U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
Pre-Effective Amendment No.
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Post-Effective Amendment No. 1
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 2
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(Check appropriate box or boxes)
WELLS FAMILY OF REAL ESTATE FUNDS
(Exact Name of Registrant as Specified in Charter)
3885 Holcomb Bridge Road
Norcross, Georgia 30092
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (800) 448-1010
Brian M. Conlon
Wells Asset Management, Inc.
3885 Holcomb Bridge Road
Norcross, Georgia 30092
(Name and Address of Agent for Service)
Copies to:
Tina D. Hosking
Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
It is proposed that this filing will become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/X/ on May 1, 1999 pursuant to paragraph (a) of Rule 485
Registrant has registered an indefinite number of shares of beneficial
interest under the Securities Act of 1933 pursuant to Rule 24f-2 under the
Investment Company Act of 1940.
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THE WELLS FAMILY OF REAL ESTATE FUNDS
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(A)
UNDER THE SECURITIES ACT OF 1933
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PART A
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Item No. Registration Statement Caption Caption in Prospectus
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1. Front and Back Cover Pages Front and Back Cover Pages
2. Risk/Return Summary: Risk/Return Summary
Investments, Risks, and Performance
3. Risk/Return Summary: Fee Table Inapplicable
4. Investment Objectives, Principal Investment Objective,
Investment Strategies, and Related Investment Strategies
Risks and Risk Considerations
5. Management's Discussion of Fund Inapplicable
Performance
6. Management, Organization, and Operation of the Fund
Capital Structure
7. Shareholder Information Calculation of Share Price;
How to Purchase and Redeem
Shares; Dividends,
Distributions and Taxes
8. Distribution Arrangements Distribution Plan
9. Financial Highlights Information Inapplicable
PART B
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Caption in Statement
of Additional
Item No. Registration Statement Caption Information
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10. Cover Page and Table of Contents Cover Page; Table of
Contents
11. Fund History The Trust
12. Description of the Fund and Its Definitions, Policies and
Investments and Risks Risk Considerations;
Investment Limitations;
Portfolio Turnover
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13. Management of the Fund Trustees and Officers
14. Control Persons and Principal Inapplicable
Holders of Securities
15. Investment Advisory and Other Services The Investment Adviser; The
Sub-Adviser; Distribution
Plan; The Underwriter;
Auditors; Custodian;
Countrywide Fund Services,
Inc.
16. Brokerage Allocation and Other Securities Transactions
Practices
17. Capital Stock and Other Securities The Trust
18. Purchase, Redemption and Pricing of Calculation of Share Price;
Shares Redemption in Kind
19. Taxation of the Fund Taxes
20. Underwriters The Underwriter
21. Calculation of Performance Data Historical Performance
Information
22. Financial Statements Inapplicable
PART C
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The information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
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PROSPECTUS
May 1, 1999
WELLS FAMILY OF REAL ESTATE FUNDS
3885 HOLCOMB BRIDGE ROAD
ATLANTA, GEORGIA 30092
WELLS S&P REIT INDEX VARIABLE ANNUITY FUND
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The Wells S&P REIT Index Variable Annuity Fund (the "Fund"), a series of
the Wells Family of Real Estate Funds, seeks to provide investment results
corresponding to the performance of the S&P REIT Index (the "Index") by
investing in the stocks included in the Index.
The Fund is an investment vehicle for variable annuity contracts and
variable life insurance policies offered by the separate accounts ("Separate
Accounts") of participating life insurance companies ("Participating Insurance
Companies"). Shares of the Fund are only offered to Participating Insurance
Companies and their Separate Accounts to fund the benefits of variable annuity
contracts and variable life insurance policies and not to the general public.
Wells Asset Management, Inc. serves as the investment manager to the Fund.
Gateway Investment Advisers, L.P. manages the Fund's investments under the
supervision of Wells Asset Management, Inc.
This Prospectus has information you should know before you invest. Please
read it carefully and keep it with your investment records. Although these
securities have been registered with the Securities and Exchange Commission, the
Commission has not judged them for investment merit and does not guarantee the
accuracy or adequacy of the information in this Prospectus. Anyone who informs
you otherwise is committing a criminal offense.
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TABLE OF CONTENTS
RISK/RETURN SUMMARY.......................................................... 2
INVESTMENT OBJECTIVE, INVESTMENT STRATEGIES
AND RISK CONSIDERATIONS.................................................... 3
OPERATION OF THE FUND........................................................ 6
HOW TO PURCHASE AND REDEEM SHARES............................................ 7
DIVIDENDS, DISTRIBUTIONS AND TAXES........................................... 7
DISTRIBUTION PLAN............................................................ 8
CALCULATION OF SHARE PRICE................................................... 9
GENERAL INFORMATION ......................................................... 9
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For Information or Assistance in Opening an Account, please call:
Nationwide (Toll Free) 1-800-282-1581
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RISK/RETURN SUMMARY
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks to provide investment results corresponding to the
performance of the S&P REIT Index.
WHAT ARE THE FUND'S PRINCIPAL INVESTMENT STRATEGIES?
Normally, at least 90% of the Fund's total assets are invested in the
stocks included in the S&P REIT Index (the "Index"). The proportion of the
Fund's assets invested in each stock held in the Fund's portfolio is
substantially similar to the proportion of the Index represented by the stock.
The Fund is normally invested in all of the stocks which comprise the Index,
except when changes are made to the Index itself.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
The Fund's investment return and net asset value will fluctuate and when
you sell shares you may receive more or less than the amount you paid for them.
As with any mutual fund investment, there is a risk that you could lose money by
investing in the Fund. The Fund is subject to, among other risks:
o MARKET RISK - Stock prices, including prices of REIT stocks, may
decline over short or extended periods. In a declining stock market,
stock prices for all REIT's may decline, regardless of any one
particular company's own unique prospects. As a result, the REIT index
may also decline in a declining stock market.
o REAL ESTATE INDUSTRY RISK - When REIT profits, revenues, or the value
real estate property owned by REITs decline or fail to meet market
expectations, REIT stock prices may decline as well. Therefore, the
REIT index's performance may, in part, fluctuate in accordance with
the business success of REITs in the index.
o INTEREST RATE RISK - Increases in interest rates typically lower the
present value of a REIT's future earnings stream, and may make
financing property purchases and improvements more costly. Since the
market price of REIT stocks may change based upon investors'
collective perceptions of future earnings, the value of the REIT index
will generally decline when investors anticipate or experience rising
interest rates.
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o INVESTMENT COMPETITION RISK - REITs compete with other investment
opportunities (e.g., general business stocks, bonds, money market
instruments, etc.) for investors' dollars. If investors invest in
these opportunities instead of REITs, then the REIT index may decline
in value.
INVESTMENT OBJECTIVE, INVESTMENT STRATEGIES AND RISK CONSIDERATIONS
Investment Objective
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The Fund seeks to provide investment results corresponding to the
performance of the S&P REIT Index by investing in the stocks included in the
Index.
Investment Techniques and Strategies
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The Fund attempts to duplicate the investment results of the S&P Real
Estate Investment Trust Composite Price Index (the "S&P REIT Index" or the
"Index"). The Index is made up of approximately 100 stocks which constitute a
representative sample of all publicly traded Real Estate Investment Trusts. A
Real Estate Investment Trust ("REIT") is a pooled investment vehicle which
invests primarily in income producing real estate or real estate related loans
or interests. REITs are generally classified as equity REITs, mortgage REITs or
hybrid REITs. An equity REIT, which owns properties, generates income from
rental and lease properties. Equity REITs also offer the potential for growth as
a result of property appreciation and, in addition, occasional capital gains
from the sales of appreciated property. Mortgage REITs invest the majority of
their assets in real estate mortgages and derive income from the collection of
interest payments. Hybrid REITs are designed to strike a balance between equity
investments and mortgage backed investments. They will derive their income from
the collection of rents, the realization of capital gains from the sale of
properties and from the collection of interest payments on outstanding mortgages
held within the trust.
The Fund is not actively managed by investment advisers who buy and sell
securities based on research and analysis. Instead, the Fund is "passively
managed," where the investment advisers attempt to match, as closely as
possible, the performance of the target index by either holding all the
securities in the index or by holding a representative sample. Indexing appeals
to many investors because of its simplicity (indexing is a straightforward
market-matching strategy); diversification (indexes generally cover a wide
variety of companies and industries); relative performance predictability (an
index fund is expected to move in the same direction - - up or down - - as
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its target index).
Investors buy shares in REITs rather than investing directly in properties
because direct ownership of real estate can be costly and difficult to quickly
convert into cash. REITs do not have to pay income taxes if they meet certain
Internal Revenue Code requirements. To qualify, a REIT must distribute at least
95% of its taxable income to its shareholders and receive at least 75% of that
income from rents, mortgages and sales of property. REITs offer investors
greater liquidity and diversification than does direct ownership of a handful of
properties.
To be included in the Index, a REIT must be traded on a major U.S. stock
exchange. As of December 31, 1998, 105 REITs were included in the Index. The
Index is rebalanced every calendar quarter as well as each time that a REIT is
removed from the Index because of corporate activity such as a merger,
acquisition, leveraged buyout, bankruptcy, IRS removal of REIT status,
fundamental change in business, or a change in shares outstanding.
The Fund is not sponsored, endorsed, sold or promoted by Standard & Poor's
Corporation ("S&P"). S&P makes no representation or warranty, express or
implied, to the purchasers of the Fund or any member of the public regarding the
advisability of investing in securities generally, or in the Fund particularly
or the ability of the Index to track the market performance of real estate
investment trusts. S&P's only relationship to the Fund is the licensing of
certain trademarks and trade names of S&P and of the S&P REIT Index which is
determined, composed and calculated by S&P without regard to the Fund. S&P has
no obligation to take the needs of the Fund or the purchasers of the Fund into
consideration in determining, composing or calculating the REIT Index. S&P is
not responsible for and has not participated in the determination of the prices
and amount of the shares of the Fund or the timing of the issuance or sale of
the shares of the Fund or in the determination or calculation of the equation by
which the shares of the Fund are to be converted into cash. S&P has no
obligation or liability in connection with the administration, marketing or
trading of the Fund.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P REIT
INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY
ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE FUND, PURCHASERS OF THE FUND, OR
ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P REIT INDEX OR ANY DATA
INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY
DISCLAIMS ALL WARRANTIES OF
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MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE
S&P REIT INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE
FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE,
INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF
THE POSSIBILITY OF SUCH DAMAGES.
Under normal market conditions, at least 90% of the Fund's total assets
will be invested in the stocks included in the S&P REIT Index. The proportion of
the Fund's assets invested in each stock held in the Fund's portfolio is
substantially similar to the proportion of the Index represented by the stock.
For example, if a stock represents 2% of the value of the Index, the Fund
invests approximately 2% of its assets in the stock. The Fund will normally be
invested in all of the stocks which comprise the S&P REIT Index, except when
changes are made to the Index itself. The Index is currently made up of
approximately 95% equity REITs, 2% mortgage REITs and 3% hybrid REITs; however,
these percentages are subject to change at any time at the discretion of S&P.
The Sub-Adviser monitors the composition of the Index and makes adjustments to
the Fund's portfolio as necessary in order to correlate with the Index.
The Fund will attempt to achieve a correlation between its performance and
that of the Index of at least 0.95, without taking into account expenses. A
correlation of 1.00 would indicate perfect correlation, which would be achieved
when the Fund's net asset value, including the value of its dividend and capital
gains distributions, increases or decreases in exact proportion to changes in
the Index. The Fund's ability to correlate its performance with the Index,
however, may be affected by, among other things, changes in securities markets,
the manner in which the Index is calculated by S&P and the timing of purchases
and redemptions.
Money market instruments will typically represent a portion of the Fund's
portfolio as funds awaiting investment, to accumulate cash for anticipated
purchases of portfolio securities and to provide for shareholder redemptions and
operational expenses of the Fund.
Investment Risks
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There is no assurance that the Fund's investment objective will be met.
Generally, if the securities owned by the Fund increase in value, the value of
the shares of the Fund which you own will increase. Similarly, if the securities
owned by the Fund decrease in value, the value of your shares will also decline.
In this way, you participate in any change in the value of the securities owned
by the Fund.
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The Fund, though not invested directly in real estate, still is subject to
the risks associated with investing in real estate, which include:
- possible declines in the value of real estate
- risks related to general and local economic conditions
- possible lack of availability of mortgage funds
- overbuilding
- changes in interest rates
- environmental problems
Investing in REITs involves certain risks in addition to those risks
associated with investing in the real estate industry in general, which include:
- REITs are dependent upon management skills
- limited diversification
- the risks of financing projects
- heavy cash flow dependency
- default by borrowers
- self-liquidation
- possibility of failing to maintain their exemptions from the Investment
Company Act of 1940
- Certain REITs have relatively small market capitalizations, which may
result in less market liquidity and greater price volatility of their
securities
OPERATION OF THE FUND
The Fund is a diversified series of the Wells Family of Real Estate Funds,
an open-end management investment company organized as an Ohio business trust.
The Fund is an investment vehicle for variable annuity contracts and variable
life insurance policies offered by the separate accounts ("Separate Accounts")
of participating life insurance companies ("Participating Insurance Companies").
Shares of the Fund are only offered to Participating Insurance Companies and
their Separate Accounts to fund the benefits of variable annuity contracts and
variable life insurance policies and not to the general public. The Board of
Trustees supervises the business activities of the Trust. Like other mutual
funds, the Trust retains various organizations to perform specialized services
for the Fund.
The Trust retains Wells Asset Management, Inc. (the "Adviser"), 3885
Holcomb Bridge Road, Atlanta, Georgia, to provide general investment supervisory
services to the Fund and to manage the Fund's business affairs. The controlling
shareholder of the Adviser is Leo F. Wells III. Mr. Wells, through various
organizations under his control, has extensive experience in the acquisition,
disposition, management, leasing
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and development of investment real estate. The Fund pays the Adviser a fee equal
to the annual rate of .50% of the average value of its daily net assets.
Gateway Investment Advisers, L.P. (the "Sub-Adviser"), 400 TechneCenter
Drive, Milford, Ohio, has been retained by the Adviser to manage the Fund's
investments. The Sub-Adviser, including its predecessor, has been managing
assets for institutional and individual investors since 1977. The Sub-Adviser
has approximately 10 years of experience in managing portfolios, which correlate
to an index, including mutual funds.
HOW TO PURCHASE AND REDEEM SHARES
Investors may not purchase or redeem shares of the Fund directly; shares
may be redeemed or purchased only through variable annuity contracts and
variable life insurance policies offered through the Separate Accounts of
Participating Insurance Companies. Please refer to the prospectus of the
Participating Insurance Company Separate Account for information on how to
invest in or redeem monies from a variable annuity contract or variable life
insurance policy.
The Separate Accounts of the Participating Insurance Companies place orders
to purchase and redeem shares of the Fund based on, among other things, the
amount of premium payments to be invested and the amount of surrender and
transfer requests (as defined in the prospectus of the Participating Insurance
Company Separate Account) to be effected on that day pursuant to the variable
annuity contracts and variable life insurance policies. Shares of the Fund are
sold on a continuous basis to the Separate Accounts and orders to purchase or
redeem shares of the Fund are effected at the net asset value per share next
calculated after the order is received in proper form by the Separate Account.
Payment for redemptions will normally be made within seven days after the
request is received. The Fund reserves the right to suspend the right of
redemption or to postpone the date of payment under unusual circumstances as
determined by the Securities and Exchange Commission.
The Fund does not assess any sales charges or redemption fees. Sales
charges, mortality and expense risk fees and other charges may be assessed by
Participating Insurance Companies under the variable annuity contracts or
variable life insurance policies. The Participating Insurance Companies are
required to describe these fees in the prospectus of the Separate Account.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund expects to distribute substantially all of its net investment
income and any net realized long-term capital gains once each year. Payment of
all income and capital gains
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distributions will be made in shares of the Fund.
Because shares of the Fund may be purchased only through Separate Accounts,
it is anticipated that any income or capital gain distributions from the Fund
will be taxable, if at all, to the Participating Insurance Companies and will be
exempt from current taxation to the variable annuity contract or variable
insurance policy owner if left to accumulate within the Separate Account.
The Fund intends to comply with the diversification requirements currently
imposed by the Internal Revenue Service on separate accounts of insurance
companies as a condition of maintaining the tax-deferred status of Separate
Accounts. See the Statement of Additional Information for more specific
information.
The foregoing discussion of federal income tax consequences is based on tax
laws and regulations as in effect on the date of this Prospectus, and is subject
to change by legislative or administrative action. For a discussion of the tax
status of a variable annuity contract or variable life insurance policy, please
refer to the prospectus of the Participating Insurance Company Separate Account.
DISTRIBUTION PLAN
Pursuant to Rule 12b-1 under the 1940 Act, the Trust has adopted a plan of
distribution (the "Plan") under which the Fund may incur or reimburse the
Underwriter for certain distribution related expenses, including payments to
Insurance Companies which engage in efforts to promote the sale of shares of the
Fund and which sell shares of the Fund or to reimburse the Participating
Insurance company for distribution related or shareholder services related
expenses they incur in selling shares of the Fund or providing Fund related
services to their customers, and any other expenses related to the distribution
of the Fund's shares.
The annual limitation for payment of expenses pursuant to the Plan is .25%
of the Fund's average daily net assets. Because these fees are paid out of the
Fund's assets on an ongoing basis, over time these fees will increase the cost
of your investment and may cost you more than paying other types of sales loads.
In the event the Plan is terminated by the Trust in accordance with its terms,
the Fund will not be required to make any payments for expenses incurred after
the date the Plan terminates.
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CALCULATION OF SHARE PRICE
On each day that the Trust is open for business, the share price (net asset
value) of the shares of the Fund is determined as of the close of the regular
session of trading on the New York Stock Exchange (normally 4:00 p.m., Eastern
time). The Trust is open for business on each day the New York Stock Exchange is
open for business and on any other day when there is sufficient trading in the
Fund's investments that its net asset value might be materially affected. The
net asset value per share of the Fund is calculated by dividing the sum of the
value of the securities held by the Fund plus cash or other assets minus all
liabilities (including estimated accrued expenses) by the total number of shares
outstanding of the Fund, rounded to the nearest cent.
The price at which a purchase or redemption of Fund shares is effected is
based on the next calculation of net asset value after the order is placed.
Portfolio securities are valued as follows: (1) securities which are traded on
stock exchanges or are quoted by NASDAQ are valued at the last reported sale
price as of the close of the regular session of trading on the New York Stock
Exchange on the day the securities are being valued, or, if not traded on a
particular day, at the most recent bid price, (2) securities traded in the
over-the-counter market, and which are not quoted by NASDAQ, are valued at the
last sale price (or, if the last sale price is not readily available, at the
most recent bid price as quoted by brokers that make markets in the securities)
as of the close of the regular session of trading on the New York Stock Exchange
on the day the securities are being valued, (3) securities which are traded both
in the over-the-counter market and on a stock exchange are valued according to
the broadest and most representative market, and (4) securities (and other
assets) for which market quotations are not readily available are valued at
their fair value as determined in good faith in accordance with consistently
applied procedures established by and under the general supervision of the Board
of Trustees. The net asset value per share of the Fund will fluctuate with the
value of the securities it holds.
GENERAL INFORMATION
Year 2000 Readiness
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The Fund and its service providers depend on their computer systems to
conduct their businesses. If the Fund's or any of these service providers'
computer systems experience difficulty processing information with dates on or
after January 1, 2000, the Fund may have difficulty running its business. To
avoid these potential problems, the Fund is working hard to identify
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and correct year 2000 related processing problems in its systems, and has
obtained or is getting assurances from its service providers that they are
taking similar precautions. Nevertheless, the Fund or its service providers may
not identify and correct all year 2000 related computer problems in time. Any
such failure could prevent the Fund from handling securities investments,
trades, pricing, or the processing of purchases and sales of Fund shares.
Conflicts of Interest
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Participating Insurance Companies may not be affiliated with each other. In
addition, Participating Insurance Companies and their Separate Accounts may be
subject to insurance regulation that varies from state to state and may be
subject to state insurance and federal tax or other regulation that varies
between variable annuity contracts and variable life insurance policies. The
Trust does not currently foresee any disadvantages to variable annuity contract
or variable life insurance policy owners arising from these circumstances.
However, it is theoretically possible that the interests of contract or policy
owners participating in the Fund through the Separate Accounts might at some
time be in material and irreconcilable conflict. In some cases, one or more
Separate Accounts might redeem its investment in the Fund, which could possibly
force the Fund to sell portfolio securities at disadvantageous prices. The Board
of Trustees of the Trust intends to monitor events in order to identify any
material irreconcilable conflicts that may possibly arise and to determine what
action, if any, should be taken in response thereto.
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WELLS FUND
3885 Holcomb Bridge Road
Atlanta, Georgia 30092
BOARD OF TRUSTEES
Leo F. Wells III
Brian M. Conlon
John L. Bell
Bud Carter
Richard W. Carpenter
Donald S. Moss
Walter W. Sessoms
INVESTMENT ADVISER
WELLS ASSET MANAGEMENT, INC.
3885 Holcomb Bridge Road
Atlanta, Georgia 30092
SUB-ADVISER
GATEWAY INVESTMENT ADVISERS, L.P.
400 TechneCenter Drive
Milford, Ohio 45150
UNDERWRITER
WELLS INVESTMENT SECURITIES, INC.
3885 Holcomb Bridge Road
Atlanta, Georgia 30092
INDEPENDENT AUDITORS
ARTHUR ANDERSEN LLP
425 Walnut Street
Cincinnati, Ohio 45202
Additional information about the Fund is included in the Statement of Additional
Information ("SAI"), which is incorporated by reference in its entirety. To
obtain a free copy of the SAI or other information about the Fund, or to make
inquiries about the Fund, please call 1-800-282-1581.
Information about the Fund (including the SAI) can be reviewed and copied at the
Securities and Exchange Commission's public reference room in Washington, D.C.
Information about the operation of the public reference room can be obtained by
calling the Commission at 1-800-SEC-0330. Reports and other information about
the Fund is available on the Commission's Internet site at http://www.sec.gov.
Copies of information on the Commission's Internet site may be obtained, upon
payment of a duplicating fee, by writing to: Securities and Exchange Commission,
Public Reference Section, Washington, D.C. 20549-6009.
File No. 811-8355
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WELLS FAMILY OF REAL ESTATE FUNDS
---------------------------------
STATEMENT OF ADDITIONAL INFORMATION
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May 1, 1999
Wells S&P REIT Index Variable Annuity Fund
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Prospectus of the Wells S&P REIT Index Variable Annuity
Fund dated May 1, 1999. A copy of the Fund's Prospectus can be obtained by
writing the Fund at 312 Walnut Street, 21st floor, Cincinnati, Ohio 45202 or by
calling the Fund nationwide toll-free 800-282-1581.
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STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
Wells Family of Real Estate Funds
3885 Holcomb Bridge Road
Atlanta, Georgia 30092
THE TRUST.................................................................... 3
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS................................ 4
INVESTMENT LIMITATIONS....................................................... 7
TRUSTEES AND OFFICERS........................................................ 9
THE INVESTMENT ADVISER....................................................... 11
THE SUB-ADVISER.............................................................. 13
THE UNDERWRITER.............................................................. 13
DISTRIBUTION PLAN............................................................ 14
SECURITIES TRANSACTIONS...................................................... 15
PORTFOLIO TURNOVER........................................................... 17
CALCULATION OF SHARE PRICE................................................... 17
TAXES .................................................................... 17
REDEMPTION IN KIND........................................................... 19
HISTORICAL PERFORMANCE INFORMATION........................................... 19
CUSTODIAN.................................................................... 22
AUDITORS .................................................................... 23
COUNTRYWIDE FUND SERVICES, INC............................................... 23
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THE TRUST
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The Wells Family of Real Estate Funds (the "Trust"), an open-end management
investment company, was organized as an Ohio business trust on June 4, 1997. The
Trust currently offers two series of shares to investors: the Wells S&P REIT
Index Fund and Wells S&P REIT Index Variable Annuity Fund. This Statement of
Additional Information provides information relating to the Wells S&P REIT Index
Variable Annuity Fund (the "Fund"). Information relating the Wells S&P REIT
Index Fund is contained in a separate Statement of Additional Information.
Shares of the Fund are sold to certain life insurance companies
("Participating Insurance Companies") and their separate accounts ("Separate
Accounts") to fund benefits under variable annuity contracts ("Contracts") and
variable life insurance policies ("Policies") offered by Participating Insurance
Companies. The Separate Accounts invest in Shares in accordance with the
allocation instructions received from Contract and Policy owners ("Contract
Owners" and "Policy Owners"). These allocation rights are described in the
prospectus for the Separate Account. Shares are redeemed to the extent necessary
to provide benefits under the Contracts and Policies.
Shares of the Fund have equal voting rights and liquidation rights. When
matters are submitted to shareholders for a vote, each shareholder is entitled
to one vote for each full share owned and fractional votes for fractional shares
owned. The Trust does not normally hold annual meetings of shareholders. The
Trustees shall promptly call and give notice of a meeting of shareholders for
the purpose of voting upon the removal of any Trustee when requested to do so in
writing by shareholders holding 10% or more of the Trust's outstanding shares.
The Trust will comply with the provisions of Section 16(c) of the Investment
Company Act of 1940 (the "1940 Act") in order to facilitate communications among
shareholders.
The rights accompanying shares of the Fund are legally vested in the
Separate Accounts. However, in accordance with current law and interpretations
thereof, Participating Insurance Companies will vote shares held in the Separate
Accounts in a manner consistent with timely voting instructions received from
the Contract Owners and Policy Owners. Each Participating Insurance Company will
vote Fund shares held in Separate Accounts for which no timely instructions are
received from the Contract Owners and Policy Owners, as well as shares it owns,
in the same proportion as those shares for which voting instructions are
received. For a further discussion, please refer to the insurance company's
Separate Account prospectus.
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Each share of the Fund represents an equal proportionate interest in the
assets and liabilities belonging to the Fund with each other share of the Fund
and is entitled to such dividends and distributions out of the income belonging
to the Fund as are declared by the Trustees. The shares do not have cumulative
voting rights or any preemptive or conversion rights, and the Trustees have the
authority from time to time to divide or combine the shares of the Fund into a
greater or lesser number of shares so long as the proportionate beneficial
interest in the assets belonging to the Fund are in no way affected. In case of
any liquidation of the Fund, the holders of shares of the Fund being liquidated
will be entitled to receive as a class a distribution out of the assets, net of
the liabilities, belonging to the Fund. Any general expenses of the Trust not
readily identifiable as belonging to a particular Fund are allocated by or under
the direction of the Trustees in such manner as the Trustees determine to be
fair and equitable. Generally, the Trustees allocate such expenses on the basis
of relative net assets or number of shareholders. No shareholder is liable to
further calls or to assessment by the Trust without his or her express consent.
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS
- ---------------------------------------------
A more detailed discussion of some of the terms used and investment
policies described in the Prospectus (see "Investment Objective, Investment
Strategies and Risk Considerations") appears below:
MAJORITY. As used in the Prospectus and this Statement of Additional
Information, the term "majority" of the outstanding shares of the Fund means the
lesser of (1) 67% or more of the Fund's outstanding shares present at a meeting,
if the holders of more than 50% of the outstanding shares of the Fund are
present or represented at such meeting or (2) more than 50% of the outstanding
shares of the Fund.
REPURCHASE AGREEMENTS. The Fund may acquire U.S. Government Securities or
other high-grade debt securities subject to repurchase agreements. A repurchase
transaction occurs when, at the time the Fund purchases a security (normally a
U.S. Treasury obligation), it also resells it to the vendor (normally a member
bank of the Federal Reserve System or a registered Government Securities dealer)
and must deliver the security (and/or securities substituted for them under the
repurchase agreement) to the vendor on an agreed upon date in the future. Such
securities, including any securities so substituted, are referred to as the
"Repurchase Securities." The repurchase price exceeds the purchase price by an
amount which reflects an agreed upon market interest rate effective for the
period of time during which the repurchase agreement is in effect.
- 4 -
<PAGE>
The majority of these transactions run day-to-day, and the delivery
pursuant to the resale typically will occur within one to five days of the
purchase. The Fund's risk is limited to the ability of the vendor to pay the
agreed upon sum upon the delivery date; in the event of bankruptcy or other
default by the vendor, there may be possible delays and expenses in liquidating
the instrument purchased, decline in its value and loss of interest. These risks
are minimized when the Fund holds a perfected security interest in the
Repurchase Securities and can therefore sell the instrument promptly. Under
guidelines issued by the Trustees, the investment adviser will carefully
consider the creditworthiness of a vendor during the term of the repurchase
agreement. Repurchase agreements are considered loans collateralized by the
Repurchase Securities, such agreements being defined as "loans" under the 1940
Act. The return on such "collateral" may be more or less than that from the
repurchase agreement. The market value of the resold securities will be
monitored so that the value of the "collateral" is at all times as least equal
to the value of the loan, including the accrued interest earned thereon. All
Repurchase Securities will be held by the Fund's custodian either directly or
through a securities depository.
DESCRIPTION OF MONEY MARKET INSTRUMENTS. Money market instruments may
include U.S. Government Securities, as described herein, provided that they
mature in thirteen months or less from the date of acquisition and are otherwise
eligible for purchase by the Fund. Money market instruments also may include
Bankers' Acceptances and Certificates of Deposit of domestic branches of U.S.
banks, Commercial Paper and Variable Amount Demand Master Notes ("Master
Notes"). BANKERS' ACCEPTANCES are time drafts drawn on and "accepted" by a bank,
which are the customary means of effecting payment for merchandise sold in
import-export transactions and are a source of financing used extensively in
international trade. When a bank "accepts" such a time draft, it assumes
liability for its payment. When the Fund acquires a Bankers' Acceptance, the
bank which "accepted" the time draft is liable for payment of interest and
principal when due. The Bankers' Acceptance, therefore, carries the full faith
and credit of such bank. A CERTIFICATE OF DEPOSIT ("CD") is an unsecured
interest-bearing debt obligation of a bank. CDs acquired by the Fund would
generally be in amounts of $100,000 or more. COMMERCIAL PAPER is an unsecured,
short term debt obligation of a bank, corporation or other borrower. Commercial
Paper maturity generally ranges from two to 270 days and is usually sold on a
discounted basis rather than as an interest-bearing instrument. The Fund will
invest in Commercial Paper only if it is rated in the highest rating category by
any nationally recognized statistical rating organization ("NRSRO") or, if not
rated, if the issuer has an outstanding unsecured debt issue rated in the three
highest categories by any NRSRO or, if not so rated, is of
- 5 -
<PAGE>
equivalent quality in the Adviser's assessment. Commercial Paper may include
Master Notes of the same quality. MASTER NOTES are unsecured obligations which
are redeemable upon demand of the holder and which permit the investment of
fluctuating amounts at varying rates of interest. Master Notes are acquired by
the Fund only through the Master Note program of the Fund's custodian, acting as
administrator thereof. The investment adviser will monitor, on a continuous
basis, the earnings power, cash flow and other liquidity ratios of the issuer of
a Master Note held by the Fund.
