<PAGE> UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. __2___ [ X ]
Post-Effective Amendment No. ____ [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [X]
Amendment No. 2 [ X ]
THE SPORTS FUNDS TRUST
(Exact name of Registrant as specified in charter)
5-H Oak Branch Drive
Greensboro, NC 27407
(Address of principal executive offices)
Registrant's Telephone Number, including Area Code:(910)851-0910
Mr. Jack R. Plymale
Pegasus Advisory Group, Inc.
5-H Oak Branch Drive
Greensboro, NC 27407
(Name and address of Agent for Service)
Copies to:
William J. Baltrus
First Data Investor Services Group, Inc.
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903
Approximate Date of Proposed Public offering: As soon as practicable
after the effective date of this Registration Statement.
__________________________________________________________________
Registrant hereby amends the Registration Statement under the
Securities Act of 1933 on such date or dates as may be necessary to
delay its effective date until Registrant shall file a further
amendment which specifically states that such Registration Statement
shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until such Registration Statement shall
become effective on such date as the Securities and Exchange
Commission, acting pursuant to Section 8(a), may determine.
Shares of Beneficial Interest
(Title of Securities Being Registered)
As filed with the U.S. Securities and Exchange Commission on March
23, 1998.<PAGE>
<PAGE>
TABLE OF CONTENTS
Registration Statement of The Sports Funds Trust
Page
1. Cross Reference Sheet 3
2. Motor Sports Growth & Income Fund
Part A - Prospectus 5
3. Motor Sports Growth & Income Fund
Part B - Statement of Additional Information 36
4. Motor Sports Growth & Income Fund
Part C - Other Information 58
5. Signature Page 62
6. Index to Exhibits 63
<PAGE>
<PAGE>
CROSS REFERENCE SHEET Pursuant to Rule 481(a)
N-1A Item
Information Required in Prospectus Caption in Prospectus
Part A
1. Cover Page Cover Page
2. Synopsis Expense Summary
3. Condensed Financial Information Not Applicable
4. General Description of Registrant A Brief Summary of
the Fund; Description
of Fund; Investment
Objective; Investment
Policies; Investment
Practices and Risk
Factors; General
Information
5. Management of the Fund A Brief Summary of
the Fund; General
Information;
Management of the
Fund;
5A. Management's Discussion of Fund Per- Not Applicable
formance
6. Capital Stock and Other Securities A Brief Summary of
the Fund; Dividends,
Distributions and
Taxes; General
Information
7. Purchase of Securities Being Offered A Brief Summary of
the Fund; How to
Purchase Shares;
Sales Load Table;
General Information
8. Redemption or Repurchase A Brief Summary of
the Fund; How to
Redeem Shares;
General Information
9. Legal Proceedings Not Applicable
<PAGE>
<PAGE>
Location in Statement
Of Additional
Part B Information (Caption)
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Not Applicable
13. Investment Objective and Policies Investment Policies
and Techniques;
Investment
Restrictions
14. Management of the Registrant Trustees and Officers
15. Control Persons and Principal Not Applicable
Holders of Securities
16. Investment Advisory and Other Services Investment Advisory
and Other Services;
Other Information
17. Brokerage Allocation and other
Practices Portfolio
Transactions
18. Capital Stock and Other Securities The Trust and the
Fund; Other
Information
19. Purchase, Redemption, and Pricing Net Asset Value;
of Securities Being Offered
20. Tax Status Taxes
21. Underwriters Investment Advisory
and Other Services
22. Calculation of Performance Data General Information
23. Financial Statements Financial Statements;
Report of Independent
Auditors
Part C Other Information
Information required to be included in Part C is set forth under
the appropriate Item, so numbered, in Part C of this Registration
Statement.
<PAGE>
<PAGE>
Subject to Completion
Prospectus dated _______________, 1998
PROSPECTUS
_______________, 1998
THE MOTORSPORTS ASSOCIATED GROWTH & INCOME FUND
5-H Oak Branch Drive
Greensboro, NC 27407
Telephone: (910) 851-0910
Toll-Free: (800) ___-___
The Motorsports Associated Growth & Income Fund (the "Fund") is
an open-end investment company commonly known as a mutual fund.
The fundamental investment objective of the Fund is to achieve the
long-term growth by investing primarily in common stocks of
companies that provide the potential for income and capital
appreciation.
The Fund invests primarily in common stocks of companies which are
involved in or related to Motorsports ("Motorsports") that provide
the potential for income and capital appreciation. Motorsports
companies include those which design, manufacture, produce or
distribute auto racing products and services, host or sponsor
racing events or manage or own racing facilities, as well as those
which provide promotional advertising and marketing for such
events.
The Fund will invest principally in medium- to large-
capitalization companies using a value-oriented investment
approach. See "Investment Policies."
Pegasus Advisory Group Inc. serves as the investment Advisor
("Advisor") to the Fund. Chartwell Investment Partners serves as
investment Sub-Advisor ("Sub-Advisor") to the Fund. See
"Management of the Fund."
This Prospectus contains information you should consider before
you invest. Please read it carefully and keep it for future
reference. A Statement of Additional Information for the Fund,
dated ___________, 1998, which contains additional information
about the Fund, is incorporated by reference into this Prospectus
and has been filed with the Securities and Exchange Commission
("SEC"). A copy of the Statement of Additional Information may be
obtained without charge by writing to the Fund's distributor, FPS
Broker Services, Inc., 3200 Horizon Drive, P.O. Box 61503, King of
Prussia, PA 19406-0903, or by calling (800) _____________.
The SEC maintains a Website (http:\\www.sec.gov) that contains the
Statement of Additional Information, material incorporated by
reference and other information regarding the Fund.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
<PAGE> TABLE OF CONTENTS
A Brief Summary of the Fund . . . . .
Expense Summary . . . . . . . . . . .
Description of Fund . . . . . . . . .
Investment Objective. . . . . . . . .
Investment Policies . . . . . . . . .
Management of the Fund. . . . . . . .
Investment Practices and Risk Factors . . . .
How to Purchase Shares. . . . . . . .
Sales Load Table. . . . . . . . . . .
How to Redeem Shares. . . . . . . . .
Net Asset Value . . . . . . . . . . .
Distribution Plan . . . . . . . . . .
Dividends, Distributions and Taxes. . . .
Performance Information . . . . . . .
General Information . . . . . . . . .
Application Forms . . . . . . . . . .
Distributor: Investment Advisor:
FPS Broker Services, Inc. Pegasus Advisory Group, Inc.
3200 Horizon Drive 5-H Oak Branch Drive
P.O. Box 61503 Greensboro NC 27407
King of Prussia, PA 19406-0903
(800) ___________________
No person has been authorized to give any information or to make
any representations other than those contained in this Prospectus
and the Statement of Additional Information, and if given or made,
such information or representations may not be relied upon as
having been authorized by the Fund. This Prospectus does not
constitute an offer to sell securities to any person in any state
jurisdiction in which such offering may not lawfully be made.
<PAGE>
<PAGE> A Brief Summary of the Fund
What is the Fund's Investment Objective?
The Fund seeks to achieve long-term growth by investing primarily
in common stocks of companies which are involved in or related to
Motorsports ("Motorsports") that provide the potential for income
and capital appreciation. The Fund will invest principally in
medium- to large- capitalization companies using a value-oriented
investment approach. There can be no assurance that the Fund will
be able to achieve its investment objective. See "Investment
Objective" and "Investment Policies."
Who is the Investment Advisor?
The Fund's investment Advisor is Pegasus Advisory Group, Inc.(the
"Advisor"), a recently organized investment manager. Chartwell
Investment Partners (the "Sub-Advisor") acts as Sub-Advisor and
manages the day-to-day investment program of the Fund. See
"Management of the Fund", "Investment Policies" and "Investment
Practices and Risk Factors."
Who may want to Invest in the Fund?
The Fund is designed for those looking for growth through an
investment that focuses on a wide range of equity securities
related to Motorsports. An investment in the Fund may be suitable
for long-term investors who may wish to consider investing a
portion of their overall equity portfolio in securities related to
Motorsports.
What risks are associated with an investment in the Fund?
The price of shares of the Fund will fluctuate as the daily price
of the equity securities in which the Fund invests fluctuate, so
that your shares, when redeemed, may be worth more or less than
their original cost. By itself, the Fund does not constitute a
balanced investment program. See "Investment Practices and Risk
Factors."
Does the Fund pay dividends?
Dividends from net investment income will normally be declared
quarterly and capital gains, if any, are distributed at least
annually. All dividends and distributions are automatically
reinvested in shares of the Fund (without sales charge) unless
payment in cash is requested. See "Dividends, Distributions and
Taxes."
How do I make an investment in the Fund?
Shares of the Fund may be purchased through broker-dealers or
directly through FPS Broker Services, Inc., the Fund's principal
distributor. The minimum initial investment is $1,000 or $250 for
IRA, Roth IRA, SEP IRA, Uniform Gift to Minor Accounts ("UGMA"),
Uniform Transfer to Minor Accounts ("UTMA") and Automatic
Investment Plan accounts. Subsequent investments can be made for
as little as $50. See "How to Purchase Shares."
The Fund is offered at net asset value per share plus a maximum
initial sales charge of 5.75% of the offering price (6.10% of the
net amount invested), reduced on investments of $50,000 or more.
The Fund is subject to annual 12b-1 Plan expenses of 0.25% of its
average daily net assets. In addition, the Fund offers several
time and money saving services to investors. Be sure to read about
the Automatic Investment Plan, Retirement Plans and the Systematic
Withdrawal Plan.
How do I sell my shares?
Shares of the Fund may be redeemed at the current net asset value
per share next determined after receipt by the transfer agent of a
redemption request in proper form. Signature guarantees may be
required for certain redemption requests. See "How to Redeem
Shares."
<PAGE>
<PAGE> EXPENSE SUMMARY
The following information is provided in order to help you
understand the various costs and expenses that you, as an investor
in the Fund, will bear directly or indirectly.
Shareholder Transaction Expenses
Class A
Maximum sales charge imposed on purchases
(as a percentage of offering price). . . . 5.75% /1/
Maximum sales charge imposed on reinvested
dividends (as a percentage of offering price). . . . . . None
Deferred sales charge (as a percentage of the
lesser of original purchase price or
redemption proceeds) . . . . None/2/
Redemption Fees (as a percentage of amount
redeemed)(3). . . . . . . . . . . . . None
Exchange Fee. . . . . . . . . . . . . None
/1/ Reduced for purchases of $50,000 and over, decreasing to zero
for purchases of $1 million and over. See "Sales Load Table."
/2/ Investments of $1 million or more are not subject to any sales
charge at the time of purchase, but a CDSC of 1.00% may be imposed
on certain redemptions made within one year of the date of
purchase. See "Sales Load Table."
/3/ The Fund's transfer agent charges $9.00 per redemption for
redemptions remitted by wire.
Annual Fund Operating Expenses:
(as a percentage of average daily net assets after expense
reimbursement)
Class A
Management fees /1/ . . . . . . . . . . . . . 0.71%
12b-1 fees /2/. . . . . . . . . . . . . . . . 0.25%
Other Expenses. . . . . . . . . . . . . . . . 1.04%
Total Fund operating expenses
(after fee waiver and reduction
of expenses)/1/. . . . . . . . . . . . . . . 2.0%
/1/ The above table reflects the Advisor's voluntary undertaking
to waive all or a portion of its fees and to reimburse certain
expenses so that the total operating expenses of the Fund for the
first year of operations will not exceed 2.0%, of the average
daily net assets of the Fund. The Advisor reserves the right to
terminate this waiver or any reimbursement at any time, in its
sole discretion. Any reductions in the Advisor's fee are subject
<PAGE>
to reimbursement by the Fund within the following three years, to
the extent such reimbursement would not cause total operating
expenses to exceed 2.0%. Absent such waivers and reimbursements,
total operating expenses for the Fund is estimated to be 2.24%, of
the respective average daily net assets of the Fund. In
subsequent years, overall expenses for the Fund may not fall below
the percentage limitations until the Advisor has been fully
reimbursed for fees foregone or expenses it paid under the
investment advisory agreement. "Other Expenses" are based on
estimated amounts for the Fund's current fiscal year. The Advisor
has not previously provided investment advisory services to
registered investment companies.
/2/ The Fund is subject to annual 12b-1 Plan fees of 0.25% of the
average daily net assets attributable to the Fund. See
"Distribution Plans."
Example
Based on the level of expenses listed above, an investor would pay
the following expenses on a $1,000 investment assuming (i) an
operating expense ratio of 2.00% for the Fund (ii) imposition of
the maximum sales charge for the Fund, (iii) a 5% annual return
and (iv) redemption at the end of each time period.
1 Year $79
3 Years $123
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS THAN
THOSE SHOWN. The purpose of the foregoing table is to assist the
investor in understanding the various costs and expenses that an
investor in the Fund will bear directly or indirectly. The 5%
annual return in this example is required by the SEC regulations
applicable to all mutual funds; it does not represent a projection
of the Fund's actual performance.
Long-term shareholders may eventually pay more than the economic
equivalent of the maximum front-end sales charge otherwise
permitted by the National Association of Securities Dealers, Inc.
(the "NASD").
DESCRIPTION OF THE FUND
The Fund is an open-end, diversified investment company, commonly
known as a mutual fund. The Fund's investment objective is
fundamental which means that it cannot be changed without a
shareholder vote. Except as noted, the Fund's investment policies
are not fundamental and can be changed without a shareholder vote.
The Fund will not change these policies without notifying its
shareholders. The Fund has also instituted fundamental investment
limitations which are described in the Statement of Additional
Information.
<PAGE>
INVESTMENT OBJECTIVE
The Fund's investment objective is to achieve long-term growth by
investing primarily in common stocks that provide the potential
for income and capital appreciation.
INVESTMENT POLICIES
The Fund invests primarily in equity securities companies which
are involved in or associated with Motorsports ("Motorsports") and
which offer the potential for income and capital appreciation. By
the term Motorsports, the Fund refers to all forms of auto racing
including, but not limited to: NASCAR, Formula One, IndyCar
racing, Endurance Racing, Open-Wheel Racing, Sprint Cars, Stock
Cars, Hydroplane Racing and Drag Racing. Motorsports companies
include those which design, manufacture, produce or distribute
auto racing products and services, host or sponsor racing events
or manage or own racing facilities, as well as those which provide
promotional advertising and marketing for such events.
The companies who are advertisers and marketers may not be
involved in the Motorsports industry other than as advertisers and
marketers. Also, they may only spend a small portion of their
overall budgets on such activities.
The Fund will invest principally in the equity securities of
medium- to large- capitalization companies which the Sub-Advisor
believes to be undervalued. The Sub-Advisor considers medium-
capitalization companies to be those companies with market
capitalizations at the time of purchase ranging from $800 million
to $5 billion. In general, medium-capitalization companies often
involve greater risks than investments in established companies.
See "Investment Practices and Risk Factors."
Under normal market conditions, the Fund will invest at least 80%
of its total assets in equity securities of those companies
related to Motorsports. Equity securities include, but are not
limited to, common stocks, preferred stocks, and securities that
are convertible into common stocks, such as rights and warrants.
The remainder of the Fund's assets may be invested in equity
securities that are not related to Motorsports and in debt
securities such as corporate bonds, notes and debentures or high
quality money market instruments and U.S. Government securities.
The Sub-Advisor's approach to investing is centered around value
investing with a focus on those companies that pay current
dividends. With the oversight of the Advisor, the Sub-Advisor
looks for securities which it believes are undervalued based on
low price-to-earnings ratio, consistent cash flow, and the
particular company's track record and also those which meet the
definition of a Motorsports company. A company may be undervalued
<PAGE>
as a result of market decline, poor economic conditions, tax-loss
selling or actual or anticipated unfavorable developments
affecting the company. The Fund expects to invest primarily in
securities currently paying dividends, although it may buy
securities that are not paying dividends but offer prospects for
growth of capital or future income.
The Fund may diversify its holdings among many different companies
and industries which meet the Advisor's definition of a
Motorsports company either as Motorsports companies or advertisers
and marketers of Motorsports. While it is the Fund's policy to
remain substantially invested in common stocks, preferred stocks
or securities convertible into common stocks, it may invest all or
part of its total assets in high-quality money market securities
and repurchase agreements for temporary defensive purposes when
the Sub-Advisor has determined that adverse market and economic
conditions so warrant.
The Fund may also engage in portfolio management techniques such
as purchasing stock futures and options contracts and lending its
portfolio securities. See "Investment Practices and Risk
Factors."
MANAGEMENT OF THE FUND
Board of Trustees
Under Delaware law, the business and affairs of the Fund are
managed under the direction of the Board of Trustees. The
Trustees elect the officers of the Fund to supervise the day-to-
day operations of the Fund. The Statement of Additional
Information contains the name and background information regarding
each Trustee.
Investment Advisor
Subject to the policies of, review by, and overall control of the
Board of Trustees of the Fund, Pegasus Advisory Group, Inc.( the
"Advisor"), 5-H Oak Branch Drive, Greensboro, North Carolina
27407, has been retained to act as the Fund's manager and
Investment Advisor pursuant to an Investment Advisory Agreement
(the "Advisory Agreement"). The Advisor was incorporated in 1997
and is a registered Investment Advisor under the Investment
Advisors Act of 1940 ("Advisors Act"), as amended. The Advisor is
engaged in the business of managing the investments of the Fund.
The Advisor has no previous experience managing mutual funds. By
reason of its ownership of 100% of the Advisor's stock, Pegasus
Sports Marketing, Inc. may be said to be a "controlling person" of
that firm.
The Advisor supervises the management of the Fund including, among
other things, reporting to the Trustees regarding economic and
statistical information as requested by the Trustees. The Advisor
continuously reviews, supervises and administers the Fund's
investment program subject to the supervision of, and policies
<PAGE>
established by, the Trustees. The Advisor currently delegates
certain of these services to the Sub-Advisor.
Under the Advisory Agreement, the Fund pays the Advisor a monthly
fee at the annual rate of 0.95% of the Fund's average daily net
assets. The fee is higher than the management fees paid by many
other funds. The fee is accrued daily and paid monthly.
From time to time, the Advisor may voluntarily waive all or a
portion of its management fee and/or reimburse the Fund for
certain expenses without further notification of the commencement
or termination of such waiver or reimbursement. Any such waiver
or absorption will have the effect of lowering the overall expense
ratio of the Fund and increasing the Fund's overall return to
investors at the time any such amounts are waiver and/or absorbed.
The Advisor has voluntarily agreed to waive all or a portion of
its fee, and/or to reimburse expenses of the Fund to the extent
necessary in order to limit net operating expenses for the first
year of operations to an annual rate of not more than 2.00% of the
Fund's average daily net assets. Any amounts waived or reimbursed
by the Advisor are subject to reimbursement by the Fund within the
following three years, provided that the Fund is able to effect
such reimbursement and remain in compliance with the stated
expense limitation.
The continuance of the Advisory Agreement, after the first two
years, must be specifically approved at least annually (i) by the
vote of the Trustees or by a vote of the shareholders of Fund, and
(ii) by the vote of a majority of the Trustees who are not parties
to the Advisory Agreement or "interested persons" of any party
thereto, cast in person at a meeting called for the purpose of
voting on such approval. The Advisory Agreement will terminate if
assigned, and is terminable at any time without penalty by the
Advisor or by the Trustees of the Fund, or by a majority of the
outstanding shares of the Fund on 60 days' written notice to the
Advisor.
Sub-Advisor
The Advisor has entered into a Sub-Advisory Agreement with
Chartwell Investment Partners L.P.("Chartwell" or the "Sub-Advisor")
to assist in the selection and management of the Fund's
investment securities. For its services, Chartwell is paid an
annual fee by the Advisor equal to 0.70% of the Fund's average
daily net assets.It is the responsibility of the Sub-Advisor,
under the direction of the Advisor, to make the day-to-day
investment decisions for the Fund, and to place the purchase and
sale orders for the portfolio transactions of the Fund, consistent
with the policies established by the Advisor and subject to the
general direction of the Advisor. Chartwell has been engaged in
the investment advisory business and providing investment advice
to individuals, trusts and pension and profit sharing plans since
its inception in April 1997. Prior to that many of the principals
of Chartwell were engaged as portfolio managers or executives of
<PAGE>
Delaware Investment Advisors ("Delaware") In addition, the Sub-
Advisor has been managing a portion of the assets of Vanguard's
Explorer Fund since August 1, 1997.
Kevin A. Melich, CFA will be responsible for the day to day
investment decisions for the Fund. Mr. Melich was previously
employed by Delaware from 1983 to 1997. During his entire time at
Delaware, he managed over $1.6 Billion for institutional accounts
in a similar equity value style. He has a Economics degree from
St. John Fisher College, and he is a Chartered Financial Analyst.
The continuance of the Sub-Advisory Agreement, after the first two
years, must be specifically approved at least annually (i) by the
vote of the Trustees or by a vote of the shareholders of Fund, and
(ii) by the vote of a majority of the Trustees who are not parties
to the Sub-Advisory Agreement or "interested persons" of any party
thereto, cast in person at a meeting called for the purpose of
voting on such approval. The Sub-Advisory Agreement will
terminate if assigned, and is terminable at any time without
penalty by the Sub-Advisor or by the Trustees of the Fund, or by a
majority of the outstanding shares of the Fund on 60 days' written
notice to the Advisor and the Sub-Advisor.
Expenses of the Fund
In addition to the payments to the Advisor under the Advisory
Agreement described above, the Fund pays certain other costs,
including, but not limited to: (a) custody, transfer agent and
administrator expenses, (b) fees of the Trustees who are not
affiliated with the Advisor or Sub-Advisor, legal and auditing
expenses, (d) clerical, accounting and other office costs, (e)
costs of printing the Fund's prospectuses and shareholder reports,
(f) costs of maintaining the Fund's existence, (g) interest
charges, taxes, brokerage fees and commissions, (h) costs of
stationery and supplies, (i) expenses and fees related to
registration and filing with the SEC and with state regulatory
authorities, and (j) such promotional, shareholder servicing and
other expenses as may be contemplated by the Distribution Services
Agreement, described under "Distribution Plan".
Distributor
FPS Broker Services, Inc. (the "Distributor") is the Fund's
statutory distributor and principal underwriter. First Data
Investor Services Group, Inc., an affiliate of the Distributor,
serves the Fund as transfer and shareholder services agent (the
"Transfer Agent").
INVESTMENT PRACTICES AND RISK FACTORS
General
There is no such thing as a guaranteed investment and no one can
see into the future. The risks inherent in investing in the Fund
are similar to those of investing directly in equity securities,
that is, the value of the investment may fluctuate in response to
<PAGE>
a variety of situations and factors. Accordingly, the value of an
investment in the Fund will fluctuate over time and may be valued
higher or lower at the time of redemption. The Fund is designed
for long-term investors who can accept the risks entailed in
seeking capital appreciation through investment primarily in
common stocks. An investment in the Fund should be only a part of
an overall investment strategy. The Advisor and Sub-Advisor (the
"Advisors") attempt to reduce the overall risks by investing in a
diversified portfolio through the implementation of value
investing.
Convertible Securities
Securities such as rights, bonds, notes and preferred stocks which
are convertible into or exchangeable for common stocks are
considered convertible securities. They have characteristics
similar to both fixed income and equity securities. Because of
the conversion feature, they provide an opportunity to participate
in capital appreciation resulting from a market price advance in
the underlying common stock. The price of a convertible security
is influenced by the market value of the underlying common stock
and tends to increase as the common stock's market value declines.
Futures Contracts and Related Options
The Fund may invest in futures contracts and options on futures
contracts for hedging purposes or to maintain liquidity. However,
the Fund may not purchase or sell a futures contract or purchase a
related option unless immediately after any such transaction the
sum of the aggregate amount of initial margin deposits on its
existing futures positions and the amount of premiums paid for
related options does not exceed 5% of its total assets.
At maturity, a futures contract obligates the Fund to take or make
delivery of certain securities or the cash value of a securities
index. When the Fund sells a futures contract, it agrees to sell
a specified underlying instrument at a specified future date. The
Fund may sell a futures contract in order to offset a decrease in
the market value of its portfolio securities that might otherwise
result from a market decline. The Fund may do so either to hedge
the value of its portfolio of securities as a whole, or to protect
against declines, occurring prior to sales of securities, in the
value of the securities to be sold. When the Fund purchases a
futures contract, it agrees to purchase a specified underlying
instrument at a specified future date. The Fund may purchase a
futures contract in anticipation of purchases of securities. In
addition, the Fund may utilize futures contracts in anticipation
of changes in the composition of its portfolio holdings.
The Fund may purchase and sell call and put options on futures
contracts traded on an exchange or board of trade. When the Fund
purchases an option on a futures contract, it has the right to
assume a position as a purchaser or seller of a futures contract
at a specified exercise price at any time during the option
period. When the Fund sells an option on a futures contract, it
<PAGE>
becomes obligated to purchase or sell a futures contract if the
option is exercised. In anticipation of a market advance, the
Fund may purchase call options on futures contracts as a
substitute for the purchase of futures contracts to hedge against
a possible increase in the price of securities which the Fund
intends to purchase. Similarly, if the market is expected to
decline, the Fund might purchase put options or sell call options
on futures contracts rather than sell futures contracts.
To enter into a futures contract, the Fund must make a deposit of
an initial margin with its custodian in a segregated account in
the name of the futures broker. Subsequent payments to or from
the broker, called variation margin, will be made on a daily
basis as the price of the underlying security or index fluctuates,
making the long and short positions in the futures contracts more
or less valuable.
The primary risks associated with the use of futures contracts and
options are: (i) imperfect correlation between the change in
market value of the securities held by the Fund and the price of
futures contracts and options; (ii) possible lack of a liquid
secondary market for a futures contract and the resulting
inability to close a futures contract when desired; (iii) losses,
which are potentially unlimited, due to unanticipated market
movements; and (iv) the Advisors's ability to predict correctly
the direction of security prices, interest rates and other
economic factors. Successful use of options and futures by the
Fund is subject to the Advisors's ability to predict correctly the
movements in the direction of the market. For example, if the
Fund uses future contracts as a hedge against the possibility of a
decline in the market adversely affecting securities held by it
and securities prices increase instead, the Fund will lose part or
all of the benefit of the increased value of its securities which
it has hedged, because it will have approximately equal offsetting
losses in its futures positions. The risk of loss in trading
futures contracts in some strategies can be substantial, due both
to the low margin deposits required, and the extremely high degree
of leverage involved in futures pricing. As a result, a
relatively small price movement in a futures contract may result
in immediate and substantial loss or gain to the investor. Thus,
a purchase or sale of a futures contract may result in losses or
gains in excess of the amount invested in the contract. For
further discussion, see "Investment Policies and Techniques" in
the Statement of Additional Information.
Options
The Fund may purchase put and call options listed on a national
securities exchange and issued by the Options Clearing Corporation
to the extent that premiums paid on all outstanding call options
do not exceed 20% of the Fund's total assets. Purchasing options
is a specialized investment technique that entails a substantial
risk of a complete loss of the amounts paid as premiums to the
writer of the option.
<PAGE>
A call option enables the purchaser, in return for the premium
paid, to purchase securities from the writer of the option at an
agreed-upon price during the option period. The advantage is that
the purchaser may hedge against an increase in the price of
securities it ultimately wishes to buy or may take advantage of a
rise in a particular index. The Fund will only write call options
on a covered basis (options on securities owned by the Fund). The
Fund will receive premium income from writing call options, which
may offset the cost of purchasing put options and may also
contribute to the Fund's total return. The Fund may lose
potential market appreciation if the Investment Advisor's judgment
is incorrect with respect to interest rates, security prices or
the movement of indices.
A put option enables the purchaser of the option, in return for
the premium paid, to sell the security underlying the option to
the writer at the exercise price during the option period, and the
writer of the option has the obligation to purchase the security
from the purchaser of the option. The advantage is that the
purchaser can be protected should the market value of the security
decline or should a particular index decline. The Fund will only
write put options on a covered basis. The Fund will receive
premium income from writing put options, although it may be
required, when the put is exercised, to purchase securities at
higher prices than the current market price.
An option on a securities index gives the purchaser of the option,
in return for the premium paid, the right to receive cash from the
seller equal to the difference between the closing price of the
index and the exercise price of the option.
Closing transactions essentially let the Fund offset put options
or call options prior to exercise or expiration. If the Fund
cannot effect a closing transaction, it may have to hold a
security it would otherwise sell or deliver a security it might
want to hold. For further discussion, see "Investment Policies
and Techniques" in the Statement of Additional Information.
Debt Securities and High Yield, High Risk Securities
The Fund may invest in debt securities of corporations and
governmental issuer. Some investments in debt securities by the
Fund will be in those that are rated within the four highest
grades( normally referred to as "Investment Grade")assigned by a
nationally recognized statistical rating agency.
