firm, corporation, partnership, trust or
association) may provide more than one of the services identified in this
Article 6.
ARTICLE 7
Shareholders' Voting Powers and Meetings
Section 7.1. Voting Powers. The Shareholders shall have power to vote only with
respect to matters expressly enumerated in Section 7.1.1, 7.1.3 or with respect
to such additional matters relating to the Trust as may be required by the 1940
Act, this Declaration of Trust, the By-Laws, any registration of the Trust with
the Commission or any state, or as the Trustees may otherwise deem necessary or
desirable.
Section 7.1.1. Matters Upon Which Shareholders May Vote. The Shareholders shall
have power to vote on the following matters:
(a) For the election or removal of Trustees as provided in Sections 5.4 and
5.7;
(b) With respect to a contract with a third party provider of services as
to which Shareholder approval is required by the 1940 Act;
(c) With respect to a termination or reorganization of the Trust to the
extent and as provided in Sections 9.1 and 9.2;
(d) With respect to an amendment of this Declaration of Trust to the extent
and as may be provided by this Declaration of Trust or applicable law; and
(e) With respect to any court action, proceeding or claim brought or
maintained derivatively or as a class action on behalf of the Trust, any Series
thereof or the Shareholders of the Trust; provided, however, that a shareholder
of a particular Series shall not be entitled to vote upon a derivative or class
action on behalf of any other Series or shareholder of any other Series. Section
7.1.2. Separate Voting by Series. On any matter submitted to a vote of the
Shareholders, all Shares shall be voted separately by individual Series, except
(i) when required by the 1940 Act, Shares shall be voted in the aggregate and
not by individual Series; and (ii) when the Trustees have determined that the
matter affects the interests of more than one Series, then the Shareholders of
all such Series shall be entitled to vote thereon.
Section 7.1.3. Number of Votes. On any matter submitted to a vote of the
Shareholders, each Shareholder shall be entitled to one vote for each dollar of
net asset value standing in such Shareholder's name on the books of each Series
in which such Shareholder owns Shares which are entitled to vote on the matter.
Section 7.1.4. Cumulative Voting. There shall be no cumulative voting in the
election of Trustees.
Section 7.1.5. Voting of Shares; Proxies. Votes may be cast in person or by
proxy. A proxy with respect to Shares held in the name of two or more persons
shall be valid if executed by any one of them unless at or prior to exercise of
the proxy the Trust receives a specific written notice to the contrary from any
one of them. A proxy purporting to be executed by or on behalf of a Shareholder
shall be deemed valid unless challenged at or prior to its exercise, and the
burden of proving the invalidity of a proxy shall rest on the challenger.
Section 7.1.6. Actions Prior to the Issuance of Shares. Until Shares are issued,
the Trustees may exercise all rights of Shareholders and may take any action
required by law, this Declaration of Trust or the Bylaws to be taken by
Shareholders.
Section 7.2. Meetings of Shareholders.
Section 7.2.1. Annual or Regular Meetings. No annual or regular
meetings of Shareholders are required to be held.
Section 7.2.2. Special Meetings. Special meetings of Shareholders may be called
by the President of the Trust or the Trustees from time to time for the purpose
of taking action upon any matter requiring the vote or authority of the
Shareholders as herein provided or upon any other matter upon which Shareholder
approval is deemed by the Trustees to be necessary or desirable.
Section 7.2.3. Notice of Meetings. Written notice of any meeting of Shareholders
shall be given or caused to be given by the Trustees by mailing or transmitting
such notice at least ten (10) days before such meeting, postage prepaid, stating
the time, place and purpose of the meeting, to each Shareholder at the
Shareholder's address as it appears on the records of the Trust.