U.S. GOVERNMENT SECURITIES. U.S. Government Securities include direct
obligations of the U.S. Treasury, securities guaranteed as to interest and
principal by the U.S. Government such as obligations of the Government National
Mortgage Association, as well as securities issued or guaranteed as to interest
and principal by U.S. Government authorities, agencies and instrumentalities
such as the Federal National Mortgage Association, the Federal Home Loan
Mortgage Corporation, the Federal Land Bank, the Federal Farm Credit Banks, the
Federal Home Loan Banks, the Student Loan Marketing Association, the Small
Business Administration, the Bank for Cooperatives, the Federal Intermediate
Bank, the Federal Financing Bank, the Resolution Funding Corporation, the
Financing Corporation of America and the Tennessee Valley Authority. U.S.
Government Securities may be acquired subject to repurchase agreements. While
obligations of some U.S. Government sponsored entities are supported by the full
faith and credit of the U.S. Government, several are supported by the right of
the issuer to borrow from the U.S. Government, and still others are supported
only by the credit of the issuer itself. The guarantee of the U.S. Government
does not extend to the yield or value of the U.S. Government Securities held by
the Fund or to the Fund's shares.
BORROWING. The Fund may borrow, temporarily, up to 5% of its total assets
for extraordinary purposes and may increase this limit to 33.3% of its total
assets to meet redemption requests which might otherwise require untimely
disposition of portfolio holdings. To the extent the Fund borrows for these
purposes, the effects of market price fluctuations on portfolio net asset value
will be exaggerated. If, while such borrowing is in effect, the value of the
Fund's assets declines, the Fund would be forced to liquidate portfolio
securities when it is disadvantageous to do so. The Fund would incur interest
and other transaction costs in connection with such borrowing. The Fund will not
make any additional investments while its borrowings are outstanding.
- 6 -
<PAGE>
INVESTMENT LIMITATIONS
- ----------------------
The Trust has adopted certain fundamental investment limitations designed
to reduce the risk of an investment in the Fund. These limitations may not be
changed without the affirmative vote of a majority of the outstanding shares of
the Fund.
Under these fundamental limitations, the Fund MAY NOT:
(1) Issue senior securities, pledge its assets or borrow money, except that it
may borrow from banks as a temporary measure (a) for extraordinary or
emergency purposes, in amounts not exceeding 5% of the Fund's total assets,
or (b) in order to meet redemption requests that might otherwise require
untimely disposition of portfolio securities if, immediately after such
borrowing, the value of the Fund's assets, including all borrowings then
outstanding, less its liabilities (excluding all borrowings), is equal to
at least 300% of the aggregate amount of borrowings then outstanding, and
may pledge its assets to secure all such borrowings;
(2) Underwrite securities issued by others except to the extent the Fund may be
deemed to be an underwriter under the federal securities laws in connection
with the disposition of portfolio securities;
(3) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of transactions);
(4) Make short sales of securities or maintain a short position, except short
sales "against the box";
(5) Make loans of money or securities, except that the Fund may (i) invest in
repurchase agreements and commercial paper; (ii) purchase a portion of an
issue of publicity distributed bonds, debentures or other debt securities;
and (iii) acquire private issues of debt securities subject to the
limitations on investments in illiquid securities;
(6) Write, purchase or sell commodities, commodities contracts, futures
contracts or related options;
(7) Invest more than 25% of its total assets in the securities of issuers in
any particular industry (other than securities of the United States
Government, its agencies or instrumentalities), except that the Fund will
invest at least 25% of its assets in securities of issuers in the real
estate industry;
- 7 -
<PAGE>
(8) Invest for the purpose of exercising control or management of another
issuer;
(9) Invest in interests in oil, gas or other mineral exploration or development
programs, except that the Fund may invest in the securities of companies
(other than those which are not readily marketable) which own or deal in
such things;
(10) Invest in interests in real estate or real estate limited partnerships
(although it may invest in real estate investment trusts and purchase
securities secured by real estate or interests therein, or issued by
companies or investment trusts which invest in real estate or interests
therein);
(11) Invest more than 15% of its net assets in illiquid securities. For this
purpose, illiquid securities include, among others (a) securities for which
no readily available market exists or which have legal or contractual
restrictions on resale and (b) repurchase agreements not terminable within
seven days; or
(12) Purchase the securities of any issuer if such purchase at the time thereof
would cause less than 75% of the value of the total assets of the Fund to
be invested in cash and cash items (including receivables), securities
issued by the U.S. Government, its agencies or instrumentalities,
securities of other investment companies, and other securities for the
purposes of this calculation limited in respect of any one issuer to an
amount not greater in value than 5% of the value of the total assets of the
Fund and to not more than 10% of the outstanding voting securities of such
issuer.
Percentage restrictions stated as an investment limitation apply at the
time of investment; if a later increase or decrease in percentage beyond the
specified limits results from a change in securities values or total assets, it
will not be considered a violation. However, in the case of the borrowing
limitation (limitation number 1, above), the Fund will, to the extent necessary,
reduce its existing borrowings to comply with the limitation.
While the Fund has reserved the right to make short sales "against the box"
(limitation number 4, above), the Fund has no present intention of engaging in
such transactions at this time or during the coming year.
- 8 -
<PAGE>
TRUSTEES AND OFFICERS
- ---------------------
The following is a list of the Trustees and executive officers of the Trust
and their aggregate compensation from the Trust for the fiscal year ended
December 31, 1998. Each Trustee who is an "interested person" of the Trust, as
defined by the 1940 Act, is indicated by an asterisk.
Compensation
Name Age Position Held From the Trust
- ---- --- ------------- --------------
*Leo F. Wells III 54 President $ 0
and Trustee
*Brian M. Conlon 40 Executive Vice
President
and Trustee 0
+John L. Bell 58 Trustee 1,000
+Richard W. Carpenter 61 Trustee 1,000
Bud Carter 61 Trustee 750
Donald S. Moss 63 Trustee 750
+Walter W. Sessoms 64 Trustee 1,000
Robert G. Dorsey 42 Vice President 0
Mark J. Seger 37 Treasurer 0
John F. Splain 42 Secretary 0
* Mr. Wells and Mr. Conlon, as affiliated persons of the Adviser and the
Underwriter, are "interested persons" of the Trust within the meaning of
Section 2(a)(19) of the 1940 Act.
+ Member of Audit Committee.
The principal occupations of the Trustees and executive officers of the
Trust during the past five years are set forth below:
LEO F. WELLS III, 3885 Holcomb Bridge Road, Atlanta, Georgia, is President
and Director of Wells Capital, Inc. (a real estate company). In addition, he is
President of Wells & Associates, Inc. (a real estate brokerage company). He is
also President and Director of Wells Management Company, Inc., a property
management company he founded in 1983; Wells Advisers, Inc., a company he
organized in 1991 to act as a non-bank custodian for IRAs; Wells Real Estate
Funds, Inc., a company he organized in February, 1997 to act as a holding
company for the Wells group of companies; and Wells Development Corporation, a
company formed in April, 1997 to acquire and develop commercial real estate
properties. Mr. Wells holds a Bachelor of Business Administration degree in
Economics from the University of Georgia. He is also a member of the
International Association for Financial Planning and a registered NASD
principal.
BRIAN M. CONLON, 3885 Holcomb Bridge Road, Atlanta, Georgia, is the
Executive Vice President and Chief Operating Officer of
- 9 -
<PAGE>
Wells Capital, Inc. Mr. Conlon received a Bachelor of Business Administration
degree from Georgia State University and a Master of Business Administration
degree from the University of Dallas. Mr. Conlon is a member of the
International Association for Financial Planning, a general securities
principal, and a Georgia real estate broker. Mr. Conlon also holds the Certified
Financial Planner (CFP) designation of the Certified Financial Planner Board of
Standards, Inc. and the Certified Commercial Investment Member (CCIM)
designation of the Commercial Investment Real Estate Institute.
JOHN L. BELL, 800 Mount Vernon Highway, Suite 230, Atlanta, Georgia, is the
General Partner of JB Family LLP (an investment firm). He is also the past owner
and Chief Executive Officer of Bell-Mann, Inc. (a flooring company).
BUD CARTER, 100 Mt. Shasta Lane, Alpharetta, Georgia, is Regional Manager
Senior Vice President of The Executive Committee. He is also Board Manager of
Warebase 9 (an Internet Media Company).
DONALD S. MOSS, 181 Hummingbird Circle, Highlands, North Carolina, is
presently retired. He previously worked for Avon Products, Incorporated.
RICHARD W. CARPENTER, 5570 Glenridge Drive, Atlanta, Georgia, is President
and Director of the following business entities: Reamark Holdings, Corp.(a real
estate company); Commonwealth Oil Refining Company (an oil terminal); Leisure
Technology, Inc. (a real estate company); and Wyatt Energy, Inc. (an oil
terminal). In addition, he is also the Managing Partner of Carpenter Properties
LP (a real estate company) and a Director of TaraCorp (a manufacturing company).
He also serves as a Director of First Liberty Financial Corp. and First Liberty
Savings Bank.
WALTER W. SESSOMS, 5995 River Chase Circle, Atlanta, Georgia, is presently
retired. He previously served as a Group President for BellSouth
Telecommunications until July 1997.
ROBERT G. DORSEY, 312 Walnut Street, Cincinnati, Ohio is President and
Treasurer of Countrywide Fund Services, Inc.(the Fund's administrator and
transfer agent) and CW Fund Distributors, Inc. and First Vice President and
Treasurer of Countrywide Financial Services, Inc. and Countrywide Investments,
Inc.(a registered investment adviser and broker-dealer). He is also Vice
President of Countrywide Tax-Free Trust, Countrywide Strategic Trust,
Countrywide Investment Trust, Markman MultiFund Trust, Maplewood Investment
Trust, a series company, The Thermo Opportunity Fund, Inc., The Dean Family of
Funds, The New York State Opportunity Funds, Brundage, Story and Rose Investment
Trust, the Lake Shore Family of Funds, Boyar Value Fund, Inc.,
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<PAGE>
Profit Funds Investment Trust, Atalanta/ Sosnoff Investment Trust, UC Investment
Trust and The Winter Harbor Fund and Assistant Vice President of Williamsburg
Investment Trust, Schwartz Investment Trust, The Tuscarora Investment Trust, The
Gannett Welsh & Kotler Funds, Firsthand Funds, the Westport Funds, Albemarle
Investment Trust, The James Advantage Funds and The Bjurman Funds, all of which
are registered investment companies.
JOHN F. SPLAIN, 312 Walnut Street, Cincinnati, Ohio is First Vice
President, Secretary and General Counsel of Countrywide Fund Services, Inc., CW
Fund Distributors, Inc., Countrywide Investments, Inc. and Countrywide Financial
Services, Inc. He is also Secretary of Countrywide Tax-Free Trust, Countrywide
Strategic Trust, Countrywide Investment Trust, Williamsburg Investment Trust,
Markman MultiFund Trust, The Tuscarora Investment Trust, Maplewood Investment
Trust, a series company, The Thermo Opportunity Fund, Inc., the Lake Shore
Family of Funds, Brundage, Story and Rose Investment Trust, Boyar Value Fund,
Inc., Profit Funds Investment Trust and The Winter Harbor Fund and Assistant
Secretary of Schwartz Investment Trust, The Gannett Welsh & Kotler Funds,
Firsthand Funds, the New York State Opportunity Funds, the Dean Family of Funds,
the Westport Funds, Atalanta/Sosnoff Investment Trust, Albemarle Investment
Trust, The James Advantage Funds, The Bjurman Funds and UC Investment Trust.
MARK J. SEGER, C.P.A., 312 Walnut Street, Cincinnati, Ohio is First Vice
President of Countrywide Fund Services, Inc. and CW Fund Distributors, Inc. He
is also Treasurer of Countrywide Tax-Free Trust, Countrywide Strategic Trust,
Countrywide Investment Trust, Williamsburg Investment Trust, Markman MultiFund
Trust, Maplewood Investment Trust, a series company, The Thermo Opportunity
Fund, Inc., the New York State Opportunity Funds, the Dean Family of Funds,
Brundage, Story and Rose Investment Trust, Profit Funds Investment Trust, the
Lake Shore Family of Funds, Albemarle Investment Trust, Atalanta/Sosnoff
Investment Trust, UC Investment Trust and The Winter Harbor Fund and Assistant
Treasurer of Schwartz Investment Trust, The Tuscarora Investment Trust, The
Gannett Welsh & Kotler Funds, Firsthand Funds, the Westport Funds, Boyar Value
Fund, Inc., The James Advantage Funds and The Bjurman Funds.
THE INVESTMENT ADVISER
- ----------------------
Wells Asset Management, Inc. (the "Adviser") is the Fund's investment
manager. Leo F. Wells III is the controlling shareholder of the Adviser. Mr.
Wells, by reason of such affiliation, may directly or indirectly receive
benefits from the advisory fees paid to the Adviser. Mr. Wells is also the
controlling shareholder of the Underwriter and a Trustee of the Trust.
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<PAGE>
Under the terms of the advisory agreement between the Trust and the
Adviser, the Adviser provides general investment supervisory services to the
Fund and the Fund's business affairs. The Fund pays the Adviser a fee computed
and accrued daily and paid monthly at an annual rate of .50% of its average
daily net assets.
The Fund is responsible for the payment of all operating expenses,
including fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, expenses related to the distribution of the Fund's shares, insurance
expenses, taxes or governmental fees, fees and expenses of the custodian,
transfer agent and accounting and pricing agent of the Fund, fees and expenses
of members of the Board of Trustees who are not interested persons of the Trust,
the cost of preparing and distributing prospectuses, statements, reports and
other documents to shareholders, expenses of shareholders' meetings and proxy
solicitations, and such extraordinary or non-recurring expenses as may arise,
including litigation to which the Fund may be a party and indemnification of the
Trust's officers and Trustees with respect thereto. The Fund may have an
obligation to indemnify the Trust's officers and Trustees with respect to such
litigation, except in instances of willful misfeasance, bad faith, gross
negligence or reckless disregard by such officers and Trustees in the
performance of their duties.
The Adviser bears promotional expenses in connection with the distribution
of the Fund's shares to the extent that such expenses are not assumed by the
Fund under its plan of distribution (see "Distribution Plan" below). The
compensation and expenses of any officer, Trustee or employee of the Trust who
is an officer, director, employee or stockholder of the Adviser are paid by the
Adviser.
By its terms, the Trust's advisory agreement will remain in force until
January 12, 2001 and from year to year thereafter, subject to annual approval by
(a) the Board of Trustees or (b) a vote of the majority of the Fund's
outstanding voting securities; provided that in either event continuance is also
approved by a majority of the Trustees who are not interested persons of the
Trust, by a vote cast in person at a meeting called for the purpose of voting
such approval. The Trust's advisory agreement may be terminated at any time, on
sixty days' written notice, without the payment of any penalty, by the Board of
Trustees, by a vote of the majority of the Fund's outstanding voting securities,
or by the Adviser. The advisory agreement automatically terminates in the event
of its assignment, as defined by the 1940 Act and the rules thereunder.
- 12 -
<PAGE>
THE SUB-ADVISER
- ---------------
Gateway Investment Advisers, L.P. (the "Sub-Adviser") manages the Fund's
investments pursuant to a sub-advisory agreement between the Sub-Adviser, the
Adviser and the Trust.
The Sub-Adviser is a Delaware limited partnership which has been managing
assets for institutional and individual investors since December, 1995. Prior to
that time, Gateway Investment Advisers, Inc. ("GIA") had provided investment
management services to institutional and individual investors since its
inception in June, 1977. The Sub-Adviser became the successor in interest to the
assets, business and personnel of GIA. GIA is the general partner of the
Sub-Adviser with a 76% ownership interest and Alex. Brown Investments
Incorporated ("ABII") is the sole limited partner with a 24% ownership interest.
ABII is an affiliate of Alex. Brown Incorporated, a nationally known investment
banking firm and registered broker/dealer located in Baltimore, Maryland. Walter
G. Sall, Chairman, and J. Patrick Rogers, President, together own of record and
beneficially 99.85% of the outstanding shares of GIA and thereby control the
Sub-Adviser.
The Adviser (not the Fund) pays the Sub-Adviser a fee computed and accrued
daily and paid monthly at an annual rate of .15% of the value of the Fund's
average daily net assets up to $100,000,000, .10% of such assets from
$100,000,000 to $200,000,000 and .07% of such assets in excess of $200,000,000;
provided, however, that the minimum fee is $3,000 per month. The Sub-Adviser has
agreed to waive its fees for the first three months of the Fund's operations.
By its terms, the sub-advisory agreement will remain in force until January
12, 2001 and from year to year thereafter, subject to annual approval by (a) the
Board of Trustees or (b) a vote of the majority of the Fund's outstanding voting
securities; provided that in either event continuance is also approved by a
majority of the Trustees who are not interested persons of the Trust, by a vote
cast in person at a meeting called for the purpose of voting on such approval.
The sub-advisory agreement may be terminated at any time, on sixty days' written
notice, without the payment of any penalty, by the Board of Trustees, by a vote
of the majority of the Fund's outstanding voting securities, or by the Adviser
or Sub-Adviser. The sub-advisory agreement automatically terminates in the event
of its assignment, as defined by the 1940 Act and the rules thereunder.
THE UNDERWRITER
- ---------------
Wells Investment Securities, Inc. (the "Underwriter") is the principal
underwriter of the Fund and, as such, is the exclusive agent for distribution of
shares of the Fund. The Underwriter is
- 13 -
<PAGE>
obligated to sell the shares on a best efforts basis only against purchase
orders for the shares. Shares of the Fund are offered on a continuous basis only
to the Participating Companies.
By its terms, the Trust's underwriting agreement will remain in force until
January 12, 2001 and from year to year thereafter, subject to annual approval by
(a) the Board of Trustees or (b) a vote of the majority of the Fund's
outstanding voting securities; provided that in either event continuance is also
approved by a majority of the Trustees who are not interested persons of the
Trust, by a vote cast in person at a meeting called for the purpose of voting
such approval. The Trust's underwriting agreement may be terminated at any time,
on sixty days' written notice, without the payment of any penalty, by the Board
of Trustees, by a vote of the majority of the Fund's outstanding voting
securities, or by the Underwriter. The underwriting agreement automatically
terminates in the event of its assignment, as defined by the 1940 Act and the
rules thereunder.
DISTRIBUTION PLAN
- -----------------
As stated in the Prospectus, the Fund has adopted a plan of distribution
(the "Plan") pursuant to Rule 12b-1 under the 1940 Act which permits the Fund to
incur or reimburse the Underwriter for certain distribution related expenses,
including payments to Participating Insurance Companies which engage in efforts
to promote the sale of Fund shares and which sell Fund shares, reimbursements of
Participating Insurance Companies for distribution related or shareholder
services related expenses they incur in selling Fund shares or providing Fund
related services to their customers, or any other expenses related to the
distribution of Fund's shares. The Plan expressly limits payment of the
distribution expenses listed above in any fiscal year to a maximum of .25% of
the average daily net assets of the Fund. Unreimbursed expenses will not be
carried over from year to year.
The continuance of the Plan must be specifically approved at least annually
by a vote of the Trust's Board of Trustees and by a vote of the Trustees who are
not interested persons of the Trust and have no direct or indirect financial
interest in the Plan (the "Rule 12b-1 Trustees") at a meeting called for the
purpose of voting on such continuance. The Plan may be terminated at any time by
a vote of a majority of the Rule 12b-1 Trustees or by a vote of the holders of a
majority of the outstanding shares of the Fund. In the event the Plan is
terminated in accordance with its terms, the Fund will not be required to make
any payments for expenses incurred after the termination date. The Plan may not
be amended to increase materially the amount to be spent for distribution
without shareholder approval. All material amendments to the Plan must be
approved by a vote of the Trust's Board of Trustees and by a vote of the Rule
12b-1 Trustees.
- 14 -
<PAGE>
In approving the Plan, the Trustees determined, in the exercise of their
business judgment and in light of their fiduciary duties as Trustees, that there
is a reasonable likelihood that the Plan will benefit the Fund and its
shareholders. The Board of Trustees believes that expenditure of the Fund's
assets for distribution expenses under the Plan should assist in the growth of
the Fund which will benefit the Fund and its shareholders through increased
economies of scale, and less chance of disruption of planned investment
strategies. The Plan will be renewed only if the Trustees make a similar
determination for each subsequent year of the Plan. There can be no assurance
that the benefits anticipated from the expenditure of the Fund's assets for
distribution will be realized. While the Plan is in effect, all amounts spent by
the Fund pursuant to the Plan and the purposes for which such expenditures were
made must be reported quarterly to the Board of Trustees for its review. In
addition, the selection and nomination of those Trustees who are not interested
persons of the Trust are committed to the discretion of the Rule 12b-1 Trustees
during such period.
As affiliated persons of the Adviser and the Underwriter, Messrs. Wells and
Conlon may be deemed to have a financial interest in the operation of the Plan.
SECURITIES TRANSACTIONS
- -----------------------
Decisions to buy and sell securities for the Fund and the placing of the
Fund's securities transactions and negotiation of commission rates where
applicable are made by the Sub-Adviser and are subject to review by the Board of
Trustees of the Trust. In the purchase and sale of portfolio securities, the
Sub-Adviser seeks best execution for the Fund, taking into account such factors
as price (including the applicable brokerage commission or dealer spread), the
execution capability, financial responsibility and responsiveness of the broker
or dealer and the brokerage and research services provided by the broker or
dealer. The Sub-Adviser generally seeks favorable prices and commission rates
that are reasonable in relation to the benefits received.
Generally, the Fund attempts to deal directly with the dealers who make a
market in the securities involved unless better prices and execution are
available elsewhere. Such dealers usually act as principals for their own
account. On occasion, portfolio securities for the Fund may be purchased
directly from the issuer.
The Sub-Adviser is specifically authorized to select brokers who also
provide brokerage and research services to the Fund and/or other accounts over
which the Sub-Adviser exercises investment discretion and to pay such brokers a
commission in excess of the commission another broker would charge if the
- 15 -
<PAGE>
Sub-Adviser determines in good faith that the commission is reasonable in
relation to the value of the brokerage and research services provided. The
determination may be viewed in terms of a particular transaction or the
Sub-Adviser's overall responsibilities with respect to the Fund and to accounts
over which it exercises investment discretion.
Research services include securities and economic analyses, reports on
issuers' financial conditions and future business prospects, newsletters and
opinions relating to interest trends, general advice on the relative merits of
possible investment securities for the Fund and statistical services and
information with respect to the availability of securities or purchasers or
sellers of securities. Although this information is useful to the Fund and the
Sub-Adviser, it is not possible to place a dollar value on it. Research services
furnished by brokers through whom the Fund effects securities transactions may
be used by the Sub-Adviser in servicing all of its accounts and not all such
services may be used by the Sub-Adviser in connection with the Fund.
Subject to the requirements of the 1940 Act and procedures adopted by the
Board of Trustees, the Fund may execute portfolio transactions through any
broker or dealer and pay brokerage commissions to a broker (i) which is an
affiliated person of the Trust, or (ii) which is an affiliated person of such
person, or (iii) an affiliated person of which is an affiliated person of the
Trust, the Adviser, the Sub-Adviser or the Underwriter.
The Fund has no obligation to deal with any broker or dealer in the
execution of securities transactions. However, the Sub-Adviser and other
affiliates of the Trust or the Sub-Adviser may effect securities transactions
which are executed on a national securities exchange or transactions in the
over-the-counter market conducted on an agency basis. The Fund will not effect
any brokerage transactions in its portfolio securities with the Sub-Adviser if
such transactions would be unfair or unreasonable to its shareholders.
Over-the-counter transactions will be placed either directly with principal
market makers or with broker-dealers. Although the Fund does not anticipate any
ongoing arrangements with other brokerage firms, brokerage business may be
transacted from time to time with other firms. Neither the Adviser nor the
Sub-Adviser, nor affiliates of the Trust, the Adviser, or the Sub-Adviser will
receive reciprocal brokerage business as a result of the brokerage business
transacted by the Fund with other brokers.
CODE OF ETHICS. The Trust, the Adviser and the Sub-Adviser have each
adopted a Code of Ethics under Rule 17j-1 of the Investment Company Act of 1940.
The Code significantly restricts the personal investing activities of all
employees of the Adviser and the Sub-Adviser and imposes additional, more
onerous,
- 16 -
<PAGE>
restrictions on investment personnel of the Adviser and the Sub-Adviser. Such
restrictions include a ban on acquiring any securities in an initial public
offering and a prohibition from profiting on short-term trading in securities.
PORTFOLIO TURNOVER
- ------------------
The Fund's portfolio turnover rate is calculated by dividing the lesser of
purchases or sales of portfolio securities for the fiscal year by the monthly
average of the value of the portfolio securities owned by the Fund during the
fiscal year. High portfolio turnover involves correspondingly greater brokerage
commissions and other transaction costs, which will be borne directly by the
Fund. The Sub-Adviser anticipates that the Fund's portfolio turnover rate
normally will not exceed 100%. A 100% turnover rate would occur if all of the
Fund's portfolio securities were replaced once within a one year period.
Generally, the Fund intends to invest for long-term purposes. However, the
rate of portfolio turnover will depend upon cash flows into and out of the Fund,
changes in the S&P REIT Index and market and other conditions, and it will not
be a limiting factor when the Sub-Adviser believes that portfolio changes are
appropriate.
CALCULATION OF SHARE PRICE
- --------------------------
The share price (net asset value) of the shares of the Fund are determined
as of the close of the regular session of trading on the New York Stock Exchange
(normally 4:00 p.m., Eastern time), on each day the Trust is open for business.
The Trust is open for business on every day except Saturdays, Sundays and the
following holidays: New Year's Day, Martin Luther King, Jr. Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. The Trust may also be open for business on other days in
which there is sufficient trading in the Fund's portfolio securities that its
net asset value might be materially affected. For a description of the methods
used to determine the share price, see "Calculation of Share Price" in the
Prospectus.
TAXES
- -----
The Fund intends to qualify for the special tax treatment afforded a
regulated investment company ("RIC") under Subchapter M of the Internal Revenue
Code so that it does not pay federal taxes on income and capital gains
distributed to shareholders. To so qualify the Fund must, among other things,
(1) derive at least 90% of its gross income in each taxable year from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock, securities or
- 17 -
<PAGE>
foreign currency, or certain other income (including but not limited to gains
from options, futures and forward contracts) derived with respect to its
business of investing in stock, securities or currencies; and (2) diversify its
holdings so that at the end of each quarter of its taxable year the following
two conditions are met: (a) at least 50% of the value of the Fund's total assets
is represented by cash, U.S. Government securities, securities of other
regulated investment companies and other securities (for this purpose such other
securities will qualify only if the Fund's investment is limited in respect to
any issuer to an amount not greater than 5% of the Fund's assets and 10% of the
outstanding voting securities of such issuer) and (b) not more than 25% of the
value of the Fund's assets is invested in securities of any one issuer (other
than U.S. Government securities or securities of other regulated investment
companies).
Federal income tax would be imposed on the Fund if it failed to make
certain distributions of its income to shareholders. The Fund intends to make
distributions in a manner which will avoid the imposition of such tax. In
addition, a 4% excise tax would be imposed upon the Fund if, in a particular
calendar year, the Fund failed to distribute substantially all of its ordinary
income and net capital gains for the twelve-month period. This excise tax will
not apply to the Fund if at all times during the calendar year each shareholder
in the Fund was a "segregated asset account" (as defined in the Internal Revenue
Code). The Fund has been informed that the Participating Insurance Companies
intend to qualify the Separate Accounts as segregated asset accounts.
Section 817(h) of the Internal Revenue Code requires that investments of a
segregated asset account of an insurance company be "adequately diversified", in
accordance with Treasury Regulations promulgated thereunder, in order for the
holders of variable annuity contracts or variable life insurance policies
investing in the account to receive the tax-deferred or tax-free treatment
generally afforded holders of annuities or life insurance policies under the
Internal Revenue Code. The Department of the Treasury has issued Regulations
under 817(h) which, among other things, provide the manner in which a segregated
asset account will treat investments in a RIC for purposes of the applicable
diversification requirements. Under the Regulations, if RIC satisfies certain
conditions, that RIC will not be treated as a single investment for these
purposes, but rather the segregated asset account will not be treated as owning
its proportionate share of each of the assets of the RIC. The Fund plans to
satisfy all these conditions at all times.
Distributions by the Fund will be taxable, if at all, to the Participating
Insurance Companies, and not to Contract or Policy
- 18 -
<PAGE>
Owners. Participating Insurance Companies will include distributions in its
taxable income in the year in which they are received (notwithstanding the fact
that they are reinvested). Distributions by the Fund of net investment income as
well as from net realized short-term capital gains, if any, are taxable as
ordinary income, and distributions by the Fund of net long-term capital gains
over net short-term capital losses are taxable as long-term capital gain.
Redemptions of shares of the Fund generally will result in recognition of
capital gain or loss, if any, for federal income tax purposes. Contract Owners
and Policy Owners should consult the prospectuses of the Separate Accounts for
information concerning the federal income tax treatment of Separate Accounts
that own shares of the Fund.
The foregoing discussion of Federal income tax consequences is based on tax
laws and regulations as in effect on the date of this Statement of Additional
Information, and is subject to change by legislative or administrative action.
REDEMPTION IN KIND
- ------------------
Under unusual circumstances, when the Board of Trustees deems it in the
best interests of the Fund's shareholders, the Fund may make payment for shares
repurchased or redeemed in whole or in part in securities of the Fund taken at
current value. If any such redemption in kind is to be made, the Fund intends to
make an election pursuant to Rule 18f-1 under the 1940 Act. This election will
require the Fund to redeem shares solely in cash up to the lesser of $250,000 or
1% of the net asset value of the Fund during any ninety day period for any one
shareholder. Should payment be made in securities, the redeeming shareholder
will generally incur brokerage costs in converting such securities to cash.
Portfolio securities which are issued in an in-kind redemption will be readily
marketable.
HISTORICAL PERFORMANCE INFORMATION
- ----------------------------------
From time to time, the Fund may advertise average annual total return.