The Fund may also invest up to 15% of its net assets in high
yield, high risk fixed-income securities. These securities are
rated lower than BBB by Standard & Poor's Ratings Group ("S&P"),
Baa by Moody's Investors Service, Inc. ("Moody's") and/or rated
similarly by another rating agency, or, if unrated, are considered
by the Advisors to be of equivalent quality. The Fund will not
invest in securities which are rated lower than C by S&P, Ca by
Moody's or similarly by another rating agency, or, if unrated, are
<PAGE>
considered by the Advisors to be of a quality that is lower than
such ratings. See Appendix A of the Statement of Additional
Information for more rating information. Fixed-income securities
of this type are considered to be of poor standing and
predominantly speculative. Such securities are subject to a
substantial degree of credit risk.
Medium and low-grade bonds held by the Fund may be issued as a
consequence of corporate restructurings, such as leveraged
buy-outs, mergers, acquisitions, debt recapitalizations or similar
events.
The economy and interest rates may affect these high yield, high
risk securities differently than other securities. Prices may be
more sensitive to adverse economic changes or individual corporate
developments. Also, highly leveraged issuers may experience
financial stress which would affect their ability to service
principal and interest payment obligations. Changes by recognized
rating agencies in their rating of any security and in the ability
of an issuer to make payments of interest and principal will also
ordinarily have a more dramatic effect on the values of these
investments than on the values of higher-rated securities. Changes
in the value of those bonds will affect the Fund's net asset value
per share.
Restricted and Illiquid Securities
The Fund may invest in restricted securities, including securities
eligible for resale without registration pursuant to Rule 144A
("Rule 144A Securities") under the Securities Act of 1933. Rule
144A permits many privately placed and legally restricted
securities to be freely traded among certain institutional buyers
such as the Fund. The Fund may invest no more than 15% of the
value of its net assets in illiquid securities.
Generally speaking, an illiquid security is any asset or
investment which a Fund cannot sell in the ordinary course of
business within seven days at approximately the value at which the
Fund has valued the asset or investment, including securities that
cannot be sold publicly due to legal or contractual restrictions.
Over the past several years, strong institutional markets have
developed for various types of restricted securities, including
repurchase agreements, commercial paper, and some corporate bonds
and notes. Securities freely salable among qualified
institutional investors under special rules adopted by the
Securities and Exchange Commission or otherwise determined to be
liquid may be treated as liquid if they satisfy liquidity
standards established by the Board of Trustees. The continued
liquidity of such securities is not as well assured as that of
publicly traded securities, and accordingly the Board of Trustees
and the Advisors will monitor their liquidity.
<PAGE>
Securities Lending
To increase return on portfolio securities, the Fund may lend its
portfolio securities on a short-term basis to banks, broker-
dealers and other institutional investors pursuant to agreements
requiring that the loans be continuously secured by collateral
equal at all times in value to at least the market value of the
securities loaned. The Fund will not lend portfolio securities in
excess of 50% of the value of its total assets. There may be
risks of delay in receiving additional collateral or in recovering
the securities loaned or even a loss of rights in the collateral
should the borrower of the securities fail financially.
Borrowing
The Fund may also make use of bank borrowing as a temporary
measure for extraordinary or emergency purposes, such as for
liquidity necessitated by shareholder redemptions, and may use
securities as collateral for such borrowing. Such temporary
borrowing may not exceed 5% of the value of the applicable Fund's
total assets at the time of borrowing.
Repurchase Agreements
The Fund may enter into repurchase agreements to earn income. The
Fund may only enter into repurchase agreements with financial
institutions that are deemed to be creditworthy by the Advisors,
pursuant to guidelines established by the Funds' Board of
Trustees. During the term of any repurchase agreement, the
Advisors will continue to monitor the creditworthiness of the
seller. Repurchase agreements are considered under the 1940 Act
to be collateralized loans by the Funds to the seller secured by
the securities transferred to the Funds. Repurchase agreements
under the 1940 Act will be fully collateralized by securities in
which the Funds may invest directly.
Such collateral will be marked-to-market daily. If the seller of
the underlying security under the repurchase agreement should
default on its obligation to repurchase the underlying security,
the Funds may experience delay or difficulty in exercising its
right to realize upon the security and, in addition, may incur a
loss if the value of the security should decline, as well as
disposition costs in liquidating the security. The Fund will not
invest more than 15% of its net assets in repurchase agreements
maturing in more than seven days. Such securities are deemed
illiquid and are subject to the Fund's restriction to invest no
more than 15% of its net assets in illiquid securities. The Funds
must treat each repurchase agreement as a security for tax
diversification purposes and not as cash, a cash equivalent or
receivable.
Medium Capitalization Companies
The Fund may invest in medium capitalization companies. While
medium-capitalization companies generally have potential for rapid
growth, investments in medium companies often involve greater
<PAGE>
risks than investments in larger, more established companies
because medium companies may lack the management experience,
financial resources, product diversification, and competitive
strengths of larger companies. In addition, in many instances the
securities of medium companies are traded only over-the-counter or
on a regional securities exchange, and the frequency and volume of
their trading is substantially less than is typical of larger
companies. Therefore, the securities of medium companies may be
subject to greater and more abrupt price fluctuations. The Fund
does not consider these types of companies to be illiquid.
Portfolio Turnover & Practices
The Fund normally will not invest for short-term trading purposes.
However, the Fund may sell securities without regard to the length
of time they have been held. The degree of portfolio activity will
affect brokerage costs of the Fund and may affect taxes payable by
the Fund's shareholders to the extent that net capital gains are
realized. Given the Fund's investment objective, its annual
portfolio turnover rate is not expected to exceed 100%.
The Fund uses its best efforts to obtain the best available price
and most favorable execution for portfolio transactions. Orders
may be placed with brokers or dealers who provide brokerage and
research services to the Advisors or their advisory clients. These
services may be used by the Advisors in servicing any of its
accounts.
Motorsports Companies
Some of the companies which the Fund invests in may involve
significantly greater risks and therefore the Fund may experience
greater volatility than a mutual fund that does not concentrate
its investments. These companies include those which design,
manufacture, produce or distribute auto racing products and those
who host, manage or own racing facilities. The Fund's performance
will be closely tied to and affected by, the Motorsports industry,
to the extent that the Fund invests in such companies. Companies
in the industry are often faced with the same obstacles, issues,
or regulatory burdens, and their securities may react similarly to
and move in unison with these or other market conditions.
The Motorsports industry is currently in the development stage
and companies in the industry may suffer periodic operating
losses. While most of the major manufacturers are large,
financially strong companies, some are smaller manufacturers that
have a non-diversified product line or customer base.
HOW TO PURCHASE SHARES
General
You can purchase shares of the Fund through broker-dealers or
directly through FPS Broker Services, Inc. (the "Distributor"),
3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA, as
<PAGE>
principal underwriter. Shares of the Fund are sold at the net
asset value next determined after receipt by the Fund's transfer
agent, First Data Investor Services Group, Inc.(the "Transfer
Agent"), plus an initial maximum sales charge of up to 5.75% of
the offering price (6.10% of the net amount invested) reduced on
investments of $100,000 or more.The minimum initial investment for
the Fund is $1,000 or $250 for, IRA, Roth IRA, SEP IRA, Uniform
Gift to Minor Accounts ("UGMA", Uniform Transfer to Minor Accounts
("UTMA") and Automatic Investment Plan accounts.
Shares may be purchased through brokers, investment advisors and
other financial intermediaries which have selling group agreements
with the Distributor, or directly through the Transfer Agent.
Shares of the Fund are offered only to residents of states in
which the shares are registered or qualified. No share
certificates will be issued in connection with the purchase of
Fund shares.
Purchase orders for shares of the Fund that are received by the
Transfer Agent in proper form by the close of the New York Stock
exchange ("NYSE")(currently 4:00 p.m. Eastern time), on any day
that the NYSE is open for trading, will be purchased at the Fund's
next determined net asset value (plus any applicable sales
charge). Orders for Fund shares received after the close of the
NYSE will be purchased at the net asset value (plus any applicable
sales charge) determined on the following business day.
The Fund and the Transfer Agent each reserves the right to reject
any purchase order in whole or in part. The Fund reserves the
right to suspend the offering of shares of the Fund. The Fund
also reserves the right to vary the initial and subsequent
investment minimums, or to waive the minimum investment
requirements for any investor. The Fund will not accept for
purchase order a check which has been endorsed by a third party.
Purchases by Mail
Shares may be purchased initially by completing the application
accompanying this Prospectus and mailing it to the Transfer Agent,
together with a check payable to the " Motorsports Associated
Growth & Income Fund." The check or money order and application
should be mailed to First Data Investor Services Group, Inc. ,
3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA
19406-0903. If this is an initial purchase, please send a minimum
of $1,000 or $250 for Automatic Investment Plans, IRA, Roth IRA,
SEP IRA, Uniform Gift to Minor Accounts ("UGMA") and Uniform
Transfer to Minor Accounts ("UTMA").
Purchases by Wire
Before making an initial investment by wire, an investor must
first telephone the Transfer Agent at (800)_________ or (610)
239-4600 in order to be assigned an account number. The
<PAGE>
investor's name, account number, taxpayer identification number or
social security number and address must be specified in the wire.
Shareholders having an account with a commercial bank that is a
member firm of the Federal Reserve System may purchase shares of
the Fund by requesting their bank to transmit funds by wire to:
UMB Bank N.A., ABA #10-10-00695/Attention: First Data Investor
Services Group, Inc. , A/C 98-7037-071-9/" Motorsports Associated
Growth & Income Fund", along with the shareholder's name and
account number as specified on the shareholder's account
registration.In addition, an account application should be
promptly forwarded to: First Data Investor Services Group, Inc. ,
3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA
19406-0903. Shareholders may be subject to 31% withholding if
original application is not received.
Additional investments may be made at any time through the wire
procedures described above, which must include a shareholder's
name and account number. The shareholder's bank may impose a fee
for investments by wire. The Fund will not be responsible for the
consequences of delays, including delays in the banking or Federal
Reserve wire systems.
Purchases through Broker-Dealers
The Fund may accept telephone orders only from broker-dealers or
service organizations that have been previously approved by the
Fund. It is the responsibility of such broker-dealers or service
organizations to promptly forward purchase orders and payments to
the Fund. Brokers, financial institutions, service organizations,
banks and bank trust departments through which an investor
purchases shares of the Fund, may charge the shareholder a
transaction fee or other fee for their services at the time of
purchase. Minimums of broker/dealers or accounts opened through a
fund network may apply.
For any order to be confirmed at the current day's offering price,
it must be received by the Transfer Agent or the selling dealer by
the close of the NYSE. For any dealer order to be confirmed at
the current day's offering price, it not only must be received by
the dealer prior to the close of the NYSE, but it must be
communicated to the Transfer Agent by 5:00 p.m. Eastern time on
that day. It is the responsibility of that dealer to communicate
the details of the order to the Transfer Agent. Orders received by
dealers after 4:00 p.m. Eastern time are confirmed at the offering
price on the following business day.
Purchases by Telephone
The Fund only accepts telephone purchases from brokers, financial
institutions or service organizations. Individuals are not able
to make purchases by telephone.
Subsequent Investments
Once an account has been opened, subsequent purchases may be made
<PAGE>
by mail, bank wire, automatic investing or direct deposit. The
minimum for subsequent investments is $50 for all accounts.
When making subsequent investments by mail, please return the
bottom portion of a previous confirmation with your investment in
the envelope that is provided with each confirmation statement.
Your check should be made payable to " Motorsports Associated
Growth & Income Fund" and mailed to First Data Investor Services
Group, Inc. , c/o UMB Bank, N.A., P.O. Box 412797, Kansas City, MO
64141-2797. Orders to purchase shares are effective on the day
the Transfer Agent receives your check or money order.
All investments must be made in U.S. dollars and checks must be
drawn only on banks located in the United States. A charge
(minimum of $20) will be imposed if any check used for the
purchase of shares is returned. Investors who purchase Fund
shares by check or money order may not receive redemption proceeds
until there is reasonable belief that the check has cleared, which
may take up to fifteen calendar days after the purchase date.
Automatic Investment Plan
Once an account has been opened for $250 or more, a shareholder
can make additional purchases of shares of the Fund through an
automatic investment plan. The automatic investment plan provides
a convenient method by which investors may have monies deducted
directly from their bank account for investment in the Fund. An
investor may authorize the automatic withdrawal of funds from his
or her bank account (minimum of $50) and completing the automatic
investment plan form enclosed with this Prospectus. Subsequent
monthly investments are subject to a minimum required amount of
$50. The Fund may alter, modify or terminate this plan at any
time. To begin participating in this plan, please complete the
Automatic Investment Plan Application found in the back of this
Prospectus.
<PAGE>
<PAGE> Sales Load Table
The applicable sales charge a shareholder of the Fund pays depends
on the dollar amount invested, as shown in the table below.
Total Sales Charge Amount Paid to
as a Percentage of Dealer as a
Offering Net Amount Percentage of
Price Invested Offering Price
------ --------- -------------
Under $50,000 5.75% 6.10% 5.00%
$50,000 but less
than $100,000 4.75% 4.99% 4.00%
$100,000 but less
than $250,000 3.75% 3.90% 3.00%
$250,000 but less
than $500,000 2.75% 2.83% 2.25%
$500,000 but less
than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more/*/ * * *
/*/ There is no initial sales charge on purchases of the Fund of
$1,000,000 or more. However, a contingent deferred sales charge
("CDSC") of 1.00% is imposed on redemptions placed within 12
months of purchases. The distributor will pay authorized dealers,
and other qualifying financial institutions except wrap fee client
accounts, 1.00% of the first $2.5 million of such purchases, plus
0.50 % of the on amounts thereafter. A CDSC will be imposed on
the proceeds of a redemption of such shares if redeemed within 12
months of purchase, based on the lower of the shares' cost or
current net asset value. In addition, shares purchased by certain
investors investing $1,000,000 or more that have made arrangements
with the distributor and whose dealer waived commission, as
described above, are not subject to any charge. In determining
whether a CDSC is payable, the Fund will first redeem shares not
subject to any charge. No CDSC charge is imposed on the redemption
of shares acquired through reinvestment if income dividends or
capital gains distributions. FPSB receives the entire amount of
the CDSC to defray its expense in providing certain distribution-
related services to the Fund, including payment of a sales
commission to selling dealers or qualifying financial
institutions, as described above.
FPSB will pay the dealer concession to those selected
dealers who have entered into an agreement with the Distributor.
The dealer's concession may be changed from time to time. The
Distributor may from time to time offer incentive compensation to
dealers which sell shares of the Fund subject to sales charges,
allowing such dealers to retain an additional portion of the sales
<PAGE>
load. On some occasions, such cash or incentives will be
conditioned upon the sale of a specified minimum dollar amount of
the shares of the Fund during a specified period of time. A
dealer who receives all or substantially all of the sales load may
be considered an "underwriter" under the Securities Act of 1933,
as amended. All such sales charges are paid to the securities
dealer involved in the trade, if any. No sales charge will be
assessed on the reinvestment of dividends or capital gain
distributions.
Reduced Sales Charges
The sales charge for purchases of the Fund may be reduced through
Rights of Accumulation or Letter of Intent. To qualify for a
reduced sales charge, an investor must so notify his or her
distributor at the time of each purchase of shares which qualifies
for the reduction.
Rights of Accumulation
For investors who already have an account with the Fund, reduced
sales charges based upon the sale charge schedule for the Fund are
applicable to subsequent purchases. The sales charge on each
additional purchase is determined by adding the current market
value of the shares the investor currently owns to the amount
being invested. The reduced sales charge is applicable only to
current purchases. It is the investor's responsibility to notify
the Transfer Agent at the time of subsequent purchases that the
account is eligible for the Right of Accumulation. The investor
must also give the account numbers of his accounts, and those
accounts held in the name of his spouse or for minor children, the
age of such children and the specific relationship of each such
person to the investor.
Letter of Intent
An investor of the Fund may qualify for a reduced sales charge
immediately by signing a non-binding Letter of Intent stating the
investor's intention to invest during the next 13 months a
specified amount which, if made at one time, would qualify for a
reduced sales charge. The first investment cannot be made more
than 90 days prior to the date of the Letter of Intent. Any
redemptions made during the 13-month period will be subtracted
from the amount of purchases in determining whether the Letter of
Intent has been completed. During the term of the Letter of
Intent, the Transfer Agent will hold shares representing 5% of the
indicated amount in escrow for payment of a higher sales load if
the full amount indicated in the Letter of Intent is not
purchased. The escrowed shares will be released when the full
amount indicated has been purchased. If the full amount indicated
is not purchased within the 13-month period, a shareholder's
escrowed shares will be redeemed in an amount equal to the
difference in the dollar amount of sales charge actually paid and
the amount of sales charge the shareholder would have had to pay
on his or her aggregate purchases if the total of such purchases
had been made at a single time. It is the shareholder's
<PAGE>
responsibility to notify the Transfer Agent at the time the Letter
of Intent is submitted that there are prior purchases that may
apply.
The term "single purchaser" refers to (i) an individual, (ii) an
individual and spouse purchasing shares of the Fund for their own
account or for trust or custodial accounts of their minor
children, or (iii) a fiduciary purchasing for any one trust,
estate or fiduciary account, including employee benefit plans of a
single employer.
Sales at Net Asset Value
The Fund may sell Shares at net asset value (i.e., without
any initial sales charge) to certain categories of investors,
including:(1) investment advisory clients of the Advisors or their
affiliates; (2) officers and present or former Trustees of the
Fund; directors and present and full-time employees of selected
dealers or agents; or the spouse, sibling, direct ancestor or
direct descendant (collectively "relatives") of any such person;
or any trust, individual retirement account or retirement plan
account for the benefit of any such person or relative; or the
estate of any such person or relative, if such shares are
purchased for investment purposes (such shares may not be resold
except to the Fund); (3) the Advisors, the Distributor, and their
affiliates; and certain employee benefit plans for employees of
the Advisors and the Distributor; (4) employer-sponsored qualified
pension or profit-sharing plans (including Section 401(k) plans),
custodial accounts maintained pursuant to Section 403(b)(7)
retirement plans and individual retirement accounts (including
individual retirement accounts to which simplified employee
pension ("SEP") contributions are made), if such plans or accounts
are established or administered under programs sponsored by
administrators or other persons that have been approved by the
Distributor; (5) investors purchasing shares of the Fund with the
redemption proceeds from other mutual fund complexes on which the
investor has paid a front-end sales charge or was subject to a
deferred sales charge, whether or not paid, if such redemption
occurred no more than 30 days prior to the purchase of Fund
shares; and (6) Registered Investment Advisors who are purchasing
on behalf of their clients.
How to Redeem Shares
Shareholders may redeem their shares of the Fund on any business
day that the NYSE is open for business. Redemptions will be
effective at the net asset value (subject to any applicable CDSC
charges) next determined after receipt by the Transfer Agent of a
redemption request meeting the requirements described below.
Redemption by Mail
Shareholders may redeem their shares by submitting a written
request for redemption to First Data Investor Services Group,
Inc., 3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA
19406-0903.
<PAGE>
A written redemption request to the Transfer Agent must be in good
order, which means that it must: (i) identify the shareholder's
account name and account number; (ii) state the number of shares
or dollar amount to be redeemed, and (iii) be signed by each
registered owner exactly as the shares are registered. To prevent
fraudulent redemptions, a signature guarantee for the signature of
each person in whose name an account is registered is required for
all written redemption requests exceeding $10,000 or where
proceeds are to be mailed to an address other than the address of
record. A guarantee may be obtained from any commercial bank,
credit union, member firm of a national securities exchange,
registered securities association, clearing agency or savings and
loan association. A credit union must be authorized to issue
signature guarantees. Signature guarantees will be accepted from
any eligible guarantor institution that participates in a
signature guarantee program. Notary public endorsements will not
be accepted in lieu of a signature guarantee. The Transfer Agent
may require additional supporting documents for redemptions made
by corporations, executors, administrators, trustees or guardians
and retirement plans.
A redemption request will not be deemed to be properly received
until the Transfer Agent receives all required documents in proper
form. Questions with respect to the proper form for redemption
requests should be directed to the Transfer Agent at
(800)______________.
Redemption by Telephone
Shareholders who have so indicated on the application, or have
subsequently arranged in writing to do so, may redeem shares by
calling the Transfer Agent at (800) _____________ or (610)
239-4600 during normal business hours. In order to arrange for
redemption by wire or telephone after an account has been opened,
or to change the bank or account designated to receive redemption
proceeds, a written request with a signature guarantee must be
sent to the Transfer Agent.
The Fund reserves the right to refuse a wire or telephone
redemption if it is believed advisable to do so. Procedures for
redeeming Fund shares by wire or telephone may be modified or
terminated at any time.
During periods of unusual economic or market changes, telephone
redemptions may be difficult to implement. In such event,
shareholders should follow the procedures for redemption by mail.
Neither the Fund nor any of its service contractors will be liable
for any loss or expense in acting upon telephone instructions that
are reasonably believed to be genuine. In this regard, the Fund
and the Transfer Agent require personal identification information
before accepting a telephone redemption. To the extent that the
Fund or the Transfer Agent fails to use reasonable procedures to
<PAGE>
verify the genuineness of telephone instructions, the Fund may be
liable for losses due to fraudulent or unauthorized instructions.
Written confirmation will be provided for all redemption
transactions initiated by telephone. Proceeds from a telephone
redemption shall only be sent to the shareholder's address of
record or wired to the shareholder's bank account on file with the
Transfer Agent.
General Redemption Information
When a request for redemption is made shortly after the purchase
of shares, you will not receive the redemption proceeds until the
check(s) received for the shares purchased has cleared. The Fund
will mail the redemption proceeds as soon as the purchase check
clears, which may take up to 15 calendar days or more. You may
avoid such delays by purchasing shares with a federal funds wire.
Redemption proceeds may be wired directly to any bank previously
designated by an investor on his or her new account application.
There is a $9.00 charge for redemptions made by wire to domestic
banks. Wires to foreign or overseas banks may be charged at
higher rates. It should also be noted that banks may impose a fee
for wire services. In addition, there may be fees for redemptions
made through brokers, financial institutions and other service
organizations.
The Fund will satisfy redemption requests for cash to the fullest
extent possible, as long as such payments would not, in the
opinion of the Board of Trustees, result in the need for the Fund
to sell assets under disadvantageous conditions or to the
detriment of the remaining shareholders of the Fund. Pursuant to
the Fund's Trust instrument, however, payment for shares redeemed
may also be made in-kind, or partly in cash and partly in-kind.
The Fund has elected, pursuant to Rule 18f-1 under the Investment
Company Act of 1940, as amended (the "1940 Act"), to redeem its
shares solely in cash up to the lesser of $250,000 or 1% of the
net asset value of the Fund, during any 90 day period for any one
shareholder. Any portfolio securities paid or distributed in-kind
would be in readily marketable securities and valued in the manner
described below. See "Net Asset Value." In the event that an
in-kind distribution is made, a shareholder may incur additional
expenses, such as brokerage commissions, on the sale or other
disposition of the securities received from the Fund. In-kind
payments need not constitute a cross-section of the Fund's
portfolio.
The Fund may suspend the right of redemption or postpone the date
of payment for more than seven days during any period when (1)
trading on the NYSE is restricted or the NYSE is closed for other
than customary weekends and holidays, (2) the SEC has by order
permitted such suspension for the protection of the Fund's
shareholders, or (3) an emergency exists making disposal of
portfolio securities or valuation of net assets of the Fund not
reasonably practicable.
<PAGE>
Systematic Cash Withdrawal Plan
The Fund offers a Systematic Cash Withdrawal Plan as another
option which may be utilized by an investor who wishes to withdraw
funds from his or her account on a regular basis. To participate
in this option, an investor must either own or purchase shares
having a value of $10,000 or more. Automatic payments by check
will be mailed to the investor on either a monthly, quarterly,
semi-annual or annual basis. All withdrawals are processed on the
25th of the month or, if such day is not a business day, on the
next business day and paid promptly thereafter. If you would like
to start a Systematic Withdrawal, please complete the section of
your application or call the Transfer Agent at (800) ____________
to obtain the form.
Minimum Balances
Due to the relatively high cost of maintaining smaller accounts,
the Fund reserves the right to involuntarily redeem shares in any
account at its then current net asset value if at any time the
total investment does not have a value of at least $250 as result
of shareholder redemptions, but not market fluctuations. A
shareholder will be notified that the value of his or her account
is less than the required minimum and will be allowed at least 60
days to bring the value of the account up to the minimum before
the redemption is processed.
Retirement Plans
The Fund offers certain Individual Retirement Accounts for use by
certain individuals who qualify (including earned income from
self-employment). More detailed information about how to
participate in these IRA Plans, the fees charged by the custodian
bank, and brochures containing other pertinent information may be
obtained by contacting the Fund at (800) _____________.
The Taxpayer Relief Act of 1997 ("Relief Act") impacts the
traditional IRA and creates one additional type of IRA.
Traditional (deductible) IRAs: The Relief Act will gradually
increase the adjusted gross income phaseouts for deductible IRAs
over the next ten years. Married individuals may make deductible
contributions even if spouses are active participants in an
employer-sponsored plan. The 10% early withdrawal tax will not
apply for up to $10,000 for first-time home purchases or education
expenses.
Roth IRAs: The Relief Act has created the new Roth IRA. While
contributions to a Roth IRA are not currently deductible, the
amounts within the accounts accumulate tax-free and qualified
distributions will not be included in a shareholder's taxable
income. The contribution limit is $2,000 annually ($4,000 for
joint returns) in aggregate with contributions to Traditional
IRAs. Certain income phaseouts apply.
<PAGE> Net Asset Value
The offering price and net asset value per share of the Fund are
calculated as of the close of regular trading on the NYSE,
currently 4:00 p.m., Eastern Time. Currently, the NYSE is closed
on the following holidays or days on which the following holidays
are observed: New Year's Day, Martin Luther King Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas.
The net asset value per share is computed by adding the value of
all securities and other assets in the portfolio, deducting any
liabilities, and dividing by the total number of outstanding
shares. Expenses are accrued daily and applied when determining
the net asset value. The Fund's equity securities are valued
based on market quotations or, when no market quotations are
available, at fair value as determined in good faith by, or under
direction of, the Board of Trustees. Market quotations are
generally the last reported sales price on the principal exchange
on which the security trades, or if no sale price is reported, the
mean of the latest bid and asked prices provided by the
independent pricing service in accordance with procedures
established by the Board of Trustees. Securities traded
over-the-counter are priced at the mean of the latest bid and
asked prices. Securities are valued through valuations obtained
from a commercial pricing service.
Short-term investments having a maturity of 60 days or less are
valued at amortized cost, which the Board of Trustees believes
represents fair value. When a security is valued at amortized
cost, it is valued at its cost when purchased, and thereafter by
assuming a constant amortization to maturity of any discount or
premium, regardless of the impact on fluctuating interest rates on
the market value of the instrument. All other securities and
other assets are valued at their fair value as determined in good
faith under procedures established by and under the supervision of
the Board of Trustees.
DISTRIBUTION PLAN
Rule 12b-1 adopted by the Commission under the 1940 Act permits an
investment company to pay expenses associated with the
distribution of its shares in accordance with a duly adopted plan.
The Fund has adopted a plan of distribution ("Plan") pursuant to
Rule 12b-1 and has entered into a Distribution Services Agreement
(the "Agreement") with the Distributor. The Plan permits the Fund
to pay the Distributor from the assets of the Fund, a monthly fee
for services provided and expenses incurred in the distribution
and promotion of shares of the Fund, including advertising
expenses and printing costs (e.g., sales materials used to offer
shares to the public). The Distributor may reallow all or a
portion of the payments received under the Plan to third parties,
including and providing personal services and/or maintaining
shareholder accounts ("service fees").
<PAGE>
These expenses include, among other things, preparing and
distributing advertisements, sales literature, and prospectuses
and reports used for sales purposes, compensating sales and
marketing personnel, holding special promotions for specified
periods of time, and paying distribution and maintenance fees to
brokers, dealers and others.
Under the Plan, the fees paid by the Fund from the assets of the
the Fund to the Distributor and others may not exceed 0.25% of the
Funds' average daily net assets in any year. Amounts payable to
the Distributor with respect to the Fund under the Plan in a given
year may not fully reimburse the Distributor for its actual
distribution-related expenses during such year. In such event,
there is no carryover of such reimbursement obligations to
succeeding years.
The Plan is characterized as compensation plans because the
distribution and service fees will be paid to the Distributor
without regard to the distribution or shareholder services
expenses incurred by the Distributor or the amount of payments
made to financial institutions and intermediaries.
The Fund is not obligated under the Plans to pay any distribution
services fee in excess of the amounts set forth above. All
expenses of distribution and marketing in excess of the maximum
amounts permitted by the Plan per annum will be borne by the
Advisor and any amounts paid for the above services will be paid
pursuant to a servicing or other agreement.