Section 7.3. Record Dates. For the purpose of determining the Shareholders who
are entitled to vote or act at any meeting, or who are entitled to participate
in any dividend or distribution, or for the purpose of any other action, the
Trustees may from time to time close the transfer books for such period, not
exceeding thirty (30) days (except at or in connection with the termination of
the Trust), as the Trustees may determine; or without closing the transfer books
the Trustees may fix a date and time not more than one hundred twenty (120) days
prior to the date of any meeting of Shareholders or other action as the date and
time of record for the determination of Shareholders entitled to vote at such
meeting or to be treated as Shareholders of record for purposes of such other
action. Any Shareholder who was a Shareholder at the date and time so fixed
shall be entitled to vote at such meeting or to be treated as a Shareholder of
record for purposes of such other action, even though such Shareholder has since
that date and time disposed of its Shares, and no Shareholder becoming such
after that date and time shall be so entitled to vote at such meeting or to be
treated as a Shareholder of record for purposes of such other action.
Section 7.4. Quorum and Required Vote. Except as otherwise required by the 1940
Act or other applicable law, this Declaration of Trust, or the By-Laws,
one-tenth (1/10) of the Shares entitled to vote in person or by proxy shall be a
quorum as to any particular matter; provided, however, that any lesser number
shall be sufficient for matters upon which the Shareholders vote at any meeting
called in accordance with Section 7.5. Any matter upon which the Shareholders
vote shall be approved by a majority of the votes cast on such matter at a
meeting of the Shareholders at which a quorum is present, except that Trustees
shall be elected by a plurality of the votes cast at such a meeting.
Section 7.5. Adjournments. If a meeting at which a quorum was present is
adjourned, a meeting may be held within a reasonable time after the date set for
the original meeting without the necessity of further notice for the purpose of
taking action upon any matter that would have been acted upon at the original
meeting but for its adjournment.
Section 7.6. Actions by Written Consent. Except as otherwise required by the
1940 Act or other applicable law, this Declaration of Trust, or the By-Laws, any
action taken by Shareholders may be taken without a meeting if Shareholders
entitled to cast at least a majority of all of the votes entitled to be cast on
the matter (or such larger proportion thereof as shall be required by the 1940
Act or by any express provision of this Declaration of Trust or the By-Laws)
consent to the action in writing and such written consents are filed with the
records of the meetings of Shareholders. Such consent shall be treated for all
purposes as a vote taken at a meeting of Shareholders.
Section 7.7. Inspection of Records. The records of the Trust shall be open to
inspection by Shareholders to the same extent as is required for stockholders of
a Delaware business corporation under the Delaware General Corporation Law.
Section 7.8. Additional Provisions. The By-Laws may include further provisions
for Shareholders' votes and meetings and related matters not inconsistent with
the provisions hereof.
ARTICLE 8
Limitation of Liability and Indemnification
Section 8.1. General Provisions.
Section 8.1.1. General Limitation of Liability. No personal liability for any
debt or obligation of the Trust shall attach to any Trustee of the Trust.
Without limiting the foregoing, a Trustee shall not be responsible for or liable
in any event for any neglect or wrongdoing of any officer, agent, employee,
investment adviser, subadviser, principal underwriter or custodian of the Trust,
nor shall any Trustee be responsible or liable for the act or omission of any
other Trustee. Every note, bond, contract, instrument, certificate, Share or
undertaking and every other act or thing whatsoever executed or done by or on
behalf of the Trust or the Trustees or any Trustee in connection with the Trust
shall be conclusively deemed to have been executed or done only in or with
respect to their or his or her capacity as Trustees or Trustee and neither such
Trustees or Trustee nor the Shareholders shall be personally liable thereon.
Section 8.1.2. Notice of Limited Liability. Every note, bond, contract,
instrument, certificate or undertaking made or issued by the Trustees or by any
officers or officer shall recite that the same was executed or made by or on
behalf of the Trust by them as Trustees or Trustee or as officers or officer and
not individually and that the obligations of such instrument are not binding
upon any of them or the Shareholders individually but are binding only upon the
assets and property of the Trust or belonging to a Series thereof, and may
contain such further recitals as they or he may deem appropriate, but the
omission thereof shall not operate to bind any Trustees or Trustee or officers
or officer or Shareholders or Shareholder individually.