Average annual total return quotations will be computed by finding the average
annual compounded rates of return over 1, 5 and 10 year periods that would
equate the initial amount invested to the ending redeemable value, according to
the following formula:
- 19 -
<PAGE>
n
P (1 + T) = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1, 5 and 10 year periods at the end of the 1, 5 or 10
year periods (or fractional portion thereof)
The calculation of average annual total return assumes the reinvestment of
all dividends and distributions. If the Fund has been in existence less than
one, five or ten years, the time period since the date of the initial public
offering of shares will be substituted for the periods stated. The Fund may also
advertise total return (a "nonstandardized quotation") which is calculated
differently from average annual total return. A nonstandardized quotation of
total return may be a cumulative return which measures the percentage change in
the value of an account between the beginning and end of a period, assuming no
activity in the account other than reinvestment of dividends and capital gains
distributions. A nonstandardized quotation may also indicate average annual
compounded rates of return over periods other than those specified for average
annual total return. A nonstandardized quotation of total return will always be
accompanied by the Fund's average annual total return as described above.
From time to time, the Fund may also advertise its yield. A yield quotation
is based on a 30-day (or one month) period and is computed by dividing the net
investment income per share earned during the period by the maximum offering
price per share on the last day of the period, according to the following
formula:
6
Yield = 2[(a-b/cd + 1) - 1]
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period that were
entitled to receive dividends
d = the maximum offering price per share on the last day of the period
Solely for the purpose of computing yield, dividend income is recognized by
accruing 1/360 of the stated dividend rate of the security each day that the
Fund owns the security. Generally, interest earned (for the purpose of "a"
above) on debt obligations is computed by reference to the yield to maturity of
each obligation held based on the market value of the obligation (including
actual accrued interest) at the close of business on the last business day prior
to the start of the 30-day (or one
- 20 -
<PAGE>
month) period for which yield is being calculated, or, with respect to
obligations purchased during the month, the purchase price (plus actual accrued
interest). With respect to the treatment of discount and premium on mortgage or
other receivables-backed obligations which are expected to be subject to monthly
paydowns of principal and interest, gain or loss attributable to actual monthly
paydowns is accounted for as an increase or decrease to interest income during
the period and discount or premium on the remaining security is not amortized.
Yields and total returns quoted for the Fund include the effect of
deducting the Fund's expenses, but may not include charges and expenses
attributable to a particular variable annuity contract or variable life
insurance policy. Since shares of the Fund can be purchased only through a
variable annuity contract or variable life insurance policy, a prospective
purchaser should carefully review the prospectus of the variable annuity
contract or variable life insurance policy he or she has chosen for information
on relevant charges and expenses. Including these charges in the quotations of
the Fund's yield and total return would have the effect of decreasing
performance. Performance information for the Fund must always be accompanied by,
and be reviewed with, performance information for the insurance product which
invests in the Funds
The Fund's performance may be compared in advertisements, sales literature
and other communications to the performance of other mutual funds having similar
objectives or to standardized indices or other measures of investment
performance. In particular, the Fund may compare its performance to the S&P Real
Estate Investment Trust Composite Price Index. Comparative performance may also
be expressed by reference to a ranking prepared by a mutual fund monitoring
service, such as Lipper Analytical Services, Inc. or Morningstar, Inc., or by
one or more newspapers, newsletters or financial periodicals. Performance
comparisons may be useful to investors who wish to compare the Fund's past
performance to that of other mutual funds and investment products. Of course,
past performance is no guarantee of future results.
o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes
the reinvestment of all capital gains distributions and income dividends
and takes into account any change in net asset value over a specific period
of time.
o MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The
- 21 -
<PAGE>
maximum rating is five stars, and ratings are effective for two weeks.
Investors may use such indices in addition to the Fund's Prospectus to
obtain a more complete view of the Fund's performance before investing. Of
course, when comparing the Fund's performance to any index, factors such as
composition of the index and prevailing market conditions should be considered
in assessing the significance of such comparisons. When comparing funds using
reporting services, or total return, investors should take into consideration
any relevant differences in funds such as permitted portfolio compositions and
methods used to value portfolio securities and compute offering price.
Advertisements and other sales literature for the Fund may quote total returns
that are calculated on non-standardized base periods. The total returns
represent the historic change in the value of an investment in the Fund based on
monthly reinvestment of dividends over a specified period of time.
From time to time the Fund may include in advertisements and other
communications information, charts, and illustrations relating to inflation and
the effects of inflation on the dollar, including the purchasing power of the
dollar at various rates of inflation. The Fund may also disclose from time to
time information about its portfolio allocation and holdings at a particular
date (including ratings of securities assigned by independent rating services
such as Standard & Poor's Ratings Group and Moody's Investors Service, Inc.).
The Fund may also depict the historical performance of the securities in which
the Fund may invest over periods reflecting a variety of market or economic
conditions either alone or in comparison with alternative investments,
performance indices of those investments, or economic indicators. The Fund may
also include in advertisements and in materials furnished to present and
prospective shareholders statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
to meet specific financial goals, such as saving for retirement, children's
education, or other future needs.
CUSTODIAN
- ---------
Star Bank, N.A., 425 Walnut Street, Cincinnati, Ohio, has been retained to
act as Custodian for the Fund's investments. Star Bank, N.A. acts as the Fund's
depository, safekeeps its portfolio securities, collects all income and other
payments with respect thereto, disburses funds as instructed and maintains
records in connection with its duties.
- 22 -
<PAGE>
AUDITORS
- --------
The firm of Arthur Andersen LLP has been selected as independent public
accountants for the Trust for the fiscal year ending December 31, 1999. Arthur
Andersen LLP, 425 Walnut Street, Cincinnati, Ohio, performs an annual audit of
the Trust's financial statements and advises the Trust as to certain accounting
matters.
COUNTRYWIDE FUND SERVICES, INC.
- -------------------------------
The Trust has retained Countrywide Fund Services, Inc. (the "Transfer
Agent"), 312 Walnut Street, Cincinnati, Ohio 45202, to act as its transfer agent
and dividend paying agent. The Transfer Agent is an indirect wholly-owned
subsidiary of Countrywide Credit Industries, Inc., a New York Stock Exchange
listed company principally engaged in the business of residential mortgage
lending. The Transfer Agent receives from the Fund for its services as transfer
agent a $1,200 fee payable monthly.
The Transfer Agent also provides accounting and pricing services to the
Fund. For calculating daily net asset value per share and maintaining such books
and records as are necessary to enable the Transfer Agent to perform its duties,
the Fund pays the Transfer Agent a fee in accordance with the following
schedule:
Average Monthly Net Assets Monthly Fee
-------------------------- -----------
$ 0 - $ 50,000,000 $2,000
$ 50,000,000 - $ 100,000,000 $2,500
$100,000,000 - $ 200,000,000 $3,000
$200,000,000 - $ 300,000,000 $4,000
Over - $ 300,000,000 $5,000 + .001%
of average monthly
net assets.
In addition, the Fund pays all costs of external pricing services.
The Transfer Agent also provides administrative services to the Fund. In
this capacity, the Transfer Agent supplies non-investment related statistical
and research data, internal regulatory compliance services and executive and
administrative services. The Transfer Agent supervises the preparation of tax
returns, reports to shareholders of the Fund, reports to and filings with the
Securities and Exchange Commission and state securities commissions, and
materials for meetings of the Board of Trustees. For the performance of these
administrative services, the Fund pays the Transfer Agent a fee at the annual
- 23 -
<PAGE>
rate of .15% of the average value of its daily net assets up to $50,000,000,
.125% of such assets from $50,000,000 to $100,000,000 and .1% of such assets in
excess of $100,000,000, provided, however, that the minimum fee is $1,000 per
month.
- 24 -
<PAGE>
WELLS FAMILY OF REAL ESTATE FUNDS
---------------------------------
PART C. OTHER INFORMATION
- ------- -----------------
Item 23. Exhibits
- -------- --------
(a) Agreement and Declaration of Trust*
(b) Bylaws*
(c) Inapplicable
(d)(i) Advisory Agreement for the Wells S&P REIT Index Fund
(ii) Sub-Advisory Agreement for the Wells S&P REIT Index Fund and
(e) Underwriting Agreement with Wells Investment Securities,
Inc.
(f) Inapplicable
(g) Custody Agreement with Star Bank, N.A.
(h)(i) Administration Agreement with Countrywide Fund Services,
Inc.
(ii) Accounting Services Agreement with Countrywide Fund
Services, Inc.
(iii) Transfer, Dividend Disbursing, Shareholder Service and Plan
Agency Agreement with Countrywide Fund Services, Inc.
(i) Opinion and Consent of Counsel*
(j) Consent of Independent Auditors
(k) Inapplicable
(l) Agreement Relating to Initial Capital
(m) Plan of Distribution Pursuant to Rule 12b-1
(n) Inapplicable
(o) Inapplicable
- --------------------------------------
* Incorporated by reference to the Trust's registration statement on Form
N-1A.
Item 24. Persons Controlled by or Under Common Control with Registrant.
- -------- --------------------------------------------------------------
None.
<PAGE>
Item 25. Indemnification
- -------- ---------------
Article VI of the Registrant's Agreement and Declaration of Trust
provides for indemnification of officers and Trustees as follows:
"Section 6.4 INDEMNIFICATION OF TRUSTEES, OFFICERS, ETC. Subject
to and except as otherwise provided in the Securities Act of
1933, as amended, and the 1940 Act, the Trust shall indemnify
each of its Trustees and officers, including persons who serve at
the Trust's request as directors, officers or trustees of another
organization in which the Trust has any interest as a
shareholder, creditor or otherwise (hereinafter referred to as a
"Covered Person") against all liabilities, including but not
limited to amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and expenses, including
reasonable accountants' and counsel fees, incurred by any Covered
Person in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal,
before any court or administrative or legislative body, in which
such Covered Person may be or may have been involved as a party
or otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of being or
having been such a Trustee or officer, director or trustee, and
except that no Covered Person shall be indemnified against any
liability to the Trust or its Shareholders to which such Covered
Person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of such Covered Person's
office
Section 6.5 ADVANCES OF EXPENSES. The Trust shall advance
attorney's fees or other expenses incurred by a Covered Person in
defending a proceeding to the full extent permitted by the
Securities Act of 1933, as amended, the 1940 Act, and Ohio
Revised Code Chapter 1707, as amended. In the event any of these
laws conflict with Ohio Revised Code Section 1701.13(E), as
amended, these laws, and not Ohio Revised Code Section
1701.13(E), shall govern.
- 2 -
<PAGE>
Section 6.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of
indemnification provided by this Article VI shall not be
exclusive of or affect any other rights to which any such Covered
Person may be entitled. As used in this Article VI, "Covered
Person" shall include such person's heirs, executors and
administrators. Nothing contained in this article shall affect
any rights to indemnification to which personnel of the Trust,
other than Trustees and officers, and other persons may be
entitled by contract or otherwise under law, nor the power of the
Trust to purchase and maintain liability insurance on behalf of
any such person.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to Trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a Trustee, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, officer or controlling person
in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The Registrant maintains a standard mutual fund and investment
advisory professional and directors and officers liability policy. The
policy provides coverage to the Registrant, its Trustees and officers,
Wells Asset Management, Inc. (the "Adviser") and Wells Investment
Securities, Inc., the Trust's principal underwriter. Coverage under
the policy includes losses by reason of any act, error, omission,
misstatement, misleading statement, neglect or breach of duty.
The Advisory Agreements with the Adviser provide that the Adviser
shall not be liable for any action taken, omitted or suffered to be
taken by it in its reasonable judgment, in good faith and believed by
it to be
- 3 -
<PAGE>
authorized or within the discretion or rights or powers conferred upon
it by the Advisory Agreements, or in accordance with (or in the
absence of) specific directions or instructions from the Trust,
provided, however, that such acts or omissions shall not have resulted
from the Adviser's willful misfeasance, bad faith or gross negligence.
The Sub-Advisory Agreements with Gateway Investment Advisers, L.P.
(the "Sub-Adviser") provide that the Sub-Adviser shall be held
harmless and indemnified by the Adviser and the Trust from any and all
losses, claims, damages, liabilities or expenses (including reasonable
counsel fees and expenses) arising from any claim, demand, action, or
suit which results from any action taken, omitted or suffered to be
taken by it in its reasonable judgment, in good faith and believed by
it to be authorized or within the discretion or rights or powers
conferred upon it by the Sub-Advisory Agreements, or in accordance
with (or in the absence of) specific directions or instructions from
the Trust, provided, however, that such acts or omissions shall not
have resulted from the Sub-Adviser's willful misfeasance, bad faith or
gross negligence or reckless disregard of the Sub-Adviser's
obligations and duties under the Sub-Advisory Agreements.
Item 26. Business and Other Connections of the Investment Adviser
- -------- --------------------------------------------------------
(a) The Adviser is a Georgia corporation organized in June, 1997 to
provide investment advisory services to the Registrant. The
Adviser has no other business of a substantial nature.
The Sub-Adviser, a Delaware limited partnership, provides
investment advisory services to the Registrant, The Gateway Trust
and various other individual and institutional clients.
(b) The directors and officers of the Adviser and any other business,
profession, vocation or employment of a substantial nature
engaged in at any time during the past two years:
(i) Leo F. Wells, III, President and Treasurer of the Adviser.
President and a Trustee of the Registrant.
- 4 -
<PAGE>
President, Treasurer and a Director of Wells Investment
Securities, Inc., a registered broker-dealer and
Registrant's principal underwriter.
President of Wells & Associates, Inc.; Wells Management
Company, Inc.; Wells Capital, Inc.; Wells Real Estate Funds,
Inc.; Wells Advisors, Inc.; Wells Development Corporation;
and Wells Real Estate Investment Trust, Inc.
(ii) Brian M. Conlon, Executive Vice President and Chief
Operating Officer of the Adviser.
Executive Vice President and a Trustee of the Registrant.
Secretary of Wells Investment Securities, Inc. and Chief
Operating Officer of Wells Capital, Inc.
(iii) Linda L. Carson - Secretary of the Adviser.
Vice President, Accounting of Wells Capital, Inc.
The directors and officers of the Sub-Adviser and any other business,
profession, vocation or employment of a substantial nature engaged in
at any time during the past two years:
(i) Walter G. Sall, Chairman of the Board and a controlling
shareholder of the Sub-Adviser.
(ii) J. Patrick Rogers, President and a controlling shareholder
of the Adviser.
President of The Gateway Trust.
Item 27. Principal Underwriters
- -------- ----------------------
(a) Inapplicable
(b) Position with Position with
Name Underwriter Fund
---- ----------- -------------
Leo F. Wells, III President, President and
Treasurer and Trustee
a Director
- 5 -
<PAGE>
Brian M. Conlon Secretary Executive Vice
President and
Trustee
The address of the above-named persons is 3885 Holcomb Bridge Road,
Norcross, Georgia 30092
(c) Inapplicable
Item 28. Location of Accounts and Records
- -------- --------------------------------
Accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules
promulgated thereunder will be maintained by the Registrant at its
offices located at 3885 Holcomb Bridge Road 30092 as well as at the
offices of the Registrant's transfer agent located at 312 Walnut
Street, 21st Floor, Cincinnati, Ohio 45202.
Item 29. Management Services
- -------- -------------------
Inapplicable
Item 30. Undertakings
- -------- ------------
Inapplicable
- 6 -
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed below on its behalf by the undersigned, thereunto duly
authorized, in the City of Norcross and State of Georgia, on the 12th day of
February, 1999.
WELLS FAMILY OF REAL ESTATE FUNDS
By: /s/ Brian M. Conlon
-----------------------------
Brian M. Conlon
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Leo F. Wells President February 12, 1999
- -------------------------- and Trustee
Leo F. Wells
/s/ Brian M. Conlon Executive February 12, 1999
- -------------------------- Vice President
Brian M. Conlon and Trustee
Trustee
- --------------------------
John L. Bell*
Trustee
- --------------------------
Richard W. Carpenter*
Trustee By: /s/ John F. Splain
- -------------------------- John F. Splain
Bud Carter* Attorney in Fact*
February 12, 1999
Trustee
- --------------------------
Donald S. Moss*
Trustee
- --------------------------
Walter W. Sessoms*
<PAGE>
INDEX TO EXHIBITS
-----------------
(a) Agreement and Declaration of Trust*
(b) Bylaws*
(c) Inapplicable
(d)(i) Advisory Agreement for the Wells S&P REIT Index Fund
(ii) Sub-Advisory Agreement for the Wells S&P REIT Index Fund
(e) Underwriting Agreement
(f) Inapplicable
(g) Custody Agreement
(h)(i) Administration Agreement
(ii) Accounting Services Agreement
(iii) Transfer, Dividend Disbursing, Shareholder Service Agreement
(i) Opinion and Consent of Counsel*
(j) Consent of Independent Auditors
(k) Inapplicable
(l) Agreement relating to Initial Capital
(m) Plan of Distribution Pursuant to Rule 12b-1 for the Wells S&P REIT
Index Fund
(n) Inapplicable
(o) Inapplicable
- ----------------------------
* Incorporated by reference to the Trust's registration statement on Form
N-1A.
Wells Asset Management, Inc.
3885 Holcomb Bridge Road
Norcross, Georgia 33092
Re: Advisory Agreement
Ladies and Gentlemen:
Wells Family of Real Estate Funds (the "Trust"), an Ohio business trust, is
a diversified open-end management investment company registered under the
Investment Company Act of 1940, as amended (the "Act"), and is subject to the
rules and regulations promulgated thereunder. The Trust currently offers one
series of shares to investors, the Wells S&P REIT Index Fund (the "Fund"). Each
share of the Fund represents an undivided interest in the assets, subject to the
liabilities, of the Fund.
1. APPOINTMENT AS ADVISER. The Trust being duly authorized hereby appoints
and employs Wells Asset Management, Inc. (the "Adviser") to manage the
investment and reinvestment of the assets of the Fund, on the terms and
conditions set forth herein.
2. ACCEPTANCE OF APPOINTMENT; STANDARD OF PERFORMANCE. The Adviser accepts
the appointment and agrees to render the services and assume the obligations set
forth herein.
3. PORTFOLIO MANAGEMENT SERVICES OF THE ADVISER. The Adviser shall have
overall supervisory responsibility for the general management and investment of
the Fund's assets and portfolio securities, subject to and in accordance with
the
<PAGE>
investment objectives and policies of the Fund and any directions which the
Trust's Board of Trustees may issue to the Adviser from time to time. The
Adviser shall provide overall investment programs and strategies for the Fund,
shall revise such programs as necessary and shall monitor and report
periodically to the Board of Trustees concerning the implementation of the
programs.
The Adviser, with the approval of the Board of Trustees of the Trust as to
particular appointments, intends to (i) appoint one or more persons or companies
(the "Sub-Adviser") and, subject to the terms and conditions of this Agreement,
the Sub-Adviser shall have full investment discretion and shall make all
determinations with respect to the investment of the Fund's assets and the
purchase and sale of portfolio securities with those assets, and (ii) take such
steps as may be necessary to implement such appointments. The Adviser shall be
solely responsible for paying the fees and expenses of the Sub-Adviser for its
services to the Fund. The Adviser shall not be responsible or liable for the
investment merits of any decision by the Sub-Adviser to purchase, hold or sell a
portfolio security for the Fund.
The Adviser shall evaluate sub-advisers and shall recommend to the Board of
Trustees the Sub-Adviser which the Adviser believes is best suited to invest the
assets of the Fund; shall monitor and evaluate the investment performance of the
Fund's Sub-Adviser; shall recommend changes in the Sub-Adviser when appropriate;
shall coordinate the investment activities of the
- 2 -
<PAGE>
Sub-Adviser to ensure compliance with applicable restrictions and limitations
applicable to the Fund; and shall compensate the Sub-Adviser.
The Adviser will make available and provide financial, accounting and
statistical information required by the Fund in the preparation of registration
statements, reports and other documents required by federal and state securities
laws, and such information as the Fund may reasonably request for use in the
preparation of registration statements, reports and other documents required by
federal and state securities laws.
In providing such services to the Fund, the Adviser shall be subject to
such investment restrictions as are set forth in the Act and the rules
thereunder, the Internal Revenue Code of 1986, as amended (the "Code"),
applicable state securities laws, the supervision and control of the Trustees of
the Trust, such specific instructions as the Trustees may adopt and communicate
to the Adviser and the investment objectives, policies and restrictions of the
Fund furnished pursuant to paragraph 4. The Adviser is not authorized by the
Trust to take any action, including the purchase or sale of securities for the
Fund, in contravention of any restriction, limitation, objective, policy or
instruction described in the previous sentence.
4. INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS. The Trust will provide
the Adviser with the statement of investment objectives, policies and
restrictions applicable to the Fund as contained in the Trust's registration
statement under the Act and
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<PAGE>
the Securities Act of 1933, and any instructions adopted by the Trustees
supplemental thereto. The Trust will provide the Adviser with such further
information concerning the investment objectives, policies and restrictions
applicable thereto as the Adviser may from time to time reasonably request. The
Trust retains the right, on written notice to the Adviser from the Trust, to
modify any such objectives, policies or restrictions in any manner at any time.
5. ALLOCATION OF BROKERAGE. The Sub-Adviser, subject to the limitations
contained in this paragraph 5, shall place on behalf of the Fund, orders for the
execution of portfolio transactions. The Sub-Adviser is not authorized by the
Trust to take any action, including the purchase or sale of securities for the
Fund's account, (a) in contravention of (i) any investment restrictions set
forth in the Act and the rules thereunder, the Internal Revenue Code of 1986 and
applicable state securities laws, (ii) specific instructions adopted by the
Board of Trustees and communicated to the Sub-Adviser, or (iii) the investment
objectives, policies and restrictions of the Fund as set forth in the Trust's
Registration Statement, or (b) which would have the effect of causing the Fund
to fail to qualify or to cease to qualify as a regulated investment company
under the Code or any succeeding statute.
Subject to the foregoing, the Sub-Adviser shall have authority and
discretion to select brokers and dealers to execute portfolio transactions
initiated by the Sub-Adviser and to select
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<PAGE>
the markets on or in which the transactions will be executed. In doing so, the
Sub-Adviser will give primary consideration to securing the best execution,
taking into account such factors as price (including the applicable brokerage
commission or dealer spread), the execution capability, financial responsibility
and responsiveness of the broker or dealer and the brokerage and research
services provided by the broker or dealer. Consistent with this policy, the
Sub-Adviser may select brokers or dealers who also provide brokerage and
research services (as those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934) to the other accounts over which it exercises investment
discretion. It is understood that neither the Trust, the Adviser nor the
Sub-Adviser has adopted a formula for allocation of the Fund's investment
transaction business. It is also understood that it is desirable for the Fund
that the Sub-Adviser have access to supplemental investment and market research
and security and economic analyses provided by certain brokers who may execute
brokerage transactions at a higher commission to the Fund than may result when
allocating brokerage to other brokers on the basis of seeking the lowest
commission. Therefore, the Sub-Adviser is authorized to place orders for the
purchase and sale of securities for the Fund with such certain brokers, subject
to review by the Trust's Trustees from time to time with respect to the extent
and continuation of this practice, provided that the Sub-Adviser determines in
good faith that the amount of the commission is reasonable in relation to the
value of the
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<PAGE>
brokerage and research services provided by the executing broker or dealer. The
determination may be viewed in terms of either a particular transaction or the
Sub-Adviser's overall responsibilities with respect to the Fund and to other
accounts over which it exercises investment discretion. It is understood that
although the information may be useful to the Trust and the Sub-Adviser, it is
not possible to place a dollar value on such information. Consistent with the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.,
and subject to seeking best execution, the Sub-Adviser may give consideration to
sales of shares of the Fund as a factor in its selection of brokers and dealers
to execute portfolio transactions of the Fund.
On occasions when the Sub-Adviser deems the purchase or sale of a security
to be in the best interest of the Fund as well as other clients, the
Sub-Adviser, to the extent permitted by applicable laws and regulations, may,
but shall be under no obligation to, aggregate the securities to be sold or
purchased in order to obtain the most favorable price or lower brokerage
commissions and efficient execution. In such event, allocation of the securities
so purchased or sold, as well as expenses incurred in the transaction, will be
made by the Sub-Adviser in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Trust and to such other
clients.
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<PAGE>
For each fiscal quarter of the Trust, the Sub-Adviser shall prepare and
render reports to the Trust's Trustees of the total brokerage business placed
and the manner in which the allocation has been accomplished. Such reports shall
set forth at a minimum the information required to be maintained by Rule
31a-1(b)(9) under the Act.
The Sub-Adviser will not execute any portfolio transactions for the Fund's
account with a broker or dealer which is an "affiliated person" (as defined in
the Act) of the Trust, the Adviser or the Sub-Adviser without the prior written
approval of the Adviser. The Adviser agrees that it will provide the Sub-Adviser
with a list of brokers and dealers which are "affiliated persons" of the Trust,
the Adviser or the Sub-Adviser.
6. TRANSACTION PROCEDURES. All transactions will be consummated by payment
to or delivery by the Trust's custodian (the "Custodian"), or such depositories
or agents as may be designated by the Custodian in writing, as custodian for the
Trust, of all cash and/or securities due to or from the Fund, and the Adviser
shall not have possession or custody thereof.
7. PROXIES. The Trust will vote all proxies solicited by or with respect to
the issuers of securities in which assets of the Fund may be invested from time
to time. At the request of the Trust, the Adviser shall provide the Trust with
its recommendations as to the voting of such proxies.
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<PAGE>
8. REPORTS TO THE ADVISER. The Trust will provide the Adviser with such
periodic reports concerning the status of the Fund as the Adviser may reasonably
request.
9. FEES FOR SERVICES. For all of the services to be rendered and payments
made as provided in this Agreement, the Fund will pay the Adviser a fee,
computed and accrued daily and paid monthly, at the annual rate of .50% of its
average daily net assets.
10. ALLOCATION OF CHARGES AND EXPENSES. The Adviser shall employ or provide
and compensate the executive, administrative, secretarial and clerical personnel
necessary to provide the services set forth herein, and shall bear the expense
thereof. The Adviser shall compensate all Trustees, officers and employees of
the Trust who are also employees of the Adviser. The Adviser will pay all
expenses incurred in connection with the sale or distribution of the Fund's
shares to the extent such expenses are not assumed by the Fund under the Trust's
Plan of Distribution Pursuant to Rule 12b-1.
The Fund will be responsible for the payment of all operating expenses of
the Fund, including fees and expenses incurred by the Fund in connection with
membership in investment company organizations, brokerage fees and commissions,
legal, auditing and accounting expenses, expenses of registering shares under
federal and state securities laws, insurance expenses, taxes or governmental
fees, fees and expenses of the custodian, the transfer, shareholder service and
dividend disbursing agent
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<PAGE>
and the accounting and pricing agent of the Fund, expenses including clerical
expenses of the issue, sale, redemption or repurchase of shares of the Fund, the
fees and expenses of Trustees of the Trust who are not interested persons of the
Trust, the cost of preparing, printing and distributing prospectuses,
statements, reports and other documents to shareholders, expenses of
shareholders' meetings and proxy solicitations, and such extraordinary or
non-recurring expenses as may arise, including litigation to which the Trust may
be a party and indemnification of the Trust's officers and Trustees with respect
thereto, or any other expense not specifically described above incurred in the
performance of the Trust's obligations. All other expenses not expressly assumed
by the Adviser herein incurred in connection with the organization, registration
of shares and operations of the Fund will be borne by the Fund.
11. OTHER INVESTMENT ACTIVITIES OF THE ADVISER. The Trust acknowledges that
the Adviser or one or more of its affiliates may have investment
responsibilities or render investment advice to or perform other investment
advisory services for other individuals or entities and that the Adviser, its
affiliates or any of its or their directors, officers, agents or employees may
buy, sell or trade in any securities for its or their respective accounts
("Affiliated Accounts"). Subject to the provisions of paragraph 2 hereof, the
Trust agrees that the Adviser or its affiliates may give advice or exercise
investment responsibility and take such other action with respect to other
Affiliated
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<PAGE>
Accounts which may differ from the advice given or the timing or nature of
action taken with respect to the Fund, provided that the Adviser acts in good
faith, and provided further, that it is the Adviser's policy to allocate, within
its reasonable discretion, investment opportunities to the Fund over a period of
time on a fair and equitable basis relative to the Affiliated Accounts, taking
into account the investment objectives and policies of the Fund and any specific
investment restrictions applicable thereto. The Trust acknowledges that one or
more of the Affiliated Accounts may at any time hold, acquire, increase,
decrease, dispose of or otherwise deal with positions in investments in which
the Fund may have an interest from time to time, whether in transactions which
involve the Fund or otherwise. The Adviser shall have no obligation to acquire
for the Fund a position in any investment which any Affiliated Account may
acquire, and the Trust shall have no first refusal, co-investment or other
rights in respect of any such investment, either for the Fund or otherwise.
12. CERTIFICATE OF AUTHORITY. The Trust and the Adviser shall furnish to
each other from time to time certified copies of the resolutions of their
Trustees or Board of Directors or executive committees, as the case may be,
evidencing the authority of officers and employees who are authorized to act on
behalf of the Trust, the Fund and/or the Adviser.
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<PAGE>
13. LIMITATION OF LIABILITY. The Adviser shall not be liable for any action
taken, omitted or suffered to be taken by it in its reasonable judgment, in good
faith and believed by it to be authorized or within the discretion or rights or
powers conferred upon it by this Agreement, or in accordance with (or in the
absence of) specific directions or instructions from the Trust, provided,
however, that such acts or omissions shall not have resulted from the Adviser's
willful misfeasance, bad faith or gross negligence. Nothing in this paragraph 13
shall be construed in a manner inconsistent with Sections 17(h) and (i) of the
Act.
14. CONFIDENTIALITY. Subject to the duty of the Adviser and the Trust to
comply with applicable law, including any demand of any regulatory or taxing
authority having jurisdiction, the parties hereto shall treat as confidential
all information pertaining to the Fund and the actions of the Adviser and the
Trust in respect thereof.
15. ASSIGNMENT. No assignment of this Agreement shall be made by the
Adviser, and this Agreement shall terminate automatically in the event of such
assignment. The Adviser shall notify the Trust in writing sufficiently in
advance of any proposed change of control, as defined in Section 2(a)(9) of the
Act, as will enable the Trust to consider whether an assignment will occur, and
to take the steps necessary to enter into a new contract with the Adviser.
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<PAGE>
16. REPRESENTATION, WARRANTIES AND AGREEMENTS OF THE TRUST. The Trust
represents, warrants and agrees that:
A. The Adviser has been duly appointed by the Trustees of the Trust to
provide investment advisory services to the Fund as contemplated hereby.
B. The Trust will deliver to the Adviser true and complete copies of
its then current prospectuses and statements of additional information as
effective from time to time and such other documents or instruments governing
the investments of the Fund and such other information as is necessary for the
Adviser to carry out its obligations under this Agreement.
C. The Trust is currently in compliance and shall at all times comply
with the requirements imposed upon the Trust by applicable law and regulations.
17. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE ADVISER. The Adviser
represents, warrants and agrees that:
A. The Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940.
B. The Adviser has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the Act and will provide the Trust with a copy
of the code of ethics and evidence of its adoption. Within forty-five (45) days
of the end of the last calendar quarter of each year while this Agreement is in
effect, an executive officer of the Adviser shall certify to the Trust that the
Adviser has complied with the requirements of Rule 17j-1 during the previous
year and that there has been no
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<PAGE>
violation of the Adviser's code of ethics or, if such a violation has occurred,
that appropriate action was taken in response to such violation. Upon the
written request of the Trust, the Adviser shall permit the Trust, its employees
or its agents to examine the reports required to be made to the Adviser by Rule
17j-1(c)(1).
C. The Adviser will, promptly after filing with the Securities and
Exchange Commission an amendment to its Form ADV, furnish a copy of such
amendment to the Trust.
D. Upon request of the Trust, the Adviser will provide assistance to
the Custodian in the collection of income due or payable to the Fund.
E. The Adviser will immediately notify the Trust of the occurrence of
any event which would disqualify the Adviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the Act or
otherwise.
18. AMENDMENT. This Agreement may be amended at any time, but only by
written agreement between the Adviser and the Trust, which amendment is subject
to the approval of the Trustees and the shareholders of the Fund in the manner
required by the Act and the rules thereunder, subject to any applicable
exemptive order of the Securities and Exchange Commission modifying the
provisions of the Act with respect to approval of amendments to this Agreement.
19. EFFECTIVE DATE; TERM. This Agreement shall become effective on the date
of its execution and shall remain in force for a period of two (2) years from
such date, and from year to year thereafter but only so long as such continuance
is
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<PAGE>
specifically approved at least annually by the vote of a majority of the
Trustees who are not interested persons of the Trust or the Adviser, cast in
person at a meeting called for the purpose of voting on such approval, and by a
vote of the Board of Trustees or of a majority of the outstanding voting
securities of the Fund. The aforesaid requirement that this Agreement may be
continued "annually" shall be construed in a manner consistent with the Act and
the rules and regulations thereunder.
20. TERMINATION. This Agreement may be terminated by either party hereto,
without the payment of any penalty, immediately upon written notice to the other
in the event of a breach of any provision thereof by the party so notified, or
otherwise upon sixty (60) days' written notice to the other, but any such
termination shall not affect the status, obligations or liabilities of any party
hereto to the other.
21. OBLIGATIONS OF THE TRUST. It is expressly agreed that the obligations
of the Trust hereunder shall not be binding upon any of the trustees,
shareholders, nominees, officers, agents or employees of the Trust, personally,
but bind only the trust property of the Trust. The execution and delivery of
this Agreement have been authorized by the trustees of the Trust and signed by
an officer of the Trust, acting as such, and neither such authorization by such
trustees nor such execution and delivery by such officer shall be deemed to have
been made by any of them individually or to impose any liability on any of them
personally, but shall bind only the trust property of the Trust.
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<PAGE>
22. USE OF NAME. The name "Wells" is a property right of the Adviser. The
Adviser may use the name "Wells" in other connections and for other purposes,
including without limitation in the name of other investment companies,
corporations or businesses that it may manage, advise, sponsor or own, or in
which it may have a financial interest. The Trust will discontinue any use of
the name "Wells" if the Adviser ceases to be employed as the Trust's portfolio
manager.
23. DEFINITIONS. As used in paragraphs 15 and 19 of this Agreement, the
terms "assignment," "interested person" and "vote of a majority of the
outstanding voting securities" shall have the meanings set forth in the Act and
the rules and regulations thereunder.
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<PAGE>
24. APPLICABLE LAW. To the extent that state law is not preempted by the
provisions of any law of the United States heretofore or hereafter enacted, as
the same may be amended from time to time, this Agreement shall be administered,
construed and enforced according to the laws of the State of Ohio.
WELLS FAMILY OF REAL ESTATE FUNDS
By: /s/ Leo F. Wells
-----------------------------
Title: President
Date: January 12, 1998
ACCEPTANCE
----------
The foregoing Agreement is hereby accepted.
WELLS ASSET MANAGEMENT, INC.
By: /s/ Leo F. Wells
-----------------------------
Title: President
Date: January 12, 1998
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SUB-ADVISORY AGREEMENT
----------------------
Gateway Investment Advisers, L.P.
400 TechneCenter Drive
Milford, Ohio 45150
Ladies and Gentlemen:
Wells Family of Real Estate Funds (the "Trust"), an Ohio business trust, is
a diversified open-end management investment company registered under the
Investment Company Act of 1940, as amended (the "Act"), and is subject to the
rules and regulations promulgated thereunder. The Trust currently offers one
series of shares to investors, the Wells S&P REIT Index Fund (the "Fund"). Each
share of the Fund represents an undivided interest in the assets, subject to the
liabilities, of the Fund.
Wells Asset Management, Inc. (the "Adviser") acts as the investment adviser
to the Fund pursuant to the terms of an Advisory Agreement. The Adviser shall
have overall supervisory responsibility for the general management and
investment of the Fund's assets and portfolio securities. However, specific
portfolio purchases and sales for the investment portfolio of the Fund are to be
made by advisory organizations recommended by the Adviser and approved by the
Board of Trustees of the Trust.
1. APPOINTMENT AS SUB-ADVISER. The Trust being duly authorized hereby
appoints and employs Gateway Investment Advisers, L.P. (the "Sub-Adviser") as
the discretionary portfolio manager of the Fund, on the terms and conditions set
forth herein.
<PAGE>
2. ACCEPTANCE OF APPOINTMENT; STANDARD OF PERFORMANCE. The Sub-Adviser
accepts the appointment as the discretionary portfolio manager and agrees to use
its best professional judgment to make timely investment decisions for the Fund
in accordance with the provisions of this agreement.
3. PORTFOLIO MANAGEMENT SERVICES OF SUB-ADVISER. The Sub-Adviser is hereby
employed and authorized to select portfolio securities for investment by the
Fund, to purchase and sell securities of the Fund, and upon making any purchase
or sale decision, to place orders for the execution of such portfolio
transactions in accordance with paragraphs 5 and 6 hereof. In providing
portfolio management services to the Fund, the Sub-Adviser shall be subject to
such investment restrictions as are set forth in the Act and the rules
thereunder, the Internal Revenue Code of 1986, applicable state securities laws,
the supervision and control of the Board of Trustees of the Trust, such specific
instructions as the Board of Trustees may adopt and communicate to the
Sub-Adviser the investment objectives, policies and restrictions of the Fund
furnished pursuant to paragraph 4 and the provisions of Schedule A hereto. The
Sub-Adviser is not authorized by the Trust to take any action, including the
purchase or sale of securities for the Fund, in contravention of any
restriction, limitation, objective, policy or instruction described in the
previous sentence. The Sub-Adviser shall maintain on behalf of the Fund the
records listed in Schedule A hereto (as amended from time to time). At
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<PAGE>
the Trust's reasonable request, the Sub-Adviser will consult with the Adviser
with respect to any decision made by it with respect to the investments of the
Fund.
4. INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS. The Trust will provide
the Sub-Adviser with the statement of investment objectives, policies and
restrictions applicable to the Fund as contained in the Fund's registration
statements under the Act and the Securities Act of 1933, and any instructions
adopted by the Board of Trustees supplemental thereto. The Trust will provide
the Sub-Adviser with such further information concerning the investment
objectives, policies and restrictions applicable thereto as the Sub-Adviser may
from time to time reasonably request. The Trust retains the right, on sixty (60)
days written notice to the Sub-Adviser from the Trust or the Adviser, to modify
any such objectives, policies or restrictions in any manner.
5. ALLOCATION OF BROKERAGE. The Sub-Adviser shall have the authority and
discretion to select brokers and dealers to execute portfolio transactions
initiated by the Sub-Adviser and to select the markets on or in which the
transactions will be executed.
A. In doing so, the Sub-Adviser will give primary consideration to
securing the best execution, taking into account such factors as price
(including the applicable brokerage commission or dealer spread), the execution
capability, financial responsibility and responsiveness of the broker or dealer
and the
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<PAGE>
brokerage and research services provided by the broker or dealer. Consistent
with this policy, the Sub-Adviser may select brokers or dealers who also provide
brokerage and research services (as those terms are defined in Section 28(e) of
the Securities Exchange Act of 1934) to the other accounts over which it
exercises investment discretion. It is understood that neither the Trust, the
Adviser nor the Sub-Adviser has adopted a formula for allocation of the Fund's
investment transaction business. It is also understood that it is desirable for
the Fund that the Sub-Adviser have access to supplemental investment and market
research and security and economic analyses provided by certain brokers who may
execute brokerage transactions at a higher commission to the Fund than may
result when allocating brokerage to other brokers on the basis of seeking the
lowest commission. Therefore, the Sub-Adviser is authorized to place orders for
the purchase and sale of securities for the Fund with such certain brokers,
subject to review by the Trust's Board of Trustees from time to time with
respect to the extent and continuation of this practice, provided that the
Sub-Adviser determines in good faith that the amount of the commission is
reasonable in relation to the value of the brokerage and research services
provided by the executing broker or dealer. The determination may be viewed in
terms of either a particular transaction or the Sub-Adviser's overall
responsibilities with respect to the Fund and to the other accounts over which
it exercises investment discretion. It is understood that although the
information may be useful to the
- 4 -
<PAGE>
Trust and the Sub-Adviser, it is not possible to place a dollar value on such
information. Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., and subject to seeking best execution,
the Sub-Adviser may give consideration to sales of shares of the Fund as a
factor in its selection of brokers and dealers to execute portfolio transactions
of the Fund.
On occasions when the Sub-Adviser deems the purchase or sale of a security
to be in the best interest of the Fund as well as other clients, the
Sub-Adviser, to the extent permitted by applicable laws and regulations, may,
but shall be under no obligation to, aggregate the securities to be sold or
purchased in order to obtain the most favorable price or lower brokerage
commissions and efficient execution. In such event, allocation of the securities
so purchased or sold, as well as expenses incurred in the transaction, will be
made by the Sub-Adviser in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Trust and to such other
clients.
For each fiscal quarter of the Trust, the Sub-Adviser shall prepare and
render reports to the Adviser and the Trust's Board of Trustees of the total
brokerage business placed and the manner in which the allocation has been
accomplished. Such reports shall set forth at a minimum the information required
to be maintained by Rule 31a-1(b)(9) under the Act.
- 5 -
<PAGE>
B. The Sub-Adviser agrees that it will not execute any portfolio
transactions for the Fund's account with a broker or dealer which is an
"affiliated person" (as defined in the Act) of the Trust, the Adviser, the
Sub-Adviser or any portfolio manager of the Trust without the prior written
approval of the Adviser. The Adviser agrees that it will provide the Sub-Adviser
with a list of brokers and dealers which are "affiliated persons" of the Trust,
the Adviser or the Sub-Adviser.
6. TRANSACTION PROCEDURES. All transactions will be consummated by payment
to or delivery by the Fund's custodian (the "Custodian"), or such depositories
or agents as may be designated by the Custodian in writing, as custodian for the
Fund, of all cash and/or securities due to or from the Fund, and the Sub-Adviser
shall not have possession or custody thereof. The Sub-Adviser shall advise the
Custodian and confirm in writing to the Trust all investment orders for the Fund
placed by it with brokers and dealers. The Sub-Adviser shall issue to the
Custodian such instructions as may be appropriate in connection with the
settlement of any transaction initiated by the Sub-Adviser. It shall be the
responsibility of the Sub-Adviser to take appropriate action if the Custodian
fails to confirm in writing proper execution of the instructions.
7. PROXIES. The Trust will vote all proxies solicited by or with respect to
the issuers of securities in which assets of the Fund may be invested from time
to time.
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<PAGE>
8. REPORTS TO THE SUB-ADVISER. The Trust will provide the Sub-Adviser with
such periodic reports concerning the status of the Fund as the Sub-Adviser may
reasonably request.
9. FEES FOR SERVICES. For the services provided to the Fund, the Adviser
(not the Fund) shall pay the Sub-Adviser a monthly fee equal to the annual rate
of .15% of the value of the Fund's average daily net assets up to $100,000,000,
.10% of such assets from $100,000,000 to $200,000,000 and .07% of such assets in
excess of $200,000,000; provided, however, that the minimum fee is $3,000 per
month. Pursuant to the provisions of the Advisory Agreement between the Trust
and the Adviser, the Adviser is solely responsible for the payment of fees to
the Sub-Adviser, and the Sub-Adviser agrees to seek payment of the Sub-Adviser's
fees solely from the Adviser. The Sub-Adviser agrees to pay the compensation of
any persons rendering any services to the Fund who are officers, directors or
employees of the Sub-Adviser.
10. OTHER INVESTMENT ACTIVITIES OF THE SUB-ADVISER. The Trust acknowledges
that the Sub-Adviser or one or more of its affiliates may have investment
responsibilities or render investment advice to or perform other investment
advisory services for other individuals or entities and that the Sub-Adviser,
its affiliates or any of its or their directors, officers, agents or employees
may buy, sell or trade in any securities for its or their respective accounts
("Affiliated Accounts"). Subject to the provisions of paragraph 2 hereof, the
Trust agrees that the Sub-Adviser or its affiliates may give
- 7 -
<PAGE>
advice or exercise investment responsibility and take such other action with
respect to other Affiliated Accounts which may differ from the timing or nature
of action taken with respect to the Fund, provided that the Sub-Adviser acts in
good faith, and provided further, that it is the Sub-Adviser's policy to
allocate, within its reasonable discretion, investment opportunities to the Fund
over a period of time on a fair and equitable basis relative to the Affiliated
Accounts, taking into account the investment objectives and policies of the Fund
and any specific investment restrictions applicable thereto. The Trust
acknowledges that one or more of the Affiliated Accounts may at any time hold,
acquire, increase, decrease, dispose of or otherwise deal with positions in
investments in which the Fund may have an interest from time to time, whether in
transactions which involve the Fund or otherwise. The Sub-Adviser shall have no
obligation to acquire for the Fund a position in any investment which any
Affiliated Account may acquire, and the Trust shall have no first refusal,
co-investment or other rights in respect of any such investment, either for the
Fund or otherwise.
11. CERTIFICATE OF AUTHORITY. The Trust, the Adviser and the Sub-Adviser
shall furnish to each other from time to time certified copies of the
resolutions of their Board of Trustees or Board of Directors or executive
committees, as the case may be, evidencing the authority of officers and
employees who are authorized to act on behalf of the Trust, the Fund, the
Adviser and/or the Sub-Adviser.
- 8 -
<PAGE>
12. INDEMNIFICATION. The Adviser and the Trust, on behalf of the Fund, will
indemnify the Sub-Adviser and its directors, officers, employees and agents
("Indemnified Parties") against and hold the Indemnified Parties harmless from
any and all losses, claims, damages, liabilities or expenses (including
reasonable counsel fees and expenses) arising from any claim, demand, action, or
suit which results from any action taken, omitted or suffered to be taken by the
Indemnified Parties in their reasonable judgment, in good faith and believed by
them to be authorized or within the discretion or rights or powers conferred
upon them by this Agreement, or in accordance with (or in the absence of)
specific directions or instructions from the Trust or the Adviser, provided
however that such acts or omissions shall not have resulted from the Indemnified
Parties' willful misfeasance, bad faith, gross negligence or reckless disregard
of the Sub-Adviser's obligations and duties under this Agreement. The
obligations of the Adviser and the Trust under this paragraph shall survive the
termination of this Agreement. Nothing in this paragraph 12 shall be construed
in a manner inconsistent with Sections 17(h) and (i) of the Act.
13. CONFIDENTIALITY. Subject to the duty of the Sub-Adviser, the Adviser
and the Trust to comply with applicable law, including any demand of any
regulatory or taxing authority having jurisdiction, the parties hereto shall
treat as confidential all information pertaining to the Fund and the actions of
the Sub-Adviser and the Trust in respect thereof.
- 9 -
<PAGE>
14. ASSIGNMENT. No assignment of this Agreement shall be made by the
Sub-Adviser, and this Agreement shall terminate automatically in the event of
such assignment. The Sub-Adviser shall notify the Trust and the Adviser in
writing sufficiently in advance of any proposed change of control, as defined in
Section 2(a)(9) of the Act, as will enable the Trust and the Adviser to consider
whether an assignment will occur, and to take the steps necessary to enter into
a new contract with the Sub-Adviser.
15. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE TRUST. The Trust
represents, warrants and agrees that:
A. The Sub-Adviser has been duly appointed by the Board of Trustees of
the Trust to provide investment services to the Fund as contemplated hereby.
B. The Trust will deliver to the Sub-Adviser a true and complete copy
of its then current prospectus and statement of additional information as
effective from time to time and such other documents or instruments governing
the investments of the Fund and such other information as is necessary for the
Sub-Adviser to carry out its obligations under this Agreement.
C. The Trust is currently in compliance and shall at all times comply
with the requirements imposed upon the Trust by applicable laws and regulations.
16. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE SUB-ADVISER. The
Sub-Adviser represents, warrants and agrees that:
A. The Sub-Adviser is registered as an "investment adviser" under the
Investment Advisers Act of 1940.
- 10 -
<PAGE>
B. The Sub-Adviser will maintain, keep current and preserve on behalf
of the Trust, in the manner and for the time periods required or permitted by
the Act, the records identified in Schedule A. The Sub-Adviser agrees that such
records (unless otherwise indicated on Schedule A) are the property of the
Trust, and will be surrendered to the Trust promptly upon request.
C. The Sub-Adviser will complete such reports concerning purchases or
sales of securities on behalf of the Fund as the Adviser or the Trust may from
time to time require to ensure compliance with the Act, the Internal Revenue
Code of 1986 and applicable state securities laws.
D. The Sub-Adviser will adopt a written code of ethics complying with
the requirements of Rule 17j-1 under the Act and will provide the Trust with a
copy of the code of ethics and evidence of its adoption. Within forty-five (45)
days of the end of the last calendar quarter of each year while this Agreement
is in effect, the President or a Vice President of the Sub-Adviser shall certify
to the Trust that the Sub-Adviser has complied with the requirements of Rule
17j-1 during the previous year and that there has been no violation of the
Sub-Adviser's code of ethics or, if such a violation has occurred, that
appropriate action was taken in response to such violation. Upon the written
request of the Trust, the Sub-Adviser shall submit to the Trust the reports
required to be made to the Sub-Adviser by Rule 17j-1(c)(1).
E. The Sub-Adviser will immediately notify the Trust and the Adviser
of the occurrence of any event which would disqualify
- 11 -
<PAGE>
the Sub-Adviser from serving as an investment adviser of an investment company
pursuant to Section 9(a) of the Act or otherwise.
17. AMENDMENT. This Agreement may be amended at any time, but only by
written agreement between the Sub-Adviser, the Adviser and the Trust, which
amendment, other than amendments to Schedule A, is subject to the approval of
the Board of Trustees and the shareholders of the Fund in the manner required by
the Act and the rules thereunder, subject to any applicable exemptive order of
the Securities and Exchange Commission modifying the provisions of the Act with
respect to approval of amendments to this Agreement.
18. EFFECTIVE DATE; TERM. This Agreement shall become effective on the date
of its execution and shall remain in full force and effect for two (2) years
from the date hereof, and from year to year thereafter but only so long as such
continuance is specifically approved at least annually by the vote of a majority
of the Trustees who are not interested persons of the Trust, the Adviser or the
Sub-Adviser, cast in person at a meeting called for the purpose of voting on
such approval, and by a vote of the Board of Trustees or of a majority of the
outstanding voting securities of the Fund. The aforesaid requirement that this
Agreement may be continued "annually" shall be construed in a manner consistent
with the Act and the rules and regulations thereunder.
19. TERMINATION. This Agreement may be terminated by any party hereto,
without the payment of any penalty, immediately upon written notice to the other
in the event of a breach of any
- 12 -
<PAGE>
provision thereof by the party so notified, or otherwise upon sixty (60) days'
written notice to the other, but any such termination shall not affect the
status, obligations or liabilities of any party hereto to the other.
20. SHAREHOLDER LIABILITY. The Sub-Adviser is hereby expressly put on
notice of the limitation of shareholder liability as set forth in the
Declaration of Trust of the Trust and agrees that obligations assumed by the
Trust pursuant to this Agreement shall be limited in all cases to the Trust and
its assets. The Sub-Adviser agrees that it shall not seek satisfaction of any
such obligations from the shareholders or any individual shareholder of the
Fund, nor from the Trustees or any individual Trustee of the Trust.
21. USE OF NAME. Neither the Adviser nor the Trust nor the Fund will use
the Sub-Adviser's name in any sales literature or other material in a manner not
approved by the Sub-Adviser in writing before such use; provided however, that
the Sub-Adviser will consent to all such uses of the Sub-Adviser's name which
merely refer in accurate terms to its appointment hereunder or which are
required by the Securities and Exchange Commission or a state securities
commission.
22. DEFINITIONS. As used in paragraphs 14 and 18 of this Agreement, the
terms "assignment," interested person" and "vote of a majority of the
outstanding voting securities" shall have the meanings set forth in the Act and
the rules and regulations thereunder.
- 13 -
<PAGE>
23. APPLICABLE LAW. To the extent that state law is not preempted by the
provisions of any law of the United States heretofore or hereafter enacted, as
the same may be amended from time to time, this Agreement shall be administered,
construed and enforced according to the laws of the State of Ohio.
- 14 -
<PAGE>
WELLS ASSET MANAGEMENT, INC. WELLS FAMILY OF REAL ESTATE FUNDS
By: /s/ Leo F. Wells By: /s/ Leo F. Wells
------------------------ -----------------------------
Title: President Title: President
Date: January 12, 1998 Date: January 12, 1998
ACCEPTANCE
----------
The foregoing Agreement is hereby accepted.
GATEWAY INVESTMENT ADVISERS, L.P.
By: /s/ Walter G. Sall
-----------------------------
Title: Chairman
--------------------------
Date: January 12, 1998
- 15 -
<PAGE>
SCHEDULE A
RECORDS TO BE MAINTAINED BY THE SUB-ADVISER
-------------------------------------------
1. (Rule 31a-1(b)(5) and (6)) A record of each brokerage order, and all other
portfolio purchases or sales, given by the Sub-Adviser on behalf of the
Fund for, or in connection with, the purchase or sale of securities,
whether executed or unexecuted. Such records shall include:
A. The name of the broker;
B. The terms and conditions of the order and of any modification or
cancellation thereof;
C. The time of entry or cancellation;
D. The price at which executed;
E. The time of receipt of a report of execution; and
F. The name of the person who placed the order on behalf of the Fund.
2. (Rule 31a-1(b)(9)) A record for each fiscal quarter, completed within ten
(10) days after the end of the quarter, showing specifically the basis or
bases upon which the allocation of orders for the purchase and sale of
portfolio securities to named brokers or dealers was effected, and the
division of brokerage commissions or other compensation on such purchase
and sale orders. Such record:
A. Shall include the consideration given to:
(i) The sale of shares of the Fund by brokers or dealers.
(ii) The supplying of services or benefits by brokers or dealers to:
(a) The Trust;
(b) the Adviser;
(c) the Sub-Adviser;
(d) any other portfolio adviser of the Trust; and
(e) any person affiliated with the foregoing persons.
- 16 -
<PAGE>
(iii) Any other consideration other than the technical qualifications
of the brokers and dealers as such.
B. Shall show the nature of the services or benefits made available.
C. Shall describe in detail the application of any general or specific
formula or other determinant used in arriving at such allocation of
purchase and sale orders and such division of brokerage commissions or
other compensation.
D. The name of the person responsible for making the determination of
such allocation and such division of brokerage commissions or other
compensation.
3. (Rule 31a-1(f)) Such accounts, books and other documents as are required to
be maintained by registered investment advisers by rules adopted under
Section 204 of the Investment Advisers Act of 1940, to the extent such
records are necessary or appropriate to record the Sub-Adviser's
transactions with respect to the Fund.
- 17 -
UNDERWRITING AGREEMENT
----------------------
This Agreement made as of January 12, 1998 by and between the Wells Family
of Real Estate Funds, an Ohio business trust (the "Trust"), and Wells Investment
Securities, Inc., a Georgia corporation ("Underwriter").
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, Underwriter is a broker-dealer registered with the Securities and
Exchange Commission and a member of the National Association of Securities
Dealers, Inc. (the "NASD"); and
WHEREAS, the Trust and Underwriter are desirous of entering into an
agreement providing for the distribution by Underwriter of shares of beneficial
interest (the "Shares") of each series of shares of the Trust (the "Series");
NOW, THEREFORE, in consideration of the promises and agreements of the
parties contained herein, the parties agree as follows:
1. Appointment.
------------
The Trust hereby appoints Underwriter as its exclusive agent for the
distribution of the Shares in jurisdictions wherein such shares may legally be
offered for sale, and Underwriter hereby accepts such appointment under the
terms of this Agreement. While this Agreement is in force, the Trust shall not
sell any Shares except on the terms set forth in this Agreement.
<PAGE>
Notwithstanding any other provision hereof, the Trust may terminate, suspend or
withdraw the offering of Shares whenever, in its sole discretion, it deems such
action to be desirable.
2. Sale and Repurchase of Shares.
------------------------------
(a) Underwriter will have the right, as agent for the Trust, to enter
into dealer agreements with responsible investment dealers, and to sell Shares
to such investment dealers against orders therefor at the public offering price
(as defined in subparagraph 2(e) hereof) less a discount determined by
Underwriter, which discount shall not exceed the amount of the sales charge
stated in the Trust's effective Registration Statement on Form N-1A under the
Securities Act of 1933, as amended, including the then current prospectus and
statement of additional information (the "Registration Statement"). Upon receipt
of an order to purchase Shares from a dealer with whom Underwriter has a dealer
agreement, Underwriter will promptly cause such order to be filled by the Trust.
(b) Underwriter will also have the right, as agent for the Trust, to
sell such Shares to the public against orders therefor at the public offering
price.
(c) Underwriter will also have the right, as agent for the Trust, to
sell Shares at their net asset value to such persons as may be approved by the
Trustees of the Trust, all such sales to comply with the provisions of the Act
and the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
- 2 -
<PAGE>
(d) Underwriter will also have the right to take, as agent for the
Trust, all actions which, in Underwriter's judgment, are necessary to carry into
effect the distribution of the Shares.
(e) The public offering price for the Shares of each Series shall be
the respective net asset value of the Shares of that Series then in effect, plus
any applicable sales charge determined in the manner set forth in the
Registration Statement or as permitted by the Act and the rules and regulations
of the Securities and Exchange Commission promulgated thereunder. In no event
shall any applicable sales charge exceed the maximum sales charge permitted by
the Rules of Fair Practice of the NASD.
(f) The net asset value of the Shares of each Series shall be
determined in the manner provided in the Registration Statement, and when
determined shall be applicable to transactions as provided for in the
Registration Statement. The net asset value of the Shares of each Series shall
be calculated by the Trust or by another entity on behalf of the Trust.
Underwriter shall have no duty to inquire into or liability for the accuracy of
the net asset value per Share as calculated.
(g) On every sale, the Trust shall receive the applicable net asset
value of the Shares promptly, but in no event later than the third business day
following the date on which Underwriter shall have received an order for the
purchase of the Shares. Underwriter shall have the right to retain the sales
charge less any applicable dealer discount.
- 3 -
<PAGE>
(h) Upon receipt of purchase instructions, Underwriter will transmit
such instructions to the Trust or its transfer agent for registration of the
Shares purchased.
(i) Nothing in this Agreement shall prevent Underwriter or any
affiliated person (as defined in the Act) of Underwriter from acting as
underwriter or distributor for any other person, firm or corporation (including
other investment companies) or in any way limit or restrict Underwriter or any
such affiliated person from buying, selling or trading any securities for its or
their own account or for the accounts of others for whom it or they may be
acting; provided, however, that Underwriter expressly represents that it will
undertake no activities which, in its judgment, will adversely affect the
performance of its obligations to the Trust under this Agreement.
(j) Underwriter, as agent of and for the account of the Trust, may
repurchase the Shares at such prices and upon such terms and conditions as shall
be specified in the Registration Statement.
3. Sale of Shares by the Trust.
----------------------------
The Trust reserves the right to issue any Shares at any time directly
to the holders of Shares ("Shareholders"), to sell Shares to its Shareholders or
to other persons approved by Underwriter at not less than net asset value and to
issue Shares in exchange for substantially all the assets of any corporation or
trust or for the shares of any corporation or trust.
- 4 -
<PAGE>
4. Basis of Sale of Shares.
------------------------
Underwriter does not agree to sell any specific number of Shares.
Underwriter, as agent for the Trust, undertakes to sell Shares on a best efforts
basis only against orders therefor.
5. Rules of NASD, etc.
-------------------
(a) Underwriter will conform to the Rules of Fair Practice of the NASD
and the securities laws of any jurisdiction in which it sells, directly or
indirectly, any Shares.
(b) Underwriter will require each dealer with whom Underwriter has a
dealer agreement to conform to the applicable provisions hereof and the
Registration Statement with respect to the public offering price of the Shares,
and neither Underwriter nor any such dealers shall withhold the placing of
purchase orders so as to make a profit thereby.
(c) Underwriter agrees to furnish to the Trust sufficient copies of
any agreements, plans or other materials it intends to use in connection with
any sales of Shares in adequate time for the Trust to file and clear them with
the proper authorities before they are put in use, and not to use them until so
filed and cleared.
(d) Underwriter, at its own expense, will qualify as dealer or broker,
or otherwise, under all applicable state or federal laws required in order that
Shares may be sold in such states as may be mutually agreed upon by the parties.
- 5 -
<PAGE>
(e) Underwriter shall not make, or permit any representative, broker
or dealer to make, in connection with any sale or solicitation of a sale of the
Shares, any representations concerning the Shares except those contained in the
then current prospectus and statement of additional information covering the
Shares and in printed information approved by the Trust as information
supplemental to such prospectus and statement of additional information. Copies
of the then effective prospectus and statement of additional information and any
such printed supplemental information will be supplied by the Trust to
Underwriter in reasonable quantities upon request.
6. Records to be Supplied by Trust.
--------------------------------
The Trust shall furnish to Underwriter copies of all information,
financial statements and other papers which Underwriter may reasonably request
for use in connection with the distribution of the Shares, and this shall
include, but shall not be limited to, one certified copy, upon request by
Underwriter, of all financial statements prepared for the Trust by independent
public accountants.
7. Expenses.
---------
In the performance of its obligations under this Agreement,
Underwriter will pay only the costs incurred in qualifying as a broker or dealer
under state and federal laws and in establishing and maintaining its
relationships with the dealers selling the Shares. All other costs in connection
with
- 6 -
<PAGE>
the offering of the Shares will be paid by the Trust or the Trust's investment
adviser (the "Adviser") in accordance with agreements between them as permitted
by applicable law, including the Act and rules and regulations promulgated
thereunder.