Distribution expenses accrued in one fiscal year may not be
paid from distribution services fees received from the Fund in
subsequent fiscal years. The Fund intends to operate the Plan in
accordance with their terms and within the rules of the NASD
concerning sales charges.
The fees paid to the Distributor under the Plan are subject to
review and approval by the Fund's independent Trustees who have
the authority to reduce the fees or terminate the Plan at any
time. All payments to the Plan shall be made for the purpose of
selling shares issued by the Fund or servicing shareholder
accounts.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
The Fund intends to distribute substantially all of its net
investment income and capital gains to shareholders each year.
Normally, income dividends will be declared in March, June,
September and December. Capital gains, if any, will normally be
distributed in December but may be made more frequently as deemed
advisable by the Board of Trustees. All such dividends and
distributions are taxable to the shareholder whether or not
reinvested in shares.
<PAGE>
Reinvestments of dividends and distributions in additional shares
of the Fund will be made at the net asset value determined on the
ex-date of the dividend or distribution unless you elect in
writing to receive dividends or distributions in cash.
If you buy shares just before the Fund deducts a distribution from
its net asset value, you will pay the full price for the shares
and then receive a portion of the price back as a taxable
distribution.
Any check tendered in payment of dividends or other distributions
which cannot be delivered by the post office or which remains
uncashed for a period of more than one year may be reinvested in
the shareholder's account at the current net asset value, and the
dividend option may be changed from cash to reinvest.
U.S. FEDERAL INCOME TAXES
The Fund intends to qualify each year as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the
"Code") so it will not pay federal taxes on either income or
capital gains distributed to shareholders, although there can be
no assurance that they will so qualify. Dividends representing net
investment income and distributions of net short-term capital
gains are taxable as ordinary income.
The excess of net capital gains over the net capital losses
realized and distributed by the Fund to its shareholders as
capital gains distributions is expected to be taxable to the
shareholders as mid-term or long-term capital gains, irrespective
of the length of time a shareholder may have held his or her
stock. Capital gains distributions are not eligible for the
dividends-received deduction referred to above.
Distributions received by a shareholder may include nontaxable
returns of capital, which will reduce a shareholder's basis in
shares of the Fund. If that basis is reduced to zero (which could
happen if the shareholder does not reinvest distributions and
returns of capital are significant), any further returns of
capital will be taxable as capital gain.
Under the current federal tax law, the amount of an income
dividend or capital gains distribution declared by the Fund during
October, November and December of a year to shareholders of record
as of a specified date in such a month that is paid during January
of the following year is includable in the prior year's taxable
income of shareholders that are calendar year taxpayers.
A dividend or capital gains distribution with respect to shares of
the Fund held by a tax-deferred or qualified plan, such as an
individual retirement account, 403(b)(7) retirement plan or
corporate pension or profit-sharing plan, will not be taxable to
<PAGE>
the plan. Distributions from such plans will be taxable to
individual participants under applicable tax rules without regard
to the character of the income earned by the qualified plan.
The Fund will be required to withhold 31% of any payments made to
a shareholder if the shareholder has not provided a certified
taxpayer identification number to the Fund, or if they are
otherwise subject to backup withholding.
Shareholders will be advised annually as to the federal tax status
of income dividends, capital gain and return of capital
distributions made by the Fund for the preceding year.
Distributions by the Fund may be subject to state and local taxes.
Shareholders are urged to consult their tax advisor regarding
their own tax situation.
Change in Rates:
The Relief Act has lowered the tax rate for long-term capital
gains from 28% to 20%, but increases the holding period of the
assets from more than one year to more than eighteen months. For
persons in the 15% income tax bracket, the new rate is 10%.
Realized gains from capital assets held more than one year, but
eighteen months or less, will be taxed at a 28% rate. Such gains
will be termed "mid-term" capital gains.
Also, capital gains in property held for more than five years will
be eligible for an 18% tax rate or 8% for persons in the 15% tax
bracket, but this only applies to assets acquired after December
31, 2000; therefore, a shareholder will not benefit from this
provision until the year 2006.
PERFORMANCE INFORMATION
The Fund may advertise a variety of types of performance
information including "average annual return," "total return" and
"cumulative total return." Each of these figures is based upon
historical results and does not represent the future performance
of the Fund. Total return is the change in value of an investment
in the Fund over a particular period, assuming that all
distributions have been reinvested. Average annual return
reflects the average percentage change per year in the value of an
investment in the Fund. Cumulative total return reflects the
total percentage change over the stated period.
Please refer to the Statement of Additional Information for more
information on performance.
GENERAL INFORMATION
<PAGE>
ORGANIZATION
The Sports Funds Trust (the "Trust") is a Delaware business trust
organized pursuant to a Trust Instrument dated November 4, 1997.
The Trust is organized to offer separate series of shares and
currently offers a single series of shares called the Motorsports
Associated Growth & Income Fund. Currently, there is one class of
shares issued by the Fund. The Board of Trustees is empowered to
establish, without shareholder approval, additional series or
classes of shares of the Trust. The Fund including all of its
services providers intend to be fully Year 2000 compliant by
December 1999.
DESCRIPTION OF SHARES
The Trust is authorized to issue an unlimited number of shares of
beneficial interest with no par value. Shares of the Fund
represent equal proportionate interests in the assets of the Fund
only, and have identical voting, dividend, redemption, liquidation
and other rights. All shares issued are fully paid and non-
assessable, and shareholders have no preemptive or other right to
subscribed to any additional shares.
VOTING RIGHTS
A shareholder is entitled to one vote for each full share held and
a fractional vote for each fractional share held. All shares of
the Fund participate equally in regard to dividends,
distributions, and liquidations with respect to the Fund.
Shareholders do not have preemptive, conversion or cumulative
voting rights.
SHAREHOLDER MEETINGS
Under Delaware law, the Fund is not required, and does not intend,
to hold annual meetings of shareholders unless, under certain
circumstances, it is required to do so under the 1940 Act.
Shareholders of 10% or more of the Fund's outstanding shares may
request that a special meeting be called to consider the removal
of any trustee. The Fund will assist in the communication with
other shareholders.
THE ADMINISTRATOR
The Fund has retained First Data Investor Services Group, Inc.
("Investor Services Group"), a wholly owned subsidiary of First
Data Corporation, which has its principal business address at 4400
Computer Drive, Westboro, MA 01581, to provide administrative
services to the Fund. Such services relate to administration,
operations and compliance. For such services, the Fund has agreed
to pay Investor Services Group a fee, subject to a minimum annual
fee of $55,000 as compared to an asset based fee computed at the
annual rate of 0.15% of the first $50 million of total average net
assets, 0.10% of the next $50 million of total average net assets
and 0.005% of total net assets in excess of $100 million.
TRANSFER AGENT AND FUND ACCOUNTANT
Investor Services Group also acts as transfer agent and maintains
<PAGE>
the records of each shareholder's account, answers shareholder
inquiries, processes purchases and redemptions and acts as
dividend disbursing agent. Investor Services Group also performs
certain accounting and pricing services for the Fund, including
the daily calculation of the Fund's net asset value per share.
CUSTODIAN
The Bank of New York serves as custodian for the safekeeping of
securities, cash and other assets of the Fund.
SHAREHOLDER REPORTS AND INQUIRIES
The Fund issues unaudited financial information semiannually and
audited financial statements annually. Shareholder inquiries
should be addressed to the Fund c/o First Data Investor Services
Group, Inc. , 3200 Horizon Drive, P.O. Box 61503, King of Prussia,
PA 19406-0903. Purchase and redemption transactions should be
made through the Transfer Agent by calling (800)___________ or
(610) 239-4600.
<PAGE>
<PAGE> [OUTSIDE BACK COVER]
INVESTMENT Advisor
Pegasus Advisory Group, Inc.
5-H Oak Branch Dr
Greensboro NC 27407
INVESTMENT SUB-ADVISOR
Chartwell Investment Partners
1235 Westlakes Drive
Suite 330
Berwyn, PA 19312
DISTRIBUTOR
FPS Broker Services, Inc.
3200 Horizon Drive, P.O. Box 61503
King of Prussia, PA 19406
(800) _____________
SHAREHOLDER SERVICES
First Data Investor Services Group, Inc.
3200 Horizon Drive, P.O. Box 61503
King of Prussia, PA 19406
(800) ________
610) 239-4600
CUSTODIAN
The Bank of New York
48 Wall Street
New York, New York 10286
LEGAL COUNSEL
Dechert Price and Rhoads
1500 "K" Street
Washington DC 20005
AUDITORS
Price Waterhouse
30 17th Street
Philadelphia PA 19103
<PAGE>
<PAGE>
Subject to Completion
Statement of Additional Information
dated __________, 1998
THE MOTORSPORTS ASSOCIATED GROWTH & INCOME FUND
STATEMENT OF ADDITIONAL INFORMATION
_____________, 1998
This Statement of Additional Information is not a prospectus but
should be read in conjunction with the Prospectus describing The
Motorsports Associated Growth & Income Fund (the "Fund") dated
___________, 1998, and is incorporated by reference in its
entirety into the Prospectus. The Prospectus may be amended or
supplemented from time to time. No investment in shares should be
made without first reading the Prospectus. A copy of the
Prospectus may be obtained without charge by contacting the Fund's
Distributor, FPS Broker Services, Inc., 3200 Horizon Drive, P.O.
Box 61503, King of Prussia, PA 19406-0903, or by calling (800)
___________.
No person has been authorized to give any information or to make
any representations not contained in this Statement of Additional
Information or in the Prospectus in connection with the offering
made by the Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized
by the Fund or its distributor. The Prospectus does not
constitute an offering by the Trust or by the distributor in any
jurisdiction in which such offering may not lawfully be made.
<PAGE>
<PAGE> TABLE OF CONTENTS
Page
The Trust and the Fund . . . . . . . . . . . . . . . . . .
Investment Policies and Techniques
Common Stock
Preferred Stock
Convertible Securities
Options
Futures
Securities Lending
Illiquid Securities
Rule 144A Securities
Borrowing
Other Investments
Investment Restrictions
Investment Advisory and Other Services
Investment Advisory Agreement
Sub-Advisory Agreements
Administrator, Transfer Agent and Fund Accountant
Distributor
Trustees and Officers
Net Asset Value
Taxes
Federal Income Tax
Portfolio Transactions
Performance Information
In General
Total Return Calculation
Performance and Advertisements
Other Information
Financial Statements<PAGE>
<PAGE>
THE TRUST AND THE FUND
This Statement of Additional Information relates to the
Motorsports Associated Growth & Income Fund (the "Fund"), a
separate series of The Sports Funds Trust (the "Trust"), a
diversified, open-end management company established on November
4, 1997 under Delaware law as a Delaware business trust. The
Trust Instrument permits the Trust to offer separate series of
shares of beneficial interest. The Trust currently is comprised
of one series, which offers its shares through one class of
shares. To the extent that the Trust is a newly formed entity, it
has no prior history. The Fund is advised by its Advisor (the
"Advisor") Pegasus Advisory Group, Inc. and its Sub-Advsior (the
"Sub-Advisor"), Chartwell Investment Partners, collectively (the
"Advisors")
Much of the information contained in this Statement of Additional
Information expands upon subjects discussed in the Prospectus. No
investment in shares of the Fund should be made without first
reading the Prospectus.
INVESTMENT POLICIES AND TECHNIQUES
The following supplements the information contained in the
Prospectus for the Fund regarding the permitted investments and
risk factors and the investment objective and policies of the
Fund.
Common Stock
Common stock is defined as shares of a corporation that entitle
the holder to a pro rata share of the profits of the corporation,
if any, without a preference over any other shareholder or class
of shareholders, including holders of the corporation's preferred
stock and other senior equity. Common stock usually carries with
it the right to vote, and frequently, an exclusive right to do so.
Holders of common stock also have the right to participate in the
remaining assets of the corporation after all other claims,
including those of debt securities and preferred stock, are paid.
Preferred Stock
Generally, preferred stock receives dividends prior to
distributions on common stock and usually has a priority of claim
over common stockholders if the issuer of the stock is liquidated.
Unlike common stock, preferred stock does not usually have voting
rights; preferred stock, in some instances, is convertible into
common stock. In order to be payable, dividends on preferred
stock must be declared by the issuer's Board of Directors or
Trustees. Dividends on the typical preferred stock are
cumulative, causing dividends to accrue even if not declared by
the issuer. There is, however, no assurance that dividends will
be declared by the issuers of the preferred stocks in which the
Fund invests.
<PAGE>
Convertible Securities
Each Fund may invest in convertible securities of issuers located
in the United States. Common stock occupies the most junior
position in a company's capital structure. Convertible securities
entitle the holder to exchange the securities for a specified
number of shares of common stock, usually of the same company, at
specified prices within a certain period of time and to receive
interest or dividends until the holder elects to convert. The
provisions of any convertible security determine its ranking in a
company's capital structure. In the case of subordinated
convertible debentures, the holder's claims on assets and earnings
are subordinated to the claims of other creditors, and are senior
to the claims of preferred and common shareholders. In the case
of preferred stock and convertible preferred stock, the holder's
claims on assets and earnings are subordinated to the claims of
all creditors but are senior to the claims of common shareholders.
To the extent that a convertible security's investment value is
greater than its conversion value, its price will be primarily a
reflection of such investment value and its price will be likely
to increase when interest rates fall and decrease when interest
rates rise, as with a fixed-income security. If the conversion
value exceeds the investment value, the price of the convertible
security will rise above its investment value and, in addition,
may sell at some premium over its conversion value. At such times
the price of the convertible security will tend to fluctuate
directly with the price of the underlying equity security.
Options
The Fund may invest in put and call options for various securities
and securities indices that are traded on national securities
exchanges, from time to time, as the Advisors deems to be
appropriate. The Fund may also engage in writing call options.
The Fund will write only covered call options (options on
securities owned by the Fund). A put option gives the purchaser
of the option the right to sell, and the writer the obligation to
buy, the underlying security at any time during the option period.
A call option gives the purchaser of the option the right to buy,
and the writer of the option the obligation to sell, the
underlying security at any time during the option period. The
premium paid to the writer is the consideration for undertaking
the obligations under the option contract. Options will be used
only for hedging purposes and will not be engaged in for
speculative purposes. Currently, the Fund will not enter into
options transactions to the extent that the aggregate value of the
portfolio securities subject to options or invested in options
positions exceeds 5% of the Fund's net assets as of the time the
Fund purchases or enters into such options.
Futures
The Fund may enter into contracts for the purchase or sale for
future delivery of securities, including index contracts. Futures
contracts are generally considered to be derivative securities.
While futures contracts provide for the delivery of securities,
<PAGE>
deliveries usually do not occur. Contracts are generally
terminated by entering into offsetting transactions.
The Fund may enter into such futures contracts to protect against
the adverse effects of fluctuations in security prices, or
interest rates without actually buying or selling the securities.
For example, if interest rates are expected to increase, the Fund
might enter into futures contracts for the sale of debt
securities. Such a sale would have much the same effect as
selling an equivalent value of the debt securities owned by the
Fund. If interest rates did increase, the value of the debt
securities in the portfolio would decline, but the value of the
futures contracts to the Fund would increase at approximately the
same rate, thereby keeping the net asset value of the Fund from
declining as much as it otherwise would have. Similarly, when it
is expected that interest rates may decline, futures contracts may
be purchased to hedge in anticipation of subsequent purchases of
securities at higher prices. Since the fluctuations in the value
of futures contracts should be similar to those of debt
securities, the Fund could take advantage of the anticipated rise
in value of debt securities without actually buying them until the
market had stabilized. At that time, the futures contracts could
be liquidated and the Fund could then buy debt securities on the
cash market.
A stock index futures contract obligates the seller to deliver
(and the purchaser to take) an amount of cash equal to a specific
dollar amount times the difference between the value of a specific
stock index at the close of the last trading day of the contract
and the price at which the agreement was made. Open futures
contracts are valued on a daily basis and a Fund may be obligated
to provide or receive cash reflecting any decline or increase in
the contract's value. No physical delivery of the underlying
stocks in the index is made in the future.
With respect to options on futures contracts, when the Fund is
temporarily not fully invested, it may purchase a call option on a
futures contract to hedge against a market advance. The purchase
of a call option on a futures contract is similar in some respects
to the purchase of a call option on an individual security.
Depending on the pricing of the option compared to either the
price of the futures contract upon which it is based, or the price
of the underlying debt securities, it may or may not be less risky
than ownership of the futures contract or underlying debt
securities. As with the purchase of futures contracts, when a
Fund is not fully invested, it may purchase a call option on a
futures contract to hedge against a market advance.
The writing of a call option on a futures contract constitutes a
partial hedge against the declining price of the security which is
deliverable upon exercise of the futures contract. If the futures
price at the expiration of the option is below the exercise price,
the Fund will retain the full amount of the option premium which
<PAGE>
provides a partial hedge against any decline that may have
occurred in the value of the Fund's portfolio holdings. The
writing of a put option on a futures contract constitutes a
partial hedge against the increasing price of the security or
foreign currency which is deliverable upon exercise of the futures
contract.
If the futures price at the expiration of the option is higher
than the exercise price, the Fund will retain the full amount of
the option premium which provides a partial hedge against any
increase in the price of securities which the Fund intends to
purchase.
Call and put options on stock index futures are similar to options
on securities except that, rather than the right to purchase or
sell stock at a specified price, options on a stock index future
give the holder the right to receive cash. Upon exercise of the
option, the delivery of the futures position by the writer of the
option to the holder of the option will be accompanied by delivery
of the accumulated balance in the writer's futures margin account
which represents the amount by which the market price of the
futures contract, at exercise, exceeds, in the case of a call, or
is less than, in the case of a put, the exercise price of the
futures contract. If an option is exercised on the last trading
day prior to the expiration date of the option, the settlement
will be made entirely in cash equal to the difference between the
exercise price of the option and the closing price of the futures
contract on the expiration date.
If a put or call option which a Fund has written is exercised, the
Fund may incur a loss which will be reduced by the amount of the
premium it received. Depending on the degree of correlation
between changes in the value of its portfolio securities and
changes in the value of its options positions, the Fund's losses
from existing options on futures may, to some extent, be reduced
or increased by changes in the value of portfolio securities. The
purchase of a put option on a futures contract is similar in some
respects to the purchase of protective puts on portfolio
securities and for Federal tax purposes, will be considered a
"short sale". For example, a Fund will purchase a put option on a
futures contract to hedge the Fund's portfolio against the
risk of rising interest rates.
To the extent that market prices move in an unexpected direction,
the Fund may not achieve the anticipated benefits of futures
contracts or options on futures contracts or may realize a loss.
For example, if the Fund is hedged against the possibility of an
increase in interest rates which would adversely affect the price
of securities held in its portfolio and interest rates decrease
instead, the Fund would lose part or all of the benefit of the
increased value which it has because it would have offsetting
losses in its futures position. In addition, in such situations,
if the Fund had insufficient cash, it may be required to sell
<PAGE>
securities from its portfolio to meet daily variation margin
requirements. Such sales of securities may, but will not
necessarily, be at increased prices which reflect the rising
market. A Fund may be required to sell securities at a time when
it may be disadvantageous to do so.
Further, with respect to options on futures contracts, the Fund
may seek to close out an option position by writing or buying an
offsetting position covering the same securities or contracts and
have the same exercise price and expiration date. The ability to
establish and close out positions on options will be subject to
the maintenance of a liquid secondary market, which cannot be
assured.
Securities Lending
The Fund may lend portfolio securities to broker-dealers and
financial institutions provided that (1) the loan is secured
continuously by collateral marked-to-market daily, and maintained
in an amount at least equal to the current market value of the
securities loaned; (2) the Fund may call the loan at any time and
receive the securities loaned; (3) the Fund will receive any
interest or dividends paid on the loaned securities and (4) the
aggregate market value of securities loaned by the Fund will not
at any time exceed 33% of the total assets of the Fund.
Collateral will consist of U.S. government securities, cash
equivalents or irrevocable letters of credit. Loans of securities
involve a risk that the borrower may fail to return the securities
or may fail to maintain the proper amount of collateral.
Therefore, the Fund will only enter into portfolio loans after a
review by the Advisors, under the supervision of the Board of
Trustees, including a review of the creditworthiness of the
borrower. Such reviews will be monitored on an ongoing basis.
Illiquid Securities
The Board of Trustees has delegated the function of making
day-to-day determinations of liquidity to the Advisors pursuant to
guidelines approved by the Board of Trustees. The Advisors will
monitor the liquidity of securities held by the Fund, and report
periodically on such determinations to the Board of Trustees. The
Fund will not invest more than 15% of its net assets in illiquid
securities (securities that may not be sold within seven days at
approximately the price used in determining the net asset value of
Fund shares), including restricted securities. See "Rule 144A
Securities" below.
Rule 144A Securities
The Fund may invest in securities that are exempt from the
registration requirements of the Securities Act of 1933 pursuant
to Securities Exchange Commission ("SEC") Rule 144A. Securities
purchased pursuant to Rule 144A are traded among qualified
institutional buyers and may be subject to the Fund's limitation
on illiquid investment.
<PAGE>
Investing in securities under Rule 144A could have the effect of
increasing the levels of the Fund's illiquidity to the extent that
qualified institutional buyers become, for a time, uninterested in
purchasing these securities. The Fund will limit its investments
in illiquid securities including securities of issuers which the
Fund is restricted from selling to the public without registration
under the Securities Act of 1933 to no more than 15% of the Fund's
net assets (excluding restricted securities eligible for resale
pursuant to Rule 144A that have been determined to be liquid by
the Fund's Board of Trustees).
Borrowing
The Fund may borrow money as a temporary measure for extraordinary
purposes or to facilitate redemptions. The Fund will not purchase
securities while its borrowings exceed 5% of its total assets.
The Fund has no intention of increasing its net income through
borrowing. Any borrowing will be done from a bank with the
required asset coverage of at least 300%.
Repurchase Agreements
The financial institutions with whom the Fund may enter into
repurchase agreements are banks and non-bank dealers of U.S.
Government securities that are listed on the Federal Reserve Bank
of New York's list of reporting dealers and banks, if such banks
and non-bank dealers are deemed creditworthy by the Advisors. The
Advisors will continue to monitor the creditworthiness of the
seller under a repurchase agreement, and will require the seller
to maintain during the term of the agreement the value of the
securities subject to the agreement at not less than the
repurchase price. The Fund will only enter into a repurchase
agreement where the market value of the underlying security,
including interest accrued, will at all times be equal to or
exceed the value of the repurchase agreement.
Other Investments
Subject to prior disclosure to shareholders, the Board of Trustees
may, in the future, authorize the Fund to invest in securities
other than those listed here and in the prospectus, provided that
such investment would be consistent with the Fund's investment
objective, and that it would not violate any fundamental
investment policies or restrictions applicable to the Fund.
INVESTMENT RESTRICTIONS
The investment restrictions set forth below are fundamental
restrictions and may not be changed without the approval of a
majority of the outstanding voting shares (as defined in the 1940
Act) of the Fund. Unless otherwise indicated, all percentage
limitations listed below apply only at the time of the
transaction. Accordingly, if a percentage restriction is adhered
to at the time of investment, a later increase or decrease in the
percentage which results from a relative change in values or from
<PAGE>
a change in the Fund's total assets will not be considered a
violation.
Except as set forth under "INVESTMENT OBJECTIVE" and "INVESTMENT
POLICIES" and "DESCRIPTION OF PERMITTED INVESTMENTS AND RISK
FACTORS" in the Prospectus, the Fund may not:
(1) Invest less than 80% of its total net assets in companies
which are involved in Motorsports;
(2) As to 75% of its total assets, purchase the securities of
any one issuer (other than securities issued by the U.S.
Government or its agencies or instrumentalities), if
immediately after such purchase more than 5% of the value of
the Fund's total assets would be invested in securities of a
single issuer;
(3) Purchase or sell real estate (but this restriction shall not
prevent a Fund from investing directly or indirectly in
portfolio instruments secured by real estate or interests
therein or acquiring securities of real estate investment
trusts or other issuers that deal in real estate), interests
in oil, gas and/or mineral exploration or development
programs or leases;
(4) Purchase or sell commodities or commodity contracts, except
that a Fund may enter into futures contracts and options
thereon in accordance with such Fund's investment objectives
and policies;
(5) Make investments in securities for the purpose of exercising
control;
(6) Purchase the securities of any one issuer if, immediately
after such purchase, a Fund would own more than 10% of the
outstanding voting securities of such issuer;
(7) Sell securities short or purchase securities on margin,
except for such short-term credits as are necessary for the
clearance of transactions. For this purpose, the deposit or
payment by a Fund for initial or maintenance margin in
connection with futures contracts is not considered to be
the purchase or sale of a security on margin;
(8) Make loans, except that this restriction shall not prohibit
(a) the purchase and holding of debt instruments in
accordance with a Fund's investment objectives and policies,
(b) the lending of portfolio securities, or (c) entry into
repurchase agreements with banks or broker-dealers;
(9) Borrow money or issue senior securities, except that each
Fund may borrow from banks for temporary purposes in amounts
up to one-third of the value of its total assets at the time
<PAGE>
of such borrowing; or mortgage, pledge, or hypothecate any
assets, except in connection with any such borrowing and in
amounts not in excess of the lesser of the dollar amounts
borrowed or 5% of the value of the total assets of the Fund
at the time of its borrowing. All borrowings will be done
from a bank and asset coverage of at least 300% is required.
A Fund will not purchase securities when borrowings exceed
5% of that Fund's total assets;
(10) Purchase the securities of issuers conducting their
principal business activities in the same industry (other
than obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities or Motorsports
Companies as defined) if immediately after such purchase the
value of a Fund's investments in such industry would exceed
25% of the value of the total assets of the Fund;
(11) Act as an underwriter of securities, except that, in
connection with the disposition of a security, a Fund may be
deemed to be an "underwriter" as that term is defined in the
Securities Act;
(12) Invest in puts, calls, straddles or combinations thereof
except to the extent disclosed in the Prospectus; and
(13) Invest more than 5% of its total assets in securities of
companies less than three years old. Such three-year period
shall include the operation of any predecessor company or
companies.
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Advisory Agreement
The Fund and the Advisor have entered into an investment advisory
agreement (the "Investment Advisory Agreement"). The Investment
Advisory Agreement provides that the Advisor shall not be
protected against any liability to the Fund or its shareholders if
it has engaged in conduct constituting willful misfeasance, bad
faith or gross negligence on its part in the performance of its
duties or from reckless disregard of its obligations or duties
thereunder.
The continuance of the Investment Advisory Agreement, after the
first two years, must be specifically approved at least annually
(i) by the vote of the Trustees or by a vote of the shareholders
of Fund, and (ii) by the vote of a majority of the Trustees who
are not parties to the Investment Advisory Agreement or
"interested persons" of any party thereto, cast in person at a
meeting called for the purpose of voting on such approval. The
Investment Advisory Agreement will terminate if assigned, and is
terminable at any time without penalty by the Trustees of the
Fund, or by a majority of the outstanding shares of the Fund on 60
days' written notice to the Advisor.
<PAGE>
Sub-Advisory Agreement
The Fund has entered into a Sub-Advisory Agreement with Chartwell
Investment Partners ("Chartwell" or the "Sub-Advisor") to assist
in the selection and management of the Fund's investment
securities. It is the responsibility of the Sub-Advisor, under
the direction of the Advisor, to make the day-to-day investment
decisions for the Fund, and to place the purchase and sale orders
for the portfolio transactions of the Fund, consistent with the
Fund's investment objective and policies and subject to the
general direction of the Advisor.
For its services, Chartwell receives from the Fund an annual fee
equal to 0.70% of the Fund's average daily net assets.
The Sub-Advisory Agreement is initially effective for two years.
The Sub-Advisory Agreement may be renewed by the parties after its
initial term only so long as such renewal and continuance are
specifically approved at least annually by the Board of Trustees
or by vote of a majority of the outstanding voting securities of
the Fund, and only if the terms of renewal thereof have been
approved by the vote of a majority of the Trustees of the Fund who
are not parties thereto or interested persons of any such party,
cast in person at the meeting called for the purpose of voting on
such approval. The Sub-Advisory Agreement will automatically
terminate in the event of its assignment, and is terminable at any
time without penalty by the Advisor, Chartwell or by the Trustees
of the Fund, or by a majority of the outstanding shares of the
Fund on 60 days' written notice to the Advisor, Chartwell or the
Fund.
Chartwell is a limited partnership organized under the laws of the
commonwealth of Pennsylvania. Winthrop S. Jessup serves as
Chartwell's principal executive officer. Chartwell has one
general partne, Chartwell G.P., Inc. The address for Chartwell
and for Chartwell G.P. is 1235 Westlakes Drive, Suite 330, Berwyn
PA 19312.