Section 8.1.3. Liability Limited to Assets of the Trust. All persons extending
credit to, contracting with or having any claim against the Trust shall look
only to the assets of the Trust or belonging to a Series thereof, as
appropriate, for payment under such credit, contract or claim, and neither the
Shareholders nor the Trustees nor any of the Trust's officers, employees or
agents, whether past, present or future, shall be personally liable therefor.
Section 8.2. Liability of Trustees. The exercise by the Trustees of their powers
and discretion hereunder shall be binding upon the Trust, the Shareholders, and
any other person dealing with the Trust. The liability of the Trustees, however,
shall be limited by this Section 8.2.
Section 8.2.1. Liability for Own Actions. A Trustee shall be liable to the Trust
or the Shareholders only for his own willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of the
office of Trustee, and for nothing else, and shall not be liable for errors of
judgment or mistakes of fact or law.
Section 8.2.2. Liability for Actions of Others. The Trustees shall not be
responsible or liable in any event for any neglect or wrongdoing of any officer,
agent, employee, consultant, adviser, administrative distributor, principal
underwriter, custodian, transfer agent, dividend disbursing agent, Shareholder
servicing agent, or accounting agent of the Trust, nor shall any Trustee be
responsible for any act or omission of any other Trustee.
Section 8.2.3. Advice of Experts and Reports of Others. The Trustees may take
advice of counsel or other experts with respect to the meaning and operation of
this Declaration of Trust and their duties as Trustees hereunder, and shall be
under no liability for any act or omission in accordance with such advice or for
failing to follow such advice. In discharging their duties, the Trustees, when
acting in good faith, shall be entitled to rely upon the books of account of the
Trust and upon written reports made to the Trustees by any officer appointed by
them, any independent public accountant and (with respect to the subject matter
of the contract involved) any officer, partner or responsible employee of any
other party to any contract entered into hereunder.
Section 8.2.4. Bond. The Trustees shall not be required to give any bond as
such, nor any surety if a bond is required.
Section 8.2.5. Declaration of Trust Governs Issues of Liability. The provisions
of this Declaration of Trust, to the extent that they restrict the duties and
liabilities of the Trustees otherwise existing at law or in equity, are agreed
by the Shareholders and all other Persons bound by this Declaration of Trust to
replace such other duties and liabilities of the Trustees.
Section 8.3. 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 8.4. Liability of Shareholders. Without limiting the provisions of this
Section 8.4 or the DBTA, the Shareholders shall be entitled to the same
limitation of personal liability extended to stockholders of private
corporations organized for profit under the General Corporation Law of the State
of Delaware.
Section 8.4.1. Limitation of Liability. No personal liability for any debt or
obligation of the Trust shall attach to any Shareholder or former Shareholder of
the Trust, and neither the Trustees, nor any officer, employee or agent of the
Trust shall have any power to bind any Shareholder personally or to call upon
any Shareholder for the payment of any sum of money or assessment whatsoever
other than such as the Shareholder may at any time personally agree to pay by
way of subscription for any Shares or otherwise.
Section 8.4.2. Indemnification of Shareholders. In case any Shareholder or
former Shareholder of the Trust shall be held to be personally liable solely by
reason of being or having been a Shareholder and not because of such
Shareholder's acts or omissions or for some other reason, the Shareholder or
former Shareholder (or, in the case of a natural person, his or her heirs,
executors, administrators or other legal representatives or, in the case of a
corporation or other entity, its corporate or other general successor) shall be
entitled out of the assets of the Trust to be held harmless from and indemnified
against all loss and expense arising from such liability; provided, however,
there shall be no liability or obligation of the Trust arising hereunder to
reimburse any Shareholder for taxes paid by reason of such Shareholder's
ownership of any Shares or for losses suffered by reason of any changes in value
of any Trust assets. The Trust shall, upon request by the Shareholder or former
Shareholder, assume the defense of any claim made against the Shareholder for
any act or obligation of the Trust and satisfy any judgment thereon.