The Trust shall pay Underwriter (a) amounts necessary in order to
permit Underwriter to pay (i) payments to securities dealers and others who are
engaged in the sale of Shares and who may be advising shareholders of the Trust
regarding the purchase, sale or retention of Shares; (ii) expenses of
maintaining personnel (including personnel of organizations with which the Trust
has entered into agreements related to this Plan) who engage in or support
distribution of Shares or who render shareholder support services not otherwise
provided by the Trust's transfer agent, including, but not limited to, office
space and equipment, telephone facilities and expenses, answering routine
inquiries regarding the Trust, processing shareholder transactions, and
providing such other shareholder services as the Trust may reasonably request;
(iii) for expenses incurred in formulating and implementing of marketing and
promotional activities, including, but not limited to, direct mail promotions
and television, radio, newspaper, magazine and other mass media advertising;
(iv) for expenses incurred in preparing, printing and distributing sales
literature; (v) for expenses incurred in preparing, printing and distributing
prospectuses and statements of additional information and reports of the Trust
for recipients
- 7 -
<PAGE>
other than existing shareholders of the Trust; and (vi) for expenses incurred in
obtaining such information, analyses and reports with respect to marketing and
promotional activities as may, from time to time, be deemed advisable, and (b)
for such other distribution costs as the Board of Trustees of the Trust,
including a majority of the Rule 12b-1 Trustees (as that term is defined in the
Registration Statement), may from time to time specify in a resolution adopted
by the Board; provided, however, that the total amount reimbursed by the Fund in
any given year shall not exceed such maximum limits as may be set forth from
time to time under the Trust's Plan of Distribution Pursuant to Rule 12b-1 under
the Act. It is understood that at such time as this maximum is reached
Underwriter will have no obligation to continue to perform under this Agreement.
The Trust agrees that if Underwriter thereafter continues to perform under this
Agreement, Underwriter may seek payment from the Trust in the amount of the
expenses incurred by it on behalf of the Trust at such times in the future as
the expenditure limits set forth have not otherwise been reached. Underwriter
acknowledges that the Trust will have no contractual obligation to pay any
portion of such amounts, if any, and that the time and conditions under which
the Trust might make such payment as requested by Underwriter will be solely
within the discretion of those trustees who are deemed to be Rule 12b-1
Trustees. Underwriter agrees to provide to the Board of Trustees of the Trust,
for each
- 8 -
<PAGE>
fiscal quarter elapsing after the commencement of the offering contemplated
hereby, a written report accounting for the monies paid or payable to
Underwriter by the Trust under this Agreement, which report shall state the
amounts expended by Underwriter and the purposes for which such expenditures
were made.
8. Indemnification of Trust.
-------------------------
Underwriter, to the extent of the net commission received by it from
the sale of Shares but to no greater amount, agrees to indemnify and hold
harmless the Trust, the Adviser and each person who has been, is, or may
hereafter be a trustee, director, officer, employee, partner, shareholder or
control person of the Trust or the Adviser, against any loss, damage or expense
(including the reasonable costs of investigation) reasonably incurred by any of
them in connection with any claim or in connection with any action, suit or
proceeding to which any of them may be a party, which arises out of or is
alleged to arise out of or is based upon any untrue statement or alleged untrue
statement of a material fact, or the omission or alleged omission to state a
material fact necessary to make the statements not misleading, on the part of
Underwriter or any agent or employee of Underwriter or any other person for
whose acts Underwriter is responsible, unless such statement or omission was
made in reliance upon written information furnished by the Trust or the Adviser.
Underwriter likewise, to the extent of the net commission received by it from
the sale of Shares but
- 9 -
<PAGE>
to no greater amount, agrees to indemnify and hold harmless the Trust, the
Adviser and each such person in connection with any claim or in connection with
any action, suit or proceeding which arises out of or is alleged to arise out of
Underwriter's failure to exercise reasonable care and diligence with respect to
its services, if any, rendered in connection with investment, reinvestment,
automatic withdrawal and other plans for Shares. The term "expenses" for
purposes of this and the next paragraph includes amounts paid in satisfaction of
judgments or in settlements which are made with Underwriter's consent. The
foregoing rights of indemnification shall be in addition to any other rights to
which the Trust, the Adviser or each such person may be entitled as a matter of
law.
9. Indemnification of Underwriter.
-------------------------------
Underwriter, its directors, officers, employees, shareholders and
control persons shall not be liable for any error of judgment or mistake of law
or for any loss suffered by the Trust in connection with the matters to which
this Agreement relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of any of such persons in the performance
of Underwriter's duties. The Trust will advance attorneys' fees or other
expenses incurred by any such person in defending a proceeding, upon the
undertaking by or on behalf of such person to repay the advance if it is
ultimately determined that such person is not entitled to indemnification. Any
person
- 10 -
<PAGE>
employed by Underwriter who may also be or become an officer or employee of the
Trust shall be deemed, when acting within the scope of his employment by the
Trust, to be acting in such employment solely for the Trust and not as an
employee or agent of Underwriter.
10. Termination and Amendment of this Agreement.
--------------------------------------------
This Agreement shall automatically terminate, without the payment of
any penalty, in the event of its assignment (as such term is defined under the
Act). This Agreement may be amended only if such amendment is approved (i) by
Underwriter, (ii) either by action of the Board of Trustees of the Trust or at a
meeting of the Shareholders of the Trust by the affirmative vote of a majority
of the outstanding Shares, and (iii) by a majority of the Trustees of the Trust
who are not interested persons of the Trust or of Underwriter by vote cast in
person at a meeting called for the purpose of voting on such approval.
Either the Trust or Underwriter may at any time terminate this
Agreement on sixty (60) days' written notice delivered or mailed by registered
mail, postage prepaid, to the other party.
11. Effective Period of this Agreement.
-----------------------------------
This Agreement shall take effect upon its execution and shall remain
in full force and effect for a period of two (2) years from the date of its
execution (unless terminated automatically as set forth in Section 10), and from
year to year
- 11 -
<PAGE>
thereafter, subject to annual approval (i) by Underwriter, (ii) by the Board of
Trustees of the Trust or a vote of a majority of the outstanding Shares, and
(iii) by a majority of the Trustees of the Trust who are not interested persons
of the Trust or of Underwriter by vote cast in person at a meeting called for
the purpose of voting on such approval.
12. Limitation of Liability.
------------------------
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, Shareholders, nominees, officers,
agents or employees of the Trust, personally, but bind only the trust property
of the Trust, as provided in the Agreement and Declaration of Trust of the
Trust. The execution and delivery of this Agreement have been authorized by the
Trustees and Shareholders of the Trust and signed by an officer of the Trust,
acting as such, and neither such authorization by such Trustees and Shareholders
nor such execution and delivery by such officer shall be deemed to have been
made by any of them individually or to impose any liability on any of them
personally, but shall bind only the trust property of the Trust as provided in
its Agreement and Declaration of Trust.
13. New Series.
-----------
The terms and provisions of this Agreement shall become automatically
applicable to any additional series of the Trust established during the initial
or renewal term of this Agreement.
- 12 -
<PAGE>
14. Successor Investment Company.
-----------------------------
Unless this Agreement has been terminated in accordance with Paragraph
10, the terms and provisions of this Agreement shall become automatically
applicable to any investment company which is a successor to the Trust as a
result of reorganization, recapitalization or change of domicile.
15. Severability.
-------------
In the event any provision of this Agreement is determined to be void
or unenforceable, such determination shall not affect the remainder of this
Agreement, which shall continue to be in force.
16. Questions of Interpretation.
----------------------------
(a) This Agreement shall be governed by the laws of the State of
Georgia.
(b) Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or provision
of the Act shall be resolved by reference to such term or provision of the Act
and to interpretation thereof, if any, by the United States courts or in the
absence of any controlling decision of any such court, by rules, regulations or
orders of the Securities and Exchange Commission issued pursuant to said Act. In
addition, where the effect of a requirement of the Act, reflected in any
provision of this Agreement is revised by rule, regulation or order of the
Securities and Exchange Commission, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
- 13 -
<PAGE>
17. Notices.
--------
Any notices under this Agreement shall be in writing, addressed and
delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Trust for this purpose
shall be 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202 and that the
address of Underwriter for this purpose shall be 3885 Holcomb Bridge Road,
Norcross, Georgia 30092.
IN WITNESS WHEREOF, the Trust and Underwriter have each caused this
Agreement to be signed in duplicate on their behalf, all as of the day and year
first above written.
ATTEST: WELLS FAMILY OF REAL ESTATE FUNDS
/s/ Linda L. Carson By: /s/ Leo F Wells
- ----------------------------- ------------------------------
Secretary Its: President
ATTEST: WELLS INVESTMENT SECURITIES, INC.
/s/ Linda L. Carson By: /s/ Leo F. Wells
- ----------------------------- ------------------------------
Secretary Its: President
- 14 -
CUSTODY AGREEMENT
-----------------
This AGREEMENT, dated as of January 12, 1998, by and between the WELLS
FAMILY OF REAL ESTATE FUNDS (the "Trust"), a business trust organized under the
laws of the State of Ohio, acting with respect to its existing series as of the
date of this Agreement, and such other series as shall be designated from time
to time by the Trust (individually, a "Fund" and, collectively, the "Funds"),
each of them a series of the Trust and each of them operated and administered by
the Trust, and STAR BANK, N.A., a national banking association (the
"Custodian").
W I T N E S S E T H:
--------------------
WHEREAS, the Trust desires that the Funds' Securities and cash be held and
administered by the Custodian pursuant to this Agreement; and
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Trust and the Custodian hereby agree as follows:
<PAGE>
ARTICLE I
---------
DEFINITIONS
-----------
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
1.1 "AUTHORIZED PERSON" means any Officer or other person duly authorized
by resolution of the Board of Trustees to give Oral Instructions and Written
Instructions on behalf of the Funds and named in Exhibit A hereto or in such
resolutions of the Board of Trustees, certified by an Officer, as may be
received by the Custodian from time to time.
1.2 "BOARD OF TRUSTEES" shall mean the Trustees from time to time serving
under the Trust's Agreement and Declaration of Trust, as from time to time
amended.
1.3 "BOOK-ENTRY SYSTEM" shall mean a federal book-entry system as provided
in Subpart O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of 31 CFR
Part 350, or in such book-entry regulations of federal agencies as are
substantially in the form of such Subpart O.
1.4 "BUSINESS DAY" shall mean any day recognized as a settlement day by The
New York Stock Exchange, Inc. and any other day for which the Trust computes the
net asset value of Shares of any Fund.
1.5 "FUND CUSTODY ACCOUNT" shall mean any of the accounts in the name of
the Trust, which is provided for in Section 3.2 below.
- 2 -
<PAGE>
1.6 "NASD" shall mean The National Association of Securities Dealers, Inc.
1.7 "OFFICER" shall mean the Chairman, the President, any Vice President,
any Assistant Vice President, the Secretary, any Assistant Secretary, the
Treasurer, or any Assistant Treasurer of the Trust.
1.8 "ORAL INSTRUCTIONS" shall mean instructions orally transmitted to and
accepted by the Custodian because such instructions are: (i) reasonably believed
by the Custodian to have been given by an Authorized Person, (ii) recorded and
kept among the records of the Custodian made in the ordinary course of business
and (iii) orally confirmed by the Custodian. The Trust shall cause all Oral
Instructions to be confirmed by Written Instructions prior to the end of the
next Business Day. If such Written Instructions confirming Oral Instructions are
not received by the Custodian prior to a transaction, it shall in no way affect
the validity of the transaction or the authorization thereof by the Trust. If
Oral Instructions vary from the Written Instructions which purport to confirm
them, the Custodian shall notify the Trust of such variance but such Oral
Instructions will govern unless the Custodian has not yet acted.
1.9 "PROPER INSTRUCTIONS" shall mean Oral Instructions or Written
Instructions. Proper Instructions may be continuing Written Instructions when
deemed appropriate by both parties.
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<PAGE>
1.10 "SECURITIES DEPOSITORY" shall mean The Depository Trust Company and
(provided that Custodian shall have received a copy of a resolution of the Board
of Trustees, certified by an Officer, specifically approving the use of such
clearing agency as a depository for the Funds) any other clearing agency
registered with the Securities and Exchange Commission under Section 17A of the
Securities and Exchange Act of 1934 as amended (the "1934 Act"), which acts as a
system for the central handling of Securities where all Securities of any
particular class or series of an issuer deposited within the system are treated
as fungible and may be transferred or pledged by bookkeeping entry without
physical delivery of the Securities.
1.11 "SECURITIES" shall include, without limitation, common and preferred
stocks, bonds, call options, put options, debentures, notes, bank certificates
of deposit, bankers' acceptances, mortgage-backed securities or other
obligations, and any certificates, receipts, warrants or other instruments or
documents representing rights to receive, purchase or subscribe for the same, or
evidencing or representing any other rights or interests therein, or any similar
property or assets that the Custodian has the facilities to clear and to
service.
1.12 "SHARES" shall mean, with respect to a Fund, the units of beneficial
interest issued by the Trust on account of such Fund.
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<PAGE>
1.13 "SUB-CUSTODIAN" shall mean and include (i) any branch of a "U.S.
Bank," as that term is defined in Rule 17f-5 under the 1940 Act, (ii) any
"Eligible Foreign Custodian," as that term is defined in Rule 17f-5 under the
1940 Act, having a contract with the Custodian which the Custodian has
determined will provide reasonable care of assets of the Funds based on the
standards specified in Section 3.3 below. Such contract shall include provisions
that provide: (i) for indemnification or insurance arrangements (or any
combination of the foregoing) such that the Funds will be adequately protected
against the risk of loss of assets held in accordance with such contract; (ii)
that the Funds' assets will not be subject to any right, charge, security
interest, lien or claim of any kind in favor of the Sub-Custodian or its
creditors except a claim of payment for their safe custody or administration, in
the case of cash deposits, liens or rights in favor of creditors of the
Sub-Custodian arising under bankruptcy, insolvency, or similar laws; (iii) that
beneficial ownership of the Funds' assets will be freely transferable without
the payment of money or value other than for safe custody or administration;
(iv) that adequate records will be maintained identifying the assets as
belonging to the Funds or as being held by a third party for the benefit of the
Funds; (v) that the Funds' independent public accountants will be given access
to those records or confirmation of the contents of those records; and (vi) that
the Funds will receive periodic reports with
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<PAGE>
respect to the safekeeping of the Funds' assets, including, but not limited to,
notification of any transfer to or from a Fund's account or a third party
account containing assets held for the benefit of the Fund. Such contract may
contain, in lieu of any or all of the provisions specified above, such other
provisions that the Custodian determines will provide, in their entirety, the
same or greater level of care and protection for Fund assets as the specified
provisions, in their entirety.
1.14 "WRITTEN INSTRUCTIONS" shall mean (i) written communications actually
received by the Custodian and signed by an Authorized Person, or (ii)
communications by telex or any other such system from one or more persons
reasonably believed by the Custodian to be Authorized Persons, or (iii)
communications between electro-mechanical or electronic devices provided that
the use of such devices and the procedures for the use thereof shall have been
approved by resolutions of the Board of Trustees, a copy of which, certified by
an Officer, shall have been delivered to the Custodian.
ARTICLE II
----------
APPOINTMENT OF CUSTODIAN
------------------------
2.1 APPOINTMENT. The Trust hereby constitutes and appoints the Custodian as
custodian of all Securities and cash owned by or in the possession of the Funds
at any time during the period of this Agreement.
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<PAGE>
2.2 ACCEPTANCE. The Custodian hereby accepts appointment as such custodian
and agrees to perform the duties thereof as hereinafter set forth.
2.3 DOCUMENTS TO BE FURNISHED. The following documents, including any
amendments thereto, will be provided contemporaneously with the execution of the
Agreement to the Custodian by the Trust:
a. A copy of the Declaration of Trust of the Trust certified by the
Secretary;
b. A copy of the Bylaws of the Trust certified by the Secretary;
c. A copy of the resolution of the Board of Trustees of the Trust
appointing the Custodian, certified by the Secretary;
d. A copy of the then current Prospectus of each Fund; and
e. A certification of the President and Secretary of the Trust
setting forth the names and signatures of the current Officers of
the Trust and other Authorized Persons.
2.4 NOTICE OF APPOINTMENT OF DIVIDEND AND TRANSFER AGENT. The Trust agrees
to notify the Custodian in writing of the appointment, termination or change in
appointment of any Dividend and Transfer Agent of the Funds.
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<PAGE>
ARTICLE III
-----------
CUSTODY OF CASH AND SECURITIES
------------------------------
3.1 SEGREGATION. All Securities and non-cash property held by the Custodian
for the account of a Fund (other than Securities maintained in a Securities
Depository or Book-Entry System) shall be physically segregated from other
Securities and non-cash property in the possession of the Custodian (including
the Securities and non-cash property of the other Funds) and shall be identified
as subject to this Agreement.
3.2 FUND CUSTODY ACCOUNTS. As to each Fund, the Custodian shall open and
maintain in its trust department a custody account in the name of the Trust
coupled with the name of such Fund, subject only to draft or order of the
Custodian, in which the Custodian shall enter and carry all Securities, cash and
other assets of such Fund which are delivered to it.
3.3 APPOINTMENT OF AGENTS. (a) In its discretion, the Custodian may appoint
one or more Sub-Custodians to act as Securities Depositories or as
sub-custodians to hold Securities and cash of the Funds and to carry out such
other provisions of this Agreement as it may determine, provided, however, that
the appointment of any such agents and maintenance of any Securities and cash of
the Funds shall be at the Custodian's expense and shall not relieve the
Custodian of any of its obligations or liabilities under this Agreement.
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<PAGE>
(b) If, after the initial approval of Sub-Custodians by the Board of
Trustees in connection with this Agreement, the Custodian wishes to appoint
other Sub-Custodians to hold property of the Funds, it will so notify the Trust
and provide it with information reasonably necessary to determine any such new
Sub-Custodian's eligibility under Rule 17f-5 under the 1940 Act, including a
copy of the proposed agreement with such Sub-Custodian. The Trust shall at the
meeting of the Board of Trustees next following receipt of such notice and
information give a written approval or disapproval of the proposed action.
(c) The Agreement between the Custodian and each Sub-Custodian acting
hereunder shall contain the required provisions set forth in Rule
17f-5(a)(1)(iii).
(d) At the end of each calendar quarter, the Custodian shall provide
written reports notifying the Board of Trustees of the placement of the
Securities and cash of the Funds with a particular Sub-Custodian and of any
material changes in the Funds' arrangements. The Custodian shall promptly take
such steps as may be required to withdraw assets of the Funds from any
Sub-Custodian that has ceased to meet the requirements of Rule 17f-5 under the
1940 Act.
(e) With respect to its responsibilities under this Section 3.3, the
Custodian hereby warrants to the Trust that it agrees to exercise reasonable
care, prudence and diligence such as a person having responsibility for the
safekeeping of property of the
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<PAGE>
Funds. The Custodian further warrants that a Fund's assets will be subject to
reasonable care, based on the standards applicable to custodians in the relevant
market, if maintained with each Sub-Custodian, after considering all factors
relevant to the safekeeping of such assets, including, without limitation: (i)
the Sub-Custodian's practices, procedures, and internal controls, including, but
not limited to, the physical protections available for certificated securities
(if applicable), the method of keeping custodial records, and the security and
data protection practices; (ii) whether the Sub-Custodian has the requisite
financial strength to provide reasonable care for Fund assets; (iii) the
Sub-Custodian's general reputation and standing and, in the case of a Securities
Depository, the Securities Depository's operating history and number of
participants; and (iv) whether the Funds will have jurisdiction over and be able
to enforce judgments against the Sub-Custodian, such as by virtue of the
existence of any offices of the Sub-Custodian in the United States or the
Sub-Custodian's consent to service of process in the United States.
(f) The Custodian shall establish a system to monitor the appropriateness
of maintaining the Funds' assets with a particular Sub-Custodian and the
contract governing the Funds' arrangements with such Sub-Custodian.
3.4 DELIVERY OF ASSETS TO CUSTODIAN. The Trust shall deliver, or cause to
be delivered, to the Custodian all of the Funds' Securities, cash and other
assets, including (a) all payments of income, payments of principal and capital
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distributions received by the Funds with respect to such Securities, cash or
other assets owned by the Funds at any time during the period of this Agreement,
and (b) all cash received by the Funds for the issuance, at any time during such
period, of Shares. The Custodian shall not be responsible for such Securities,
cash or other assets until actually received by it.
3.5 SECURITIES DEPOSITORIES AND BOOK-ENTRY SYSTEMS. The Custodian may
deposit and/or maintain Securities of the Funds in a Securities Depository or in
a Book-Entry System, subject to the following provisions:
(a) Prior to a deposit of Securities of the Funds in any Securities
Depository or Book-Entry System, the Trust shall deliver to the
Custodian a resolution of the Board of Trustees, certified by an
Officer, authorizing and instructing the Custodian on an on-going
basis to deposit in such Securities Depository or Book-Entry
System all Securities eligible for deposit therein and to make
use of such Securities Depository or Book-Entry System to the
extent possible and practical in connection with its performance
hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of
Securities, and deliveries and returns of collateral consisting
of Securities.
(b) Securities of the Funds kept in a Book-Entry System or Securities
Depository shall be kept in an account
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<PAGE>
("Depository Account") of the Custodian in such Book-Entry System
or Securities Depository which includes only assets held by the
Custodian as a fiduciary, custodian or otherwise for customers.
(c) The records of the Custodian with respect to Securities of a Fund
maintained in a Book-Entry System or Securities Depository shall,
by book-entry, identify such Securities as belonging to such
Fund.
(d) If Securities purchased by a Fund are to be held in a Book-Entry
System or Securities Depository, the Custodian shall pay for such
Securities upon (i) receipt of advice from the Book-Entry System
or Securities Depository that such Securities have been
transferred to the Depository Account, and (ii) the making of an
entry on the records of the Custodian to reflect such payment and
transfer for the account of such Fund. If Securities sold by a
Fund are held in a Book-Entry System or Securities Depository,
the Custodian shall transfer such Securities upon (i) receipt of
advice from the Book-Entry System or Securities Depository that
payment for such Securities has been transferred to the
Depository Account, and (ii) the making of an entry on the
records of the Custodian to reflect such transfer and payment for
the account of such Fund.
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<PAGE>
(e) The Custodian shall provide the Trust with copies of any report
(obtained by the Custodian from a Book-Entry System or Securities
Depository in which Securities of the Funds are kept) on the
internal accounting controls and procedures for safeguarding
Securities deposited in such Book-Entry System or Securities
Depository.
(f) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Trust for any loss or damage to
a Fund resulting (i) from the use of a Book-Entry System or
Securities Depository by reason of any negligence or willful
misconduct on the part of Custodian or any Sub-Custodian
appointed pursuant to Section 3.3 above or any of its or their
employees, or (ii) from failure of Custodian or any such
Sub-Custodian to enforce effectively such rights as it may have
against a Book-Entry System or Securities Depository. At its
election, the Trust shall be subrogated to the rights of the
Custodian with respect to any claim against a Book-Entry System
or Securities Depository or any other person from any loss or
damage to the Funds arising from the use of such Book-Entry
System or Securities Depository, if and to the extent that the
Funds have not been made whole for any such loss or damage.
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<PAGE>
3.6 DISBURSEMENT OF MONEYS FROM FUND CUSTODY ACCOUNTS. Upon receipt of
Proper Instructions, the Custodian shall disburse moneys from a Fund Custody
Account but only in the following cases:
(a) For the purchase of Securities for the Fund but only in
accordance with Section 4.1 of this Agreement and only (i) in the
case of Securities (other than options on Securities, futures
contracts and options on futures contracts), against the delivery
to the Custodian (or any Sub-Custodian appointed pursuant to
Section 3.3 above) of such Securities registered as provided in
Section 3.9 below or in proper form for transfer, or if the
purchase of such Securities is effected through a Book-Entry
System or Securities Depository, in accordance with the
conditions set forth in Section 3.5 above; (ii) in the case of
options on Securities, against delivery to the Custodian (or such
Sub-Custodian) of such receipts as are required by the customs
prevailing among dealers in such options; (iii) in the case of
futures contracts and options on futures contracts, against
delivery to the Custodian (or such Sub-Custodian) of evidence of
title thereto in favor of the Fund or any nominee referred to in
Section 3.9 below; and (iv) in the case of repurchase or reverse
repurchase agreements entered into between the Trust
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<PAGE>
and a bank which is a member of the Federal Reserve System or
between the Trust and a primary dealer in U.S. Government
securities, against delivery of the purchased Securities either
in certificate form or through an entry crediting the Custodian's
account at a Book-Entry System or Securities Depository with such
Securities;
(b) In connection with the conversion, exchange or surrender, as set
forth in Section 3.7(f) below, of Securities owned by the Fund;
(c) For the payment of any dividends or capital gain distributions
declared by the Fund;
(d) In payment of the redemption price of Shares as provided in
Section 5.1 below;
(e) For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the
account of the Fund: interest; taxes; administration, investment
advisory, accounting, auditing, transfer agent, custodian,
trustee and legal fees; and other operating expenses of the Fund;
in all cases, whether or not such expenses are to be in whole or
in part capitalized or treated as deferred expenses;
(f) For transfer in accordance with the provisions of any agreement
among the Trust, the Custodian and a broker-dealer registered
under the 1934 Act and a
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<PAGE>
member of the NASD, relating to compliance with rules of The
Options Clearing Corporation and of any registered national
securities exchange (or of any similar organization or
organizations) regarding escrow or other arrangements in
connection with transactions by the Fund;
(g) For transfer in accordance with the provision of any agreement
among the Trust, the Custodian, and a futures commission merchant
registered under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity Futures Trading
Commission and/or any contract market (or any similar
organization or organizations) regarding account deposits in
connection with transactions by the Fund;
(h) For the funding of any uncertificated time deposit or other
interest-bearing account with any banking institution (including
the Custodian), which deposit or account has a term of one year
or less; and
(i) For any other proper purpose, but only upon receipt, in addition
to Proper Instructions, of a copy of a resolution of the Board of
Trustees, certified by an Officer, specifying the amount and
purpose of such payment, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom such
payment is to be made.
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<PAGE>
3.7 DELIVERY OF SECURITIES FROM FUND CUSTODY ACCOUNTS. Upon receipt of
Proper Instructions, the Custodian shall release and deliver Securities from a
Fund Custody Account but only in the following cases:
(a) Upon the sale of Securities for the account of the Fund but only
against receipt of payment therefor in cash, by certified or
cashiers check or bank credit;
(b) In the case of a sale effected through a Book-Entry System or
Securities Depository, in accordance with the provisions of
Section 3.5 above;
(c) To an offeror's depository agent in connection with tender or
other similar offers for Securities of the Fund; provided that,
in any such case, the cash or other consideration is to be
delivered to the Custodian;
(d) To the issuer thereof or its agent (i) for transfer into the name
of the Fund, the Custodian or any Sub-Custodian appointed
pursuant to Section 3.3 above, or of any nominee or nominees of
any of the foregoing, or (ii) for exchange for a different number
of certificates or other evidence representing the same aggregate
face amount or number of units; provided that, in any such case,
the new Securities are to be delivered to the Custodian;
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<PAGE>
(e) To the broker selling Securities, for examination in accordance
with the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan or merger,
consolidation, recapitalization, reorganization or readjustment
of the issuer of such Securities, or pursuant to provisions for
conversion contained in such Securities, or pursuant to any
deposit agreement, including surrender or receipt of underlying
Securities in connection with the issuance or cancellation of
depository receipts; provided that, in any such case, the new
Securities and cash, if any, are to be delivered to the
Custodian;
(g) Upon receipt of payment therefor pursuant to any repurchase or
reverse repurchase agreement entered into by the Fund;
(h) In the case of warrants, rights or similar Securities, upon the
exercise thereof, provided that, in any such case, the new
Securities and cash, if any, are to be delivered to the
Custodian;
(i) For delivery in connection with any loans of Securities of the
Fund, but only against receipt of such collateral as the Trust
shall have specified to the Custodian in Proper Instructions;
(j) For delivery as security in connection with any borrowings by the
Fund requiring a pledge of assets by the Trust, but only against
receipt by the Custodian of the amounts borrowed;
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<PAGE>
(k) Pursuant to any authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of the Trust;
(l) For delivery in accordance with the provisions of any agreement
among the Trust, the Custodian and a broker-dealer registered
under the 1934 Act and a member of the NASD, relating to
compliance with the rules of The Options Clearing Corporation and
of any registered national securities exchange (or of any similar
organization or organizations) regarding escrow or other
arrangements in connection with transactions by the Fund;
(m) For delivery in accordance with the provisions of any agreement
among the Trust, the Custodian, and a futures commission merchant
registered under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity Futures Trading
Commission and/or any contract market (or any similar
organization or organizations) regarding account deposits in
connection with transactions by the Fund; or
(n) For any other proper corporate purpose, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution of the
Board of Trustees, certified by an Officer, specifying the
Securities to be delivered, setting forth the purpose for which
such delivery is to
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<PAGE>
be made, declaring such purpose to be a proper corporate purpose,
and naming the person or persons to whom delivery of such
Securities shall be made.
3.8 ACTIONS NOT REQUIRING PROPER INSTRUCTIONS. Unless otherwise instructed
by the Trust, the Custodian shall with respect to all Securities held for a
Fund:
(a) Subject to Section 7.4 below, collect on a timely basis all
income and other payments to which the Fund is entitled either by
law or pursuant to custom in the securities business;
(b) Present for payment and, subject to Section 7.4 below, collect on
a timely basis the amount payable upon all Securities which may
mature or be called, redeemed, or retired, or otherwise become
payable;
(c) Endorse for collection, in the name of the Fund, checks, drafts
and other negotiable instruments;
(d) Surrender interim receipts or Securities in temporary form for
Securities in definitive form;
(e) Execute, as custodian, any necessary declarations or certificates
of ownership under the federal income tax laws or the laws or
regulations of any other taxing authority now or hereafter in
effect, and prepare and submit reports to the Internal Revenue
Service ("IRS") and to the Trust at such time, in such manner and
containing such information as is prescribed by the IRS;
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<PAGE>
(f) Hold for the Fund, either directly or, with respect to Securities
held therein, through a Book-Entry System or Securities
Depository, all rights and similar securities issued with respect
to Securities of the Fund; and
(g) In general, and except as otherwise directed in Proper
Instructions, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with Securities and assets of the
Fund.