The Administrator, Transfer Agent and Fund Accountant
First Data Investor Services Group, Inc. ("Investor Services
Group"), a wholly owned subsidiary of First Data Corporation,which
has its principal business address at 4400 Computer Drive,
Westboro, MA 01581 (the "Administrator", "Transfer Agent" and
"Fund Accountant") provides certain administrative and other
services to the Fund pursuant to an Investment Company Services
Agreement.
Under the Investment Company Services Agreement, the
Administrator: (1) coordinates with the Custodian and Transfer
Agent and monitors the services they provide to the Fund; (2)
coordinates with and monitors any other third parties furnishing
services to the Fund (e.g. the Fund's independent auditors,
printers, etc.); (3) provides the Fund with necessary office
<PAGE>
space, telephones and other communications facilities and
personnel competent to perform administrative and clerical
functions; (4) supervises the maintenance by third parties of such
books and records of the Fund as may be required by applicable
federal or state law; (5) prepares and, after approval by the
Fund, files and arranges for the distribution of proxy materials
and periodic reports to shareholders of the Fund as required by
applicable law; (6) prepares and, after approval by the Fund,
arranges for the filing of such registration statements and other
documents with the SEC and other federal and state regulatory
authorities as may be required by applicable law; (7) reviews and
submits to the officers of the Fund for their approval invoices or
other requests for payment of the Fund's expenses and instructs
the Custodian to issue checks in payment thereof and (8) takes
such other action with respect to the Fund as may be necessary in
the opinion of the Administrator to perform its duties under the
agreement.
Pursuant to this Investment Company Services Agreement, Investor
Services Group receives an administrative services fee computed at
the annual rate of 0.15% of the first $50 million of total average
net assets, 0.10% of the next $50 million of total average net
assets and 0.05% of total net assets in excess of $100 million.
Pursuant to the Investment Company Services Agreement, aggregate
administrative services fees shall not be less than $67,000.
Investor Services Group also receives fees under the Investment
Company Services Agreement for providing transfer agency services
and fund accounting services.
Distributor
FPS Broker Services, Inc. ( "FPSB"), a broker-dealer affiliated
with Investor Services Group, acts as the Fund's principal
underwriter in a continuous offering of the Fund's shares pursuant
to an underwriting agreement approved by the Board of Trustees.
In this regard, the FPSB has agreed at its own expense to qualify
as a broker-dealer under all applicable federal or state laws in
those states which the Fund shall from time to time identify to
the FPSB as states in which it wishes to offer its shares for
sale, in order that state registrations may be maintained for the
Fund.
The FPSB is a broker-dealer registered with the U.S. Securities
and Exchange Commission and a member in good standing of the
National Association of Securities Dealers, Inc.
Shares of the Fund are subject to a distribution plan (the
"Distribution Plan") pursuant to Rule 12b-1 under the 1940 Act.
As provided in the Distribution Plan, the Fund will pay an annual
fee of 0.25% of the Fund's average daily net assets to FPSB as
compensation for its services. From this amount, FPSB may make
payments to financial institutions and intermediaries such as
<PAGE>
banks, savings and loan associations, insurance companies,
investment counselors and broker-dealers as compensation for
services, reimbursement of expenses incurred in connection with
distribution assistance or provision of shareholder services. The
Distribution Plan is characterized as a compensation plan because
the distribution fee will be paid to the FPSB without regard to
the distribution or shareholder service expenses incurred by FPSB
or the amount of payments made to financial institutions and
intermediaries. The Fund intends to operate the Distribution Plan
in accordance with its terms and within the rules of the National
Association of Securities Dealers, Inc. concerning sales charges.
Pursuant to such rules, the FPSB is required to limit aggregate
initial sales charges and asset-based sales charges to 6.25% of
total gross sales.
The Distribution Plan will continue in effect from year to year,
provided that each such continuance is approved at least annually
by a vote of the Board of Trustees, including a majority vote of
the Trustees who are not parties to the Distribution Plan or
"interested persons" of any party thereto ("Disinterested
Trustees"), cast in person at a meeting called for the purpose of
voting on such continuance. The Distribution Plan may be
terminated at any time, without penalty, by vote of a majority of
the Disinterested Trustees or by vote of the holders of a majority
of the outstanding shares of the Fund on not more than 60 days',
nor less than 30 days' written notice to any other party to the
Distribution Plan. The Distribution Plan may not be amended to
increase materially the amounts to be spent for the services
described herein without approval by the shareholders, and all
material amendments are required to be approved by the Board of
Trustees. The Distribution Plan will automatically terminate in
the event of its assignment. Pursuant to the Distribution Plan,
the Board of Trustees will review at least quarterly a written
report of the distribution expenses incurred on behalf of the
Fund. The report will include an itemization of the distribution
expenses and the purpose of such expenditures.
<PAGE>
<PAGE> TRUSTEES AND OFFICERS
The Trustees and executive officers of the Fund and their
principal occupations for the last five years are set forth below.
Each Trustee who is an "interested person" of the Fund, as that
term is defined in the 1940 Act, is indicated by an asterisk.
Position Principal
Name Age with Fund Occupation
Jack Plymale 53 President & Trustee President of
Pegasus Sports
Marketing, Inc.
(marketing
consulting) from
12/96 to present.
Vice President of
Newman Machine
Company(Manufacturing)
from 5/75 to 11/95
Ken Melton 48 Trustee &
President Executive vice
president of
Pegasus Sports
Marketing, Inc.
(Marketing
consulting) from
5/97 to present.
President of
Falcon Financial
Management Group,
Inc. from 6/95
to 10/96.
Dixon R Johnston 56 Trustee Vice president of
Albs-Waldensian
(Apparel) from
2/96 to Present.
Executive Vice-President of Geta
Davies (apparel)
from 2/95 to
2/96. Director,
Sun Box
International
(collectibles)
from 10/94 to
2/95. Executive
Vice-President,
Trune
Advertising(advertising) from
10/90 to 10/94.
<PAGE>
Charlie Criss 66 Trustee Owner of Criss
Associates
(consulting) from
1/97 to present.
Treasurer of Sun
pacific Foods,
Inc (Citrus
Processing) from
11/82 to 1/97
COMPENSATION TABLE
Trustees and Officers
Estimated Aggregate Estimated total
Name of Compensation from Compensation from
Trustee/ Trust for Fiscal Trust and Fund
Officer /1/ Year End 2/28/99 Complex Paid to Trustees/1/
Jack Plymale/*/ 0 0
Ken Melton/*/ 0 0
Dixon R Johnston $3,500 $3,500
Charlie Criss $3,500 $3,500
/*/ These Trustee is considered an "Interested Person" of the Trust
as defined under the 1940 Act.
/1/ This amount represents the estimated aggregate amount of
compensation paid to the Trustees for service on the Board of
Trustees for the fiscal year ending February 28, 1999.
No officer or Trustee of the Trust who is also an officer or
employee of the Advisor or Sub-Advisor receives any compensation
from the Trust for services to the Trust. The Trust pays each
Trustee who is not affiliated with the Advisor or Sub-Advisor an
annual retainer of $2,500 plus a fee of $250 for attendance at
Board Meetings and reimburses each Trustee and officer for
out-of-pocket expenses in connection with travel and attendance at
such meetings. Members of the audit committee, Mr Johnston and
Criss, receive no money for audit committee meetings.
NET ASSET VALUE
A more complete discussion of the Fund's determination of net
asset value is contained in the Prospectus. The net asset value
per share is computed by dividing the value of the assets of the
Fund, less its liabilities, by the number of shares outstanding.
<PAGE>
The net asset value of all outstanding shares will be computed on
a pro-rata basis for each outstanding share based on the
proportionate participation in the Fund represented by the value
of shares. All income earned and expenses incurred by the Fund
will be borne on a pro-rata basis by each outstanding share.
Portfolio securities are valued and net asset value per share is
determined as of the close of regular trading on the New York
Stock Exchange ("NYSE") which currently is 4:00 p.m. (Eastern
Time), on each day the NYSE is open for trading.
TAXES
The following is only a summary of certain federal tax
considerations generally affecting the Fund and its shareholders
that are not described in the Prospectus, and is not intended as a
substitute for careful tax planning. Shareholders are urged to
consult their tax advisor with specific reference to their own tax
situations, including their state and local tax liabilities.
Non-U.S. investors should consult their tax advisor concerning the
tax consequences of ownership of shares of the Fund, including the
possibility that distributions may be subject to a 30% United
States withholding tax.
Federal Income Tax
The following discussion of federal income tax consequences is
based on the Internal Revenue Code of 1986, as amended (the
"Code") and the regulations issued thereunder as in effect on the
date of this Statement of Additional Information. New
legislation, as well as administrative changes or court decisions,
may significantly change the conclusions expressed herein, and may
have a retroactive effect with respect to the transactions
contemplated herein.
The Fund intends to qualify as a "regulated investment company"
("RIC") as defined under Subchapter M of the Code. By following
such a policy, the Fund expects to eliminate or reduce to a
nominal amount the federal income taxes to which it may be
subject. In order to qualify for treatment as a RIC under the
Code, the Fund generally must distribute annually to its
shareholders at least 90% of its investment company taxable income
(generally, net investment income plus net short-term capital
gain) (the "Distribution Requirement") and also must meet several
additional requirements. Among these requirements are the
following: (i) at least 90% of the Fund's gross income each
taxable year must be derived from dividends, interest, payments
with respect to securities loans, and gains from the sale or other
disposition of stock or securities, or certain other income; (ii)
at the close of each quarter of the Fund's taxable year, at least
50% of the value of its total assets must be represented by cash
and cash items, U.S. Government securities, securities of other
RICs and other securities, with such other securities limited, in
<PAGE>
respect to any one issuer, to an amount that does not exceed 5% of
the value of the Fund's assets and that does not represent more
than 10% of the outstanding voting securities of such issuer and
(iii) at the close of each quarter of the Fund's taxable year, not
more than 25% of the value of its assets may be invested in
securities (other than U.S. Government securities or the
securities of other RICs) of any one issuer or of two or more
issuers which the Fund controls and which are engaged in the same,
similar or related trades or businesses. Notwithstanding the
Distribution Requirement described above, which requires only that
the Fund distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of
net capital gain, the Fund will be subject to a nondeductible 4%
federal excise tax to the extent that it fails to distribute by
the end of any calendar year 98% of its ordinary income for that
year and 98% of its capital gain net income (the excess of short-
and long-term capital gains over short- and long-term capital
losses) for the one-year period ending on October 31 of that year,
plus certain other amounts. The Fund intends to make sufficient
distributions of its ordinary income and capital gain net income
prior to the end of each calendar year to avoid liability for
federal excise tax.
In certain cases, the Fund will be required to withhold, and remit
to the United States Treasury, 31% of any distributions paid to a
shareholder who (1) has failed to provide a correct taxpayer
identification number, (2) is subject to backup withholding by the
Internal Revenue Service or (3) has not certified to the Fund that
such shareholder is not subject to backup withholding.
If the Fund fails to qualify as a RIC for any taxable year, it
will be subject to tax on its taxable income at regular corporate
rates. In such an event, all distributions from the Fund generally
would be eligible for the corporate dividend received deduction
for corporate shareholders.
PORTFOLIO TRANSACTIONS
The Fund does not have an obligation to deal with any
broker/dealer or group of broker/dealers in the execution of
transactions in portfolio securities.
Subject to policies established by the Trustees, the Sub-Advisor
is responsible for placing the orders to execute transactions for
the Fund. In placing orders, it is the policy of the Fund to seek
to obtain the best net results taking into account such factors as
price (including the applicable dealer spread), the size, type and
difficulty of the transaction involved, the firm's general
execution and operational facilities, and the firm's risk in
positioning the securities involved. While the Sub-Advisor
generally seeks reasonably competitive spreads, the Fund will not
necessarily be paying the lowest spread available.
<PAGE> PERFORMANCE INFORMATION
From time to time, the Fund's total return may be quoted in
advertisements, shareholder reports or other communications to
shareholders.
Total Return Calculation
The Fund computes average annual total return by determining the
average annual compounded rate of return during specified periods
that equate the initial amount invested to the ending redeemable
value of such investment. This is done by dividing the ending
redeemable value of a hypothetical $1,000 initial investment by
$1,000 and raising the quotient to a power equal to one divided by
the number of years (or fractional portion thereof) covered by the
computation and subtracting one from the result. This calculation
can be expressed as follows:
T = [( ERV ) 1/n - 1 ]
----
P
Where: T = average annual total return
ERV = ending redeemable value at the end of
the period covered by the computation of
a hypothetical $1,000 investment made at
the beginning of the period.
P = hypothetical initial investment of
$1,000.
n = period covered by the computation,
expressed in terms of years.
The Fund may also compute the aggregate total return by
determining the aggregate compounded rate of return during
specified periods that likewise equate the initial amount invested
to the ending redeemable value of such investment. The formula
for calculating aggregate total return is as follows:
A = [ERV - P ]
---
P
Where: A = aggregate total return
ERV = ending redeemable value at the end of
the period covered by the computation of
hypothetical $1,000 investment made at
the beginning of the period.
P = hypothetical initial investment of
$1,000.
<PAGE>
The calculations of average annual total return and aggregate
total return assume the reinvestment of all dividends and capital
gain distributions on the reinvestment dates during the period.
The ending redeemable value (variable "ERV" in each formula) is
determined by assuming complete redemption of the hypothetical
investment and the deduction of all nonrecurring charges at the
end of the period covered by the computations.
Since performance will fluctuate, performance data for the Fund
should not be used to compare an investment in the Fund's shares
with bank deposits, savings accounts and similar investment
alternatives which often provide an agreed-upon or guaranteed
fixed yield for a stated period of time. Shareholders should
remember that performance is generally a function of the kind and
quality of the instruments held in a portfolio, portfolio
maturity, operating expenses and market conditions.
Performance and Advertisements
From time to time, in marketing and other fund literature, the
Fund's performance may be compared to the performance of other
mutual funds in general or to the performance of particular types
of mutual funds with similar investment goals, as tracked by
independent organizations. Among these organizations, Lipper
Analytical Services, Inc. ("Lipper"), a widely used independent
research firm which ranks mutual funds by overall performance,
investment objectives and assets, may be cited. Lipper
performance figures are based on changes in net asset value, with
all income and capital gains dividends reinvested. Such
calculations do not include the effect of any sales charges
imposed by other funds. The Fund will be compared to Lipper's
appropriate fund category, that is, by fund objective and
portfolio holdings. The Fund's performance may also be compared
to the average performance of its Lipper category.
The Fund's performance may also be compared to the performance of
other mutual funds by Morningstar, Inc. ("Morningstar") which
ranks funds on the basis of historical risk and total return.
Morningstar's rankings range from five stars (highest) to one star
(lowest) and represent Morningstar's assessment of the historical
risk level and total return of a fund as a weighted average for
three-, five- and ten-year periods. Ranks are not absolute or
necessarily predictive of future performance. The Fund may also
compare its performance to a wide variety of indices.
In assessing such comparisons of yield, return or volatility, an
investor should keep in mind that the composition of the
investments in the reported indices and averages is not identical
to those of the Fund, that the averages are generally unmanaged,
and that the items included in the calculations of such averages
may not be identical to the formula used by the Fund to calculate
its figures.
<PAGE> OTHER INFORMATION
Limitation of Trustees' Liability
The Trust Instrument provides that a Trustee shall be liable only
for his or her own willful defaults and, if reasonable care has
been exercised in the selection of officers, agents, employees
Advisors or Sub-Advisors, shall not be liable for any neglect or
wrongdoing of any such person. The Trust Instrument also provides
that the Trust will indemnify its Trustees and officers against
liabilities and expenses incurred in connection with actual or
threatened litigation in which they may be involved because of
their offices with the Trust unless it is determined in the manner
provided in the Trust Instrument that they have not acted in good
faith in the reasonable belief that their actions were in the best
interests of the Trust. However, nothing in the Trust Instrument
shall protect or indemnify a Trustee against any liability for his
willful misfeasance, bad faith, gross negligence or reckless
disregard of his duties.
Custodian
The Bank of New York, 48 Wall Street, New York, New York 10286 is
custodian of the Fund's assets pursuant to a custody agreement.
Under the custody agreement, The Bank of New York (i) maintains a
separate account or accounts in the name of the Fund, (ii) holds
and transfers portfolio securities on account of the Fund, (iii)
accepts receipts and makes disbursements of money on behalf of the
Fund, (iv) collects and receives all income and other payments and
distributions on account of the Fund's securities, and (v) makes
periodic reports to the Board of Trustees concerning the Fund's
operations.
Independent Auditors
Price Waterhouse LLP ("Price Waterhouse") has been selected as the
independent auditors for the Fund. Price Waterhouse provides audit
and tax services. The books of the Fund will be audited at least
once a year by Price Waterhouse.
Reports to Shareholders
Shareholders will receive unaudited semi-annual reports describing
the Fund's investment operations and annual financial statements
audited by independent accountants.
Shareholder Inquiries
Inquiries regarding the Fund may be directed to the Fund by
calling (800) _________.<PAGE>
<PAGE> APPENDIX
Bond Ratings
Moody's Investors Service, Inc. ("Moody's") describes
classifications of corporate bonds as follows:
Aaa Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk
and are generally referred to as "gilt edge." Interest
payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various
protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise
what are generally known as high grade bonds. They are
rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa
securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and
interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment
sometime in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security
appear adequate for the present but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have
speculative characteristics as well.
Bonds rated Aaa, Aa, A and Baa are considered investment
grade bonds.
Ba Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may
be very moderate, and therefore not well safeguarded during
both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of
desirable investments. Assurance of interest and principal
<PAGE>
payments or of maintenance of other terms of the contract
over any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger
with respect to principal or interest.
Ca Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in
default or have other market shortcomings.
C Bonds which are rated C are the lowest rated class of bonds,
and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
Rating Refinements: Moody's may apply numerical modifiers, 1, 2,
and 3 in each generic rating classification from Aa through B in
its corporate and municipal bond rating system. The modifier 1
indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
Standard & Poor's Corporation ("S&P") describes classification of
corporate and municipal debt as follows:
AAA Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely
strong.
AA Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the highest-rated issues
only in small degree.
A Debt rated A has a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher-rated categories.
BBB Debt rated BBB is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally
exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead
to a weakened capacity to pay interest and repay principal
for debt in this category than for debt in higher-rated
categories.
Bonds rated AAA, AA, A and BBB are considered investment grade
bonds.
BB Debt rated BB has less near-term vulnerability to default
than other speculative grade debt. However, it faces major
ongoing uncertainties or exposure to adverse business,
<PAGE>
financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal
payment.
B Debt rated B has a greater vulnerability to default but
presently has the capacity to meet interest payments and
principal repayments. Adverse business, financial or
economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
CCC Debt rated CCC has a current identifiable vulnerability to
default, and is dependent upon favorable business,
financial and economic conditions to meet timely payments of
interest and repayments of principal. In the event of
adverse business, financial or economic conditions, it is
not likely to have the capacity to pay interest and repay
principal.
CC The rating CC is typically applied to debt subordinated to
senior debt which is assigned an actual or implied CCC
rating.
C The rating C is typically applied to debt subordinated to
senior debt which is assigned an actual or implied CCC -
debt rating.
CI The rating CI is reserved for income bonds on which no
interest is being paid.
D Debt rated D is in default. The D rating is assigned on the
day an interest or principal payment is missed.
NR Indicates that no rating has been requested, that there is
insufficient information on which to base a rating or that
S&P does not rate a particular type of obligation as a
matter of policy.<PAGE>
<PAGE> THE SPORTS FUNDS TRUST
Form N-1A
Part C -- Other Information
Part C. Other Information
Item 24. Financial Statements and Exhibits.
(a) Financial Statements.
Included in Part A: None
Included in Part B: None, to be filed by
amendment
(b) Exhibits:
Exhibits filed pursuant to Form N-1A:
(1) Trust Instrument --Filed as Exhibit 99.1
(2) By-Laws --Filed as Exhibit 99.2
(3) Voting Trust Agreement -- None
(4) All Instruments Defining the Rights of Holders
None
(5) Investment Advisory Contracts --
A. Investment Advisory Agreement Filed as
Exhibit 99.A.5
B. Sub-Advisory Agreement filed as Exhibit
99.B.5
(6) Underwriting Agreement --Filed as Exhibit 99.6
(7) Bonus, Profit Sharing, Pension or Other
Similar Contracts -- None
(8) Custodian Agreements -- Filed as Exhibit 99.8
(9) Investment Company Services Agreement -- Filed
as Exhibit 99.9
(10) Opinion and Consent of Counsel -- to be filed by
amendment.
(11) Consent of Independent Auditors -- to be filed
by amendment.
(12) Financial Statements Omitted from Item 23.--
None
<PAGE>
(13) Agreements or Understandings Made in
Consideration for Providing the Initial Capital
None
(14) Model Plan -- None
(15) Plan of Distribution pursuant to Rule 12b-1 --
Filed as Exhibit 99.15
(16) Schedule for Computation of Performance
Quotations -- None.
(17) Financial Data Schedule -- None.
(18) Trustees' Powers of Attorney -- Filed herein as
Exhibit 99.B.18.
Item 25. Persons Controlled by or Under Common Control with
Registrant.
None.
Item 26. Number of Holders of Securities.
None.
Item 27. Indemnification.
Reference is made to Article X of the Registrant's
Trust Instrument filed herewith.
The Trust Instrument limits the liabilities of a Trustee to
that of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of
the office of Trustee, and in the event a Trustee is sued
for his or her activities concerning the Trust, the Trust
will indemnify that Trustee to the fullest extent permitted
by law, except if a Trustee engages in willful misfeasance,
bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.
Item 28
(a) Business and Other Connections of Investment Advisor Pegasus
Advisory Group, Inc.
For information as to any other business, vocation or
employment of a substantial nature in which each Trustee or
officer of the Registrant's Investment Advisor is or has
been engaged for his own account or in the capacity of
Trustee, officer, employee, partner or trustee, reference is
made to Form ADV for Pegasus Advisory Group, Inc.(File
#801-55238) filed under the Investment Advisors Act of 1940
which is incorporated herein by reference.
<PAGE>
Item 28
(b) Business and Other Connections of Officers and
Directors of Chartwell Investment Partners, the
investment Sub-Advisor.
Chartwell Investment Partners ("Chartwell") is an investment
Advisor registered under the Investment Advisors Act of
1940, as amended (the "Advisors Act"). The list required by
this Item 28 of officers and partners of Chartwell, together
with any information as to any business profession, vocation
or employment of substantial nature engaged in by such
officers and partners during the past two years, is
incorporated herein by reference to Schedules A and D of
Form ADV filed by Chartwell pursuant to the Advisors Act
(SEC File No. (801-54124).
Item 29. Principal Underwriter.
a) FPS Broker Services, Inc. ("FPSB"), the principal
underwriter for the Registrant's securities, currently acts
as principal underwriter for the following entities:
The Bjurman Funds
Focus Trust, Inc.
The Govett Funds, Inc.
IAA Trust Growth Fund, Inc.
IAA Trust Asset Allocation Fund, Inc.
IAA Trust Tax Exempt Bond Fund, Inc.
IAA Trust Taxable Fixed Income Series Fund, Inc.
Matthews International Funds
McM Funds
Metropolitan West Funds
Polynous Trust
Smith Breeden Series Fund
Smith Breeden Short Duration U.S. Government Fund
Smith Breeden Trust
The Sports Trust Funds
Stratton Growth Fund, Inc.
Stratton Monthly Dividend Shares, Inc.
The Stratton Funds, Inc
Trainer Wortham First Mutual Funds
(b) The information required by this Item 29 with respect
to each Director, Officer or Partner of FPSB is
incorporated herein by reference to Form BD filed by
FPSB with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934 (Sec
File No. 8-41540)
(c) Not Applicable.
<PAGE>
Item 30. Location of Accounts and Records.
All records described in Section 31(a) of the 1940 Act and
theRules 17 CFR 270.31a-1 to 31a-3 promulgated thereunder,
aremaintained by the Trust's Investment Advisor, Pegasus
Advisory Group, Inc., 5-H Oak Branch Drive, Greensboro,
North Carolina, 27407, except for those maintained by the
Fund's Custodian, The Bank of New York, 48 Wall Street, New
York, New York 10172 and the Trust's Administrator, Transfer
Agent and Fund Accounting Services Agent, First Data
Investor Services Group, Inc. Services Inc., 3200 Horizon
Drive, P.O. Box 61503, King of Prussia, PA 19406-0903.
Item 31. Management Services.
There are no management-related service contracts not discussed in
Part A or Part B.
Item 32. Undertakings.
(a) Registrant hereby undertakes to file a post-effective
amendment within four to six months from the effective
date of this Registration Statement under the
Securities Act of 1933. Registrant understands that
such post-effective amendment will contain reasonably
current financial statements which need not be
certified by independent public accountants.
(b) Registrant hereby undertakes to promptly call a
meeting of shareholders for the purpose of voting upon
the question of removal of any trustee or trustees
when requested in writing to do so by the record
holders of not less than 10 percent of the
Registrant's outstanding shares and to assist its
shareholders in accordance with the requirements of
Section 16 of the Investment Company Act relating to
shareholder communications.
<PAGE>
<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 on its behalf by the
undersigned, thereunto duly authorized, in the City of Greensboro,
and State of North Carolina on the 23rd day of March, 1998.
The Sports Funds Trust
Registrant
By /s/ Jack Plymale*
Jack Plymale, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
Signature Capacity Date
/s/ Jack Plymale* Trustee 3/23/98
Jack Plymale
/s/ Ken Melton* Trustee 3/23/98
Ken Melton
/s/ Dixon R. Johnston* Trustee 3/23/98
Dixon R. Johnston
/s/ Charlie Criss* Trustee 3/23/98
Charlie Criss
/s/ Jack Plymale* President and Principal 3/23/98
Jack Plymale Executive Officer
/s/ Jack Plymale* Principal Financial and
Jack Plymale and Accounting Officer 3/23/98
/s/William J. Baltrus 3/23/98
* By William J. Baltrus, as
Attorney-in-fact and agent
pursuant to Power of Attorney <PAGE>
<PAGE> The Sports Funds Trust
Index to Exhibits to Form N-1A
Exhibit No.
EX-99.1 Trust Instrument
EX-99.2 By-Laws
EX-99.A.5 Investment Advisory Agreement
EX-99.B.5 Sub-Advisory Agreement
EX-99.6 Underwriting Agreement
EX-99.8 Custodian Agreements
EX-99-9 Investment Company Services Agreement
EX-99.15 Plan of Distribution pursuant to Rule 12b-1
EX-99.B.18 Power of Attorney for Trustees
The Sports Funds Trust
Trust Instrument Dated: November 4, 1997
Principal Place of Business:
5-H Oak Branch Drive
Greensboro, North Carolina 27407
<PAGE>
Table of Contents
Page
Article I - Name and Definitions 1
Section 1.1 Name 1
Section 1.2 Definitions 1
ARTICLE II - Beneficial Interest 2
Section 2.1 Shares of Beneficial Interest 2
Section 2.2 Issuance of Shares 2
Section 2.3 Register of Shares and Share Certificates 2
Section 2.4 Transfer of Shares 2
Section 2.5 Treasury Shares 2
Section 2.6 Establishment of Series 2
Section 2.7 Investment in the Trust 3
Section 2.8 Assets and Liabilities of Series 3
Section 2.9 No Preemptive Rights 4
Section 2.10 Personal Liability of Shareholders 4
Section 2.11 Assent to Trust Instrument 4
ARTICLE III - the Trustees 4
Section 3.1 Management of the Trust 4
Section 3.2 Initial Trustee 4
Section 3.3 Term of Office of Trustees 4
Section 3.4 Vacancies and Appointment of Trustees 5
Section 3.5 Temporary Absence of Trustee 5
Section 3.6 Number of Trustees 5
Section 3.7 Effect of Death, Resignation, Etc.
of a Trustee 5
Section 3.8 Ownership of Assets of the Trust 5
ARTICLE IV - Powers of the Trustees 5
Section 4.1 Powers 5
Section 4.2 Issuance and Repurchase of Shares 7
Section 4.3 Trustees and Officers as Shareholders 7
Section 4.4 Action by the Trustees and Committees 8
Section 4.5 Chairman of the Trustees 8
Section 4.6 Principal Transactions 8
ARTICLE V - Expenses of the Trust 8
Section 5.1 General 8
Section 5.2 Expenses of Series 8
Section 5.3 Trustee Reimbursement 8
ARTICLE VI - Investment Adviser, Principal Underwriter,
Administrator and Transfer Agent 9
Section 6.1 Investment Adviser 9
Section 6.2 Principal Underwriter 9
Section 6.3 Administrator 9
Section 6.4 Transfer Agent 9
Section 6.5 Parties to Contract 9
ARTICLE VII - Shareholders' Voting Powers and Meetings 10
Section 7.1 Voting Powers 10
Section 7.2 Meetings 10
Section 7.3 Quorum and Required Vote 10
Section 7.4 Action by Written Consent 11
ARTICLE VIII - Custodian 11
Section 8.1 Appointment and Duties 11
Section 8.2 Central Certificate System 11
ARTICLE IX - Distributions and Redemptions 11
Section 9.1 Distributions 11
Section 9.2 Redemptions 12
Section 9.3 Determination of Net Asset Value and
Valuation of Portfolio Assets 12
Section 9.4 Suspension of the Right of Redemption 12
Section 9.5 Redemption of Shares in Order to Qualify as
Regulated Investment Company 13
ARTICLE X - Limitation of Liability and Indemnification 13
Section 10.1 Limitation of Liability 13
Section 10.2 Indemnification 13
Section 10.3 Shareholders 13
ARTICLE XI - Miscellaneous 14
Section 11.1 Trust Not a Partnership 14
Section 11.2 Trustees' Good Faith Action, Expert Advice,
No Bond or Surety 14
Section 11.3 Establishment of Record Dates 14
Section 11.4 Termination of Trust or Series 14
Section 11.5 Reorganization 15
Section 11.6 Filing of Copies, References, Headings 15
Section 11.7 Applicable Law 15
Section 11.8 Amendments 16
Section 11.9 Fiscal Year 16
Section 11.1 Use of Name "The Sports Funds Trust" 16
Section 11.11 Provisions in Conflict with Law 16
<PAGE>
The Sports Funds Trust
TRUST INSTRUMENT, made this 4th day of November, 1997 by
Jack R. Plymale ("Trustee").