Section 8.5. Indemnification.
Section 8.5.1. Indemnification of Covered Persons. Subject to the exceptions and
limitations contained in Section 8.5.2, every person who is, or has been, a
Trustee, officer, employee or agent of the Trust, including persons who serve at
the request of the Trust as directors, trustees, officers, employees or agents
of another organization in which the Trust has an interest as a shareholder,
creditor or otherwise (hereinafter referred to as a "Covered Person"), shall be
indemnified by the Trust to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been such a
Trustee, director, officer, employee or agent and against amounts paid or
incurred by him in settlement thereof.
Section 8.5.2. Exceptions. No indemnification shall be provided
hereunder to a Covered Person:
(a) For any liability to the Trust or its Shareholders arising out of a
final adjudication by the court or other body before which the proceeding was
brought that the Covered Person engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office;
(b) With respect to any matter as to which the Covered Person shall have
been finally adjudicated not to have acted in good faith in the reasonable
belief that his or her action was in the best interests of the Trust; or
(c) In the event of a settlement or other disposition not involving a
final adjudication (as provided in paragraph (a) or (b) of this Section 8.5.2)
and resulting in a payment by a Covered Person, unless there has been either a
determination that such Covered Person did not engage in willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office by the court or other body approving the settlement or
other disposition, or a reasonable determination, based on a review of readily
available facts (as opposed to a full trial-type inquiry), that he or she did
not engage in such conduct, such determination being made by: (i) a vote of a
majority of the Disinterested Trustees (as such term is defined in Section
8.5.5) acting on the matter (provided that a majority of Disinterested Trustees
then in office act on the matter); or (ii) a written opinion of independent
legal counsel.
Section 8.5.3. Rights of Indemnification. The rights of indemnification herein
provided may be insured against by policies maintained by the Trust, and shall
be severable, shall not affect any other rights to which any Covered Person may
now or hereafter be entitled, shall continue as to a person who has ceased to be
a Covered Person, and shall inure to the benefit of the heirs, executors and
administrators of such a person. Nothing contained herein shall affect any
rights to indemnification to which Trust personnel other than Covered Persons
may be entitled by contract or otherwise under law.
Section 8.5.4. Expenses of Indemnification. Expenses of preparation and
presentation of a defense to any claim, action, suit or proceeding subject to a
claim for indemnification under this Section 8.5 shall be advanced by the Trust
prior to final disposition thereof upon receipt of an undertaking by or on
behalf of the recipient to repay such amount if it is ultimately determined that
he or she is not entitled to indemnification under this Section 8.5, provided
that either:
(a) Such undertaking is secured by a surety bond or some other appropriate
security or the Trust shall be insured against losses arising out of any such
advances; or
(b) A majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then in office act on
the matter) or independent legal counsel in a written opinion shall determine,
based upon a review of the readily available facts (as opposed to the facts
available upon a full trial), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
Section 8.5.5. Certain Defined Terms Relating to Indemnification. As used in
this Section 8.5, the following words shall have the meanings set forth below:
(a) A "Disinterested Trustee" is one (i) who is not an Interested Person
of the Trust (including anyone, as such Disinterested Trustee, who has been
exempted from being an Interested Person by any rule, regulation or order of the
Commission), and (ii) against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the same or similar
grounds is then or has been pending;
(b) "Claim," "action," "suit" or "proceeding" shall apply to all claims,
actions, suits, proceedings (civil, criminal, administrative or other, including
appeals), actual or threatened; and
(c) "Liability" and "expenses" shall include without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties
and other liabilities.
ARTICLE 9
Termination or Reorganization
Section 9.1. Termination of Trust or Series. Unless terminated as provided
herein, the Trust and each Series designated and established pursuant to this
Declaration of Trust shall continue without limitation of time.