3.9 REGISTRATION AND TRANSFER OF SECURITIES. All Securities held for a Fund
that are issued or issuable only in bearer form shall be held by the Custodian
in that form, provided that any such Securities shall be held in a Book-Entry
System if eligible therefor. All other Securities held for a Fund may be
registered in the name of such Fund, the Custodian, or any Sub-Custodian
appointed pursuant to Section 3.3 above, or in the name of any nominee of any of
them, or in the name of a Book-Entry System, Securities Depository or any
nominee of either thereof. The Trust shall furnish to the Custodian appropriate
instruments to enable the Custodian to hold or deliver in proper form for
transfer, or to register in the name of any of the nominees hereinabove referred
to or in the name of a Book-Entry System or Securities Depository, any
Securities registered in the name of a Fund.
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<PAGE>
3.10 RECORDS. (a) The Custodian shall maintain, by Fund, complete and
accurate records with respect to Securities, cash or other property held for the
Funds, including (i) journals or other records of original entry containing an
itemized daily record in detail of all receipts and deliveries of Securities and
all receipts and disbursements of cash; (ii) ledgers (or other records)
reflecting (A) Securities in transfer, (B) Securities in physical possession,
(C) moneys and Securities borrowed and moneys and Securities loaned (together
with a record of the collateral therefor and substitutions of such collateral),
(D) dividends and interest received, and (E) dividends receivable and interest
receivable; and (iii) canceled checks and bank records related thereto. The
Custodian shall keep such other books and records of the Funds as the Trust
shall reasonably request, or as may be required by the 1940 Act, including, but
not limited to, Section 31 of the 1940 Act and Rule 31a-2 promulgated
thereunder.
(b) All such books and records maintained by the Custodian shall (i) be
maintained in a form acceptable to the Trust and in compliance with rules and
regulations of the Securities and Exchange Commission, (ii) be the property of
the Trust and at all times during the regular business hours of the Custodian be
made available upon request for inspection by duly authorized officers,
employees or agents of the Trust and employees or agents of the Securities and
Exchange Commission, and (iii) if required to be maintained by Rule 31a-1 under
the 1940 Act, be preserved for the periods prescribed in Rule 31a-2 under the
1940 Act.
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<PAGE>
3.11 FUND REPORTS BY CUSTODIAN. The Custodian shall furnish the Trust with
a daily activity statement by Fund and a summary of all transfers to or from
each Fund Custody Account on the day following such transfers. At least monthly
and from time to time, the Custodian shall furnish the Trust with a detailed
statement, by Fund, of the Securities and moneys held by the Custodian and the
Sub-Custodians for the Funds under this Agreement.
3.12 OTHER REPORTS BY CUSTODIAN. The Custodian shall provide the Trust with
such reports, as the Trust may reasonably request from time to time, on the
internal accounting controls and procedures for safeguarding Securities, which
are employed by the Custodian or any Sub-Custodian appointed pursuant to Section
3.3 above.
3.13 PROXIES AND OTHER MATERIALS. The Custodian shall cause all proxies
relating to Securities which are not registered in the name of a Fund, to be
promptly executed by the registered holder of such Securities, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Trust such proxies, all proxy soliciting materials and
all notices relating to such Securities.
3.14 INFORMATION ON CORPORATE ACTIONS. The Custodian shall promptly deliver
to the Trust all information received by the Custodian and pertaining to
Securities being held by the Funds with respect to optional tender or exchange
offers, calls for redemption or purchase, or expiration of rights as described
in the Standards of Service Guide attached as Exhibit B. If the
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<PAGE>
Trust desires to take action with respect to any tender offer, exchange offer or
other similar transaction, the Trust shall notify the Custodian at least five
Business Days prior to the date on which the Custodian is to take such action.
The Trust will provide or cause to be provided to the Custodian all relevant
information for any Security which has unique put/option provisions at least
five Business Days prior to the beginning date of the tender period.
ARTICLE IV
----------
PURCHASE AND SALE OF INVESTMENTS OF THE FUNDS
---------------------------------------------
4.1 PURCHASE OF SECURITIES. Promptly upon each purchase of Securities for a
Fund, Written Instructions shall be delivered to the Custodian, specifying (a)
the Fund for which the purchase was made, (b) the name of the issuer or writer
of such Securities, and the title or other description thereof, (c) the number
of shares, principal amount (and accrued interest, if any) or other units
purchased, (d) the date of purchase and settlement, (e) the purchase price per
unit, (f) the total amount payable upon such purchase, and (g) the name of the
person to whom such amount is payable. The Custodian shall upon receipt of such
Securities purchased by a Fund pay out of the moneys held for the account of
such Fund the total amount specified in such Written Instructions to the person
named therein. The Custodian shall not be under any obligation to pay out moneys
to cover the cost of a purchase
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<PAGE>
of Securities for a Fund, if in the relevant Fund Custody Account there is
insufficient cash available to the Fund for which such purchase was made.
4.2 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED. In
any and every case where payment for the purchase of Securities for a Fund is
made by the Custodian in advance of receipt of the Securities purchased but in
the absence of specified Written Instructions to so pay in advance, the
Custodian shall be liable to the Fund for such Securities to the same extent as
if the Securities had been received by the Custodian.
4.3 SALE OF SECURITIES. Promptly upon each sale of Securities by a Fund,
Written Instructions shall be delivered to the Custodian, specifying (a) the
Fund for which the sale was made, (b) the name of the issuer or writer of such
Securities, and the title or other description thereof, (c) the number of
Shares, principal amount (and accrued interest, if any), or other units sold,
(d) the date of sale and settlement, (e) the sale price per unit, (f) the total
amount payable upon such sale, and (g) the person to whom such Securities are to
be delivered. Upon receipt of the total amount payable to the Fund as specified
in such Written Instructions, the Custodian shall deliver such Securities to the
person specified in such Written Instructions. Subject to the foregoing, the
Custodian may accept payment in such form as shall be satisfactory to it, and
may deliver Securities and arrange for payment in accordance with the customs
prevailing among dealers in Securities.
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<PAGE>
4.4 DELIVERY OF SECURITIES SOLD. Notwithstanding Section 4.3 above or any
other provision of this Agreement, the Custodian, when instructed to deliver
Securities against payment, shall be entitled, if in accordance with generally
accepted market practice, to deliver such Securities prior to actual receipt of
final payment therefor. In any such case, the Fund for which such Securities
were delivered shall bear the risk that final payment for such Securities may
not be made or that such Securities may be returned or otherwise held or
disposed of by or through the person to whom they were delivered, and the
Custodian shall have no liability for any for the foregoing.
4.5 PAYMENT FOR SECURITIES SOLD, ETC. In its sole discretion and from time
to time, the Custodian may credit the relevant Fund Custody Account, prior to
actual receipt of final payment thereof, with (i) proceeds from the sale of
Securities which it has been instructed to deliver against payment, (ii)
proceeds from the redemption of Securities or other assets of the Fund, and
(iii) income from cash, Securities or other assets of the Fund. Any such credit
shall be conditional upon actual receipt by Custodian of final payment and may
be reversed if final payment is not actually received in full. The Custodian
may, in its sole discretion and from time to time, permit a Fund to use funds so
credited to its Fund Custody Account in anticipation of actual receipt of final
payment. Any such funds shall be repayable immediately upon demand made by the
Custodian
- 26 -
<PAGE>
at any time prior to the actual receipt of all final payments in anticipation of
which funds were credited to the Fund Custody Account.
4.6 ADVANCES BY CUSTODIAN FOR SETTLEMENT. The Custodian may, in its sole
discretion and from time to time, advance funds to the Trust to facilitate the
settlement of a Fund's transactions in its Fund Custody Account. Any such
advance shall be repayable immediately upon demand made by Custodian.
ARTICLE V
---------
REDEMPTION OF FUND SHARES
-------------------------
5.1 TRANSFER OF FUNDS. From such funds as may be available for the purpose
in the relevant Fund Custody Account, and upon receipt of Proper Instructions
specifying that the funds are required to redeem Shares of a Fund, the Custodian
shall wire each amount specified in such Proper Instructions to or through such
bank as the Trust may designate with respect to such amount in such Proper
Instructions.
5.2 NO DUTY REGARDING PAYING BANKS. The Custodian shall not be under any
obligation to effect payment or distribution by any bank designated in Proper
Instructions given pursuant to Section 5.1 above of any amount paid by the
Custodian to such bank in accordance with such Proper Instructions.
- 27 -
<PAGE>
ARTICLE VI
----------
SEGREGATED ACCOUNTS
-------------------
Upon receipt of Proper Instructions, the Custodian shall establish and
maintain a segregated account or accounts for and on behalf of a Fund, into
which account or accounts may be transferred cash and/or Securities, including
Securities maintained in a Depository Account,
(a) in accordance with the provisions of any agreement among the
Trust, the Custodian and a broker-dealer registered under the
1934 Act and a member of the NASD (or any futures commission
merchant registered under the Commodity Exchange Act), relating
to compliance with the rules of The Options Clearing Corporation
and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract
market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with
transactions by a Fund,
(b) for purposes of segregating cash or Securities in connection with
securities options purchased or written by a Fund or in
connection with financial futures contracts (or options thereon)
purchased or sold by a Fund,
(c) which constitute collateral for loans of Securities made by a
Fund,
- 28 -
<PAGE>
(d) for purposes of compliance by a Fund with requirements under the
1940 Act for the maintenance of segregated accounts by registered
investment companies in connection with reverse repurchase
agreements and when-issued, delayed delivery and firm commitment
transactions, and
(e) for other proper corporate purposes, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution
of the Board of Trustees, certified by an Officer, setting forth
the purpose or purposes of such segregated account and declaring
such purposes to be proper corporate purposes.
Each segregated account established under this Article VI shall be
established and maintained for a single Fund only. All Proper Instructions
relating to a segregated account shall specify the Fund involved.
ARTICLE VII
-----------
CONCERNING THE CUSTODIAN
------------------------
7.1 STANDARD OF CARE. The Custodian shall be held to the exercise of
reasonable care in carrying out its obligations under this Agreement, and shall
be without liability to the Trust or any Fund for any loss, damage, cost,
expense (including
- 29 -
<PAGE>
attorneys' fees and disbursements), liability or claim unless such loss, damage,
cost, expense, liability or claim arises from negligence, bad faith or willful
misconduct on its part or on the part of any Sub-Custodian appointed pursuant to
Section 3.3 above. The Custodian shall be entitled to rely on and may act upon
advice of counsel on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice. The Custodian shall
promptly notify the Trust of any action taken or omitted by the Custodian
pursuant to advice of counsel. The Custodian shall not be under any obligation
at any time to ascertain whether the Trust or a Fund is in compliance with the
1940 Act, the regulations thereunder, the provisions of the Trust's charter
documents or bylaws, or its investment objectives and policies as then in
effect.
7.2 ACTUAL COLLECTION REQUIRED. The Custodian shall not be liable for, or
considered to be the custodian of, any cash belonging to a Fund or any money
represented by a check, draft or other instrument for the payment of money,
until the Custodian or its agents actually receive such cash or collect on such
instrument.
7.3 NO RESPONSIBILITY FOR TITLE, ETC. So long as and to the extent that it
is in the exercise of reasonable care, the Custodian shall not be responsible
for the title, validity or genuineness of any property or evidence of title
thereto received or delivered by it pursuant to this Agreement.
- 30 -
<PAGE>
7.4 LIMITATION ON DUTY TO COLLECT. Custodian shall not be required to
enforce collection, by legal means or otherwise, of any money or property due
and payable with respect to Securities held for a Fund if such Securities are in
default or payment is not made after due demand or presentation.
7.5 RELIANCE UPON DOCUMENTS AND INSTRUCTIONS. The Custodian shall be
entitled to rely upon any certificate, notice or other instrument in writing
received by it and reasonably believed by it to be genuine. The Custodian shall
be entitled to rely upon any Oral Instructions and any Written Instructions
actually received by it pursuant to this Agreement.
7.6 EXPRESS DUTIES ONLY. The Custodian shall have no duties or obligations
whatsoever except such duties and obligations as are specifically set forth in
this Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
7.7 CO-OPERATION. The Custodian shall cooperate with and supply necessary
information, by Fund, to the entity or entities appointed by the Trust to keep
the books of account of the Funds and/or compute the value of the assets of the
Funds. The Custodian shall take all such reasonable actions as the Trust may
from time to time request to enable the Trust to obtain, from year to year,
favorable opinions from the Trust's independent accountants with respect to the
Custodian's activities hereunder in connection with (a) the preparation of the
Trust's reports on
- 31 -
<PAGE>
Form N-1A and Form N-SAR and any other reports required by the Securities and
Exchange Commission, and (b) the fulfillment by the Trust of any other
requirements of the Securities and Exchange Commission.
ARTICLE VIII
------------
INDEMNIFICATION
---------------
8.1 INDEMNIFICATION BY TRUST. The Trust shall indemnify and hold harmless
the Custodian and any Sub-Custodian appointed pursuant to Section 3.3 above, and
any nominee of the Custodian or of such Sub-Custodian, from and against any
loss, damage, cost, expense (including attorneys' fees and disbursements),
liability (including, without limitation, liability arising under the Securities
Act of 1933, the 1934 Act, the 1940 Act, and any state or foreign securities
and/or banking laws) or claim arising directly or indirectly (a) from the fact
that Securities are registered in the name of any such nominee, or (b) from any
action or inaction by the Custodian or such Sub-Custodian (i) at the request or
direction of or in reliance on the advice of the Trust, or (ii) upon Proper
Instructions, or (c) generally, from the performance of its obligations under
this Agreement or any sub-custody agreement with a Sub-Custodian appointed
pursuant to Section 3.3 above, provided that neither the Custodian nor any such
Sub-Custodian shall be indemnified and held harmless from and against any such
loss, damage, cost, expense, liability or claim arising from the Custodian's or
such Sub-Custodian's negligence, bad faith or willful misconduct.
- 32 -
<PAGE>
8.2 INDEMNIFICATION BY CUSTODIAN. The Custodian shall indemnify and hold
harmless the Trust from and against any loss, damage, cost, expense (including
attorneys' fees and disbursements), liability (including without limitation,
liability arising under the Securities Act of 1933, the 1934 Act, the 1940 Act,
and any state or foreign securities and/or banking laws) or claim arising from
the negligence, bad faith or willful misconduct of the Custodian or any
Sub-Custodian appointed pursuant to Section 3.3 above, or any nominee of the
Custodian or of such Sub-Custodian.
8.3 INDEMNITY TO BE PROVIDED. If the Trust requests the Custodian to take
any action with respect to Securities, which may, in the opinion of the
Custodian, result in the Custodian or its nominee becoming liable for the
payment of money or incurring liability of some other form, the Custodian shall
not be required to take such action until the Trust shall have provided
indemnity therefor to the Custodian in an amount and form satisfactory to the
Custodian.
8.4 SECURITY. If the Custodian advances cash or Securities to a Fund for
any purpose, either at the Trust's request or as otherwise contemplated in this
Agreement, or in the event that the Custodian or its nominee incurs, in
connection with its performance under this Agreement, any loss, damage, cost,
expense (including attorneys' fees and disbursements), liability or claim
(except such as may arise from its or its nominee's negligence, bad faith or
willful misconduct), then, in any such event, any property at any time held for
the account of such Fund shall be
- 33 -
<PAGE>
security therefor, and should such Fund fail promptly to repay or indemnify the
Custodian, the Custodian shall be entitled to utilize available cash of such
Fund and to dispose of other assets of such Fund to the extent necessary to
obtain reimbursement or indemnification.
ARTICLE IX
----------
FORCE MAJEURE
-------------
Neither the Custodian nor the Trust shall be liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control,
including, without limitation, acts of God; earthquakes; fires; floods; wars;
civil or military disturbances; sabotage; strikes; epidemics; riots; power
failures; computer failure and any such circumstances beyond its reasonable
control as may cause interruption, loss or malfunction of utility,
transportation, computer (hardware or software) or telephone communication
service; accidents; labor disputes; acts of civil or military authority;
governmental actions; or inability to obtain labor, material, equipment or
transportation; provided, however, that the Custodian in the event of a failure
or delay (i) shall not discriminate against the Funds in favor of any other
customer of the Custodian in making computer time and personnel available to
input or process the transactions contemplated by this Agreement and (ii) shall
use its best efforts to ameliorate the effects of any such failure or delay.
- 34 -
<PAGE>
ARTICLE X
---------
EFFECTIVE PERIOD; TERMINATION
-----------------------------
10.1 EFFECTIVE PERIOD. This Agreement shall become effective as of its
execution and shall continue in full force and effect until terminated as
hereinafter provided.
10.2 TERMINATION. Either party hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than sixty (60) days after the date of the
giving of such notice. If a successor custodian shall have been appointed by the
Board of Trustees, the Custodian shall, upon receipt of a notice of acceptance
by the successor custodian, on such specified date of termination (a) deliver
directly to the successor custodian all Securities (other than Securities held
in a Book-Entry System or Securities Depository) and cash then owned by the
Funds and held by the Custodian as custodian, and (b) transfer any Securities
held in a Book-Entry System or Securities Depository to an account of or for the
benefit of the Funds at the successor custodian, provided that the Trust shall
have paid to the Custodian all fees, expenses and other amounts to the payment
or reimbursement of which it shall then be entitled. Upon such delivery and
transfer, the Custodian shall be relieved of all obligations under this
Agreement. The Trust may at any time immediately terminate this Agreement in the
event of the appointment of a conservator or receiver for the Custodian by
- 35 -
<PAGE>
regulatory authorities or upon the happening of a like event at the direction of
an appropriate regulatory agency or court of competent jurisdiction.
10.3 FAILURE TO APPOINT SUCCESSOR CUSTODIAN. If a successor custodian is
not designated by the Trust on or before the date of termination specified
pursuant to Section 10.1 above, then the Custodian shall have the right to
deliver to a bank or trust company of its own selection, which (a) is a "bank"
as defined in the 1940 Act and (b) has aggregate capital, surplus and undivided
profits as shown on its then most recent published report of not less than $25
million, all Securities, cash and other property held by Custodian under this
Agreement and to transfer to an account of or for the Funds at such bank or
trust company all Securities of the Funds held in a Book-Entry System or
Securities Depository. Upon such delivery and transfer, such bank or trust
company shall be the successor custodian under this Agreement and the Custodian
shall be relieved of all obligations under this Agreement.
ARTICLE XI
----------
COMPENSATION OF CUSTODIAN
-------------------------
The Custodian shall be entitled to compensation as agreed upon from time to
time by the Trust and the Custodian. The fees and other charges in effect on the
date hereof and applicable to the Funds are set forth in Exhibit C attached
hereto.
- 36 -
<PAGE>
ARTICLE XII
-----------
LIMITATION OF LIABILITY
-----------------------
It is expressly agreed that the obligations of the Trust hereunder shall
not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust personally, but shall bind only the trust
property of the Trust as provided in the Trust's Agreement and Declaration of
Trust, as from time to time amended. The execution and delivery of this
Agreement have been authorized by the Trustees, and this Agreement has been
signed and delivered by an authorized officer of the Trust, acting as such, and
neither such authorization by the Trustees nor such execution and delivery by
such officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the Trust as provided in the above-mentioned Agreement and
Declaration of Trust.
ARTICLE XIII
------------
NOTICES
-------
Unless otherwise specified herein, all demands, notices, instructions, and
other communications to be given hereunder shall be in writing and shall be sent
or delivered to the recipient at the address set forth after its name
hereinbelow:
To the Trust:
-------------
Wells Family of Real Estate Funds
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Telephone: (513) 629-2000
Facsimile: (513) 629-2008
- 37 -
<PAGE>
To Custodian:
-------------
Star Bank, N.A.
425 Walnut Street, M.L. 6118
Cincinnati, Ohio 45202
Attention: Mutual Fund Custody Services
Telephone: (513) 632-3016
Facsimile: (513) 632-4448
or at such other address as either party shall have provided to the other by
notice given in accordance with this Article XIII. Writing shall include
transmissions by or through teletype, facsimile, central processing unit
connection, on-line terminal and magnetic tape.
ARTICLE XIV
-----------
MISCELLANEOUS
-------------
14.1 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
14.2 REFERENCES TO CUSTODIAN. The Trust shall not circulate any printed
matter which contains any reference to Custodian without the prior written
approval of Custodian, excepting printed matter contained in the prospectus or
statement of additional information for a Fund and such other printed matter as
merely identifies Custodian as custodian for one or more Funds. The Trust shall
submit printed matter requiring approval to Custodian in draft form, allowing
sufficient time for review by Custodian and its counsel prior to any deadline
for printing.
- 38 -
<PAGE>
14.3 NO WAIVER. No failure by either party hereto to exercise, and no delay
by such party in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by either party hereto of any right hereunder shall not
preclude the exercise of any other right, and the remedies provided herein are
cumulative and not exclusive of any remedies provided at law or in equity.
14.4 AMENDMENTS. This Agreement cannot be changed orally and no amendment
to this Agreement shall be effective unless evidenced by an instrument in
writing executed by the parties hereto.
14.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the parties hereto on separate counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and the same instrument.
14.6 SEVERABILITY. If any provision of this Agreement shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions shall not be affected or
impaired thereby.
14.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; PROVIDED, HOWEVER, that this Agreement shall not be assignable by
either party hereto without the written consent of the other party hereto.
- 39 -
<PAGE>
14.8 HEADINGS. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed and delivered in its name and on its behalf by its representatives
thereunto duly authorized, all as of the day and year first above written.
ATTEST: WELLS FAMILY OF REAL ESTATE FUNDS
/s/ Linda L. Carson By: /s/ Leo F. Wells
- ----------------------------- -----------------------------
Secretary Its: President
ATTEST: STAR BANK, N.A.
/s/ Lynnette C. Gibson By: /s/ Marsha A. Crofton
- ----------------------------- -----------------------------
Its: Senior Vice President
- 40 -
<PAGE>
EXHIBIT A
---------
AUTHORIZED PERSONS
------------------
Set forth below are the names and specimen signatures of the persons
authorized by the Trust to administer the Fund Custody Accounts.
Name Signature
- ---- ---------
Brian M. Conlon /s/ Brian M. Conlon
----------------------------------
Robert G. Dorsey /s/ Robert G. Dorsey
----------------------------------
Mark J. Seger /s/ Mark J. Seger
----------------------------------
John F. Splain /s/ John F. Splain
----------------------------------
M. Kathleen Leugers /s/ M. Kathleen Luegers
----------------------------------
Christina H. Kelso /s/ Christina H. Kelso
----------------------------------
Gary H. Goldschmidt /s/ Gary H. Goldschmidt
----------------------------------
Tina D. Hosking /s/ Tina D. Hosking
----------------------------------
Theresa M. Samocki /s/ Theresa M. Samocki
----------------------------------
J. Patrick Rogers /s/ J. Patrick Rogers
----------------------------------
Paul R. Stewart /s/ Paul R. Stewart
----------------------------------
Kenneth H. Toft /s/ Kenneth H. Toft
----------------------------------
Shi Cheng /s/ Shi Cheng
----------------------------------
- 41 -
<PAGE>
EXHIBIT B
STAR BANK, N.A.
STANDARDS OF SERVICE GUIDE
Star Bank, N.A., is committed to providing superior quality service to all
customers and their agents at all times. We have compiled this guide as a tool
for our clients to determine our standards for the processing of security
settlements, payment collection, and capital change transactions. Deadlines
recited in this guide represent the times required for Star Bank to guarantee
processing. Failure to meet these deadlines will result in settlement at our
client's risk. In all cases, Star Bank will make every effort to complete all
processing on a timely basis.
Star Bank is a direct participant of the Depository Trust Company, a direct
member of the Federal Reserve Bank of Cleveland, and utilizes the Bankers Trust
Company as its agent for ineligible and foreign securities.
For corporate reorganizations, Star Bank utilizes SEI's Reorg Source,
Financial Information, Inc., XCITEK, DTC Important Notices, and the WALL STREET
JOURNAL,
For bond calls and mandatory puts, Star Bank utilizes SEI's Bond Source,
Kenny Information Systems, Standard & Poor's Corporation, and DTC Important
Notices. Star Bank will not notify clients of optional put opportunities.
Any securities delivered free to Star Bank or its agents must be received
three (3) business days prior to any payment or settlement in order for the Star
Bank standards of service to apply.
Should you have any questions regarding the information contained in this
guide, please feel free to contact your account representative.
The information contained in this Standards of Service Guide is
subject to change. Should any changes be made Star Bank will provide
you with an updated copy of its Standards of Service Guide.
<PAGE>
<TABLE>
<CAPTION>
STAR BANK SECURITY SETTLEMENT STANDARDS
- ---------------------------------------------------------------------------------------------------------------
TRANSACTION TYPE INSTRUCTIONS DEADLINES* DELIVERY INSTRUCTIONS
- ---------------- ----------------------- ---------------------
<S> <C> <C>
DTC 1:30 P.M. on Settlement Date DTC Participant #2219
Agent Bank ID #27895
Institutional #___________
For Account #_____________
Federal Reserve Book Entry 12:30 P.M. on Settlement Date Federal Reserve Bank of
Cinti/Trust for Star Bank, N.A.
ABA# 042000013
For Account #_____________
Federal Reserve Book Entry 1:00 P.M. on Settlement Date Federal Reserve Bank of
(Repurchase Agreement Cinti/Spec for Star Bank, N.A.
Collateral Only) ABA# 042000013
For Account #_____________
PTC Securities 12:00 P.M. on Settlement Date PTC For Account BTRST/CUST
(GNMA Book Entry) Sub Account: Star Bank, N.A. #090334
Physical Securities 9:30 A.M. EST on Settlement Date Bankers Trust Company
(for Deliveries, by 4:00 P.M. on 16 Wall Street 4th Floor, Window 43
Settlement Date minus 1) for Star Bank Account #090334
CEDEL/EURO-CLEAR 11:00 A.M. on Settlement Date Euroclear Via Cedel Bridge
minus 2 In favor of Bankers Trust Comp
Cedel 53355
For Star Bank Account #501526354
Cash Wire Transfer 3:00 P.M. Star Bank, N.A. Cinti/Trust ABA# 042000013
Credit Account #9901877
Further Credit to ________
Account #_________________
</TABLE>
*All times listed are Cincinnati time.
<PAGE>
STAR BANK PAYMENT STANDARDS
- --------------------------------------------------------------------------------
SECURITY TYPE INCOME PRINCIPAL
- --------------------------------------------------------------------------------
Equities Payable Date
Municipal Bonds* Payable Date Payable Date
Corporate Bonds* Payable Date Payable Date
Federal Reserve Bank
Book Entry* Payable Date Payable Date
PTC GNMA's (P&I) Payable Date + 1 Payable Date + 1
CMOs*
DTC Payable Date + 1 Payable Date + 1
Bankers Trust Payable Date + 1 Payable Date + 1
SBA Loan Certificates When Received When Received
Unit Investment Trust
Certificates* Payable Date Payable Date
Certificates of Deposit* Payable Date Payable Date
Limited Partnerships When Received When Received
Foreign Securities When Received When Received
*Variable Rate Securities
Federal Reserve Bank
Book Entry Payable Date Payable Date
DTC Payable Date + 1 Payable Date + 1
Bankers Trust Payable Date + 1 Payable Date + 1
NOTE: If a payable date falls on a weekend or bank holiday, payment will be made
on the immediately following business day.
<PAGE>
<TABLE>
<CAPTION>
STAR BANK CORPORATE REORGANIZATION STANDARDS
- -------------------------------------------------------------------------------------------------------------------------
TYPE OF ACTION NOTIFICATION TO CLIENT DEADLINE FOR CLIENT INSTRUCTIONS TRANSACTION
TO STAR BANK POSTING
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rights, Warrants, Later of 10 business days prior 5 business days prior to expiration Upon receipt
and Optional Mergers to expiration or receipt of notice
Mandatory Puts with Later of 10 business days prior 5 business days prior to expiration Upon receipt
Option to Retain to expiration or receipt of notice
Class Actions 10 business days prior 5 business days prior to expiration Upon receipt
expiration date
Voluntary Tenders, Later of 10 business days prior 5 business days prior to expiration Upon receipt
Exchanges, expiration or receipt of notice
and Conversions
Mandatory Puts, Defaults, At posting of funds or securities None Upon receipt
Liquidations, Bankruptcies, received
Stock Splits, Mandatory
Exchanges
Full and Partial Calls Later of 10 business days prior None Upon receipt
to expiration or receipt of notice
</TABLE>
NOTE: Fractional shares/par amounts resulting from any of the above will be
sold.
<PAGE>
EXHIBIT C
---------
STAR BANK, N.A.
DOMESTIC CUSTODY FEE SCHEDULE
Star Bank, N.A., as Custodian, will receive monthly compensation for services
according to the terms of the following Schedule:
I. PORTFOLIO TRANSACTION FEES:
---------------------------
(a) For each repurchase agreement transaction $ 7.00
(b) For each portfolio transaction processed
through DTC or Federal Reserve $ 9.00
(c) For each portfolio transaction processed
through our New York custodian $25.00
(d) For each GNMA/Amortized Security Purchase $16.00
(e) For each GNMA/Prin/Int Paydown, GNMA Sales $ 8.00
(f) For each option/future contract written,
exercised or expired $40.00
(g) For each Cedel/Euroclear transaction $80.00
(h) For each Disbursement (Fund expenses only) $ 5.00
A transaction is a purchase/sale of a security, free receipt/free delivery
(excludes initial conversion), maturity, tender or exchange.
II. MARKET VALUE FEE
----------------
Based upon an annual rate of: MILLION
.0003 (3 Basis Points) on First $20
.0002 (2 Basis Points) on Next $20
.00015 (1.5 Basis Points) on Balance
III. MONTHLY MINIMUM FEE-PER FUND $300.00
----------------------------
IV. OUT-OF-POCKET EXPENSES
----------------------
The only out-of-pocket expenses charged to your account will be shipping
fees or transfer fees.
V. EARNINGS CREDITS
----------------
On a monthly basis any earnings credits generated from uninvested custody
balances will be applied against any cash management service fees
generated. Earnings credits are based on a Cost of Funds Tiered Earnings
Credit Rate.
<PAGE>
STAR BANK, N.A.