WHEREAS, the Trustee desires to establish a business trust
under the Delaware Business Trust Act for the investment and
reinvestment of funds contributed thereto;
NOW, THEREFORE, the Trustee declares that all money and
property contributed to the trust hereunder shall be held and managed
in trust under this Trust Instrument as herein set forth below.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1 Name. The name of the trust created hereby is the
"The Sports Funds Trust".
Section 1.2 Definitions. Wherever used herein, unless otherwise
required by the context or specifically provided:
(a) "By-laws" means the by-laws referred to in Article
IV, Section 4.1(e) hereof, as from time to time amended;
(b) The "1940 Act" refers to the Investment Company Act
of 1940, as amended from time to time.
(c) The terms "Affiliated Person," "Assignment,"
"Commission," "Interested Person" and "Principal Underwriter" shall
have the meanings given them in the 1940 Act. "Majority Shareholder
Vote" shall have the same meaning as the term "vote of a majority of
the outstanding voting securities" is given in the 1940 Act;
(d) "Net Asset Value" means the net asset value of each
Series of the Trust determined in the manner provided in Article IX,
Section 9.3 hereof;
(e) "Outstanding Shares" means those Shares recorded from
time to time in the books of the Trust or its Transfer Agent as then
issued and outstanding, but shall not include Shares which have been
redeemed or repurchased by the Trust and which are at the time held
in the treasury of the Trust;
(f) "Series" or "Class" mean a separate series or Class
of Shares of the Trust established in accordance with the provisions
of Article II, Section 2.6 hereof;
(g) "Shareholder" means a record owner of Outstanding
Shares of the Trust;
(h) "Shares" means the equal proportionate transferable
units of beneficial interest into which the beneficial interest of
each Series of the Trust or Class thereof shall be divided and may
include fractions of Shares as well as whole Shares;
(i) The "Trust" refers to The Sports Funds Trust and
reference to the Trust, when applicable to one or more Series of the
Trust, shall refer to any such Series;
(j) The "Trustee" or "Trustees" means the person or
persons who has or have signed this Trust Instrument, so long as such
person or persons shall continue in office in accordance with the
terms hereof, and all other persons who may from time to time be duly
qualified and serving as Trustees in accordance with the provisions
of Article III hereof and reference herein to a Trustee or to the
Trustees shall refer to the individual Trustees in their capacity as
Trustees hereunder;
(k) "Trust Property" means any and all property, real or
personal, tangible or intangible, which is owned or held by or for
the account of one or more of the Trust or any Series, or the
Trustees on behalf of the Trust or any Series.
ARTICLE II
BENEFICIAL INTEREST
Section 2.1 Shares of Beneficial Interest. The beneficial
interest in the Trust shall be divided into such transferable Shares
of one or more separate and distinct Series or Classes of a Series as
the Trustees shall from time to time create and establish. The number
of Shares of each Series, and Class thereof, authorized hereunder is
unlimited. Each Share shall have no par value. All Shares issued
hereunder, including, without limitation, Shares issued in connection
with a dividend in Shares or a split or reverse split of Shares,
shall be fully paid and non-assessable.
Section 2.2 Issuance of Shares. The Trustees in their
discretion may, from time to time, without vote of the Shareholders,
issue Shares to such party or parties and for such amount and type of
consideration, subject to applicable law, including cash or
securities (including Shares of a different Series), at such time or
times and on such terms as the Trustees may deem appropriate, and may
in such manner acquire other assets (including the acquisitions of
assets subject to, and in connection with, the assumption of
liabilities). In connection with any issuance of Shares, the Trustees
may issue fractional Shares and Shares held in the treasury. The
Trustees may from time to time divide or combine the Shares of any
Series or Class into a greater or lesser number without thereby
changing the proportionate beneficial interests in the Trust.
Section 2.3 Register of Shares and Share Certificates. A
register shall be kept at the principal office of the Trust or an
office of the Trust's transfer agent which shall contain the names
and addresses of the Shareholders of each Series, the number of
Shares of that Series (or any Class or Classes thereof) held by them
respectively and a record of all transfers thereof. As to Shares for
which no certificate has been issued, such register shall be
conclusive as to who are the holders of the Shares and who shall be
entitled to receive dividends or other distributions or otherwise to
exercise or enjoy the rights of Shareholders. No Shareholder shall be
entitled to receive payment of any dividend or other distribution,
nor to have notice given to him as herein or in the By-laws provided,
until he has given his address to the transfer agent or such other
officer or agent of the Trustees as shall keep the said register for
entry thereon. The Trustees, in their discretion, may authorize the
issuance of share certificates and promulgate appropriate rules and
regulations as to their use. In the event that one or more
certificates are issued, whether in the name of a shareholder or a
nominee, such certificate or certificates shall constitute evidence
of ownership of Shares for all purposes, including transfer,
assignment or sale of such Shares, subject to such limitations as the
Trustees may, in their discretion, prescribe.
Section 2.4 Transfer of Shares. Except as otherwise provided by
the Trustees, Shares shall be transferable on the records of the
Trust only by the record holder thereof or by his agent thereunto
duly authorized in writing, upon delivery to the Trustees or the
Trust's transfer agent of a duly executed instrument of transfer,
together with a Share certificate, if one is outstanding, and such
evidence of the genuineness of each such execution and authorization
and of such other matters as may be required by the Trustees. Upon
such delivery the transfer shall be recorded on the register of the
Trust. Until such record is made, the Shareholder of record shall be
deemed to be the holder of such Shares for all purposes hereunder and
neither the Trustees nor the Trust, nor any transfer agent or
registrar nor any officer, employee or agent of the Trust shall be
affected by any notice of the proposed transfer.
Section 2.5 Treasury Shares. Shares held in the treasury shall,
until reissued pursuant to Section 2.2 hereof, not confer any voting
rights on the Trustees, nor shall such Shares be entitled to any
dividends or other distributions declared with respect to the Shares.
Section 2.6 Establishment of Series and Classes. The Trust
created hereby shall consist of one or more Series and, within each
Series, one or more Classes of shares. All references herein to
Series shall be deemed to apply to Classes as appropriate if more
than one Class is established for any Series. Separate and distinct
records shall be maintained by the Trust for each Series and the
assets associated with any such Series shall be held and accounted
for separately from the assets of the Trust or any other Series. The
Trustees shall have full power and authority, in their sole
discretion, and without obtaining any prior authorization or vote of
the Shareholders of any Series of the Trust, to establish and
designate and to change in any manner any such Series of Shares or
any Classes of initial or additional Series and to fix such
preferences, voting powers, rights and privileges of such Series or
Classes thereof as the Trustees may from time to time determine, to
divide or combine the Shares or any Series or Classes thereof into a
greater or lesser number, to classify or reclassify any issued Shares
or any Series or Classes thereof into one or more Series or Classes
of Shares, and to take such other action with respect to the Shares
as the Trustees may deem desirable. The establishment and designation
of any Series shall be effective upon the adoption of a resolution by
the Trustees setting forth such establishment and designation and the
relative rights and preferences of the Shares of such Series. A
Series may issue any number of Shares and need not issue shares.
All references to Shares in this Trust Instrument shall be
deemed to be Shares of any or all Series, or Classes thereof, as the
context may require. All provisions herein relating to the Trust
shall apply equally to each Series of the Trust, and each Class
thereof, except as the context otherwise requires.
Each Share of a Series of the Trust shall represent an equal
beneficial interest in the net assets of such Series. Each holder of
Shares of a Series shall be entitled to receive distributions of
income and capital gains, if any, which are made with respect to such
Series and which are attributable to such Shares. Upon redemption of
Shares, such Shareholder shall be paid solely out of the funds and
property of such Series of the Trust.
Section 2.7 Investment in the Trust. The Trustees shall accept
investments in any Series of the Trust from such persons and on such
terms as they may from time to time authorize. At the Trustees'
discretion, such investments, subject to applicable law, may be in
the form of cash or securities in which the affected Series is
authorized to invest, valued as provided in Article IX, Section 9.3
hereof. Investments in a Series shall be credited to each
Shareholder's account in the form of full or fractional Shares at the
Net Asset Value per Share next determined after the investment is
received; provided, however, that the Trustees may, in their sole
discretion, (a) fix the Net Asset Value per Share of the initial
capital contribution, or (b) impose sales or other charges upon
investments in the Trust.
Section 2.8 Assets and Liabilities of Series. All consideration
received by the Trust for the issue or sale of Shares of a particular
Series, together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits, and proceeds
thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from
any reinvestment of such proceeds in whatever form the same may be,
shall be held and accounted for separately from the other assets of
the Trust and of every other Series and may be referred to herein as
"assets belonging to" that Series. The assets belonging to a
particular Series shall belong to that Series for all purposes, and
to no other Series, subject only to the rights of creditors of that
Series. In addition, any assets, income, earnings, profits or funds,
or payments and proceeds with respect thereto, which are not readily
identifiable as belonging to any particular Series shall be allocated
by the Trustees between and among one or more of the Series in such
manner as the Trustees, in their sole discretion, deem fair and
equitable. Each such allocation shall be conclusive and binding upon
the Shareholders of all Series for all purposes, and such assets,
income, earnings, profits or funds, or payments and proceeds with
respect thereto shall be assets belonging to that Series. The assets
belonging to a particular Series shall be so recorded upon the books
of the Trust, and shall be held by the Trustees in trust for the
benefit of the holders of Shares of that Series. The assets belonging
to each particular Series shall be charged with the liabilities of
that Series and all expenses, costs, charges and reserves
attributable to that Series. Any general liabilities, expenses,
costs, charges or reserves of the Trust which are not readily
identifiable as belonging to any particular Series shall be allocated
and charged by the Trustees between or among any one or more of the
Series in such manner as the Trustees in their sole discretion deem
fair and equitable. Each such allocation shall be conclusive and
binding upon the Shareholders of all Series for all purposes. Without
limitation of the foregoing provisions of this Section 2.8, but
subject to the right of the Trustees in their discretion to allocate
general liabilities, expenses, costs, charges or reserves as herein
provided, the debts, liabilities, obligations and expenses incurred,
contracted for or otherwise existing with respect to a particular
Series shall be enforceable against the assets of such Series only,
and not against the assets of the Trust generally. Notice of this
contractual limitation on inter-Series liabilities shall be set forth
in the certificate of trust of the Trust (whether originally or by
amendment) as filed or to be filed in the Office of the Secretary of
State of the State of Delaware pursuant to the Delaware Business
Trust Act (the "Act"), and upon the giving of such notice in the
certificate of trust, the statutory provisions of the Act relating to
limitations on inter-Series liabilities (and the statutory effect
under the Act of setting forth such notice in the certificate of
trust) shall become applicable to the Trust and each Series. Any
person extending credit to, contracting with or having any claim
against any Series may satisfy or enforce any debt, liability,
obligation or expense incurred, contracted for or otherwise existing
with respect to that Series from the assets of that Series only. No
Shareholder or former Shareholder of any Series shall have a claim on
or any right to any assets allocated or belonging to any other
Series.
Section 2.9 No Preemptive Rights. Shareholders shall have no
preemptive or other right to subscribe to any additional Shares or
other securities issued by the Trust or the Trustees, whether of the
same or other Series.
Section 2.10 Personal Liability of Shareholders. Each
Shareholder of the Trust and of each Series shall not be personally
liable for the debts, liabilities, obligations and expenses incurred
by, contracted for, or otherwise existing with respect to, the Trust
or by or on behalf of any Series. The Trustees shall have no power to
bind any Shareholder personally or to call upon any Shareholder for
the payment of any sum of money or assessment whatsoever other than
such as the Shareholder may at any time personally agree to pay by
way of subscription for any Shares or otherwise. Every note, bond,
contract or other undertaking issued by or on behalf of the Trust or
the Trustees relating to the Trust or to a Series shall include a
recitation limiting the obligation represented thereby to the Trust
or to one or more Series and its or their assets (but the omission of
such a recitation shall not operate to bind any Shareholder or
Trustee of the Trust).
Section 2.11 Assent to Trust Instrument. Every Shareholder, by
virtue of having purchased or otherwise acquired a Share, shall
become a Shareholder and shall be held to have expressly assented and
agreed to be bound by the terms hereof.
ARTICLE III
THE TRUSTEES
Section 3.1 Management of the Trust. The Trustees shall have
exclusive and absolute control over the Trust Property and over the
business of the Trust to the same extent as if the Trustees were the
sole owners of the Trust Property and business in their own right,
but with such powers of delegation as may be permitted by this Trust
Instrument. The Trustees shall have power to conduct the business of
the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without the State of Delaware,
in any and all states of the United States of America, in the
District of Columbia, in any and all commonwealths, territories,
dependencies, colonies, or possessions of the United States of
America, and in any foreign jurisdiction and to do all such other
things and execute all such instruments as they deem necessary,
proper or desirable in order to promote the interests of the Trust
although such things are not herein specifically mentioned. Any
determination as to what is in the interests of the Trust made by the
Trustees in good faith shall be conclusive. In construing the
provisions of this Trust Instrument, the presumption shall be in
favor of a grant of power to the Trustees.
The enumeration of any specific power in this Trust Instrument
shall not be construed as limiting the aforesaid power. The powers of
the Trustees may be exercised without order of or resort to any
court.
Except for the Trustee named herein or Trustees appointed to
fill vacancies pursuant to Section 3.4 of this Article III, the
Trustees shall be elected by the Shareholders owning of record a
plurality of the Shares voting at a meeting of Shareholders.
Section 3.2 Initial Trustee. The initial Trustee shall be the
person named herein.
Section 3.3 Term of Office of Trustees. The Trustees shall hold
office during the existence of this Trust, and until its termination
as herein provided; except (a) that any Trustee may resign his trust
by written instrument signed by him and delivered to the Chairman,
President, Secretary, or other Trustees of the Trust, which shall
take effect upon such delivery or upon such later date as is
specified therein; (b) that any Trustee may be removed at any time by
written instrument, signed by at least two-thirds of the number of
Trustees prior to such removal, specifying the date when such removal
shall become effective; (c) that any Trustee who requests in writing
to be retired or who has died, become physically or mentally
incapacitated by reason of disease or otherwise, or is otherwise
unable to serve, may be retired by written instrument signed by a
majority of the other Trustees, specifying the date of his
retirement; and (d) that a Trustee may be removed at any meeting of
the Shareholders of the Trust by a vote of Shareholders owning at
least two-thirds of the outstanding Shares.
Section 3.4 Vacancies and Appointment of Trustees. In case of
the declination to serve, death, resignation, retirement, removal,
physical or mental incapacity by reason of disease or otherwise of a
Trustee, or a Trustee is otherwise unable to serve, or an increase in
the number of Trustees, a vacancy shall occur. Whenever a vacancy in
the Board of Trustees shall occur, until such vacancy is filled, the
other Trustees shall have all the powers hereunder and the
certificate of the other Trustees of such vacancy shall be
conclusive. In the case of an existing vacancy, the remaining
Trustees shall fill such vacancy by appointing such other person as
they in their discretion shall see fit consistent with the
limitations under the 1940 Act.
An appointment of a Trustee may be made by the Trustees then in
office in anticipation of a vacancy to occur by reason of retirement,
resignation or increase in number of Trustees effective at a later
date, provided that said appointment shall become effective only at
or after the effective date of said retirement, resignation or
increase in number of Trustees. As soon as any Trustee appointed
pursuant to this Section 3.4 shall have accepted this trust, he shall
be deemed a Trustee hereunder.
Section 3.5 Temporary Absence of Trustee. Any Trustee may, by
power of attorney, delegate his power for a period not exceeding six
months at any one time to any other Trustee or Trustees, provided
that in no case shall less than two Trustees personally exercise the
other powers hereunder except as herein otherwise expressly provided.
Section 3.6 Number of Trustees. The number of Trustees shall be
one, or such other number as shall be fixed from time to time by the
Trustees.
Section 3.7 Effect of Death, Resignation, Etc. of a Trustee.
The declination to serve, death, resignation, retirement, removal,
incapacity, or inability of the Trustees, or any one of them, shall
not operate to terminate the Trust or to revoke any existing agency
created pursuant to the terms of this Trust Instrument.
Section 3.8 Ownership of Assets of the Trust. Legal title in
and beneficial ownership of all of the assets of the Trust shall at
all times be considered as vested in the Trust, except that the
Trustees may cause legal title in and beneficial ownership of any
Trust Property to be held by, or in the name of one or more of the
Trustees acting for and on behalf of the Trust, or in the name of any
person as nominee acting for and on behalf of the Trust. No
Shareholder shall be deemed to have a severable ownership interest in
any individual asset of the Trust or of any Series or any right of
partition or possession thereof, but each Shareholder shall have,
except as otherwise provided for herein, a proportionate undivided
beneficial interest in the Trust or Series. The Shares shall be
personal property giving only the rights specifically set forth in
this Trust Instrument. The Trust, or at the determination of the
Trustees one or more of the Trustees or a nominee acting for and on
behalf of the Trust, shall be deemed to hold legal title and
beneficial ownership of any income earned on securities of the Trust
issued by any business entities formed, organized, or existing under
the laws of any jurisdiction, including the laws of any foreign
country.
ARTICLE IV
POWERS OF THE TRUSTEES
Section 4.1 Powers. The Trustees in all instances shall act as
principals, and are and shall be free from the control of the
Shareholders. The Trustees shall have full power and authority to do
any and all acts and to make and execute any and all contracts and
instruments that they may consider necessary or appropriate in
connection with the management of the Trust. The Trustees shall have
full authority and power to make any and all investments which they,
in their sole discretion, shall deem proper to accomplish the purpose
of this Trust. Subject to any applicable limitation in this Trust
Instrument, the Trustees shall have power and authority:
(a) To invest and reinvest cash and other property, and
to hold cash or other property uninvested, and to sell, exchange,
lend, pledge, mortgage, hypothecate, write options on and lease any
or all of the assets of the Trust;
(b) To operate as and carry on the business of an
investment company, and exercise all the powers necessary and
appropriate to the conduct of such business;
(c) To borrow money and in this connection issue notes or
other evidence of indebtedness; to secure borrowings by mortgaging,
pledging or otherwise subjecting as security the Trust Property; to
endorse, guarantee, or undertake the performance of an obligation or
engagement of any other person and to lend Trust Property;
(d) To provide for the distribution of interests of the
Trust either through a Principal Underwriter in the manner
hereinafter provided for or by the Trust itself, or both, or
otherwise pursuant to a plan of distribution of any kind;
(e) To adopt By-laws not inconsistent with this Trust
Instrument providing for the conduct of the business of the Trust and
to amend and repeal them to the extent that they do not reserve that
right to the Shareholders, which By-laws shall be deemed a part of
this Trust Instrument and are incorporated herein by reference;
(f) To elect and remove such officers and appoint and
terminate such agents as they consider appropriate;
(g) To appoint custodians of any assets of the Trust,
subject to the 1940 Act and to any conditions set forth in this Trust
Instrument;
(h) To retain one or more transfer agents and shareholder
servicing agents, or both;
(i) To set record dates in the manner provided herein or
in the By-laws;
(j) To delegate such authority (which delegation may
include the power to subdelegate) as they consider desirable to any
officers of the Trust and to any investment adviser, manager,
administrator, custodian, underwriter or other agent or independent
contractor;
(k) To purchase and pay for entirely out of Trust
Property such insurance as they may deem necessary or appropriate for
the conduct of the business of the Trust, including insurance
policies insuring the Trust Property and payment of distributions and
principal on its investments, and insurance policies insuring the
Shareholders, Trustees, officers, representatives, employees, agents,
investment advisers, managers, administrators, custodians,
underwriters, or independent contractors of the Trust individually
against all claims and liabilities of every nature arising by reason
of holding, being or having held any such office or position, or by
reason of any action alleged to have been taken or omitted by any
such person in such capacity, including any action taken or omitted
that may be determined to constitute negligence, whether or not the
Trust would have the power to indemnify such person against such
liability.
(l) To sell or exchange any or all of the assets of the
Trust or terminate and liquidate any Series of the Trust, subject to
the provisions of Article XI, Section 11.4(b) hereof;
(m) To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities or property; and
to execute and deliver powers of attorney to such person or persons
as the Trustees shall deem proper, granting to such person or persons
such power and discretion with relation to securities or property as
the Trustees shall deem proper;
(n) To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of securities;
(o) To hold any security or property in a form not
indicating any trust, whether in bearer, book entry, unregistered or
other negotiable form; or either in the name of the Trust or in the
name of a custodian or a nominee or nominees;
(p) To establish separate and distinct Series (and
Classes), with separately defined investment objectives and policies
and distinct investment purposes in accordance with the provisions of
Article II hereof and to establish Classes of such Series having
relative rights, powers and duties as they may provide consistent
with applicable law;
(q) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or
concern, any security of which is held in the Trust; to consent to
any contract, lease, mortgage, purchase, or sale of property by such
corporation or concern, and to pay calls or subscriptions with
respect to any security held in the Trust;
(r) To compromise, arbitrate, or otherwise adjust claims
in favor of or against the Trust or any matter in controversy
including, but not limited to, claims for taxes;
(s) To make distributions of income and of capital gains
to Shareholders in the manner hereinafter provided;
(t) To establish, from time to time, a minimum investment
for Shareholders in the Trust or in one or more Series or Class, and
to require the redemption of the Shares of any Shareholders whose
investment is less than such minimum upon giving notice to such
Shareholder;
(u) To establish one or more committees composed of one
or more of the Trustees, and to delegate any of the powers of the
Trustees to said committees, subject to the provisions of the 1940
Act. Notwithstanding the provisions of this Article IV, and in
addition to such provisions or any other provision of this Trust
Instrument or of the Bylaws, the Trustees may by resolution appoint a
committee consisting of less than the whole number of Trustees then
in office, which committee may be empowered to act for and bind the
Trustees and the Trust, as if the acts of such committee were the
acts of all the Trustees then in office, with respect to the
institution, prosecution, dismissal, settlement, review or
investigation of any action, suit or proceeding which shall be
pending or threatened to be brought before any court, administrative
agency or other adjudicative body;
(v) To interpret the investment policies, practices or
limitations of any Series;
(w) To establish a registered office and have a
registered agent in the state of Delaware; and
(x) In general to carry on any other business in
connection with or incidental to any of the foregoing powers, to do
everything necessary, suitable or proper for the accomplishment of
any purpose or the attainment of any object or the furtherance of any
power hereinbefore set forth, either alone or in association with
others, and to do every other act or thing incidental or appurtenant
to or growing out of or connected with the aforesaid business or
purposes, objects or powers.
The foregoing clauses shall be construed both as objects and
powers, and the foregoing enumeration of specific powers shall not be
held to limit or restrict in any manner the general powers of the
Trustees. Any action by one or more of the Trustees in their capacity
as such hereunder shall be deemed an action on behalf of the Trust or
the applicable Series, and not an action in an individual capacity.
No one dealing with the Trustees shall be under any obligation
to make any inquiry concerning the authority of the Trustees, or to
see to the application of any payments made or property transferred
to the Trustees or upon their order.
Section 4.2 Issuance and Repurchase of Shares. The Trustees
shall have the power to issue, sell, repurchase, redeem, retire,
cancel, acquire, hold, resell, reissue, dispose of, exchange, and
otherwise deal in Shares and, subject to the provisions set forth in
Article II and Article IX, to apply to any such repurchase,
redemption, retirement, cancellation or acquisition of Shares any
funds or property of the Trust, or the particular Series of the
Trust, with respect to which such Shares are issued.
Section 4.3 Trustees and Officers as Shareholders. Any Trustee,
officer or other agent of the Trust may acquire, own and dispose of
Shares to the same extent as if such person were not a Trustee,
officer or agent; and the Trustees may issue and sell or cause to be
issued and sold Shares to and buy such Shares from any such person or
any firm or company in which such person is interested, subject to
the general limitations herein contained as to the sale and purchase
of such Shares.
Section 4.4 Action by the Trustees and Committees. The Trustees
(and any committee thereof) may act at a meeting held in person or in
whole or in part by conference telephone equipment or other
communications technology. One-third, but (except at such times as
there is only one Trustee) no less than two, of the Trustees shall
constitute a quorum at any meeting. Except as the Trustees may
otherwise determine, one-third of the members of any committee shall
constitute a quorum at any meeting. The vote of a majority of the
Trustees (or committee members) present at a meeting at which a
quorum is present shall be the act of the Trustees (or any committee
thereof). The Trustees (and any committee thereof) may also act by
written consent signed by a majority of the Trustees (or committee
members). Regular meetings of the Trustees may be held at such places
and at such times as the Trustees may from time to time determine.
Special meetings of the Trustees (and meetings of any committee
thereof) may be called orally or in writing by the Chairman of the
Board of Trustees (or the chairman of any committee thereof) or by
any two other Trustees. Notice of the time, date and place of all
meetings of the Trustees (or any committee thereof) shall be given by
the party calling the meeting to each Trustee (or committee member)
by telephone, telefax, or telegram sent to the person's home or
business address at least twenty-four hours in advance of the meeting
or by written notice mailed to the person's home or business address
at least seventy-two hours in advance of the meeting. Notice of all
proposed written consents of Trustees (or committees thereof) shall
be given to each Trustee (or committee member) by telephone, telefax,
telegram, or first Class mail sent to the person's home or business
address. Notice need not be given to any person who attends a meeting
without objecting to the lack of notice or who executes a written
consent or a written waiver of notice with respect to a meeting.
Written consents or waivers may be executed in one or more
counterparts. Execution of a written consent or waiver and delivery
thereof may be accomplished by telefax.
Section 4.5 Chairman of the Trustees. The Trustees shall
appoint one of their number to be Chairman of the Board of Trustees.
The Chairman shall preside at all meetings of the Trustees at which
he is present and may be (but is not required to be) the chief
executive officer of the Trust.
Section 4.6 Principal Transactions. Except to the extent
prohibited by applicable law, the Trustees may, on behalf of the
Trust, buy any securities from or sell any securities to, or lend any
assets of the Trust to, any Trustee or officer of the Trust or any
firm of which any such Trustee or officer is a member acting as
principal, or have any such dealings with any investment adviser,
distributor or transfer agent for the Trust or with any Interested
Person of such person; and the Trust may employ any such person, or
firm or company in which such person is an Interested Person, as
broker, legal counsel, registrar, investment adviser, distributor,
transfer agent, dividend disbursing agent, custodian or in any other
capacity upon customary terms.
ARTICLE V
EXPENSES OF THE TRUST
Section 5.1 General. The Trustees shall have the power to incur
and pay or be reimbursed from the assets of the Trust or the assets
of the appropriate Series any expenses which in the opinion of the
Trustees are necessary or incidental to carry out any of the purposes
of the Trust or such Series, and to pay reasonable compensation from
the funds of the Trust to themselves as Trustees. The Trustees shall
fix the compensation of all officers, employees and Trustees, and
shall be reimbursed from the assets of the Trust or the assets of the
appropriate Series for expenses reasonably incurred by themselves on
behalf of the Trust.
Section 5.2 Expenses of Series. The Trustees shall have the
power to allocate and charge all expenses which are not readily
identifiable as belonging to any particular Series (or Class) between
or among any one or more of the Series (or Class) as set forth in
Article II, Section 2.8 of this Trust Instrument.