Section 9.1.1. Termination. Subject to approval by a majority of the affected
Shareholders, the Trust or any Series (and the establishment and designation
thereof) may be terminated by an instrument executed by a majority of the
Trustees then in office; provided, however, that no approval of affected
Shareholders is necessary if a majority of the trustees then in office
determines that the continuation of the Trust or Series is not in the best
interests of the Trust, such Series, or the affected Shareholders as a result of
factors or events adversely affecting the ability of the Trust or Series to
conduct its business and operations in an economically viable manner.
Section 9.1.2. Distribution of Assets. Upon termination of the Trustor any
Series, after paying or otherwise providing for all charges, taxes, expenses and
liabilities, whether due or accrued or anticipated, as may be determined by the
Trustees, the Trust shall, in accordance with such procedures as the Trustees
consider appropriate, reduce the remaining assets of the Trust to distributable
form in cash or other securities, or any combination thereof, and distribute the
proceeds to the affected Shareholders in the manner set forth by resolution of
the Trustees.
Section 9.1.3. Certificate of Cancellation. Upon termination of the Trust, the
Trustees shall file a certificate of cancellation in accordance with Section
3810 of the DBTA.
Section 9.2. Reorganization. The Trustees may sell, convey, merge and transfer
the assets of the Trust, or the assets belonging to any one or more Series, to
another trust, partnership, association or corporation organized under the laws
of any state of the United States, or to the Trust to be held as assets
belonging to another Series of the Trust, in exchange for cash, shares or other
securities (including, in the case of a transfer to another Series of the Trust,
Shares of such other Series) with such transfer either (i) being made subject
to, or with the assumption by the transferee of, the liabilities belonging to
each Series the assets of which are so transferred, or (ii) not being made
subject to, or not with the assumption of, such liabilities. Following such
transfer, the Trustees shall distribute such cash, Shares or other securities
(giving due effect to the assets and liabilities belonging to and any other
differences among the various Series the assets belonging to which have so been
transferred) among the Shareholders of the Series the assets belonging to which
have been so transferred. If all of the assets of the Trust have been so
transferred, the Trust shall be terminated. Section 9.3. Merger or
Consolidation.
Section 9.3.1. Authority to Merge or Consolidate. Pursuant to an agreement of
merger or consolidation, the Trust, or any one or more Series, may merge or
consolidate with or into one or more business trusts or other business entities
formed or organized or existing under the laws of the State of Delaware or any
other state or the United States or any foreign country or other foreign
jurisdiction.
Section 9.3.2. No Shareholder Approval Required. Any merger or consolidation
described in Section 9.3.1 shall not require the vote of the Shareholders
affected thereby, unless such vote is required by the 1940 Act or other
applicable laws, or unless such merger or consolidation would result in an
amendment of this Declaration of Trust which would otherwise require the
approval of such Shareholders.
Section 9.3.3. Subsequent Amendments. In accordance with Section 3815(f) of
DBTA, an agreement of merger or consolidation may effect any amendment to this
Declaration of Trust or the By-Laws or effect the adoption of a new declaration
of trust or By-Laws of the Trust if the Trust is the surviving or resulting
business trust.
Section 9.3.4. Certificate of Merger or Consolidation. Upon completion of the
merger or consolidation, the Trustees shall file a certificate of merger or
consolidation in accordance with Section 3810 of the DBTA.
ARTICLE 10
Miscellaneous Provisions
Section 10.1. Signatures. To the extent permitted by applicable law, any
instrument signed pursuant to a validly executed power of attorney shall be
deemed to have been signed by the Trustee or officer executing the power of
attorney. To the extent permitted by law, any Trustee or officer may, in his or
her discretion, accept a facsimile signature as evidence of a valid signature on
any document.