CASH MANAGEMENT FEE SCHEDULE
SERVICES UNIT COST($) MONTHLY COST($)
-------- ------------ ---------------
D.D.A. Account Maintenance 14.00
Deposits .399
Deposited Items .109
Checks Paid .159
Balance Reporting - P.C. Access 50.00 1st Acct
35.00 each add'l
ACH Transaction .105
ACH Monthly Maintenance 40.00
ACH Additions, Deletions,
Changes 3.50
ACH Debits .12
Controlled Disbursement
(1st account) 110.00
Each additional account 25.00
Deposited Items Returned 6.00
International Returned Items 10.00
NSF Returned Check 25.00
Stop Payments 22.00
Data Transmission per account 110.00
Data Capture* .10
Drafts Cleared .179
Lockbox Maintenance** 55.00
Lockbox items Processed
with copy of check .32
without copy of check .26
Checks Printed .20
Positive Pay .06
Issued Items .015
ARP Tape/Transmission/Diskette 25.00
Special Statements 6.00
Invoicing for Service Charge 15.00
Wires Incoming
Domestic 10.00
International 10.00
Wires Outgoing
Domestic International
Repetitive 12.00 Repetitive 35.00
Non-Repetitive 13.00 Non-Repetitive 40.00
PC - Initiated Wires:
Domestic International
Repetitive 9.00 Repetitive 25.00
Non-Repetitive 9.00 Non-Repetitive 25.00
***Uncollected Charge
Star Bank Prime Rate as of first of month plus 4%
* Price can vary depending upon what information needs to be captured
** With the use of lockbox, the collected balance in the demand deposit
account will be significantly increased and therefore earnings to offset
cash managment service fees will be maximized.
*** Fees for uncollected balances are figured on the MONTHLY AVERAGE of all
combined accounts.
**** Other available cash management services are priced separately.
Revised October, 1997
ADMINISTRATION AGREEMENT
------------------------
AGREEMENT dated as of January 12, 1998 between Wells Family of Real Estate
Funds, an Ohio business trust (the "Trust"), and Countrywide Fund Services, Inc.
("Countrywide"), an Ohio corporation.
WHEREAS, the Trust is an investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust wishes to employ the services of Countrywide to serve as
its administrative agent; and
WHEREAS, Countrywide wishes to provide such services under the conditions
set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Trust and Countrywide agree as follows:
1. APPOINTMENT.
------------
The Trust hereby appoints and employs Countrywide as agent to perform
those services described in this Agreement for the Trust. Countrywide shall act
under such appointment and perform the obligations thereof upon the terms and
conditions hereinafter set forth.
2. DOCUMENTATION.
--------------
The Trust will furnish from time to time the following documents:
A. Each resolution of the Board of Trustees of the Trust authorizing the
original issue of its shares;
B. Each Registration Statement filed with the Securities and Exchange
Commission (the "SEC") and amendments thereof;
C. A certified copy of each amendment to the Agreement and Declaration of
Trust and the Bylaws of the Trust;
D. Certified copies of each resolution of the Board of Trustees
authorizing officers to give instructions to Countrywide;
E. Specimens of all new forms of share certificates accompanied by Board
of Trustees' resolutions approving such forms;
<PAGE>
F. Such other certificates, documents or opinions which Countrywide may,
in its discretion, deem necessary or appropriate in the proper
performance of its duties;
G. Copies of all Underwriting and Dealer Agreements in effect;
H. Copies of all Advisory Agreements in effect; and
I. Copies of all documents relating to special investment or withdrawal
plans which are offered or may be offered in the future by the Trust
and for which Countrywide is to act as plan agent.
3. TRUST ADMINISTRATION.
---------------------
Subject to the direction and control of the Trustees of the Trust,
Countrywide shall supervise the Trust's business affairs not otherwise
supervised by other agents of the Trust. To the extent not otherwise the primary
responsibility of, or provided by, other agents of the Trust, Countrywide shall
supply (i) office facilities, (ii) internal auditing and regulatory services,
and (iii) executive and administrative services. Countrywide shall coordinate
the preparation of (i) tax returns, (ii) reports to shareholders of the Trust,
(iii) reports to and filings with the SEC and state securities authorities
including preliminary and definitive proxy materials, post-effective amendments
to the Trust's registration statement, and the Trust's Form N-SAR, and (iv)
necessary materials for Board of Trustees' meetings unless prepared by other
parties under agreement with the Trust. Countrywide shall provide personnel to
serve as officers of the Trust if so elected by the Board of Trustees; provided,
however, that the Trust shall reimburse Countrywide for the reasonable
out-of-pocket expenses incurred by such personnel in attending Board of
Trustees' meetings and shareholders' meetings of the Trust.
4. RECORDKEEPING AND OTHER INFORMATION.
------------------------------------
Countrywide shall create and maintain all records required by
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act and the rules thereunder, as the same
may be amended from time to time, pertaining to the various functions performed
by it and not otherwise created and maintained by another party pursuant to
contract with the Trust. All such records shall be the property of the Trust at
all times and shall be available for inspection and use by the Trust. Where
applicable, such records shall be maintained by Countrywide for the periods and
in the places required by Rule 31a-2 under the 1940 Act. The retention of such
records shall be at the expense of the Trust. Countrywide shall make available
during regular business hours all records and
- 2 -
<PAGE>
other data created and maintained pursuant to this Agreement for reasonable
audit and inspection by the Trust, any person retained by the Trust, or any
regulatory agency having authority over the Trust.
5. FURTHER ACTIONS.
----------------
Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof.
6. COMPENSATION.
-------------
For the performance of Countrywide's obligations under this Agreement,
each series of the Trust shall pay Countrywide, on the first business day
following the end of each month, a monthly fee at the annual rate of .15% of
such series' average daily net assets up to $50 million; .125% of such assets
from $50 to $100 million; and .1% of such assets in excess of $100 million;
provided, however, that the minimum fee shall be $1,000 per month for each
series.
7. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
---------------------------------------------------
The parties hereto acknowledge and agree that nothing contained herein
shall be construed to require Countrywide to perform any services for the Trust
which services could cause Countrywide to be deemed an "investment advisor" of
the Trust within the meaning of Section 2(a)(20) of the 1940 Act or to supersede
or contravene the Trust's prospectus or statement of additional information or
any provisions of the 1940 Act and the rules thereunder. Except as otherwise
provided in this Agreement and except for the accuracy of information furnished
to it by Countrywide, the Trust assumes full responsibility for complying with
all applicable requirements of the 1940 Act, the Securities Act of 1933, as
amended, and any other laws, rules and regulations of governmental authorities
having jurisdiction.
8. REFERENCES TO COUNTRYWIDE.
--------------------------
The Trust shall not circulate any printed matter which contains any
reference to Countrywide without the prior written approval of Countrywide,
excepting solely such printed matter as merely identifies Countrywide as
Administrative Services Agent, Transfer, Shareholder Servicing and Dividend
Disbursing Agent and Accounting Services Agent. The Trust will submit printed
matter requiring approval to Countrywide in draft form, allowing sufficient time
for review by Countrywide and its counsel prior to any deadline for printing.
- 3 -
<PAGE>
9. INDEMNIFICATION OF COUNTRYWIDE.
-------------------------------
A. Countrywide may rely on information reasonably believed by it to be
accurate and reliable. Except as may otherwise be required by the 1940 Act and
the rules thereunder, neither Countrywide nor its shareholders, officers,
directors, employees, agents, control persons or affiliates of any thereof shall
be subject to any liability for, or any damages, expenses or losses incurred by
the Trust in connection with, any error of judgment, mistake of law, any act or
omission connected with or arising out of any services rendered under or
payments made pursuant to this Agreement or any other matter to which this
Agreement relates, except by reason of willful misfeasance, bad faith or
negligence on the part of any such persons in the performance of the duties of
Countrywide under this Agreement or by reason of reckless disregard by any of
such persons of the obligations and duties of Countrywide under this Agreement.
B. Notwithstanding any other provision of this Agreement, the Trust
shall indemnify and hold harmless Countrywide, its directors, officers,
employees, shareholders, agents, control persons and affiliates from and against
any and all claims, demands, expenses and liabilities (whether with or without
basis in fact or law) of any and every nature which Countrywide may sustain or
incur or which may be asserted against Countrywide by any person by reason of,
or as a result of: (i) any action taken or omitted to be taken by Countrywide in
good faith in reliance upon any certificate, instrument, order or share
certificate reasonably believed by it to be genuine and to be signed,
countersigned or executed by any duly authorized person, upon the oral
instructions or written instructions of an authorized person of the Trust or
upon the opinion of legal counsel for the Trust or its own counsel; or (ii) any
action taken or omitted to be taken by Countrywide in connection with its
appointment in good faith in reliance upon any law, act, regulation or
interpretation of the same even though the same may thereafter have been
altered, changed, amended or repealed. However, indemnification under this
subparagraph shall not apply to actions or omissions of Countrywide or its
directors, officers, employees, shareholders or agents in cases of its or their
own negligence, willful misconduct, bad faith, or reckless disregard of its or
their own duties hereunder.
10. TERMINATION.
------------
A. The provisions of this Agreement shall be effective on the date
first above written, shall continue in effect for two years from that date and
shall continue in force from year to year thereafter, but only so long as such
continuance is approved (1) by vote, cast in person at a meeting called for the
purpose, of a majority of the Trust's trustees who are not parties to this
Agreement or interested persons (as
- 4 -
<PAGE>
defined in the 1940 Act) of any such party, and (2) by vote of a majority of the
Trust's Board of Trustees or a majority of the Trust's outstanding voting
securities.
B. Either party may terminate this Agreement on any date by giving the
other party at least sixty (60) days' prior written notice of such termination
specifying the date fixed therefor. Upon termination of this Agreement, the
Trust shall pay to Countrywide such compensation as may be due as of the date of
such termination, and shall likewise reimburse Countrywide for any out-of-pocket
expenses and disbursements reasonably incurred by Countrywide to such date.
C. In the event that in connection with the termination of this
Agreement a successor to any of Countrywide's duties or responsibilities under
this Agreement is designated by the Trust by written notice to Countrywide,
Countrywide shall, promptly upon such termination and at the expense of the
Trust, transfer all records maintained by Countrywide under this Agreement and
shall cooperate in the transfer of such duties and responsibilities, including
provision for assistance from Countrywide's cognizant personnel in the
establishment of books, records and other data by such successor.
D. Countrywide shall not assign or transfer its rights and obligations
under this Agreement without the prior written consent of the Trust.
11. SERVICES FOR OTHERS.
--------------------
Nothing in this Agreement shall prevent Countrywide or any affiliated
person (as defined in the 1940 Act) of Countrywide from providing services for
any other person, firm or corporation (including other investment companies);
provided, however, that Countrywide expressly represents that it will undertake
no activities which, in its judgment, will adversely affect the performance of
its obligations to the Trust under this Agreement.
12. LIMITATION OF LIABILITY.
------------------------
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust, personally, but bind only the trust property
of the Trust. The execution and delivery of this Agreement have been authorized
by the Trustees of the Trust and signed by an officer of the Trust, acting as
such, and neither such authorization by such Trustees nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but shall
bind only the trust property of the Trust.
- 5 -
<PAGE>
13. SEVERABILITY.
-------------
In the event any provision of this Agreement is determined to be void
or unenforceable, such determination shall not affect the remainder of this
Agreement, which shall continue to be in force.
14. QUESTIONS OF INTERPRETATION.
----------------------------
This Agreement shall be governed by the laws of the State of Ohio. Any
question of interpretation of any term or provision of this Agreement having a
counterpart in or otherwise derived from a term or provision of the 1940 Act
shall be resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States Courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the SEC issued pursuant to said 1940 Act. In addition, where the effect of a
requirement of the 1940 Act, reflected in any provision of this Agreement, is
revised by rule, regulation or order of the SEC, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
15. NOTICES.
--------
All notices, requests, consents and other communications required or
permitted under this Agreement shall be in writing (including telex and
telegraphic communication) and shall be (as elected by the person giving such
notice) hand delivered by messenger or courier service, telecommunicated, or
mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, addressed to:
To the Trust: Wells Family of Real Estate Funds
3885 Holcomb Bridge Road
Norcross, Georgia 33092
Attention: Brian M. Conlon
To Countrywide: Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attention: Robert G. Dorsey
or to such other address as any party may designate by notice complying with the
terms of this Section 15. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery; (b) on the date telecommunicated if by
telegraph; (c) on the date of transmission with confirmed answer back if by
telex, telefax or other telegraphic method; and (d) on the date upon which the
return receipt is signed or delivery is refused or the notice is designated by
the postal authorities as not deliverable, as the case may be, if mailed.
- 6 -
<PAGE>
16. AMENDMENT.
----------
This Agreement may not be amended or modified except by a written
agreement executed by both parties.
17. BINDING EFFECT.
---------------
Each of the undersigned expressly warrants and represents that he has
the full power and authority to sign this Agreement on behalf of the party
indicated, and that his signature will operate to bind the party indicated to
the foregoing terms.
18. COUNTERPARTS.
-------------
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
19. FORCE MAJEURE.
--------------
If Countrywide shall be delayed in its performance of services or
prevented entirely or in part from performing services due to causes or events
beyond its control, including and without limitation, acts of God, interruption
of power or other utility, transportation or communication services, acts of
civil or military authority, sabotages, national emergencies, explosion, flood,
accident, earthquake or other catastrophe, fire, strike or other labor problems,
legal action, present or future law, governmental order, rule or regulation, or
shortages of suitable parts, materials, labor or transportation, such delay or
non-performance shall be excused and a reasonable time for performance in
connection with this Agreement shall be extended to include the period of such
delay or non-performance.
20. MISCELLANEOUS.
--------------
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
- 7 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
WELLS FAMILY OF REAL ESTATE FUNDS
By: /s/ Leo F. Wells
-----------------------------
Its: President
COUNTRYWIDE FUND SERVICES, INC.
By: /s/ Robert G. Dorsey
-----------------------------
Its: President
- 8 -
ACCOUNTING SERVICES AGREEMENT
-----------------------------
AGREEMENT dated as of January 12, 1998 between Wells Family of Real Estate
Funds, an Ohio business trust (the "Trust"), and Countrywide Fund Services, Inc.
("Countrywide"), an Ohio corporation.
WHEREAS, the Trust is an investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust wishes to employ the services of Countrywide to provide
the Trust with certain accounting and pricing services; and
WHEREAS, Countrywide wishes to provide such services under the conditions
set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Trust and Countrywide agree as follows:
1. APPOINTMENT.
------------
The Trust hereby appoints and employs Countrywide as agent to perform
those services described in this Agreement for the Trust. Countrywide shall act
under such appointment and perform the obligations thereof upon the terms and
conditions hereinafter set forth.
2. CALCULATION OF NET ASSET VALUE.
-------------------------------
Countrywide will calculate the net asset value of each series of the
Trust and the per share net asset value of each series of the Trust, in
accordance with the Trust's current prospectus and statement of additional
information, once daily as of the time selected by the Trust's Board of
Trustees. Countrywide will prepare and maintain a daily valuation of all
securities and other assets of the Trust in accordance with instructions from a
designated officer of the Trust or its investment advisor and in the manner set
forth in the Trust's current prospectus and statement of additional information.
In valuing securities of the Trust, Countrywide may contract with, and rely upon
market quotations provided by, outside services, subject to the approval of the
Trust's Board of Trustees.
3. BOOKS AND RECORDS.
------------------
Countrywide will maintain and keep current the general ledger for each
series of the Trust, recording all income and expenses, capital share activity
and security transactions of the Trust. Countrywide will maintain such further
books and records as are necessary to enable it to perform its duties under this
- 2 -
<PAGE>
Agreement, and will periodically provide reports to the Trust and its authorized
agents regarding share purchases and redemptions and trial balances of each
series of the Trust. Countrywide will prepare and maintain complete, accurate
and current all records with respect to the Trust required to be maintained by
the Trust under the Internal Revenue Code of 1986, as amended, and under the
rules and regulations of the 1940 Act, and will preserve said records in the
manner and for the periods prescribed in the Code and the 1940 Act. The
retention of such records shall be at the expense of the Trust.
All of the records prepared and maintained by Countrywide pursuant to
this Section 3 which are required to be maintained by the Trust under the Code
and the 1940 Act will be the property of the Trust. In the event this Agreement
is terminated, all such records shall be delivered to the Trust at the Trust's
expense, and Countrywide shall be relieved of responsibility for the preparation
and maintenance of any such records delivered to the Trust.
4. PAYMENT OF TRUST EXPENSES.
--------------------------
Countrywide shall process each request received from the Trust or its
authorized agents for payment of the Trust's expenses. Upon receipt of written
instructions signed by an officer or other authorized agent of the Trust,
Countrywide shall prepare checks in the appropriate amounts which shall be
signed by an authorized officer of Countrywide and mailed to the appropriate
party.
5. FORM N-SAR.
-----------
Countrywide shall maintain such records within its control and shall
be requested by the Trust to assist the Trust in fulfilling the requirements of
Form N-SAR.
6. COOPERATION WITH ACCOUNTANTS.
-----------------------------
Countrywide shall cooperate with the Trust's independent public
accountants and shall take all reasonable action in the performance of its
obligations under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their unqualified
opinion where required for any document for the Trust.
7. FURTHER ACTIONS.
----------------
Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof.
- 2 -
<PAGE>
8. FEES.
-----
For the performance of the services under this Agreement, each series
of the Trust shall pay Countrywide a monthly fee in accordance with the schedule
attached hereto as Schedule A. The fees with respect to any month shall be paid
to Countrywide on the last business day of such month. The Trust shall also
promptly reimburse Countrywide for the cost of external pricing services
utilized by Countrywide.
9. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
---------------------------------------------------
The parties hereto acknowledge and agree that nothing contained herein
shall be construed to require Countrywide to perform any services for the Trust
which services could cause Countrywide to be deemed an "investment advisor" of
the Trust within the meaning of Section 2(a)(20) of the 1940 Act or to supersede
or contravene the Trust's prospectus or statement of additional information or
any provisions of the 1940 Act and the rules thereunder. Except as otherwise
provided in this Agreement and except for the accuracy of information furnished
to it by Countrywide, the Trust assumes full responsibility for complying with
all applicable requirements of the 1940 Act, the Securities Act of 1933, as
amended, and any other laws, rules and regulations of governmental authorities
having jurisdiction.
10. REFERENCES TO COUNTRYWIDE.
--------------------------
The Trust shall not circulate any printed matter which contains any
reference to Countrywide without the prior written approval of Countrywide,
excepting solely such printed matter as merely identifies Countrywide as
Administrative Services Agent, Transfer, Shareholder Servicing and Dividend
Disbursing Agent and Accounting Services Agent. The Trust will submit printed
matter requiring approval to Countrywide in draft form, allowing sufficient time
for review by Countrywide and its counsel prior to any deadline for printing.
11. EQUIPMENT FAILURES.
-------------------
Countrywide shall take all steps necessary to minimize or avoid
service interruptions, and has entered into one or more agreements making
provision for emergency use of electronic data processing equipment. Countrywide
shall have no liability with respect to equipment failures beyond its control.
12. INDEMNIFICATION OF COUNTRYWIDE.
-------------------------------
A. Countrywide may rely on information reasonably believed by it to be
accurate and reliable. Except as may otherwise be required by the 1940 Act and
the rules thereunder, neither Countrywide nor its shareholders, officers,
directors, employees, agents, control persons or affiliates of any thereof shall
be subject to any liability for, or any damages, expenses or losses incurred by
the Trust in connection with, any error of judgment,
- 3 -
<PAGE>
mistake of law, any act or omission connected with or arising out of any
services rendered under or payments made pursuant to this Agreement or any other
matter to which this Agreement relates, except by reason of willful misfeasance,
bad faith or negligence on the part of any such persons in the performance of
the duties of Countrywide under this Agreement or by reason of reckless
disregard by any of such persons of the obligations and duties of Countrywide
under this Agreement.
B. Notwithstanding any other provision of this Agreement, the Trust shall
indemnify and hold harmless Countrywide, its directors, officers, employees,
shareholders, agents, control persons and affiliates from and against any and
all claims, demands, expenses and liabilities (whether with or without basis in
fact or law) of any and every nature which Countrywide may sustain or incur or
which may be asserted against Countrywide by any person by reason of, or as a
result of: (i) any action taken or omitted to be taken by Countrywide in good
faith in reliance upon any certificate, instrument, order or share certificate
reasonably believed by it to be genuine and to be signed, countersigned or
executed by any duly authorized person, upon the oral instructions or written
instructions of an authorized person of the Trust or upon the opinion of legal
counsel for the Trust or its own counsel; or (ii) any action taken or omitted to
be taken by Countrywide in connection with its appointment in good faith in
reliance upon any law, act, regulation or interpretation of the same even though
the same may thereafter have been altered, changed, amended or repealed.
However, indemnification under this subparagraph shall not apply to actions or
omissions of Countrywide or its directors, officers, employees, shareholders or
agents in cases of its or their own negligence, willful misconduct, bad faith,
or reckless disregard of its or their own duties hereunder.
13. TERMINATION.
------------
A. The provisions of this Agreement shall be effective on the date
first above written, shall continue in effect for two years from that date and
shall continue in force from year to year thereafter, but only so long as such
continuance is approved (1) by vote, cast in person at a meeting called for the
purpose, of a majority of the Trust's trustees who are not parties to this
Agreement or interested persons (as defined in the 1940 Act) of any such party,
and (2) by vote of a majority of the Trust's Board of Trustees or a majority of
the Trust's outstanding voting securities.
B. Either party may terminate this Agreement on any date by giving the
other party at least sixty (60) days' prior written notice of such termination
specifying the date fixed therefor. Upon termination of this Agreement, the
Trust shall pay to Countrywide such compensation as may be due as of the date
- 4 -
<PAGE>
of such termination, and shall likewise reimburse Countrywide for any
out-of-pocket expenses and disbursements reasonably incurred by Countrywide to
such date.
C. In the event that in connection with the termination of this
Agreement a successor to any of Countrywide's duties or responsibilities under
this Agreement is designated by the Trust by written notice to Countrywide,
Countrywide shall, promptly upon such termination and at the expense of the
Trust, transfer all records maintained by Countrywide under this Agreement and
shall cooperate in the transfer of such duties and responsibilities, including
provision for assistance from Countrywide's cognizant personnel in the
establishment of books, records and other data by such successor.
D. Countrywide shall not assign or transfer its rights and obligations
under this Agreement without the prior written consent of the Trust.
14. SERVICES FOR OTHERS.
--------------------
Nothing in this Agreement shall prevent Countrywide or any affiliated
person (as defined in the 1940 Act) of Countrywide from providing services for
any other person, firm or corporation (including other investment companies);
provided, however, that Countrywide expressly represents that it will undertake
no activities which, in its judgment, will adversely affect the performance of
its obligations to the Trust under this Agreement.
15. LIMITATION OF LIABILITY.
------------------------
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust, personally, but bind only the trust property
of the Trust. The execution and delivery of this Agreement have been authorized
by the Trustees of the Trust and signed by an officer of the Trust, acting as
such, and neither such authorization by such Trustees nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but shall
bind only the trust property of the Trust.
16. SEVERABILITY.
-------------
In the event any provision of this Agreement is determined to be void
or unenforceable, such determination shall not affect the remainder of this
Agreement, which shall continue to be in force.
17. QUESTIONS OF INTERPRETATION.
----------------------------
This Agreement shall be governed by the laws of the State of Ohio. Any
question of interpretation of any term or provision of this Agreement having a
counterpart in or otherwise
- 5 -
<PAGE>
derived from a term or provision of the 1940 Act shall be resolved by reference
to such term or provision of the 1940 Act and to interpretations thereof, if
any, by the United States Courts or in the absence of any controlling decision
of any such court, by rules, regulations or orders of the Securities and
Exchange Commission issued pursuant to said 1940 Act. In addition, where the
effect of a requirement of the 1940 Act, reflected in any provision of this
Agreement, is revised by rule, regulation or order of the Securities and
Exchange Commission, such provision shall be deemed to incorporate the effect of
such rule, regulation or order.
18. NOTICES.
--------
All notices, requests, consents and other communications required or
permitted under this Agreement shall be in writing (including telex and
telegraphic communication) and shall be (as elected by the person giving such
notice) hand delivered by messenger or courier service, telecommunicated, or
mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, addressed to:
To the Trust: Wells Family of Real Estate Funds
3885 Holcomb Bridge Road
Norcross, Georgia 33092
Attention: Brian M. Conlon
To Countrywide: Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attention: Robert G. Dorsey
or to such other address as any party may designate by notice complying with the
terms of this Section 18. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery; (b) on the date telecommunicated if by
telegraph; (c) on the date of transmission with confirmed answer back if by
telex, telefax or other telegraphic method; and (d) on the date upon which the
return receipt is signed or delivery is refused or the notice is designated by
the postal authorities as not deliverable, as the case may be, if mailed.
19. AMENDMENT.
----------
This Agreement may not be amended or modified except by a written
agreement executed by both parties.
20. BINDING EFFECT.
---------------
Each of the undersigned expressly warrants and represents that he has
the full power and authority to sign this Agreement on behalf of the party
indicated, and that his signature will operate to bind the party indicated to
the foregoing terms.
- 6 -
<PAGE>
21. COUNTERPARTS.
-------------
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
22. FORCE MAJEURE.
--------------
If Countrywide shall be delayed in its performance of services or
prevented entirely or in part from performing services due to causes or events
beyond its control, including and without limitation, acts of God, interruption
of power or other utility, transportation or communication services, acts of
civil or military authority, sabotages, national emergencies, explosion, flood,
accident, earthquake or other catastrophe, fire, strike or other labor problems,
legal action, present or future law, governmental order, rule or regulation, or
shortages of suitable parts, materials, labor or transportation, such delay or
non-performance shall be excused and a reasonable time for performance in
connection with this Agreement shall be extended to include the period of such
delay or non-performance.
23. MISCELLANEOUS.
--------------
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
WELLS FAMILY OF REAL ESTATE FUNDS
By: /s/ Leo F. Wells
-----------------------------
Its: President
COUNTRYWIDE FUND SERVICES, INC.
By: /s/ Robert G. Dorsey
-----------------------------
Its: President
- 7 -
<PAGE>
Schedule A
----------
COMPENSATION
------------
The Wells S&P REIT Index Fund will pay Countrywide a monthly fee, according
to the average net assets of the Fund during such month, as follows:
Monthly Fee Average Monthly Net Assets
----------- --------------------------
$2,000 $ 0 - $ 50,000,000
$2,500 $ 50,000,000 - $100,000,000
$3,000 $100,000,000 - $200,000,000
$4,000 $200,000,000 - $300,000,000
$5,000 + .001% of
average monthly
net assets Over $300,000,000
- 8 -
TRANSFER, DIVIDEND DISBURSING, SHAREHOLDER SERVICE
--------------------------------------------------
AND PLAN AGENCY AGREEMENT
-------------------------
AGREEMENT dated as of January 12, 1998 between Wells Family of Real Estate
Funds, an Ohio business trust (the "Trust"), and Countrywide Fund Services, Inc.
("Countrywide"), an Ohio corporation.
WHEREAS, the Trust is an investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust wishes to employ the services of Countrywide to serve as
its transfer, dividend disbursing, shareholder service and plan agent; and
WHEREAS, Countrywide wishes to provide such services under the conditions
set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Trust and Countrywide agree as follows:
1. APPOINTMENT.
------------
The Trust hereby appoints and employs Countrywide as agent to perform
those services described in this Agreement for the Trust. Countrywide shall act
under such appointment and perform the obligations thereof upon the terms and
conditions hereinafter set forth.
2. DOCUMENTATION.
--------------
The Trust will furnish from time to time the following documents:
A. Each resolution of the Board of Trustees of the Trust authorizing the
original issue of its shares;
B. Each Registration Statement filed with the Securities and Exchange
Commission (the "SEC") and amendments thereof;
C. A certified copy of each amendment to the Agreement and Declaration of
Trust and the Bylaws of the Trust;
D. Certified copies of each resolution of the Board of Trustees
authorizing officers to give instructions to Countrywide;
E. Specimens of all new forms of share certificates accompanied by Board
of Trustees' resolutions approving such forms;
<PAGE>
F. Such other certificates, documents or opinions which Countrywide may,
in its discretion, deem necessary or appropriate in the proper
performance of its duties;
G. Copies of all Underwriting and Dealer Agreements in effect;
H. Copies of all Investment Advisory Agreements in effect; and
I. Copies of all documents relating to special investment or withdrawal
plans which are offered or may be offered in the future by the Trust
and for which Countrywide is to act as plan agent.
3. COUNTRYWIDE TO RECORD SHARES.
-----------------------------
Countrywide shall record the issuance of shares of the Trust and
maintain pursuant to applicable rules of the SEC a record of the total number of
shares of the Trust which are authorized, issued and outstanding, based upon
data provided to it by the Trust. Countrywide shall also provide the Trust on a
regular basis or upon reasonable request the total number of shares which are
authorized, issued and outstanding, but shall have no obligation when recording
the issuance of the Trust's shares, except as otherwise set forth herein, to
monitor the issuance of such shares or to take cognizance of any laws relating
to the issue or sale of such shares, which functions shall be the sole
responsibility of the Trust.
4. COUNTRYWIDE TO VALIDATE TRANSFERS.
----------------------------------
Upon receipt of a proper request for transfer and upon surrender to
Countrywide of certificates, if any, in proper form for transfer, Countrywide
shall approve such transfer and shall take all necessary steps to effectuate the
transfer as indicated in the transfer request. Upon approval of the transfer,
Countrywide shall notify the Trust in writing of each such transaction and shall
make appropriate entries on the shareholder records maintained by Countrywide.
5. SHARE CERTIFICATES.
-------------------
If the Trust authorizes the issuance of share certificates and an
investor requests a share certificate, Countrywide will countersign and mail, by
insured first class mail, a share certificate to the investor at his address as
set forth on the transfer books of the Trust, subject to any other instructions
for delivery of certificates representing newly purchased shares and subject to
the limitation that no certificates representing newly purchased shares shall be
mailed to the investor until the cash purchase price of such shares has
- 2 -
<PAGE>
been collected and credited to the account of the Trust maintained by the
Custodian. The Trust shall supply Countrywide with a sufficient supply of blank
share certificates and from time to time shall renew such supply upon request of
Countrywide. Such blank share certificates shall be properly signed, manually
or, if authorized by the Trust, by facsimile; and notwithstanding the death,
resignation or removal of any officers of the Trust authorized to sign share
certificates, Countrywide may continue to countersign certificates which bear
the manual or facsimile signature of such officer until otherwise directed by
the Trust. In case of the alleged loss or destruction of any share certificate,
no new certificates shall be issued in lieu thereof, unless there shall first be
furnished an appropriate bond satisfactory to Countrywide and the Trust, and
issued by a surety company satisfactory to Countrywide and the Trust.
6. RECEIPT OF FUNDS.
-----------------
Upon receipt of any check or other instrument drawn or endorsed to it
as agent for, or identified as being for the account of, the Trust or Wells
Investment Securities, Inc., as underwriter of the Trust (the "Underwriter"),
Countrywide shall stamp the check or instrument with the date of receipt,
determine the amount thereof due the Trust and shall forthwith process the same
for collection. Upon receipt of notification of receipt of funds eligible for
share purchases in accordance with the Trust's then current prospectus and
statement of additional information, Countrywide shall notify the Trust, at the
close of each business day, in writing of the amount of said funds credited to
the Trust and deposited in its account with the Custodian, and shall similarly
notify the Underwriter of the amount of said funds credited to the Underwriter
and deposited in its account with its designated bank.