Section 5.3 Trustee Reimbursement. Subject to the provisions
of Article II, Section 2.8 hereof, the Trustees shall be reimbursed
from the Trust estate or the assets belonging to the appropriate
Series (or Class) for their expenses and disbursements, including,
without limitation, fees and expenses of Trustees who are not
Interested Persons of the Trust, interest expense, taxes, fees and
commissions of every kind, expenses of pricing Trust portfolio
securities, expenses of issue, repurchase and redemption of shares,
including expenses attributable to a program of periodic repurchases
or redemptions, expenses of registering and qualifying the Trust and
its Shares under Federal and State laws and regulations or under the
laws of any foreign jurisdiction, charges of third parties, including
investment advisers, managers, custodians, transfer agents, portfolio
accounting and/or pricing agents, and registrars, expenses of
preparing and setting up in type prospectuses and statements of
additional information and other related Trust documents, expenses of
printing and distributing prospectuses sent to existing Shareholders,
auditing and legal expenses, reports to Shareholders, expenses of
meetings of Shareholders and proxy solicitations therefor, insurance
expenses, association membership dues and for such non-recurring
items as may arise, including litigation to which the Trust (or a
Trustee acting as such) is a party, and for all losses and
liabilities by them incurred in administering the Trust, and for the
payment of such expenses, disbursements, losses and liabilities the
Trustees shall have a lien on the assets belonging to the appropriate
Series, or in the case of and expense allocable to more than one
Series, on the assets of each such Series, prior to any rights or
interests of the Shareholders thereto. This section shall not
preclude the Trust from directly paying any of the aforementioned
fees and expenses.
ARTICLE VI
INVESTMENT ADVISER, PRINCIPAL UNDERWRITER, ADMINISTRATOR
AND TRANSFER AGENT
Section 6.1 Investment Adviser. The Trustees may in their
discretion, from time to time, enter into an investment advisory or
management contract or contracts with respect to the Trust or any
Series whereby the other party or parties to such contract or
contracts shall undertake to furnish the Trust with such management,
investment advisory, statistical and research facilities and services
and such other facilities and services, if any, and all upon such
terms and conditions, as the Trustees may in their discretion
determine; provided, however, that the initial approval and entering
into of such contract or contracts shall be subject to a Majority
Shareholder Vote. Notwithstanding any other provision of this Trust
Instrument, the Trustees may authorize any investment adviser
(subject to such general or specific instructions as the Trustees may
from time to time adopt) to effect purchases, sales or exchanges of
portfolio securities, other investment instruments of the Trust, or
other Trust Property on behalf of the Trustees, or may authorize any
officer, agent, or Trustee to effect such purchases, sales or
exchanges pursuant to recommendations of the investment adviser (and
all without further action by the Trustees). Any such purchases,
sales and exchanges shall be deemed to have been authorized by the
Trustees.
The Trustees may authorize, subject to applicable requirements
of the 1940 Act, the investment adviser to employ, from time to time,
one or more sub-advisers to perform such of the acts and services of
the investment adviser, and upon such terms and conditions, as may be
agreed upon between the investment adviser and sub-adviser. Any
reference in this Trust Instrument to the investment adviser shall be
deemed to include such sub-advisers, unless the context otherwise
requires.
Section 6.2 Principal Underwriter. The Trustees may in their
discretion from time to time enter into an exclusive or non-exclusive
underwriting contract or contracts providing for the sale of Shares,
whereby the Trust may either agree to sell Shares to the other party
to the contract or appoint such other party its sales agent for such
Shares. In either case, the contract may also provide for the
repurchase or sale of Shares by such other party as principal or as
agent of the Trust.
Section 6.3 Administrator. The Trustees may in their discretion
from time to time enter into one or more contracts whereby the other
party or parties shall undertake to furnish the Trust with
administrative services. The contract or contracts shall be on such
terms and conditions as the Trustees may in their discretion
determine.
Section 6.4 Transfer Agent. The Trustees may in their
discretion from time to time enter into one or more transfer agency
and Shareholder service contracts whereby the other party or parties
shall undertake to furnish the Trustees with transfer agency and
Shareholder services. The contract or contracts shall be on such
terms and conditions as the Trustees may in their discretion
determine.
Section 6.5 Parties to Contract. Any contract described in this
Article VI or any contract described in Article VIII hereof may be
entered into with any corporation, firm, partnership, trust or
association, although one or more of the Trustees or officers of the
Trust may be an officer, director, trustee, shareholder, or member of
such other party to the contract, and no such contract shall be
invalidated or rendered void or voidable by reason of the existence
of any relationship, nor shall any person holding such relationship
be disqualified from voting on or executing the same in his capacity
as Shareholder and/or Trustee, nor shall any person holding such
relationship be liable merely by reason of such relationship for any
loss or expense to the Trust under or by reason of said contract or
accountable for any profit realized directly or indirectly therefrom,
provided that the contract when entered into was not inconsistent
with the provisions of this Article VI or Article VIII hereof. The
same person (including a firm, corporation, partnership, trust, or
association) may be the other party to contracts entered into
pursuant to this Article VI or pursuant to Article VIII hereof, and
any individual may be financially interested or otherwise affiliated
with persons who are parties to any or all of the contracts mentioned
in this Section 6.5.
ARTICLE VII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 7.1 Voting Powers. The Shareholders shall have power to
vote only (i) for the election of Trustees as provided in Article
III, Section 3.1 hereof, (ii) for the removal of Trustees as provided
in Article III, Section 3.3(d) hereof, and (iii) with respect to such
additional matters relating to the Trust as may be required by law,
by this Trust Instrument, or as the Trustees may consider desirable.
On any matter submitted to a vote of the Shareholders, all Shares
shall be voted separately by individual Series, except (i) when
required by the 1940 Act, Shares shall be voted in the aggregate and
not by individual Series; and (ii) when the Trustees have determined
that the matter affects the interests of more than one Series, then
the Shareholders of all such Series shall be entitled to vote
thereon. The Trustees may also determine that a matter affects only
the interests of one or more Classes of a Series, in which case any
such matter shall be voted on by such Class or Classes. Each whole
Share shall be entitled to one vote as to any matter on which it is
entitled to vote, and each fractional Share shall be entitled to a
proportionate fractional vote. There shall be no cumulative voting in
the election of Trustees. Shares may be voted in person or by proxy
or in any manner provided for in the By-laws. A proxy may be given in
writing, by telefax, or in any other manner provided for in the
By-laws. Anything in this Trust Instrument to the contrary
notwithstanding, in the event a proposal by anyone other than the
officers or Trustees of the Trust is submitted to a vote of the
Shareholders of one or more Series or of the Trust, or in the event
of any proxy contest or proxy solicitation or proposal in opposition
to any proposal by the officers or Trustees of the Trust, Shares may
be voted only in person or by written proxy. Until Shares are issued,
the Trustees may exercise all rights of Shareholders and may take any
action required or permitted by law, this Trust Instrument or any of
the By-laws of the Trust to be taken by Shareholders.
Section 7.2 Meetings. Meetings of Shareholders may be held
within or without the State of Delaware. Special meetings of the
Shareholders of any Series may be called by the Trustees and shall be
called by the Trustees upon the written request of Shareholders
owning at least one-tenth of the Outstanding Shares entitled to vote.
Whenever ten or more Shareholders meeting the qualifications set
forth in Section 16(c) of the 1940 Act seek the opportunity of
furnishing materials to the other Shareholders with a view to
obtaining signatures on such a request for a meeting, the Trustees
shall comply with the provisions of said Section 16(c) with respect
to providing such Shareholders access to the list of the Shareholders
of record of the Trust or the mailing of such materials to such
Shareholders of record, subject to any rights provided to the Trust
or any Trustees provided by said Section 16(c). Notice shall be sent,
by mail or such other means determined by the Trustees, at least 15
days prior to any such meeting.
Section 7.3 Quorum and Required Vote. One-third of Shares
entitled to vote in person or by proxy shall be a quorum for the
transaction of business at a Shareholders' meeting, except that where
any provision of law or of this Trust Instrument permits or requires
that holders of any Series shall vote as a Series (or that holders of
a Class shall vote as a Class), then one-third of the aggregate
number of Shares of that Series (or that Class) entitled to vote
shall be necessary to constitute a quorum for the transaction of
business by that Series (or that Class). Any lesser number shall be
sufficient for adjournments. Any adjourned session or sessions may be
held without the necessity of further notice. Except when a larger
vote is required by law or by any provision of this Trust Instrument,
a majority of the Shares voted in person or by proxy shall decide any
questions and a plurality shall elect a Trustee, provided that where
any provision of law or of this Trust Instrument permits or requires
that the holders of any Series shall vote as a Series (or that the
holders of any Class shall vote as a Class), then a majority of the
Shares present in person or by proxy of that Series or, if required
by law, a Majority Shareholder Vote of that Series (or Class), voted
on the matter in person or by proxy shall decide that matter insofar
as that Series (or Class) is concerned.
Section 7.4 Action by Written Consent. Any action which may be
taken by the Shareholders of the Trust or of a Series may be taken
without a meeting if Shareholders holding more than a majority of the
Shares entitled to vote, except when a larger vote is required by law
or by any provision of this Trust Instrument, shall consent to the
action in writing. If the consents of all Shareholders entitled to
vote have not been solicited in writing and if the unanimous written
consent of all such Shareholders shall not have been received, the
Secretary shall give prompt notice to all Shareholders of actions
approved by the Shareholders without a meeting.
ARTICLE VIII
CUSTODIAN
Section 8.1 Appointment and Duties. The Trustees shall at all
times employ a bank, a company that is a member of a national
securities exchange, or a trust company, each having capital, surplus
and undivided profits of at least two million dollars ($2,000,000) as
custodian with authority as its agent:
(1) to hold the securities owned by the Trust and deliver the
same upon written order or oral order confirmed in writing;
(2) to receive and receipt for any moneys due to the Trust and
deposit the same in its own banking department or elsewhere as the
Trustees may direct; and
(3) to disburse such funds upon orders or vouchers; and the
Trust may also employ such custodian as its agent:
(4) to keep the books and accounts of the Trust or of any
Series or Class and furnish clerical and accounting services; and
(5) to compute, if authorized to do so by the Trustees, the Net
Asset Value of any Series, or Class thereof, in accordance with the
provisions hereof;
all upon such basis of compensation as may be agreed upon between the
Trustees and the custodian.
In accordance with the 1940 Act, the Trustees may also
authorize the custodian to employ one or more sub-custodians from
time to time to perform such of the acts and services of the
custodian, and upon such terms and conditions, as may be agreed upon
between the custodian and such sub-custodian and approved by the
Trustees.
Section 8.2 Central Certificate System. Subject to the 1940
Act, the Trustees may direct the custodian to deposit all or any part
of the securities owned by the Trust in a system for the central
handling of securities established by a national securities exchange
or a national securities association, pursuant to which system all
securities of any particular Class or series of any issuer deposited
within the system are treated as fungible and may be transferred or
pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to
withdrawal only upon the order of the Trust or its custodians, sub-
custodians or other agents.
ARTICLE IX
DISTRIBUTIONS AND REDEMPTIONS
Section 9.1 Distributions.
(a) The Trustees may from time to time declare and pay
dividends or other distributions with respect to any Series, or Class
thereof. The amount of such dividends or distributions and the
payment of them and whether they are in cash or any other Trust
property shall be wholly in the discretion of the Trustees.
(b) Dividends and other distributions may be paid or made
to the Shareholders of record at the time of declaring a dividend or
other distribution or among the Shareholders of record at such other
date or time or dates or times as the Trustees shall determine, which
dividends or distributions, at the election of the Trustees, may be
paid pursuant to a standing resolution or resolutions adopted only
once or with such frequency as the Trustees may determine. All
dividends and other distributions on Shares of a particular Series
shall be distributed pro rata to the Shareholders of that Series in
proportion to the number of Shares of that Series they held on the
record date established for such payment, except that such dividends
and distributions shall reflect expenses allocated to a particular
Class of such Series. The Trustees may adopt and offer to
Shareholders such dividend reinvestment plans, cash dividend payout
plans or related plans as the Trustees shall deem appropriate.
(c) Anything in this Trust Instrument to the contrary
notwithstanding, the Trustees may at any time declare and distribute
a stock dividend pro rata among the Shareholders of a particular
Series, or Class thereof, as of the record date of that Series fixed
as provided in Section (b) hereof.
Section 9.2 Redemptions. In case any holder of record of Shares
of a particular Series desired to dispose of his Shares or any
portion thereof, he may deposit at the office of the transfer agent
or other authorized agent of that Series a written request or such
other form of request as the Trustees may from time to time
authorize, requesting that the Series purchase the Shares in
accordance with this Section 9.2; and the Shareholder so requesting
shall be entitled to require the Series to purchase, and the Series
or the Principal Underwriter of the Series shall purchase his said
Shares, but only at the Net Asset Value thereof (as described in
Section 9.3 of this Article IX). The Series shall make payment for
any such Shares to be redeemed, as aforesaid, in cash or property
from the assets of that Series and payment for such Shares shall be
made by the Series or the Principal Underwriter of the Series to the
Share-holder of record within seven (7) days after the date upon
which the request is effective. Upon redemption, shares shall become
Treasury shares and may be re-issued from time to time.
Section 9.3 Determination of Net Asset Value and Valuation of
Portfolio Assets. The term "Net Asset Value" of any Series shall mean
that amount of which the assets of that Series exceeds its
liabilities, all as determined by or under the direction of the
Trustees. Such value shall be determined separately for each Series
and shall be determined on such days and at such times as the
Trustees may determine. Such determination shall be made with respect
to securities for which market quotations are readily available, at
the market value of such securities; and with respect to other
securities and assets, at the fair value as determined in good faith
by the Trustees; provided, however, that the Trustees, without
Shareholder approval, may alter the method of valuing portfolio
securities consistent with the 1940 Act. The Trustees may delegate
any of their powers and duties under this Section 9.3 with respect to
valuation of assets and liabilities. The resulting amount, which
shall represent the total Net Asset Value of the particular Series,
shall be divided by the total number of shares of that Series
outstanding at the time and the quotient so obtained shall be the Net
Asset Value per Share of that Series. At any time the Trustees may
cause the Net Asset Value per Share last determined to be determined
again in similar manner and may fix the time when such redetermined
value shall become effective. If, for any reason, the net income of
any Series, determined at any time, is a negative amount, the
Trustees shall have the power with respect to that Series (i) to
offset each Shareholder's pro rata share of such negative amount from
the accrued dividend account of such Shareholder, or (ii) to reduce
the number of Outstanding Shares of such Series by reducing the
number of Shares in the amount of each Shareholder by a pro rata
portion of that number of full and fractional Shares which represents
the amount of such excess negative net income, or (iii) to cause to
be recorded on the books of such Series an asset account in the
amount of such negative net income (provided that the same shall
thereupon become the property of such Series and shall not be paid to
any Shareholder), which account may be reduced by the amount, of
dividends declared thereafter upon the Outstanding Shares of such
Series on the day such negative net income is experienced, until such
asset account is reduced to zero; (iv) to combine the methods
described in clauses (i) and (ii) and (iii) of this sentence; or (iv)
to take any other action they deem appropriate, in order to cause (or
in order to assist in causing) the Net Asset Value per Share of such
Series to remain at a constant amount per Outstanding Share
immediately after each such determination and declaration. The
Trustees shall also have the power not to declare a dividend out of
net income for the purpose of causing the Net Asset Value per Share
to be increased. The Trustees shall not be required to adopt, but may
at any time adopt, discontinue or amend the practice of maintaining
the Net Asset Value per Share of the Series at a constant amount.
Section 9.4 Suspension of the Right of Redemption. The Trustees
may declare a suspension of the right of redemption or postpone the
date of payment as permitted under the 1940 Act. Such suspension
shall take effect at such time as the Trustees shall specify but not
later than the close of business on the business day next following
the declaration of suspension, and thereafter there shall be no right
of redemption or payment until the Trustees shall declare the
suspension at an end. In the case of a suspension of the right of
redemption, a Shareholder may either withdraw his request for
redemption or receive payment based on the Net Asset Value per Share
next determined after the termination of the suspension. In the event
that any Series is divided into Classes, the provisions of this
Section 9.4, to the extent applicable as determined in the discretion
of the Trustees and consistent with applicable law, may be equally
applied to each such Class.
Section 9.5 Redemption of Shares in Order to Qualify as
Regulated Investment Company. If the Trustees shall be of the opinion
that direct or indirect ownership of Shares of any Series has or may
become concentrated in any Person to an extent which would disqualify
any Series as a regulated investment company under the Internal
Revenue Code, then the Trustees shall have the power (but not the
obligation) by lot or other means deemed equitable by them (i) to
call for redemption by any such person of a number, or principal
amount, of Shares sufficient to maintain or bring the direct or
indirect ownership of Shares into conformity with the requirements
for such qualification and (ii) to refuse to transfer or issue Shares
to any person whose acquisition of the Shares in question would
result in such disqualification. The redemption shall be effected at
the redemption price and in the manner provided in this Article IX.
The holders of Shares shall upon demand disclose to the Trustees in
writing such information with respect to direct and indirect
ownership of Shares as the Trustees deem necessary to comply with the
provisions of the Internal Revenue Code, or to comply with the
requirements of any other taxing authority.
ARTICLE X
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 10.1 Limitation of Liability. A Trustee, when acting in
such capacity, shall not be personally liable to any person other
than the Trust or a beneficial owner for any act, omission or
obligation of the Trust or any Trustee. A Trustee shall not be liable
for any act or omission in his capacity as Trustee, or for any act or
omission of any officer or employee of the Trust or of any other
person or party, provided that nothing contained herein or in the
Delaware Business Trust Act shall protect any Trustee against any
liability to the Trust or to Shareholders to which he would otherwise
be subject by reason willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of the
office of Trustee hereunder.
Section 10.2 Indemnification. The Trust shall indemnify each of
its Trustees to the full extent permitted by law against all
liabilities and expenses (including amounts paid in satisfaction of
judgments, in settlement, as fines and penalties, and as counsel
fees) reasonably incurred by such Trustee in connection with the
defense or disposition of any action, suit or other proceeding,
whether civil or criminal, in which such Trustee may be involved or
with which such Trustee may be threatened, while as a Trustee or
thereafter, by reason of being or having been such a Trustee except
with respect to any matter as to which such Trustee shall have been
adjudicated to have acted in bad faith, willful misfeasance, gross
negligence or reckless disregard of such Trustee's duties. In the
event of a settlement, no indemnification shall be provided unless
there has been a determination that such Trustee did not engage in
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office, (i) by
the court or other body approving the settlement; (ii) by at least a
majority of those Trustees who are neither interested persons of the
Trust nor are parties to the matter based upon a review of readily
available facts (as opposed to a full trial-type inquiry); or (iii)
by written opinion of independent legal counsel based upon a review
of readily available facts (as opposed to a full trial-type inquiry).
The rights accruing to any person under these provisions shall not
exclude any other right to which such Trustee may be lawfully
entitled, provided that no person may satisfy any right of indemnity
or reimbursement hereunder except out of the property of the Trust.
The Trustees may authorize advance payments in connection with the
indemnification under this Section 10.2, provided that the
indemnified person shall have given a written undertaking to
reimburse the Trust in the event it is subsequently determined that
such Trustee is not entitled to such indemnification.
The Trust shall indemnify officers, and shall have the power to
indemnify representatives and employees of the Trust, to the same
extent that Trustees are entitled to indemnification pursuant to this
Section 10.2.
Section 10.3 Shareholders. In case any Shareholder or former
Shareholder of any Series shall be held to be personally liable
solely by reason of his being or having been a Shareholder of such
Series and not because of his acts or omissions or for some other
reason, the Shareholder or former Shareholder (or his heirs,
executors, administrators or other legal representatives, or, in the
case of a corporation or other entity, its corporate or other general
successor) shall be entitled out of the assets belonging to the
applicable Series to be held harmless from and indemnified against
all loss and expense arising from such liability. The Trust, on
behalf of the affected Series, shall, upon request by the
Shareholder, assume the defense of any claim made against the
Shareholder for any act or obligation of the Series and satisfy any
judgment thereon from the assets of the Series.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Trust Not a Partnership. It is hereby expressly
declared that a trust and not a partnership is created hereby. No
Trustee hereunder shall have any power to bind personally either the
Trust's officers or any Shareholder. All persons extending credit to,
contracting with or having any claim against the Trust or the
Trustees may satisfy or enforce any debt, liability, obligation or
expense incurred, contracted for or otherwise existing with respect
to the Trust from the assets of the Trust only; and neither the
Shareholders nor the Trustees, nor any of their agents, whether past,
present or future, shall be personally liable therefor.
Section 11.2 Trustees' Good Faith Action, Expert Advice, No
Bond or Surety. The exercise by the Trustees of their powers and
discretions hereunder in good faith and with reasonable care under
the circumstances then prevailing shall be binding upon everyone
interested. Subject to the provisions of Article X hereof, the
Trustees shall not be liable for errors of judgment or mistakes of
fact or law. The Trustees may take advice of counsel or other experts
with respect to the meaning and operation of this Trust Instrument,
and subject to the provisions of Article X hereof, shall be under no
liability for any act or omission in accordance with such advice or
for failing to follow such advice. The Trustees shall not be required
to give any bond as such, nor any surety if a bond is obtained.
Section 11.3 Establishment of Record Dates. The Trustees may
close the Share transfer books of the Trust for a period not
exceeding ninety (90) days preceding the date of any meeting of
Shareholders, or the date for the payment of any dividends or other
distributors, or the date for the allotment of rights, or the date
when any change or conversion or exchange of Shares shall go into
effect; or in lieu of closing the stock transfer books as aforesaid,
the Trustees may fix in advance a date, not exceeding ninety (90)
days preceding the date of any meeting of Shareholders, or the date
for payment of any dividend or other distribution, or the date for
the allotment of rights, or the date when any change or conversion or
exchange of Shares shall into effect, as a record date for the
determination of the Shareholders entitled to notice of, and to vote
at, any such meeting, or entitled to receive payment of any such
dividend or other distribution, or to any such allotment of rights,
or to exercise the rights in respect of any such change, conversion
or exchange of Shares, and in such case such Shareholders and only
such Shareholders as shall be Shareholders of record on the date so
fixed shall be entitled to such notice of, and to vote at, such
meeting, or to receive payment of such dividend or other
distribution, or to receive such allotment or rights, or to exercise
such rights, as the case may be, notwithstanding any transfer of any
Shares on the books of the Trust after any such record date fixed as
aforesaid.
Section 11.4 Termination of Trust or Series.
(a) This Trust shall continue without limitation of time
but subject to the provisions of sub-section (b) of this Section
11.4.
(b) The Trustees may
(i) sell and convey all or substantially all of the
assets of the Trust or any Series to another trust,
partnership, association or corporation, or to a separate
series of shares thereof, organized under the laws of any
state, for adequate consideration which may include the
assumption of all outstanding obligations, taxes and
other liabilities, accrued or contingent, of the Trust or
any Series, and which may include shares of beneficial
interest, stock or other ownership interests of such
trust, partnership, association or corporation or of a
series thereof; or
(ii) at any time sell and convert into money all of
the assets of the Trust or any Series and provide for the
termination and liquidation of the Trust or any Series.
Upon making reasonable provision, in the determination of the
Trustees, for the payment of all such liabilities in either (i) or
(ii), by such assumption or otherwise, the Trustees shall distribute
the remaining proceeds or assets (as the case may be) of each Series
(or Class) ratably among the holders of Shares of that Series then
outstanding.
(c) Upon completion of the distribution of the remaining
proceeds or the remaining assets as provided in subsection (b), the
Trust or any affected Series shall terminate and the Trustees and the
Trust shall be discharged of any and all further liabilities and
duties hereunder and the right, title and interest of all parties
with respect to the Trust or Series shall be canceled and discharged.
Upon termination of the Trust, following completion of winding
up of its business, the Trustees shall cause a certificate of
cancellation of the Trust's certificate of trust to be filed in
accordance with the Delaware Business Trust Act, which certificate of
cancellation may be signed by any one Trustee.
Section 11.5 Reorganization. Anything in this Trust Instrument
to the contrary notwithstanding, the Trustees, in order to change the
form of organization and/or domicile of the Trust, may, without prior
Shareholder approval, (i) cause the Trust to merge or consolidate
with or into one or more trusts, partnerships, associations or
corporations which is formed, organized or existing under the laws of
a state, commonwealth possession or colony of the United States or
(ii) cause the Trust to incorporate under the laws of Delaware. Any
agreement of merger or consolidation or certificate of merger may be
signed by a majority of the Trustees. Pursuant to and in accordance
with the provisions of Section 3815(f) of the Delaware Business Trust
Act, and notwithstanding anything to the contrary contained in this
Trust Instrument, an agreement of merger or consolidation approved by
the Trustees in accordance with this Section 11.5 may effect any
amendment to the Trust Instrument or effect the adoption of a new
trust instrument of the Trust if it is the surviving or resulting
trust in the merger or consolidation. Any merger or consolidation of
the Trust other than as described in the foregoing provisions of this
Section 11.5 shall, in addition to the approval of the Trustees,
require the approval of the holders of a majority of the Outstanding
Shares.
Section 11.6 Filing of Copies, References, Headings. The
original or a copy of this Trust Instrument and of each amendment
hereof or Trust Instrument supplemental hereto shall be kept at the
office of the Trust where it may be inspected by any Shareholder.
Anyone dealing with the Trust may rely on a certificate by an officer
or Trustee of the Trust as to whether or not any such amendments or
supplements have been made and as to any matters in connection with
the Trust hereunder, and with the same effect as if it were the
original, may rely on a copy certified by an officer or Trustee of
the Trust to be a copy of this Trust Instrument or of any such
amendment or supplemental Trust Instrument. In this Trust Instrument
or in any such amendment or supplemental Trust Instrument, references
to this Trust Instrument, and all expressions like "herein," "hereof"
and "hereunder," shall be deemed to refer to this Trust Instrument as
amended or affected by any such supplemental Trust Instrument. All
expressions like "his", "he" and "him", shall be deemed to include
the feminine and neuter, as well as masculine, genders. Headings are
placed herein for convenience of reference only and in case of any
conflict, the text of this Trust Instrument rather than the headings,
shall control. This Trust Instrument may be executed in any number of
counterparts each of which shall be deemed an original.
Section 11.7 Applicable Law. The trust set forth in this
instrument is made in the State of Delaware, and the Trust and this
Trust Instrument, and the rights and obligations of the Trustees and
Shareholders hereunder, are to be governed by and construed and
administered according to the Delaware Business Trust Act and the
laws of said State; provided, however, that there shall not be
applicable to the Trust, the Trustees or this Trust Instrument (a)
the provisions of Section 3540 of Title 12 of the Delaware Code or
(b) any provisions of the laws (statutory or common) of the State of
Delaware (other than the Delaware Business Trust Act) pertaining to
trusts which relate to or regulate (i) the filing with any court or
governmental body or agency of trustee accounts or schedules of
trustee fees and charges, (ii) affirmative requirements to post bonds
for trustees, officers, agents or employees of a trust, (iii) the
necessity for obtaining court or other governmental approval
concerning the acquisition, holding or disposition of real or
personal property, (iv) fees or other sums payable to trustees,
officers, agents or employees of a trust, (v) the allocation of
receipts and expenditures to income or principal, (vi) restrictions
or limitations on the permissible nature, amount or concentration of
trust investments or requirements relating to the titling, storage or
other manner of holding of trust assets, or (vii) the establishment
of fiduciary or other standards or responsibilities or limitations on
the acts or powers of trustees, which are inconsistent with the
limitations or liabilities or authorities and powers of the Trustees
set forth or referenced in this Trust Instrument. The Trust shall be
of the type commonly called a "business trust", and without limiting
the provisions hereof, the Trust may exercise all powers which are
ordinarily exercised by such a trust under Delaware law. The Trust
specifically reserves the right to exercise any of the powers or
privileges afforded to trusts or actions that may be engaged in by
trusts under the Delaware Business Trust Act, and the absence of a
specific reference herein to any such power, privilege or action
shall not imply that the Trust may not exercise such power or
privilege or take such actions.
Section 11.8 Amendments. Except as specifically provided
herein, the Trustees may, without shareholder vote, amend or
otherwise supplement this Trust Instrument by making an amendment, a
Trust Instrument supplemental hereto or an amended and restated trust
instrument. Shareholders shall have the right to vote (i) on any
amendment which would affect their right to vote granted in Section
7.1 of Article VII hereof, (ii) on any amendment to this Section
11.8, (iii) on any amendment as may be required by law and (iv) on
any amendment submitted to them by the Trustees. Any amendment
required or permitted to be submitted to Shareholders which, as the
Trustees determine, shall affect the Shareholders of one or more
Series shall be authorized by vote of the Shareholders of each Series
affected and no vote of shareholders of a Series not affected shall
be required. Anything in this Trust Instrument to the contrary
notwithstanding, any amendment to Article X hereof shall not limit
the rights to indemnification or insurance provided therein with
respect to action or omission of Covered Persons prior to such
amendment.