Section 10.2. Certified Copies. The original or a copy of this Declaration of
Trust and of each amendment hereto shall be kept in the office of the Trust
where it may be inspected by any Shareholder. Anyone dealing with the Trust may
rely on a certificate by an officer or Trustee of the Trust as to whether or not
any such amendments have been made and as to any matters in connection with the
Trust hereunder, and with the same effect as if it were the original, may rely
on a copy certified by an officer or Trustee of the Trust to be a copy of this
Declaration of Trust or of any such amendments.
Section 10.3. Certain Internal References. In this Declaration of Trust or in
any such amendment, references to this Declaration of Trust, and all expressions
like "herein," "hereof" and "hereunder," shall be deemed to refer to this
Declaration of Trust as a whole and as amended or affected by any such
amendment.
Section 10.4. Headings. Headings are placed herein for convenience of reference
only, and in case of any conflict, the text of this instrument, rather than the
headings, shall control. This instrument may be executed in any number of
counterparts, each of which shall be deemed an original. Section 10.5.
Resolution of Ambiguities. The Trustees may construe any of the provisions of
this Declaration insofar as the same may appear to be ambiguous or inconsistent
with any other provisions hereof, and any such construction hereof by the
Trustees in good faith shall be conclusive as to the meaning to be given to such
provisions. In construing this Declaration, the presumption shall be in favor of
a grant of power to the Trustees.
Section 10.6. Amendments.
Section 10.6.1. Generally. Except as otherwise specifically provided herein or
as required by the 1940 Act or other applicable law, this Declaration of Trust
may be amended at any time by an instrument in writing signed by a majority of
the Trustees then in office.
Section 10.6.2. Certificate of Amendment. In the event of any amendment to this
Declaration of Trust which affects the Trust's certificate of trust, the
Trustees shall file a certificate of amendment in accordance with Section 3810
of the DBTA.
Section 10.6.3. Prohibited Retrospective Amendments. No amendment of this
Declaration of Trust or repeal of any of its provisions shall limit or eliminate
the limitation of liability provided to Trustees and officers hereunder with
respect to any act or omission occurring prior to such amendment or repeal.
Section 10.7. Governing Law. This Declaration of Trust is executed and delivered
with reference to DBTA and the laws of the State of Delaware by all of the
Trustees whose signatures appear below, and the rights of all parties and the
validity and construction of every provision hereof shall be subject to and
construed according to DBTA and the laws of the State of Delaware (unless and to
the extent otherwise provided for and/or preempted by the 1940 Act or other
applicable federal securities laws); provided, however, that there shall not be
applicable to the Trust, the Trustees, or this Declaration of Trust (a) the
provisions of Section 3540 of Title 12 of the Delaware Code or (b) any
provisions of the laws (statutory or common) of the State of Delaware (other
than the DBTA) pertaining to trusts which are inconsistent with the rights,
duties, powers, limitations or liabilities of the Trustees set forth or
referenced in this Declaration of Trust. All references to sections of the DBTA
or the 1940 Act, or any rules or regulations thereunder, refer to such sections,
rules, or regulations in effect as of the date of this Declaration of Trust, or
any successor sections, rules, or regulations thereto.
Section 10.8. Severability. The provisions of this Declaration of Trust are
severable, and if the Trustees shall determine, with the advice of counsel, that
any of such provision is in conflict with the 1940 Act, the DBTA, or with other
applicable laws and regulations, the conflicting provision shall be deemed never
to have constituted a part of this Declaration of Trust; provided, however, that
such determination shall not affect any of the remaining provisions of this
Declaration of Trust or render invalid or improper any action taken or omitted
prior to such determination. If any provision of this Declaration of Trust shall
be held invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction and
shall not in any manner affect such provision in any other jurisdiction or any
other provision of this Declaration of Trust in any jurisdiction.
IN WITNESS WHEREOF, the undersigned, being the Trustees of the Trust, have
executed this Declaration of Trust as of the date first written above.
/s/ Michael L. Sapir
--------------------
Michael L. Sapir
/s/ Louis M. Mayberg
--------------------
Louis M. Mayberg