7. PURCHASE ORDERS.
----------------
Upon receipt of an order for the purchase of shares of the Trust,
accompanied by sufficient information to enable Countrywide to establish a
shareholder account, Countrywide shall, as of the next determination of net
asset value after receipt of such order in accordance with the Trust's then
current prospectus and statement of additional information, compute the number
of shares due to the shareholder, credit the share account of the shareholder,
subject to collection of the funds, with the number of shares so purchased,
shall notify the Trust in writing or by computer report at the close of each
business day of such transactions and shall mail to the shareholder and/or
dealer of record a notice of such credit.
- 3 -
<PAGE>
8. RETURNED CHECKS.
----------------
In the event that Countrywide is notified by the Trust's Custodian
that any check or other order for the payment of money is returned unpaid for
any reason, Countrywide will:
A. Give prompt notification to the Trust and the Underwriter of the
non-payment of said check;
B. In the absence of other instructions from the Trust or the
Underwriter, take such steps as may be necessary to redeem any shares purchased
on the basis of such returned check and cause the proceeds of such redemption
plus any dividends declared with respect to such shares to be credited to the
account of the Trust and to request the Trust's Custodian to forward such
returned check to the person who originally submitted the check; and
C. Notify the Trust of such actions and correct the Trust's records
maintained by Countrywide pursuant to this Agreement.
9. SALES CHARGE.
-------------
In computing the number of shares to credit to the account of a
shareholder, Countrywide will calculate the total of the applicable sales
charges with respect to each purchase as set forth in the Trust's current
prospectus and statement of additional information and in accordance with any
notification filed with respect to combined and accumulated purchases.
Countrywide will also determine the portion of each sales charge payable by the
Underwriter to the dealer of record participating in the sale in accordance with
such schedules as are from time to time delivered by the Underwriter to
Countrywide; provided, however, Countrywide shall have no liability hereunder
arising from the incorrect selection by Countrywide of the gross rate of sales
charges except that this exculpation shall not apply in the event the rate is
specified by the Underwriter or the Trust and Countrywide fails to select the
rate specified.
10. DIVIDENDS AND DISTRIBUTIONS.
----------------------------
The Trust shall furnish Countrywide with appropriate evidence of
trustee action authorizing the declaration of dividends and other distributions.
Countrywide shall establish procedures in accordance with the Trust's then
current prospectus and statement of additional information and with other
authorized actions of the Trust's Board of Trustees under which it will have
available from the Custodian or the Trust any required information for each
dividend and other distribution. After deducting any amount required to be
withheld by any applicable laws, Countrywide shall, as agent for each
shareholder who so
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<PAGE>
requests, invest the dividends and other distributions in full and fractional
shares in accordance with the Trust's then current prospectus and statement of
additional information. If a shareholder has elected to receive dividends or
other distributions in cash, then Countrywide shall disburse dividends to
shareholders of record in accordance with the Trust's then current prospectus
and statement of additional information. Countrywide shall, on or before the
mailing date of such checks, notify the Trust and the Custodian of the estimated
amount of cash required to pay such dividend or distribution, and the Trust
shall instruct the Custodian to make available sufficient funds therefor in the
appropriate account of the Trust. Countrywide shall mail to the shareholders
periodic statements, as requested by the Trust, showing the number of full and
fractional shares and the net asset value per share of shares so credited. When
requested by the Trust, Countrywide shall prepare and file with the Internal
Revenue Service, and when required, shall address and mail to shareholders, such
returns and information relating to dividends and distributions paid by the
Trust as are required to be so prepared, filed and mailed by applicable laws,
rules and regulations.
11. UNCLAIMED DIVIDENDS AND UNCLAIMED REDEMPTION PROCEEDS.
------------------------------------------------------
Countrywide shall, at least annually, furnish in writing to the Trust
the names and addresses, as shown in the shareholder accounts maintained by
Countrywide, of all shareholders for which there are, as of the end of the
calendar year, dividends, distributions or redemption proceeds for which checks
or share certificates mailed in payment of distributions have been returned.
Countrywide shall use its best efforts to contact the shareholders affected and
to follow any other written instructions received from the Trust concerning the
disposition of any such unclaimed dividends, distributions or redemption
proceeds.
12. REDEMPTIONS AND EXCHANGES.
--------------------------
A. Countrywide shall process, in accordance with the Trust's then
current prospectus and statement of additional information, each order for the
redemption of shares accepted by Countrywide. Upon its approval of such
redemption transactions, Countrywide, if requested by the Trust, shall mail to
the shareholder and/or dealer of record a confirmation showing trade date,
number of full and fractional shares redeemed, the price per share and the total
redemption proceeds. For each such redemption, Countrywide shall either: (a)
prepare checks in the appropriate amounts for approval and verification by the
Trust and signature by an authorized officer of Countrywide and mail the checks
to the appropriate person, or (b) in the event redemption proceeds are to be
wired through the Federal Reserve Wire System or by bank wire, cause such
proceeds to be wired in
- 5 -
<PAGE>
federal funds to the bank account designated by the shareholder, or (c)
effectuate such other redemption procedures which are authorized by the Trust's
Board of Trustees or its then current prospectus and statement of additional
information. The requirements as to instruments of transfer and other
documentation, the applicable redemption price and the time of payment shall be
as provided in the then current prospectus and statement of additional
information, subject to such supplemental instructions as may be furnished by
the Trust and accepted by Countrywide. If Countrywide or the Trust determines
that a request for redemption does not comply with the requirements for
redemptions, Countrywide shall promptly notify the shareholder indicating the
reason therefor.
B. If shares of the Trust are eligible for exchange with shares of any
other investment company, Countrywide, in accordance with the then current
prospectus and statement of additional information and exchange rules of the
Trust and such other investment company, or such other investment company's
transfer agent, shall review and approve all exchange requests and shall, on
behalf of the Trust's shareholders, process such approved exchange requests.
C. Countrywide shall notify the Trust, the Custodian and the
Underwriter on each business day of the amount of cash required to meet payments
made pursuant to the provisions of this Paragraph 12, and, on the basis of such
notice, the Trust shall instruct the Custodian to make available from time to
time sufficient funds therefor in the appropriate account of the Trust.
Procedures for effecting redemption orders accepted from shareholders or dealers
of record by telephone or other methods shall be established by mutual agreement
between Countrywide and the Trust consistent with the Trust's then current
prospectus and statement of additional information.
D. The authority of Countrywide to perform its responsibilities under
Paragraph 7, Paragraph 10, and this Paragraph 12 shall be suspended with respect
to any series of the Trust upon receipt of notification by it of the suspension
of the determination of such series' net asset value.
13. AUTOMATIC WITHDRAWAL PLANS.
---------------------------
Countrywide will process automatic withdrawal orders pursuant to the
provisions of the withdrawal plans duly executed by shareholders and the current
prospectus and statement of additional information of the Trust. Payments upon
such withdrawal order shall be made by Countrywide from the appropriate account
maintained by the Trust with the Custodian on approximately the last business
day of each month in which a payment has been requested, and Countrywide will
withdraw from a shareholder's account and present for repurchase or redemption
as
- 6 -
<PAGE>
many shares as shall be sufficient to make such withdrawal payment pursuant to
the provisions of the shareholder's withdrawal plan and the current prospectus
and statement of additional information of the Trust. From time to time on new
automatic withdrawal plans a check for payment date already past may be issued
upon request by the shareholder.
14. LETTERS OF INTENT.
------------------
Countrywide will process such letters of intent for investing in
shares of the Trust as are provided for in the Trust's current prospectus and
statement of additional information. Countrywide will make appropriate deposits
to the account of the Underwriter for the adjustment of sales charges as therein
provided and will currently report the same to the Underwriter.
15. WIRE-ORDER PURCHASES.
---------------------
Countrywide will send written confirmations to the dealers of record
containing all details of the wire-order purchases placed by each such dealer by
the close of business on the business day following receipt of such orders by
Countrywide or the Underwriter, with copies to the Underwriter. Upon receipt of
any check drawn or endorsed to the Trust (or Countrywide, as agent) or otherwise
identified as being payment of an outstanding wire-order, Countrywide will stamp
said check with the date of its receipt and deposit the amount represented by
such check to Countrywide's deposit accounts maintained with the Custodian.
Countrywide will compute the respective portions of such deposit which represent
the sales charge and the net asset value of the shares so purchased, will cause
the Custodian to transfer federal funds in an amount equal to the net asset
value of the shares so purchased to the Trust's account with the Custodian, and
will notify the Trust and the Underwriter before noon of each business day of
the total amount deposited in the Trust's deposit accounts, and in the event
that payment for a purchase order is not received by Countrywide or the
Custodian on the tenth business day following receipt of the order, prepare an
NASD "notice of failure of dealer to make payment" and forward such notification
to the Underwriter.
16. OTHER PLANS.
------------
Countrywide will process such accumulation plans, group programs and
other plans or programs for investing in shares of the Trust as are now provided
for in the Trust's current prospectus and statement of additional information
and will act as plan agent for shareholders pursuant to the terms of such plans
and programs duly executed by such shareholders.
- 7 -
<PAGE>
17. RECORDKEEPING AND OTHER INFORMATION.
------------------------------------
Countrywide shall create and maintain all records required by
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act and the rules thereunder, as the same
may be amended from time to time, pertaining to the various functions performed
by it and not otherwise created and maintained by another party pursuant to
contract with the Trust. All such records shall be the property of the Trust at
all times and shall be available for inspection and use by the Trust. Where
applicable, such records shall be maintained by Countrywide for the periods and
in the places required by Rule 31a-2 under the 1940 Act. The retention of such
records shall be at the expense of the Trust. Countrywide shall make available
during regular business hours all records and other data created and maintained
pursuant to this Agreement for reasonable audit and inspection by the Trust, any
person retained by the Trust, or any regulatory agency having authority over the
Trust.
18. SHAREHOLDER RECORDS.
--------------------
Countrywide shall maintain records for each shareholder account
showing the following:
A. Names, addresses and tax identifying numbers;
B. Name of the dealer of record, if any;
C. Number of shares held of each series;
D. Historical information regarding the account of each shareholder,
including dividends and distributions in cash or invested in shares;
E. Information with respect to the source of all dividends and
distributions allocated among income, realized short-term gains and
realized long-term gains;
F. Any instructions from a shareholder including all forms furnished by
the Trust and executed by a shareholder with respect to (i) dividend
or distribution elections and (ii) elections with respect to payment
options in connection with the redemption of shares;
G. Any correspondence relating to the current maintenance of a
shareholder's account;
H. Certificate numbers and denominations for any shareholder holding
certificates;
- 8 -
<PAGE>
I. Any stop or restraining order placed against a shareholder's account;
J. Information with respect to withholding in the case of a foreign
account or any other account for which withholding is required by the
Internal Revenue Code of 1986, as amended; and
K. Any information required in order for Countrywide to perform the
calculations contemplated under this Agreement.
19. TAX RETURNS AND REPORTS.
------------------------
Countrywide will prepare in the appropriate form, file with the
Internal Revenue Service and appropriate state agencies and, if required, mail
to shareholders of the Trust such returns for reporting dividends and
distributions paid by the Trust as are required to be so prepared, filed and
mailed and shall withhold such sums as are required to be withheld under
applicable federal and state income tax laws, rules and regulations.
20. OTHER INFORMATION TO THE TRUST.
-------------------------------
Subject to such instructions, verification and approval of the
Custodian and the Trust as shall be required by any agreement or applicable law,
Countrywide will also maintain such records as shall be necessary to furnish to
the Trust the following: annual shareholder meeting lists, proxy lists and
mailing materials, shareholder reports and confirmations and checks for
disbursing redemption proceeds, dividends and other distributions or expense
disbursements.
21. ACCESS TO SHAREHOLDER INFORMATION.
----------------------------------
Upon request, Countrywide shall arrange for the Trust's investment
advisor to have direct access to shareholder information contained in
Countrywide's computer system, including account balances, performance
information and such other information which is available to Countrywide with
respect to shareholder accounts.
22. COOPERATION WITH ACCOUNTANTS.
-----------------------------
Countrywide shall cooperate with the Trust's independent public
accountants and shall take all reasonable action in the performance of its
obligations under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their unqualified
opinion where required for any document for the Trust.
- 9 -
<PAGE>
23. SHAREHOLDER SERVICE AND CORRESPONDENCE.
---------------------------------------
Countrywide will provide and maintain adequate personnel, records and
equipment to receive and answer all shareholder and dealer inquiries relating to
account status, share purchases, redemptions and exchanges and other investment
plans available to Trust shareholders. Countrywide will answer written
correspondence from shareholders relating to their share accounts and such other
written or oral inquiries as may from time to time be mutually agreed upon, and
Countrywide will notify the Trust of any correspondence or inquiries which may
require an answer from the Trust.
24. PROXIES.
--------
Countrywide shall assist the Trust in the mailing of proxy cards and
other material in connection with shareholder meetings of the Trust, shall
receive, examine and tabulate returned proxies and shall, if requested by the
Trust, provide at least one inspector of election to attend and participate as
required by law in shareholder meetings of the Trust.
25. FURTHER ACTIONS.
----------------
Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof.
26. COMPENSATION.
-------------
For the performance of Countrywide's obligations under this Agreement,
each series of the Trust shall pay Countrywide, on the first business day
following the end of each month, a monthly fee in accordance with the schedule
attached hereto as Schedule A. The Trust shall promptly reimburse Countrywide
for any out-of-pocket expenses and advances which are to be paid by the Trust in
accordance with Paragraph 27.
27. EXPENSES.
---------
Countrywide shall furnish, at its expense and without cost to the
Trust (i) the services of its personnel to the extent that such services are
required to carry out its obligations under this Agreement and (ii) use of data
processing equipment. All costs and expenses not expressly assumed by
Countrywide under this Paragraph 27 shall be paid by the Trust, including, but
not limited to, costs and expenses of officers and employees of Countrywide in
attending meetings of the Board of Trustees and shareholders of the Trust, as
well as costs and expenses for postage, envelopes, checks, drafts, continuous
forms, reports, communications, statements and other materials, telephone,
telegraph and remote transmission lines, use of outside pricing
- 10 -
<PAGE>
services, use of outside mailing firms, necessary outside record storage, media
for storage of records (e.g., microfilm, microfiche, computer tapes), printing,
confirmations and any other shareholder correspondence and any and all
assessments, taxes or levies assessed on Countrywide for services provided under
this Agreement. Postage for mailings of dividends, proxies, reports and other
mailings to all shareholders shall be advanced to Countrywide three business
days prior to the mailing date of such materials.
28. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
---------------------------------------------------
The parties hereto acknowledge and agree that nothing contained herein
shall be construed to require Countrywide to perform any services for the Trust
which services could cause Countrywide to be deemed an "investment adviser" of
the Trust within the meaning of Section 2(a)(20) of the 1940 Act or to supersede
or contravene the Trust's prospectus or statement of additional information or
any provisions of the 1940 Act and the rules thereunder. Except as otherwise
provided in this Agreement and except for the accuracy of information furnished
to it by Countrywide, the Trust assumes full responsibility for complying with
all applicable requirements of the 1940 Act, the Securities Act of 1933, as
amended, and any other laws, rules and regulations of governmental authorities
having jurisdiction.
29. REFERENCES TO COUNTRYWIDE.
--------------------------
The Trust shall not circulate any printed matter which contains any
reference to Countrywide without the prior written approval of Countrywide,
excepting solely such printed matter as merely identifies Countrywide as
Administrative Services Agent, Transfer, Shareholder Servicing and Dividend
Disbursing Agent and Accounting Services Agent. The Trust will submit printed
matter requiring approval to Countrywide in draft form, allowing sufficient time
for review by Countrywide and its counsel prior to any deadline for printing.
30. EQUIPMENT FAILURES.
-------------------
Countrywide shall take all steps necessary to minimize or avoid
service interruptions, and has entered into one or more agreements making
provision for emergency use of electronic data processing equipment. Countrywide
shall have no liability with respect to equipment failures beyond its control.
31. INDEMNIFICATION OF COUNTRYWIDE.
-------------------------------
A. Countrywide may rely on information reasonably believed by it to be
accurate and reliable. Except as may otherwise be required by the 1940 Act and
the rules thereunder, neither Countrywide nor its shareholders, officers,
directors, employees, agents, control persons or affiliates of any thereof shall
be subject to any liability for, or any damages, expenses or losses incurred by
the Trust in connection with, any error of judgment,
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<PAGE>
mistake of law, any act or omission connected with or arising out of any
services rendered under or payments made pursuant to this Agreement or any other
matter to which this Agreement relates, except by reason of willful misfeasance,
bad faith or negligence on the part of any such persons in the performance of
the duties of Countrywide under this Agreement or by reason of reckless
disregard by any of such persons of the obligations and duties of Countrywide
under this Agreement.
B. The Trust shall indemnify and hold harmless Countrywide, its directors,
officers, employees, shareholders, agents, control persons and affiliates from
and against any and all claims, demands, expenses and liabilities (whether with
or without basis in fact or law) of any and every nature which Countrywide may
sustain or incur or which may be asserted against Countrywide by any person by
reason of, or as a result of: (i) any action taken or omitted to be taken by
Countrywide in good faith in reliance upon any certificate, instrument, order or
share certificate reasonably believed by it to be genuine and to be signed,
countersigned or executed by any duly authorized person, upon the oral
instructions or written instructions of an authorized person of the Trust or
upon the opinion of legal counsel for the Trust or its own counsel; or (ii) any
action taken or omitted to be taken by Countrywide in connection with its
appointment in good faith in reliance upon any law, act, regulation or
interpretation of the same even though the same may thereafter have been
altered, changed, amended or repealed. However, indemnification under this
subparagraph shall not apply to actions or omissions of Countrywide or its
directors, officers, employees, shareholders or agents in cases of its or their
own negligence, willful misconduct, bad faith, or reckless disregard of its or
their own duties hereunder.
32. TERMINATION
-----------
A. The provisions of this Agreement shall be effective on the date
first above written, shall continue in effect for two years from that date and
shall continue in force from year to year thereafter, but only so long as such
continuance is approved (1) by vote, cast in person at a meeting called for the
purpose, of a majority of the Trust's trustees who are not parties to this
Agreement or interested persons (as defined in the 1940 Act) of any such party,
and (2) by vote of a majority of the Trust's Board of Trustees or a majority of
the Trust's outstanding voting securities.
B. Either party may terminate this Agreement on any date by giving the
other party at least sixty (60) days' prior written notice of such termination
specifying the date fixed therefor. Upon termination of this Agreement, the
Trust shall pay to Countrywide such compensation as may be due as of the date of
such termination, and shall likewise reimburse Countrywide for any out-of-pocket
expenses and disbursements reasonably incurred by Countrywide to such date.
- 12 -
<PAGE>
C. In the event that in connection with the termination of this
Agreement a successor to any of Countrywide's duties or responsibilities under
this Agreement is designated by the Trust by written notice to Countrywide,
Countrywide shall, promptly upon such termination and at the expense of the
Trust, transfer all records maintained by Countrywide under this Agreement and
shall cooperate in the transfer of such duties and responsibilities, including
provision for assistance from Countrywide's cognizant personnel in the
establishment of books, records and other data by such successor.
D. Countrywide shall not assign or transfer its rights and obligations
under this Agreement without the prior written consent of the Trust.
33. SERVICES FOR OTHERS.
--------------------
Nothing in this Agreement shall prevent Countrywide or any affiliated
person (as defined in the 1940 Act) of Countrywide from providing services for
any other person, firm or corporation (including other investment companies);
provided, however, that Countrywide expressly represents that it will undertake
no activities which, in its judgment, will adversely affect the performance of
its obligations to the Trust under this Agreement.
34. LIMITATION OF LIABILITY.
------------------------
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust, personally, but bind only the trust property
of the Trust. The execution and delivery of this Agreement have been authorized
by the Trustees of the Trust and signed by an officer of the Trust, acting as
such, and neither such authorization by such Trustees nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but shall
bind only the trust property of the Trust.
35. SEVERABILITY.
-------------
In the event any provision of this Agreement is determined to be void
or unenforceable, such determination shall not affect the remainder of this
Agreement, which shall continue to be in force.
36. QUESTIONS OF INTERPRETATION.
----------------------------
This Agreement shall be governed by the laws of the State of Ohio. Any
question of interpretation of any term or provision of this Agreement having a
counterpart in or otherwise derived from a term or provision of the 1940 Act
shall be resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States Courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the SEC issued pursuant to said 1940 Act. In addition, where the effect of a
requirement
- 13 -
<PAGE>
of the 1940 Act, reflected in any provision of this Agreement, is revised by
rule, regulation or order of the SEC, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
37. NOTICES.
--------
All notices, requests, consents and other communications required or
permitted under this Agreement shall be in writing (including telex and
telegraphic communication) and shall be (as elected by the person giving such
notice) hand delivered by messenger or courier service, telecommunicated, or
mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, addressed to:
To the Trust: Wells Family of Real Estate Funds
3885 Holcomb Bridge Road
Norcross, Georgia 33092
Attention: Brian M. Conlon
To Countrywide: Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attention: Robert G. Dorsey
or to such other address as any party may designate by notice complying with the
terms of this Section 37. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery; (b) on the date telecommunicated if by
telegraph; (c) on the date of transmission with confirmed answer back if by
telex, telefax or other telegraphic method; and (d) on the date upon which the
return receipt is signed or delivery is refused or the notice is designated by
the postal authorities as not deliverable, as the case may be, if mailed.
38. AMENDMENT.
----------
This Agreement may not be amended or modified except by a written
agreement executed by both parties.
39. BINDING EFFECT.
---------------
Each of the undersigned expressly warrants and represents that he has
the full power and authority to sign this Agreement on behalf of the party
indicated, and that his signature will operate to bind the party indicated to
the foregoing terms.
- 14 -
<PAGE>
40. COUNTERPARTS.
-------------
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
41. FORCE MAJEURE.
--------------
If Countrywide shall be delayed in its performance of services or
prevented entirely or in part from performing services due to causes or events
beyond its control, including and without limitation, acts of God, interruption
of power or other utility, transportation or communication services, acts of
civil or military authority, sabotages, national emergencies, explosion, flood,
accident, earthquake or other catastrophe, fire, strike or other labor problems,
legal action, present or future law, governmental order, rule or regulation, or
shortages of suitable parts, materials, labor or transportation, such delay or
non-performance shall be excused and a reasonable time for performance in
connection with this Agreement shall be extended to include the period of such
delay or non-performance.
42. MISCELLANEOUS.
--------------
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
WELLS FAMILY OF REAL ESTATE FUNDS
By: /s/ Leo F. Wells
-----------------------------
Its: President
COUNTRYWIDE FUND SERVICES, INC.
By: /s/ Robert G. Dorsey
-----------------------------
Its: President
- 15 -
<PAGE>
Schedule A
----------
COMPENSATION
------------
Services FEE
- -------- ---
As Transfer Agent and Shareholder (Per Account)
Servicing Agent:
Wells S&P REIT Index Fund Payable monthly at
rate of $20.00/account;
subject to a minimum
of $1,200 per month
- 16 -
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the use of our name and
to all references to our Firm included in or made a part of this Post-Effective
Amendment No. 1.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Cincinnati, Ohio
February 10, 1999
AGREEMENT RELATING TO INITIAL CAPITAL
-------------------------------------
December 23, 1997
WELLS FAMILY OF REAL ESTATE FUNDS
3885 Holcomb Bridge Road
Norcross, Georgia 30092
Dear Sir/Madam:
In conjunction with the purchase by Wells Capital, Inc. (the "Purchaser")
of 10,000 shares of beneficial interest of the Wells S&P REIT Index Fund of
Wells Family of Real Estate Funds (the "Shares"), the Purchaser hereby
represents that it is acquiring the Shares for investment with no intention of
reselling or otherwise distributing the Shares. The Purchaser hereby further
agrees that any transfer of any of the Shares or any interest therein shall be
subject to the following conditions:
1. The Purchaser shall furnish you and counsel satisfactory to you prior
to the time of transfer, a written description of the proposed
transfer specifying its nature and consequence and giving the name of
the proposed transferee.
2. You shall have obtained from your counsel a written opinion stating
whether in the opinion of such counsel the proposed transfer may be
effected without registration under the Securities Act of 1933. If
such opinion states that such transfer may be so effected, the
Purchaser shall then be entitled to transfer the Shares in accordance
with the terms specified in its description of the transaction to you.
If such opinion states that the proposed transfer may not be so
effected, the Purchaser will not be entitled to transfer the Shares
unless the Shares are registered.
The Purchaser hereby authorizes you to take such action as you shall
reasonably deem appropriate to prevent any violation of the Securities Act of
1933 in connection with the transfer of the Shares, including the imposition of
a requirement that any transferee of the Shares sign a letter agreement similar
to this one. The Purchaser agrees that in the event the Shares are redeemed by
the Purchaser or its successors or any current holder prior to the complete
amortization of organization expenses by
<PAGE>
the Wells S&P REIT Index Fund, the redemption proceeds payable in respect of the
Shares so redeemed shall be reduced by the pro-rata share (based on the
proportionate share of the Shares redeemed to the total number of the Shares
outstanding at the time of redemption) of the then unamortized deferred
organization expenses as of the date of such redemption.
Very truly yours,
WELLS CAPITAL, INC.
By: /s/ Leo F. Wells
---------------------------
Its: President
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PLAN OF DISTRIBUTION
PURSUANT TO RULE 12B-1
----------------------
WHEREAS, Wells Family of Real Estate Funds (the "Trust"), a business trust
organized under the laws of the State of Ohio, engages in business as an
open-end management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue an unlimited number of shares of
beneficial interest without par value (the "Shares"), which may be divided into
two or more Series of Shares; and
WHEREAS, the Trustees of the Trust as a whole, and the Trustees who are not
interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "Rule 12b-1 Trustees"), having determined, in the
exercise of reasonable business judgment and in light of their fiduciary duties
under state law and under Section 36(a) and (b) of the 1940 Act, that there is a
reasonable likelihood that this Plan will benefit the Trust and its
shareholders, have approved this Plan by votes cast in person at a meeting
called for the purpose of voting hereon and on any agreements related hereto;
NOW, THEREFORE, the Trust hereby adopts this Plan in accordance with Rule
12b-1 under the 1940 Act, on the following terms and conditions:
1. DISTRIBUTION ACTIVITIES. Subject to the supervision of the Trustees of
the Trust, the Trust may, directly or indirectly, engage in any activities
related to the distribution of Shares, which activities may include, but are not
limited to, the following: (a) payments to securities dealers and others,
including the Underwriter and its affiliates, who are engaged in the sale of
Shares and who may be advising shareholders of the Trust regarding the purchase,
sale or retention of Shares; (b) expenses of maintaining personnel (including
personnel of organizations with which the Trust has entered into agreements
related to this Plan) who engage in or support distribution of Shares or who
render shareholder support services not otherwise provided by the Trust's
transfer agent, including, but not limited to, office space and equipment,
telephone facilities and expenses, answering routine inquiries regarding the
Trust, processing shareholder transactions, and providing such other shareholder
services as the Trust may reasonably request; (c) formulating and implementing
of marketing and promotional activities, including, but not limited to, direct
mail promotions and television, radio, newspaper, magazine and other mass media
advertising; (d) preparing, printing and distributing sales literature; (e)
preparing, printing and distributing prospectuses
<PAGE>
and statements of additional information and reports of the Trust for recipients
other than existing shareholders of the Trust; and (f) obtaining such
information, analyses and reports with respect to marketing and promotional
activities as the Trust may, from time to time, deem advisable. The Trust is
authorized to engage in the activities listed above, and in any other activities
related to the distribution of Shares, either directly or through other persons
with which the Trust has entered into agreements related to this Plan.
2. MAXIMUM EXPENDITURES. The expenditures to be made by the Trust pursuant
to this Plan and the basis upon which payment of such expenditures will be made
shall be determined by the Trustees of the Trust, but in no event may such
expenditures exceed in any fiscal year an amount calculated at the rate of .25%
of the average daily net asset value of any Series of the Trust. Such payments
for distribution activities may be made directly by the Trust or the Trust's
investment adviser or underwriter may incur such expenses and obtain
reimbursement from the Trust. Unreimbursed expenditures will not be carried over
from year to year. In the event the Plan is terminated with respect to any
Series, such Series will not be required to make any payments for expenses
incurred after the date the Plan terminates.
3. TERM AND TERMINATION. (a) This Plan shall become effective on the date
hereof. Unless terminated as herein provided, this Plan shall continue in effect
for one year from the date hereof and shall continue in effect for successive
periods of one year thereafter, but only so long as each such continuance is
specifically approved by votes of a majority of both (i) the Trustees of the
Trust and (ii) the Rule 12b-1 Trustees, cast in person at a meeting called for
the purpose of voting on such approval.
(b) This Plan may be terminated with respect to any Series at any time
by vote of a majority of the Rule 12b-1 Trustees or by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of such Series.
4. AMENDMENTS. This Plan may not be amended to increase materially the
amount of a Series' expenditures provided for in Section 2 hereof unless such
amendment is approved by a vote of the majority of the outstanding voting
securities of such Series (as defined in the 1940 Act), and no material
amendment to this Plan shall be made unless approved in the manner provided for
annual renewal of this Plan in Section 3(a) hereof.
5. SELECTION AND NOMINATION OF TRUSTEES. While this Plan is in effect, the
selection and nomination of Trustees who are not interested persons (as defined
in the 1940 Act) of the Trust shall be committed to the discretion of the
Trustees who are not interested persons of the Trust.
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<PAGE>
6. QUARTERLY REPORTS. The Treasurer of the Trust shall provide to the
Trustees and the Trustees shall review, at least quarterly, a written report of
the amounts expended pursuant to this Plan and any related agreement and the
purposes for which such expenditures were made.
7. RECORDKEEPING. The Trust shall preserve copies of this Plan and any
related agreement and all reports made pursuant to Section 6 hereof, for a
period of not less than six years from the date of this Plan, the agreements or
such reports, as the case may be, the first two years in an easily accessible
place.
8. LIMITATION OF LIABILITY. A copy of the Agreement and Declaration of
Trust of the Trust is on file with the Secretary of the State of Ohio and notice
is hereby given that this Plan is executed on behalf of the Trustees of the
Trust as trustees and not individually and that the obligations of this
instrument are not binding upon the Trustees or shareholders of the Trust
individually but are binding only upon the assets and property of the Trust.
IN WITNESS WHEREOF, the Trust has caused this Plan to be executed as of the
date set forth below.
Dated: January 12, 1998
WELLS FAMILY OF
Attest: REAL ESTATE FUNDS
/s/ Linda L. Carson By: /s/ Leo F. Wells
- ----------------------------- ----------------------
Secretary President
- 3 -