Section 11.9 Fiscal Year. The fiscal year of the Trust shall
end on a specified date as determined from time to time by the
Trustees.
Section 11.10 Use of the Name "The Sports Funds Trust". The
name "The Sports Funds Trust," and all rights to the use thereof
belong to _____________________, the investment adviser of the Trust.
________________ has consented to the use by the Trust of such name.
Section 11.11 Provisions in Conflict with Law. The provisions
of this Trust Instrument are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is
in conflict with the 1940 Act, the regulated investment company
provisions of the Internal Revenue Code or with other applicable laws
and regulations, the conflicting provision shall be deemed never to
have constituted a part of this Trust Instrument; provided, however,
that such determination shall not affect any of the remaining
provisions of this Trust Instrument or render invalid or improper any
action taken or omitted prior to such determination. If any provision
of this Trust Instrument shall be held invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall attach
only to such provision in such jurisdiction and shall not in any
manner affect such provisions in any other jurisdiction or any other
provision of this Trust Instrument in any jurisdiction.
IN WITNESS WHEREOF, the undersigned, being the initial Trustee
of the Trust, has executed this Trust Instrument this 4th day of
November, 1997.
Jack R. Plymale,Trustee
The Sports Funds Trust
By-Laws Dated: November 4, 1997
Principal Place of Business:
5-H Oak Branch Drive
Greensboro, North Carolina 27407<PAGE>
The Sports Funds Trust
BY-LAWS
These By-laws of The Sports Funds Trust (the "Trust"), a
Delaware Business Trust, are subject to the Trust Instrument of the
Trust dated November 4, 1997, as from time to time amended, supplemented
or restated (the "Trust Instrument"). Capitalized terms used herein
which are defined in the Trust Instrument are used as therein defined.
ARTICLE I
PRINCIPAL OFFICE
The principal office of the Trust shall be located in such
location as the Trustees may from time to time determine. The Trust may
establish and maintain such other offices and places of business as the
Trustees may from time to time determine.
ARTICLE II
OFFICERS AND THEIR ELECTION
Section 2.1 Officers. The officers of the Trust shall be
a President, a Treasurer, a Secretary, and such other officers as the
Trustees may from time to time elect. It shall not be necessary for any
Trustee or other officer to be a holder of Shares in the Trust.
Section 2.2 Election of Officers. Two or more offices may
be held by a single person. Subject to the provisions of Section 2.3
hereof, the officers shall hold office until their successors are chosen
and qualified and serve at the pleasure of the Trustees.
Section 2.3 Resignations. Any officer of the Trust may
resign by filing a written resignation with the President, the Secretary
or the Trustees, which resignation shall take effect on being so filed
or at such later time as may be therein specified.
ARTICLE III
POWERS AND DUTIES OF OFFICERS AND TRUSTEES
Section 3.1 Chief Executive Officer. Unless the Trustees
have designated the Chairman as the chief executive officer of the
Trust, the President shall be the chief executive officer of the Trust.
Subject to the direction of the Trustees, the chief executive officer
shall have general administration of the business and policies of the
Trust. Except as the Trustees may otherwise order, the chief executive
officer shall have the power to grant, issue, execute or sign such
powers of attorney, proxies, agreements or other documents as may be
deemed advisable or necessary in the furtherance of the interests of the
Trust or any Series thereof. He shall also have the power to employ
attorneys, accountants and other advisers and agents and counsel for the
Trust. If the President is not the chief executive officer, he shall
perform such duties as the Trustees or the chief executive officer may
from time to time designate and, at the request or in the absence or
disability of the chief executive officer, may perform all the duties
of the chief executive officer and, when so acting, shall have all the
powers of and be subject to all the restrictions upon the chief
executive officer.
Section 3.2 Treasurer. The Treasurer shall be the
principal financial and accounting officer of the Trust. He shall
deliver all funds and securities of the Trust which may come into his
hands to such company as the Trustees shall employ as Custodian in
accordance with the Trust Instrument and applicable provisions of law.
He shall make annual reports regarding the business and condition of the
Trust, which reports shall be preserved in Trust records, and he shall
furnish such other reports regarding the business and condition of the
Trust as the Trustees may from time to time require. The Treasurer
shall perform such additional duties as the Trustees or the chief
executive officer may from time to time designate.
Section 3.3 Secretary. The Secretary shall record in books
kept for the purpose all votes and proceedings of the Trustees and the
Shareholders at their respective meetings. He shall have the custody
of the seal of the Trust. The Secretary shall perform such additional
duties as the Trustees or the chief executive officer may from time to
time designate.
Section 3.4 Vice President. Any Vice President of the
Trust shall perform such duties as the Trustees or the chief executive
officer may from time to time designate. At the request or in the
absence or disability of the President, the most senior Vice President
present and able to act may perform all the duties of the President and,
when so acting, shall have all the powers of and be subject to all the
restrictions upon the President.
Section 3.5 Assistant Treasurer. Any Assistant Treasurer
of the Trust shall perform such duties as the Trustees or the Treasurer
may from time to time designate, and, in the absence of the Treasurer,
the most senior Assistant Treasurer present and able to act may perform
all the duties of the Treasurer.
Section 3.6 Assistant Secretary. Any Assistant Secretary
of the Trust shall perform such duties as the Trustees or the Secretary
may from time to time designate, and, in the absence of the Secretary,
the most senior Assistant Secretary present and able to act may perform
all the duties of the Secretary.
Section 3.7 Subordinate Officers. The Trustees from time
to time may appoint such other officers or agents as they may deem
advisable, each of whom shall have such title, hold office for such
period, have such authority and perform such duties as the Trustees may
determine.
Section 3.8 Surety Bonds. The Trustees may require any
officer or agent of the Trust to execute a bond (including, without
limitation, any bond required by the Investment Company Act of 1940
("1940 Act") in such sum and with such surety or sureties as the
Trustees may determine, conditioned upon the faithful performance of his
duties to the Trust including responsibility for negligence and for the
accounting of any of the Trust's property, funds or securities that may
come into his hands.
Section 3.9 Removal. Any officer may be removed from
office at any time by the Trustees.
Section 3.10 Remuneration. The salaries or other
compensation, if any, of the officers of the Trust shall be fixed from
time to time by resolution of the Trustees.
ARTICLE IV
SHAREHOLDERS' MEETINGS
Section 4.1 Notices. Notices of any meeting of the
Shareholders shall be given by the Secretary by delivering or mailing,
postage prepaid, to each Shareholder entitled to vote at said meeting,
written or printed notification of such meeting at least fifteen days
before the meeting, to such address as may be registered with the Trust
by the Shareholder. Notice of any Shareholder meeting need not be given
to any Shareholder if a written waiver of notice, executed before or
after such meeting, is filed with the record of such meeting, or to any
Shareholder who shall attend such meeting in person or by proxy. Notice
of adjournment of a Shareholders' meeting to another time or place need
not be given, if such time and place are announced at the meeting or
reasonable notice is given to persons present at the meeting.
Section 4.2 Voting-Proxies. Subject to the provisions of
the Trust Instrument, Shareholders entitled to vote may vote either in
person or by proxy, provided that either (i) an instrument authorizing
such proxy to act is executed by the Shareholder in writing and dated
not more than eleven months before the meeting, unless the instrument
specifically provides for a longer period or (ii) the Trustees adopt by
resolution an electronic, telephonic, computerized or other alternative
to execution of a written instrument authorizing the proxy to act, which
authorization is received not more than eleven months before the
meeting. Proxies shall be delivered to the Secretary of the Trust or
other person responsible for recording the proceedings before being
voted. A proxy with respect to Shares held in the name of two or more
persons shall be valid if executed by one of them unless at or prior to
exercise of such proxy the Trust receives a specific written notice to
the contrary from any one of them. Unless otherwise specifically
limited by their terms, proxies shall entitle the holder thereof to vote
at any adjournment of a meeting. A proxy purporting to be exercised by
or on behalf of a Shareholder shall be deemed valid unless challenged
at or prior to its exercise and the burden of proving invalidity shall
rest on the challenger. At all meetings of the Shareholders, unless the
voting is conducted by inspectors, all questions relating to the
qualifications of voters, the validity of proxies, and the acceptance
or rejection of votes shall be decided by the Chairman of the meeting.
Except as otherwise provided herein or in the Trust Instrument, all
matters relating to the giving, voting or validity of proxies shall be
governed by the General Corporation Law of the State of Delaware
relating to proxies, and judicial interpretations thereunder, as if the
Trust were a Delaware corporation and the Shareholders were shareholders
of a Delaware corporation.
Section 4.3 Place of Meeting. All meetings of the
Shareholders shall be held at such places as the Trustees may designate.
ARTICLE V
SHARES OF BENEFICIAL INTEREST
Section 5.1 Share Certificate. No certificates certifying
the ownership of Shares shall be issued except as the Trustees may
otherwise authorize. The Trustees may issue certificates to a
Shareholder of any Series or class thereof for any purpose and the
issuance of a certificate to one or more Shareholders shall not require
the issuance of certificates generally. In the event that the Trustees
authorize the issuance of Share certificates, such certificates shall
be in the form prescribed from time to time by the Trustees and shall
be signed by the President or a Vice President and by the Treasurer,
Assistant Treasurer, Secretary or Assistant Secretary. Such signatures
may be facsimiles if the certificate is signed by a transfer or
shareholder services agent or by a registrar, other than a Trustee,
officer or employee of the Trust. In case any officer who has signed
or whose facsimile signature has been placed on such certificate shall
have ceased to be such officer before such certificate is issued, it may
be issued by the Trust with the same effect as if he or she were such
officer at the time of its issue.
Section 5.2 Loss of Certificate. In case of the alleged
loss or destruction or the mutilation of a Share certificate, a
duplicate certificate may be issued in place thereof, upon such terms
as the Trustees may prescribe.
Section 5.3 Discontinuance of Issuance of Certificates.
The Trustees may at any time discontinue the issuance of Share
certificates and may, by written notice to each Shareholder, require the
surrender of Share certificates to the Trust for cancellation. Such
surrender and cancellation shall not affect the ownership of Shares of
the Trust.
ARTICLE VI
INSPECTION OF BOOKS
The Trustees shall from time to time determine whether and
to what extent, and at what times and places, and under what conditions
and regulations the accounts and books of the Trust or any of them shall
be open to the inspection of the Shareholders; and no Shareholder shall
have any right to inspect any account or book or document of the Trust
except as conferred by law or otherwise by the Trustees.
ARTICLE VII
SEAL
The seal of the Trust shall be circular in form bearing the
inscription:
"The Sports Funds Trust -- 1997
THE STATE OF DELAWARE"
The form of the seal shall be subject to alteration by the
Trustees and the seal may be used by causing it or a facsimile to be
impressed or affixed or printed or otherwise reproduced.
Any officer or Trustee of the Trust shall have authority to
affix the seal of the Trust to any document, instrument or other paper
executed and delivered by or on behalf of the Trust; however, unless
otherwise required by the Trustees, the seal shall not be necessary to
be placed on and its absence shall not impair the validity of, any
document, instrument, or other paper executed by or on behalf of the
Trust.
ARTICLE VIII
AMENDMENTS
These By-laws may be amended from time to time by the
Trustees.
ARTICLE IX
HEADINGS
Headings are placed in these By-laws for convenience of
reference only and, in case of any conflict, the text of these By-laws
rather than the headings shall control.
Investment Advisory Agreement
AGREEMENT made this ____ day of ______________, 1998 by and
between The Sports Funds Trust (the "Trust"), a Delaware business
trust and Pegasus Advisory Group, Inc., (the "Advisor") a corporation
operating as a registered investment adviser and duly organized and
existing under the laws of the State of North Carolina
1. Duties of Advisor. The Trust hereby appoints the Advisor
to act as investment adviser to the Fund for the period and on such
terms set forth in this Agreement. The Trust employs the Advisor to
manage the investment and reinvestment of the assets of the Fund, to
determine in its discretion the assets to be held uninvested, to
provide the Trust with records concerning the Advisor's activities
which the Trust is required to maintain, and to render regular
reports to the Trust's officers and Board of Trustees concerning the
Advisor's discharge of the foregoing responsibilities. The Advisor
shall discharge the foregoing responsibilities subject to the control
of the Board of Trustees of the Trust, and in compliance with the
objectives, policies and limitations set forth in the Trust's
Prospectus and Statement of Additional Information. The Advisor
accepts such employment and agrees to render the services and to
provide, at its own expense, the office space, furnishings, equipment
and the personnel required by it to perform the services on the terms
and for the compensation provided herein.
The Advisor may employ or contract with other persons to assist
it in the performance of this Agreement (herein, a "Subadvisor");
provided that the retention of any Subadvisor shall be approved as
may be required by the Investment Company Act of 1940 Act, as
amended, (the "Act"). A Subadvisor may perform under the supervision
of the Advisor any or all services described herein. Subadvisors may
include other investment advisory or management firms and officers or
employees who are employed by the Advisor and the Trust. The fees or
other compensation of any Subadvisor shall be paid by the Advisor and
no obligation may be incurred on the Trust's behalf to any such
person.
2. Portfolio Transactions. The Advisor shall provide the
Fund with a trading department. The Advisor shall select the brokers
or dealers that will execute the purchases and sales of securities
for the Fund, and is directed to use its best efforts to ensure that
the best available price and most favorable execution of securities
transactions for the Fund are obtained. The Fund will bear all
expenses, not specifically assumed by the Advisor, incurred in its
operations and offering of its shares, including, without limitation,
brokerage commissions and custody expenses. Subject to policies
established by the Board of Trustees of the Trust and communicated to
the Advisor, it is understood that the Advisor will not be deemed to
have acted unlawfully, or to have breached a fiduciary duty to the
Trust or in respect of the Fund, or be in breach of any obligation
owing to the Trust or in respect of the Fund under this Agreement, or
otherwise, solely by reason of its having caused the Fund to pay a
member of a securities exchange, a broker or a dealer a commission
for effecting a securities transaction for the Fund in excess of the
amount of commission that another member of an exchange, broker or
dealer would have charged, if the Advisor determines in good faith
that the commission paid was reasonable in relation to the brokerage
or research services provided by such member, broker or dealer,
viewed in terms of that particular transaction or the Advisor's
overall responsibilities with respect to the accounts, including the
Fund, as to which it exercises investment discretion. The Advisor
will promptly communicate to the officers and Trustees of the Trust
such information relating to Fund transactions as they may reasonably
request.
3. Compensation of the Advisor. For the services to be
rendered by the Advisor as provided in Section 1 and 2 of this
Agreement, the Fund shall pay to the Advisor within five business
days after the end of each calendar month, a monthly fee of one
twelfth of 0.95% of the average daily net assets. The net asset
value shall be calculated in the manner provided in the Fund's
Prospectus and Statement of Additional Information then in effect.
In the event of termination of this Agreement, the fee provided
in this Section 3 shall be paid on a pro rata basis, based on the
number of days when this Agreement was in effect.
Any amounts waived or reimbursed by the Advisor are subject to
reimbursement by the Fund within the following three years, provided
the Fund is able to effect such reimbursement and remain in
compliance with the expense limitations stated in the Prospectus.
4. Reports. The Fund and the Advisor agree to furnish to
each other such information regarding their operations with regard to
their affairs as each may reasonably request.
5. Status of Advisor. The services of the Advisor to the
Fund are not to be deemed exclusive, and the Advisor shall be free to
render similar services to others so long as its services to the Fund
are not impaired thereby.
6. Liability of Advisor. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard by the
Advisor of its obligations and duties hereunder, the Advisor shall
not be subject to any liability whatsoever to the Fund, or to any
shareholder of the Fund, for any error of judgement, mistake of law
or any other act or omission in the course of, or connected with,
rendering services hereunder including, without limitation, for any
losses that may be sustained in connection with the purchase,
holding, redemption or sale of any security on behalf of the Fund.
7. Duration and Termination. This Agreement shall become
effective on the date that the Trust's registration statement is
declared effective by the U.S. Securities and Exchange Commission,
provided that first it is approved by the Board of Trustees of the
Trust, including a majority of those Trustees who are not parties to
this Agreement or interested persons of any party hereto, in the
manner provided in Section 15(c) of the Act, and by the holders of a
majority of the outstanding voting securities of the Fund; and shall
continue in effect for two years. Thereafter, this Agreement may
continue in effect only if such continuance is approved at least
annually by: (i) the Trust's Board of Trustees or, (ii) by the vote
of a majority of the outstanding voting securities of the Fund; and
in either event by a vote of a majority of those Trustees of the
Trust who are not parties to this Agreement or interested persons of
any such party in the manner provided in Section 15(c) of the Act.
This Agreement may be terminated by the Trust, at any time, without
the payment of any penalty, by the Board of Trustees of the Trust or
by vote of the holders of a majority of the outstanding voting
securities of the Fund on 60 days' written notice to the Advisor.
This Agreement may be terminated by the Advisor at any time, without
the payment of any penalty, upon not more than 60 days' written
notice to the Trust. This Agreement will automatically terminate in
the event of its assignment. Any notice under this Agreement shall
be given in writing, addressed and delivered or mailed postage
prepaid, to the other party at the principal office of such party.
As used in this Section 7, the terms "assignment", "interested
person", and "a vote of a majority of the outstanding voting
securities" shall have the respective meanings set forth in Section
2(a)(4), Section 2(a)(19) and Section 2(a)(42) of the Act and Rule
18f-2 thereunder.
8. Name of Fund. The parties agree that the Advisor has a
proprietary interest in the name "The Sports Funds Trust," and the
Trust agrees to promptly take such action as may be necessary to
delete from its name and/or the name of the Fund any reference to
such name promptly after receipt from the Advisor of a written
request therefore.
9. Severability. If any provisions of this Agreement shall
be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby.
10. Governing Law. This Agreement shall be governed by and
construed and interpreted in accordance with the laws of the State of
Delaware, without giving effect to the conflicts of law principles
thereof, and in accordance with the 1940 Act. To the extent that the
applicable laws of the State of Delaware conflict with the applicable
provisions of the 1940 Act, the latter shall control..
11. Records. All records held by the Advisor which are
required to be maintained and preserved by the Fund in order to
comply with Rules 31 a-1 and 31 a-2 of the Act remain the property of
the Fund and will be surrendered promptly by the Advisor upon the
request of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of this ______ day of ____________, 1997.
The Sports Funds Trust Pegasus Advisory Group,Inc.
Jack R. Plymale, Sole Trustee Jack R. Plymale,
President
SUB-ADVISORY AGREEMENT
Agreement made this __th day of _____, 199_, by and between
CHARTWELL INVESTMENT PARTNERS, a Partnership under the laws of the
Commonwealth of Pennsylvania, and registered investment adviser ("Sub-
Adviser") and PEGASUS ADVISORY GROUP, INC. and registered investment
adviser ("Adviser").
WHEREAS, The Sports Funds Trust, a Delaware business trust
("Trust") is an open-end management investment company registered under
the Investment Company Act of 1940, as amended ("1940 Act"), the shares
of beneficial interest of the initial series of which are called The
Pegasus Motorsports Growth & Income Fund ("Fund") and are registered
under the Securities Act of 1933, as amended ("1933 Act");
WHEREAS, the Trust has retained the Adviser to render to it
investment advisory and management services pursuant to an Investment
Management Agreement, dated February 23, 1998 ("Management Agreement");
and
WHEREAS, the Adviser desires at this time to retain the Sub-Adviser
to render investment advisory and management services for the Fund and
the Sub-Adviser is willing to render such services;
NOW THEREFORE, in consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto as
follows:
1. Appointment. The Adviser hereby appoints the Sub-Adviser, and the
Sub-Adviser accepts the appointment, to manage the investment and
reinvestment of the assets of the Fund and to furnish other services for
the period and on the terms set forth herein.
2. Delivery of Documents.
(a) Adviser has furnished Sub-Adviser with copies properly
certified or authenticated of each of the following:
(I) Certificate of Trust, as filed with the Secretary of
State of Delaware on November 4, 1997, and all amendments
thereto or restatements thereof;
(ii) Trust Instrument and Trust's By-Laws and amendments
thereto;
(iii) resolutions of Trust's Board of Trustees
authorizing the appointment of Sub-Adviser and approving this
Agreement;
(iv) Trust's Notification of Registration on Form N-8A
under the 1940 Act as filed with the Securities and Exchange
Commission ("SEC") on December 18, 1997 and all amendments
thereto; and
(v) Trust's Registration Statement on Form N-1A under
the 1933 Act (File No. 333-42583) and under the 1940 Act as
filed with the SEC and all amendments thereto.
Adviser will furnish Sub-Adviser from time to time with copies of
all amendments of or supplements to the foregoing and Trust's most
recent Prospectus and Statement of Additional Information (such
Propsectus and Statement of Additional Information, as presently in
effect, and all amendments and supplements thereto are herein
collectively called the "Prospectus").
(b) By executing this Agreement, the Adviser acknowledges prior
receipt of the Sub-Adviser's Part II of Form ADV filed with the
Securities and Exchange Commission.
3. Management. The Sub-Adviser will: (i) manage the investment and
reinvestment of the Fund's assets in accordance with the applicable
investment objectives, policies and limitations set forth in the Trust's
Prospectus and applicable laws and regulations; (ii) be subject to the
supervision of the Adviser and the Board of Trustees; and (iii) place
orders for the purchase or sale of securities for the Fund's account
with brokers or dealers selected by the Sub-Adviser. The Sub-Adviser
is authorized, on behalf of the Fund to give instructions to the
custodian of the Fund as to the deliveries of securities and payments
of cash for the account of the Fund. The Sub-Adviser shall have access
to such reports and records of the Fund it deems necessary to perform
it services hereunder.
Except as specifically stated in this Section 3 and Section 10, the
Sub-Adviser shall not be responsible for providing (I) compliance
monitoring, reporting or testing; (ii) record maintenance or
preparation; or (iii) accounting, tax or other services to the Fund.
The Sub-Adviser will prepare and maintain the following: trade orders
and written correspondence with brokers or dealers regarding such trade
orders, written correspondence with the custodian(s) and accountants for
the Fund and all communications with issuers regarding the voting of
securities.
In connection with the selection of brokers or dealers by the Sub-Adviser
and the placing of orders with said brokers or dealers, the Sub-
Adviser will seek for the Fund best execution of orders. The Sub-
Adviser shall not be deemed to have acted unlawfully or to have breached
any duty, created by this Agreement or otherwise, solely by reason of
its having caused the Fund to pay a broker or dealer an amount of
commission for effecting a securities transaction in excess of the
amount of commission another broker or dealer would have charged for
effecting that transaction, if the Sub-Adviser determined in good faith
that such amount of commission was reasonable in relation to the value
of the brokerage and research services provided by such broker or dealer
viewed in terms of either that particular transaction or the Sub-Adviser's
overall responsibilities with respect to the clients of the
Sub-Adviser as to which the Sub-Adviser exercises investment discretion.
The Adviser recognizes that all research services and research that the
Sub-Adviser receives or generates are available for all clients and that
the Fund and other clients may benefit thereby.
The Sub-Adviser shall for all purposes herein provided be deemed
to be an independent contractor and, unless otherwise expressly provided
or authorized, shall have no authority to act for or represent the Fund
or the Adviser in any way or otherwise be deemed an agent of the Fund
or the Adviser.
4. Additional Series. In the event that the Trust establishes one or
more additional series with respect to which the Adviser desires to
retain the Sub-Adviser to render investment advisory and management
services hereunder, the Adviser shall notify the Sub-Adviser in writing.
If the Sub-Adviser is willing to render such services, it shall notify
the Adviser in writing whereupon such series shall become subject to
this Agreement.
5. Compensation. For the services described in Section 3, the Adviser
will pay to the Sub-Adviser as of the close of business on the last
business day of each month, a sub-advisory fee computed at an annual
rate of .70 of the Fund's average daily net assets.
The fee as computed above shall be computed separately for each
series of the Trust subject to this Agreement based on the average daily
net assets of such series. For the month and year in which this
Agreement becomes effective or terminates, there shall be an appropriate
proration on the basis of the number of days that the Agreement is in
effect during the month and year, respectively.
All sub-advisory fees hereunder will be invoiced directly to the
Adviser at the address immediately below and be due no later than thirty
(30) days after the date of the invoice.
Pegasus Advisory Group, Inc.
5-H Oak Branch Drive
Greensboro NC 27407
6. Non-Exclusivity. The services of the Sub-Adviser under this
Agreement are not to be deemed exclusive, and the Sub-Adviser shall be
free to render similar services or other services to others so long as
its services hereunder are not impaired thereby.
7. Net Asset Value. The net asset value for each series of the Trust
shall be calculated in accordance with the provisions of the Prospectus.
On each day when net asset value is not calculated, the net asset value
of a series shall be deemed to be the net asset value of such series as
of the close of business on the last day on which such calculation was
made for the purpose of the foregoing computations.
8. Limitation of Liability. The Sub-Adviser shall not be liable for
any error of judgment or of law or for any loss suffered by the Trust
or the Adviser in connection with the matters to which this Agreement
relates, except loss resulting from willful misfeasance, bad faith or
gross negligence on the part of the Sub-Adviser in the performance of
its obligations and duties or by reason of its reckless disregard of its
obligations and duties under this Agreement.
9. Duration and Termination. This Agreement shall become effective
with respect to the Fund on the date hereof and shall remain in full
force for two years thereafter, unless sooner terminated as hereinafter
provided. This Agreement shall continue in force from year to year
thereafter with respect to each series subject to this Agreement, but
only as long as such continuance is specifically approved for each
series at least annually in the manner required by the 1940 Act and the
rules and regulations thereunder; provided, however, that if the
continuation of this Agreement is not approved for a series, the Sub-
Adviser may continue to serve in such capacity for such series in the
manner and to the extent permitted by the 1940 Act and the rules and
regulations thereunder.
This Agreement shall automatically terminate in the event of its
assignment or in the event of the termination of the Management
Agreement and may be terminated at any time with respect to any series
without the payment of any penalty by the Adviser or by the Sub-Adviser
on sixty (60) days written notice to the other party. The Trust may
effect termination with respect to any series without payment of any
penalty by action of the Board of Trustees or by vote of a majority of
the outstanding voting securities of such series on sixty (60) days
written notice to the Adviser and the Sub-Adviser.
This Agreement may be terminated with respect to any series at any
time without the payment of any penalty by the Board of Trustees of the
Trust, by vote of a majority of the outstanding voting securities of
such series or by the Adviser in the event that it shall have been
established by a court of competent jurisdiction that the Sub-Adviser
or any officer or director of the Sub-Adviser has taken any action which
results in a breach of the covenants of the Sub-Adviser set forth
herein.
The terms "assignment" and "vote" of a majority of the outstanding
voting securities" shall have the meanings set forth in the 1940 Act and
the rules and regulations thereunder.
Termination of this Agreement shall not affect the right of the
Sub-Adviser to receive payments on any unpaid balance of the
compensation described in Section 5 earned prior to such termination.
10. Proxies, Tender Offers, Class Actions, Etc. The Sub-Adviser will
act as the Trust's agent and attorney-in-fact to vote, tender, convert,
endorse, transfer and deliver securities in the Fund, to elect the form
of dividend payments and to execute proxies, waivers, consents and other
instruments with respect to such securities, subject to any written
instructions received from the Adviser or the Trust within a reasonable
period prior to the action. The Sub-Adviser shall disclose to the
Adviser any material conflict of interest it or its affiliates may have
with respect to the vote or other requested action, within a reasonable
period prior to the action.
11. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the
remainder shall not be thereby affected.
12. Notice. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other party
at such address as such other party may designate for the receipt of
such notice.
13. Governing Law. This Agreement shall be construed in accordance
with applicable federal law and the laws of the State of Delaware and
the Commonwealth of Pennsylvania, without giving effect to the conflicts
of law principles thereof, and in accordance with the 1940 Act. To the
extent that the applicable laws of the State of Delaware or the
Commonwealth of Pennsylvania conflict with the applicable provisions of
the 1940 Act, the latter shall control.
14. Amendment. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by a written instrument signed
on behalf of each of the parties.
15. Entire Agreement. This Agreement is the entire contract between
the parties relating to the subject matter hereof and supersedes all
prior agreements between the parties relating to the subject matter
hereof.<PAGE>
IN WITNESS WHEREOF, the Adviser and the Sub-Adviser have caused
this Agreement to be executed as of the day and year first above
written.
CHARTWELL INVESTMENT PARTNERS
By:____________________________
Title:
PEGASUS ADVISORY GROUP, INC.
By:____________________________
Title:_________________________
UNDERWRITING AGREEMENT
This AGREEMENT, dated as of the day of
, 1998, made by and between The Sports Funds
Trust, (the "Trust"), a Delaware business trust operating as an
open-end, diversified management investment company registered under
the Investment Company Act of 1940, as amended (the "Act"); Pegasus
Advisory Group, Inc. (?Advisor?), a registered investment advisor
duly organized and existing as a corporation under the laws of the
state of North Carolina; and FPS Broker Services, Inc. ("FPSB"), a
corporation duly organized and existing under the laws of the State
of Delaware (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Trust Instrument to
issue separate series of shares representing interests in separate
investment portfolios (the "Series"), which are identified on
Schedule "C" attached hereto and which Schedule "C" may be amended
from time to time by mutual agreement among the Parties; and
WHEREAS, Pegasus Advisory Group, Inc. has been appointed
investment advisor to the Trust; and
WHEREAS, FPSB is a broker-dealer registered with the U.S.
Securities and Exchange Commission and a member in good standing of
the National Association of Securities Dealers, Inc. (the "NASD");
and
WHEREAS, the Parties desire to enter into an agreement providing
for the distribution by FPSB of the shares of the Trust (the
"Shares").
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, and in exchange of good and valuable
consideration, the sufficiency and receipt of which is hereby
acknowledged, the Parties hereto, intending to be legally bound, do
hereby agree as follows:
GENERAL PROVISIONS
Section 1. Appointment. The Trust hereby appoints FPSB as its
principal agent for the distribution of the Shares in the fifty United States
of America, the District of Columbia and Commonwealth of Puerto Rico, and FPS
hereby accepts such appointment under the terms of this Agreement. The Trust
agrees that it will not sell any shares to any person except to fill orders
for the shares received through FPSB; provided, however, that the foregoing
exclusive right shall not apply: (a) to shares issued or sold in connection
with the merger or consolidation of any other investment company with the
Trust or the acquisition by purchase or otherwise of all or substantially all
of the assets of any investment company or substantially all of the
outstanding shares of any such company by the Trust; (b) to shares which may
be offered by the Trust to its stockholders for reinvestment of cash
distributed from capital gains or net investment income of the Trust; or (c)
to shares which may be issued to shareholders of other funds who exercise any
exchange privilege set forth in the Trust?s Prospectus. Notwithstanding any
other provision hereof, the Trust may terminate, suspend, or withdraw the
offering of the Shares whenever, in their sole discretion, they deem such
action to be desirable.
Section 2. Sale and Repurchase of Shares.
(a) FPSB is hereby granted the right, as agent for the Trust, to sell
Shares to the public against orders received at the public offering price as
defined in the Trust?s Prospectus and Statement of Additional Information.
(b) FPSB will also have the right to take, as agent for the Trust, all
actions which, in FPSB's judgement, and subject to the Trust's reasonable
approval, are necessary to carry into effect the distribution of the Shares.
(c) FPSB will act as agent for the Trust in connection with the
repurchase of Shares by the Trust upon the terms set forth in the Trust?s
Prospectus and Statement of Additional Information.
(d) The net asset value of the Shares shall be determined in the
manner provided in the then current Prospectus and Statement of Additional
Information relating to the Shares, and when determined shall be applicable to
all transactions as provided in the Prospectus. The net asset value of the
Shares shall be calculated by the Trust or by another entity on behalf of the
Trust. FPSB shall have no duty to inquire into, or liability for, the
accuracy of the net asset value per Share as calculated.
(e) On every sale, FPSB shall promptly pay to the Trust the applicable
net asset value of the Shares.
(f) Upon receipt of purchase instructions, FPSB will transmit such
instructions to the Trust or its transfer agent for registration of the Shares
purchased.
(g) Nothing in this Agreement shall prevent FPSB or any affiliated
person (as defined in the Act) of FPSB from acting as underwriter for any
other person, firm or corporation (including other investment companies), or
in any way limit or restrict FPSB or 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
FPSB expressly agrees that it will not for its own account purchase any Shares
of the Trust except for investment purposes, and that it will not for its own
account dispose of any such Shares except by redemption of such Shares with
the Trust, and that it will not undertake in any activities which, in its
judgement, will adversely affect the performance of its obligations to the
Trust under this Agreement.
Section 3. Rules of Sale of Shares. FPSB does not agree to sell any
specific number of Shares and serves only in the capacity of Statutory
Underwriter. The Trust reserves the right to terminate, suspend or withdraw
the sale of its Shares for any reason deemed adequate by it, and the Trust
reserves the right to refuse at any time or times to sell any of its Shares to
any person for any reason deemed adequate by it.
Section 4. Rules of NASD, etc.
(a) FPSB will conform to the Conduct Rules of the NASD and the
securities laws of any jurisdiction in which it directly or indirectly sells
any Shares.
(b) FPSB will require each dealer with whom FPSB has a selling
agreement to conform to the applicable provisions of the Prospectus, with
respect to the public offering price of the Shares, and FPSB shall not cause
the Trust to withhold the placing of purchase orders so as to make a profit
thereby.
(c) The Trust and the Advisor agree to furnish to FPSB sufficient
copies of any and all: agreements, plans, communications with the public or
other materials which the Trust or the Advisor intend to use in connection
with any sales of Shares, in adequate time for FPSB to file and clear such
materials with the proper authorities before they are put in use. FPSB and
the Trust or the Advisor may agree that any such material does not need to be
filed subsequent to distribution. In addition, the Trust and the Advisor
agree not to use any such materials until so filed and cleared for use, if
required, by appropriate authorities as well as by FPSB.
(d) FPSB, at its own expense, will qualify as a dealer or broker, or
otherwise, under all applicable state or federal laws required in order that
the Shares may be sold in such states as may be mutually agreed upon by the
Parties.
(e) FPSB shall remain registered with the U.S. Securities and Exchange
Commission and a member of the National Association of Securities Dealers for
the term of this Agreement.
(f) FPSB shall not, in connection with any sale or solicitation of a
sale of the Shares, make or authorize any representative, service
organization, broker or dealer to make any representations concerning the
Shares, except those contained in the Prospectus offering the Shares and in
communications with the public or sales materials approved by FPSB as
information supplemental to such Prospectus. Copies of the Prospectus will be
supplied by the Trust or the Advisor to FPSB in reasonable quantities upon
request.
(g) FPSB shall only be authorized to make representations in respect
of the Trust consistent with the then current Prospectus, Statement of
Additional Information, and other written information provided by the Trust or
its agents to be used explicitly with respect to the sale of Shares.
Section 5. Records to be Supplied by the Trust. The Trust shall
furnish to FPSB copies of all information, financial statements and other
papers which FPSB may reasonably request for use in connection with the
underwriting of the Shares including, but not limited to, one certified copy
of all financial statements prepared for the Trust by its independent public
accountants.
Section 6. Expenses.
(a) The Trust will bear the following expenses:
(i) preparation, setting in type, and printing of
sufficient copies of the Prospectus and Statement of Additional Information
for distribution to shareholders, and the cost of distribution of same to the
shareholders;
(ii) preparation, printing and distribution of reports and
other communications to shareholders;
(iii) registration of the Shares under the federal securities
laws;
(iv) qualification of the Shares for sale in the jurisdictions
as directed by the Trust;
(v) maintaining facilities for the issue and transfer of
the Shares;
(vi) supplying information, prices and other data to be
furnished by the Trust under this Agreement; and
(vii) any original issue taxes or transfer taxes applicable to
the sale or delivery of the Shares or certificates therefor.
(b) The Advisor will pay all other expenses incident to the sale and
distribution of the Shares sold hereunder.
(c) FPSB agrees to pay all of its own expenses in performing its
obligations hereunder.
Section 7. Duration and Termination.
(a) The term of this Agreement shall commence on the date on
hereinabove first written (the "Effective Date").
(b) This Agreement shall remain in effect for one (1) year from the
Effective Date. This Agreement shall continue thereafter for periods not
exceeding one (1) year, if approved at least annually (i) by a vote of a
majority of the outstanding voting securities of each Series; or (ii) by a
vote of a majority of the Trustees of the Trust who are not parties to this
Agreement (other than as Trustees of the Trust) or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such approval.
(c) Fees payable to FPSB shall be paid by the Advisor as set forth in
Schedule "B" attached and shall be fixed for the one (1) year period
commencing on the Effective Date of this Agreement. Thereafter, the fee
schedule will be subject to annual review and adjustment.
(d) This Agreement (i) may be terminated at any time without the
payment of any penalty, either by a vote of the Trustees of the Trust or by a
vote of a majority of the outstanding voting securities of each Series with
respect to such Series, on not less than one hundred eighty (180) days'
written notice to FPSB; and (ii) may be terminated by FPSB on sixty (60) days'
written notice to the Trust with respect to any Series.
(e) This Agreement shall automatically terminate in the event of its
assignment, as defined in the Investment Company Act of 1940.
Section 8. Indemnification of FPSB by the Advisor and the Trust.
FPSB is responsible for its own conduct and the employment, control, and
conduct of its agents and employees and for injury to such agents or employees
or to others caused by it, its agents or employees. Notwithstanding the
above. The Advisor and the Trust will indemnify and hold FPSB harmless for
the actions of the Advisor's employees registered with the NASD as registered
representatives of FPSB, and the Advisor hereby undertakes to maintain
compliance with all NASD and U.S. Securities and Exchange Commission rules and
regulations concerning any activities of such employees.
Section 9. Liability of FPSB.
(a) FPSB, its directors, officers, employees, shareholders and agents
shall not be liable for any error of judgement or mistake of law or for any
loss suffered by the Trust in connection with the performance of this
Agreement, except a loss resulting from a breach of FPSB's obligations
pursuant to Section 4 of this Agreement (Rules of NASD), a breach of fiduciary
duty with respect to the receipt of compensation for services or a loss
resulting from willful misfeasance, bad faith or gross negligence on the part
of FPSB in the performance of its obligations and duties or by reason of its
reckless disregard of its obligations and duties under this Agreement. FPSB
agrees to indemnify and hold harmless the Trust and each person who has been,
is, or may hereafter be a Trustee, officer, or employee of the Trust against
expenses 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 any misrepresentation
or omission to state a material fact, or out of any alleged misrepresentation
or omission to stat a material fact, on the part of FPSB or any agent or
employee of FPSB or any other person for whose acts FPSB is responsible or is
alleged to be responsible unless such misrepresentation or omission was made
in reliance upon written information furnished to FPSB by the Trust. FPSB
also agrees to indemnify and hold harmless the Trust 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 FPSB?s failure to
exercise reasonable care and diligence with respect to its services rendered
in connection with the purchase and sale of Shares. The foregoing rights of
indemnification shall be in addition to any other rights to which the Trust or
any such person shall be entitled to as a matter of law.
(b) The Trust agrees to indemnify and hold harmless FPSB against any
and all liability, loss, damages, costs or expenses (including reasonable
counsel fees) which FPSB may incur or be required to pay hereafter, in
connection with any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or legislative body, in which
FPSB may be involved as a party or otherwise or with which FPSB may be
threatened, by reason of the offer or sale of the Trust?s Shares by persons
other than FPSB or its representatives, prior to the execution of this
Agreement. If a claim is made against FPSB as to which FPSB may seek
indemnity under this Section, FPSB shall notify the Trust promptly after any
written assertion of such claim threatening to institute an action or
proceeding with respect thereto and shall notify the Trust promptly of any
action commenced against FPSB within 10 days time after FPSB shall have been
served with a summons or other legal process, giving information as to the
nature and basis of the claim. Failure to notify the Trust shall not,
however, relieve the Trust from any liability which it may have on account of
the indemnity under this Section 9(b) if the Trust has not been prejudiced in
any material respect by such failure. The Trust shall have the sole right to
control the settlement of any such action, suit or proceeding subject to
FPSB's approval, which shall not be unreasonably withheld. FPSB shall have
the right to participate in the defense of an action or proceeding and to
retain its own counsel, and the reasonable fees and expenses of such counsel
shall be borne by the Trust (which shall pay such fees, costs and expenses at
least quarterly) if:
(i) FPSB has received an opinion of counsel stating that
the use of counsel chosen by the Trust to represent FPSB would present such
counsel with a conflict of interest;
(ii) the defendants in, or targets of, any such action or
proceeding include both FPSB and the Trust, and legal counsel to FPSB shall
have reasonably concluded that there are legal defenses available to it which
are different from or additional to those available to the Trust or which may
be adverse to or inconsistent with defenses available to the Trust (in which
case the Trust shall not have the right to direct the defense of such action
on behalf of FPSB); or
(iii) the Trust shall authorize FPSB to employ separate counsel
at the expense of the Trust.
(c) Any person, even though also a director, officer, employee,
shareholder or agent of FPSB, who may be or become an officer, director,
Trustee, employee or agent of the Trust, shall be deemed, when rendering
services to the Trust or acting on any business of the Trust (other than
services or business in connection with FPSB's duties hereunder), to be
rendering such services to or acting solely for the Trust and not as a
director, officer, employee, shareholder or agent, or one under the control or
direction of FPSB even though receiving a salary from FPSB.
(d) The Trust agrees to indemnify and hold harmless FPSB, and each
person who controls FPSB within the meaning of Section 15 of the Securities
Act of 1933, as amended (the "Securities Act"), or Section 20 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), against any
and all losses, claims, damages and liabilities, joint or several (including
any reasonable investigative, legal and other expenses incurred in connection
therewith) to which they, or any of them, may become subject under the Act,
the Securities Act, the Exchange Act or other federal or state law or
regulation, at common law or otherwise insofar as such losses, claims, damages
or liabilities (or actions, suits or proceedings in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in a Prospectus, Statement of Additional Information,
supplement thereto, sales literature (or other written information) prepared
by the Trust and furnished by the Trust to FPSB for FPSB's use hereunder,
disseminated by the Trust or which arise out of or are based upon any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading.
Such indemnity shall not, however, inure to the benefit of FPSB (or any
person controlling FPSB) on account of any losses, claims, damages or
liabilities (or actions, suits or proceedings in respect thereof) arising from
the sale of the Shares of the Trust to any person by FPSB (i) if such untrue
statement or omission or alleged untrue statement or omission was made in the
Prospectus, Statement of Additional Information, or supplement, sales or other
literature, in reliance upon and in conformity with information furnished in
writing to the Trust by FPSB specifically for use therein or (ii) if such
losses, claims, damages or liabilities arise out of or are based upon an
untrue statement or omission or alleged untrue statement or omission found in
any Prospectus, Statement of Additional Information, supplement, sales or
other literature, subsequently corrected, but negligently distributed by FPSB
and a copy of the corrected Prospectus was not delivered to such person at or
before the confirmation of the sale to such person.
(e) FPSB shall not be responsible for any damages, consequential or
otherwise, which the Advisor or the Trust may experience, due to the
disruption of the distribution of Shares caused by any action or inaction of
any registered representative or affiliate of FPSB or of FPSB itself.
Section 10. Amendment. No provision of this Agreement may be amended
or modified in any manner except by a written agreement properly authorized
and executed by the Parties.
Section 11. Section Headings. Section and paragraph headings are for
convenience only and shall not be construed as part of this Agreement.
Section 12. Reports. FPSB shall prepare reports for the Board of
Trustees of the Trust, on a quarterly basis, showing such information as, from
time to time, shall be reasonably requested by the Board.
Section 13. Severability. If any part, term or provision of this
Agreement is held by any court to be illegal, in conflict with any law or
otherwise invalid, the remaining portion or portions shall be considered
severable and not affected, and the rights and obligations of the Parties
shall be construed and enforced as if the Agreement did not contain the
particular part, term or provision held to be illegal or invalid provided that
the basic agreement is not thereby substantially impaired.
Section 14. Governing Law. This Agreement shall be governed by the
laws of the Commonwealth of Pennsylvania and the exclusive venue of any action
arising under this Agreement shall be Montgomery County, Commonwealth of
Pennsylvania.
Section 15. Authority to Execute. The Parties represent and warrant to
each other that the execution and delivery of this Agreement by the
undersigned officer of each Party has been duly and validly authorized; and,
when duly executed, this Agreement will constitute a valid and legally binding
and enforceable obligation of each Party.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement
consisting of nine type written pages, together with Schedules "A," "B" and
"C" to be signed by their duly authorized officers as of the day and year
first above written.
The Sports Funds Trust FPS Broker Services, Inc.
By: Jack R. Plymale, Sole Trustee By: Kenneth J. Kempf
President
Pegasus Advisory Group, Inc.
By: Jack R. Plymale, President
SCHEDULE "A"
UNDERWRITER/SPONSOR SERVICES
I. Underwriter/Sponsor services include:
A) Preparation and execution of Underwriter and 12b-1 Plan Agreements
? Monitoring accruals
? Monitoring expenses
? Disbursements for expenses and trail commissions
B) Quarterly 12b-1 Reports to Board of Trustees
C) Literature review, recommendations and submission to the NASD
SCHEDULE "B"
STATUTORY UNDERWRITER SCHEDULE
This Fee Schedule is fixed for a period of one (1) year from the Effective
Date as that term is defined in the Agreement.
I. Statutory Underwriter Services
A) The Trust agrees to pay FPS Broker Services, Inc. (FPSB) $25,000 for
the first portfolio and $2,500 for each additional portfolio for services
performed under this Agreement.
SCHEDULE "C"
Identification of Series
Below are listed the Series of Shares to which services under this Agreement
are to be performed as of the Effective Date of this Agreement:
The Sports Funds Trust
1. The Motorsports Growth & Income Fund
This Schedule "C" may be amended from time to time by agreement of the
Parties.
CUSTODY AGREEMENT
Agreement made as of this day of ,
1998, between THE SPORTS FUNDS TRUST, a Delaware business
trust organized and existing under the laws of the State of
Delaware, having its principal office and place of business at
5-H Oak Branch Drive, Greensboro, North Carolina 27407
(hereinafter called the "Fund"), and THE BANK OF NEW YORK, a
New York corporation authorized to do a banking business, hav-
ing its principal office and place of business at 48 Wall
Street, New York, New York 10286 (hereinafter called the "Cus-
todian").
W I T N E S S E T H :
WHEREAS, the Fund represents that pursuant to the
Administration Agreement (as hereinafter defined) between FPS
Services, Inc. ("FPS") and the Fund, FPS (a) has agreed to
perform certain administrative functions which may include the
functions of administrator, transfer agent and accounting ser-
vices agent and (b) has been appointed by the Fund to act as
its agent in respect of certain transactions contemplated in
this Agreement; and
WHEREAS, the Fund represents that (a) FPS has agreed to
act as Fund's agent in respect of certain transactions
contemplated in this Agreement and (b) the Custodian is au-
thorized and directed to rely upon and follow Certificates and
Instructions given by FPS, the Fund's agent, in respect of
transactions contemplated in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises
hereinafter set forth, the Fund and the Custodian agree as
follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the
following meanings
1. "Administrator" shall mean FPS and such successors
or permitted assigns as may succeed and perform its duties
under the Administration Agreement.
2. "Administration Agreement" shall mean that certain
separate agreement entitled "Custody Administration and Agency
Agreement" dated as of _______________, 1998 between the Fund
and the FPS.
3. "Book-Entry System" shall mean the Federal
Reserve/Treasury book-entry system for United States and fed-
eral agency securities, its successor or successors and its
nominee or nominees.
4. "Call Option" shall mean an exchange traded option
with respect to Securities other than Stock Index Options,
Futures Contracts, and Futures Contract Options entitling the
holder, upon timely exercise and payment of the exercise
price, as specified therein, to purchase from the writer
thereof the specified underlying Securities.
5. "Certificate" shall mean any notice, instruction, or
other instrument in writing, authorized or required by this
Agreement to be given to the Custodian which is actually re-
ceived by the Custodian and signed on behalf of the Fund by
any two Officers, and the term Certificate shall also include
Instructions communicated to the Custodian by the
Administrator.
6. "Clearing Member" shall mean a registered
broker-dealer which is a clearing member under the rules of
O.C.C. and a member of a national securities exchange quali-
fied to act as a custodian for an investment company, or any
broker-dealer reasonably believed by the Custodian to be such
a clearing member.
7. "Collateral Account" shall mean a segregated account
so denominated which is specifically allocated to a Series and
pledged to the Custodian as security for, and in consideration
of, the Custodian's issuance of (a) any Put Option guarantee
letter or similar document described in paragraph 8 of Article
V herein, or (b) any receipt described in Article V or VIII
herein.
8. "Composite Currency Unit" shall mean the European
Currency Unit or any other composite unit consisting of the
aggregate of specified amounts of specified Currencies as such
unit may be constituted from time to time.
9. "Covered Call Option" shall mean an exchange traded
option entitling the holder, upon timely exercise and payment
of the exercise price, as specified therein, to purchase from
- 2
the writer thereof the specified underlying Securities (ex-
cluding Futures Contracts) which are owned by the writer
thereof and subject to appropriate restrictions.
10. "Currency" shall mean money denominated in a lawful
currency of any country or the European Currency Unit.
11. "Depository" shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and
Exchange Commission, its successor or successors and its nomi-
nee or nominees. The term "Depository" shall further mean and
include any other person authorized to act as a depository
under the Investment Company Act of 1940, its successor or
successors and its nominee or nominees, specifically identi-
fied in a certified copy of a resolution of the Fund's Board
of Trustees specifically approving deposits therein by the
Custodian.
12. "Financial Futures Contract" shall mean the firm
commitment to buy or sell fixed income securities including,
without limitation, U.S. Treasury Bills, U.S. Treasury Notes,
U.S. Treasury Bonds, domestic bank certificates of deposit,
and Eurodollar certificates of deposit, during a specified
month at an agreed upon price.
13. "Futures Contract" shall mean a Financial Futures
Contract and/or Stock Index Futures Contracts.
14. "Futures Contract Option" shall mean an option with
respect to a Futures Contract.
15. "FX Transaction" shall mean any transaction for the
purchase by one party of an agreed amount in one Currency
against the sale by it to the other party of an agreed amount
in another Currency.
16. "Instructions" shall mean instructions
communications transmitted by electronic or telecommunications
media including S.W.I.F.T., computer-to-computer interface,
dedicated transmission line, facsimile transmission (which may
be signed by an Officer or unsigned) and tested telex.
17. "Margin Account" shall mean a segregated account in
the name of a broker, dealer, futures commission merchant, or
a Clearing Member, or in the name of the Fund for the benefit
of a broker, dealer, futures commission merchant, or Clearing
Member, or otherwise, in accordance with an agreement between
the Fund, the Custodian and a broker, dealer, futures commis-
sion merchant or a Clearing Member (a "Margin Account Agree-
ment"), separate and distinct from the custody account, in
which certain Securities and/or money of the Fund shall be
deposited and withdrawn from time to time in connection with
- 3
such transactions as the Fund may from time to time deter-
mine. Securities held in the Book-Entry System or the Deposi-
tory shall be deemed to have been deposited in, or withdrawn
from, a Margin Account upon the Custodian's effecting an ap-
propriate entry in its books and records.
18. "Money Market Security" shall be deemed to include,
without limitation, certain Reverse Repurchase Agreements,
debt obligations issued or guaranteed as to interest and prin-
cipal by the government of the United States or agencies or
instrumentalities thereof, any tax, bond or revenue anticipa-
tion note issued by any state or municipal government or pub-
lic authority, commercial paper, certificates of deposit and
bankers' acceptances, repurchase agreements with respect to
the same and bank time deposits, where the purchase and sale
of such securities normally requires settlement in federal
funds on the same day as such purchase or sale.
19. "O.C.C." shall mean the Options Clearing Corpora-
tion, a clearing agency registered under Section 17A of the
Securities Exchange Act of 1934, its successor or successors,
and its nominee or nominees.
20. "Officers" shall be deemed to include the President,
any Vice President, the Secretary, the Clerk, the Treasurer,
the Controller, any Assistant Secretary, any Assistant Clerk,
any Assistant Treasurer, and any other person or persons, in-
cluding officers or employees of the Administrator, whether or
not any such other person is an officer of the Fund, duly au-
thorized by the Board of Trustees of the Fund to execute any
Certificate, instruction, notice or other instrument on behalf
of the Fund and listed in the Certificate annexed hereto as
Appendix A or such other Certificate as may be received by the
Custodian from time to time.
21. "Option" shall mean a Call Option, Covered Call Op-
tion, Stock Index Option and/or a Put Option.
22. "Oral Instructions" shall mean verbal instructions
actually received by the Custodian from an Officer or from a
person reasonably believed by the Custodian to be an Officer.
23. "Put Option" shall mean an exchange traded option
with respect to Securities other than Stock Index Options,
Futures Contracts, and Futures Contract Options entitling the
holder, upon timely exercise and tender of the specified un-
derlying Securities, to sell such Securities to the writer
thereof for the exercise price.
24. "Reverse Repurchase Agreement" shall mean an agree-
ment pursuant to which the Fund sells Securities and agrees to
repurchase such Securities at a described or specified date
and price.
- 4
25. "Security" shall be deemed to include, without limi-
tation, Money Market Securities, Call Options, Put Options,
Stock Index Options, Stock Index Futures Contracts, Stock In-
dex Futures Contract Options, Financial Futures Contracts,
Financial Futures Contract Options, Reverse Repurchase Agree-
ments, common stocks and other securities having characteris-
tics similar to common stocks, preferred stocks, debt obliga-
tions issued by state or municipal governments and by public
authorities, (including, without limitation, general obliga-
tion bonds, revenue bonds, industrial bonds and industrial
development bonds), bonds, debentures, notes, mortgages or
other obligations, and any certificates, receipts, warrants or
other instruments representing rights to receive, purchase,
sell or subscribe for the same, or evidencing or representing
any other rights or interest therein, or any property or as-
sets.
26. "Senior Security Account" shall mean an account
maintained and specifically allocated to a Series under the
terms of this Agreement as a segregated account, by recorda-
tion or otherwise, within the custody account in which certain
Securities and/or other assets of the Fund specifically al-
located to such Series shall be deposited and withdrawn from
time to time in accordance with Certificates received by the
Custodian in connection with such transactions as the Fund may
from time to time determine.
27. "Series" shall mean the various portfolios, if any,
of the Fund as described from time to time in the current and
effective prospectus for the Fund and listed on Appendix B
hereto as amended from time to time.
28. "Shares" shall mean the shares of beneficial inter-
est of the Fund, each of which is, in the case of a Fund hav-
ing Series, allocated to a particular Series.
29. "Stock Index Futures Contract" shall mean a bilat-
eral agreement pursuant to which the parties agree to take or
make delivery of an amount of cash equal to a specified dollar
amount times the difference between the value of a particular
stock index at the close of the last business day of the con-
tract and the price at which the futures contract is origi-
nally struck.
30. "Stock Index Option" shall mean an exchange traded
option entitling the holder, upon timely exercise, to receive
an amount of cash determined by reference to the difference
between the exercise price and the value of the index on the
date of exercise.
- 5
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custo-
dian as custodian of the Securities and money at any time
owned by the Fund during the period of this Agreement.
2. The Custodian hereby accepts appointment as such
custodian and agrees to perform the duties thereof as herein-
after set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this
Article and in Article VIII, the Fund will deliver or cause to
be delivered to the Custodian all Securities and all money
owned by it, at any time during the period of this Agreement,
and shall specify with respect to such Securities and money
the Series to which the same are specifically allocated. The
Custodian shall segregate, keep and maintain the assets of the
Series separate and apart. The Custodian will not be respon-
sible for any Securities and money not actually received by
it. The Custodian will be entitled to reverse any credits
made on the Fund's behalf where such credits have been previ-
ously made and money is not finally collected. The Fund shall
deliver to the Custodian a certified resolution of the Board
of Trustees of the Fund, substantially in the form of Exhibit
A hereto, approving, authorizing and instructing the Custodian
on a continuous and on-going basis to deposit in the
Book-Entry System all Securities eligible for deposit therein,
regardless of the Series to which the same are specifically
allocated and to utilize the Book-Entry System to the extent
possible in connection with its performance hereunder, includ-
ing, without limitation, in connection with settlements of
purchases and sales of Securities, loans of Securities and
deliveries and returns of Securities collateral. Prior to a
deposit of Securities specifically allocated to a Series in
the Depository, the Fund shall deliver to the Custodian a cer-
tified resolution of the Board of Trustees of the Fund, sub-
stantially in the form of Exhibit B hereto, approving, autho-
rizing and instructing the Custodian on a continuous and ongo-
ing basis until instructed to the contrary by a Certificate
actually received by the Custodian to deposit in the Deposi-
tory all Securities specifically allocated to such Series eli-
gible for deposit therein, and to utilize the Depository to
the extent possible with respect to such Securities in connec-
tion with its performance hereunder, including, without limi-
tation, in connection with settlements of purchases and sales
- 6
of Securities, loans of Securities, and deliveries and returns
of Securities collateral. Securities and money deposited in
either the Book-Entry System or the Depository will be repre-
sented in accounts which include only assets held by the Cus-
todian for customers, including, but not limited to, accounts
in which the Custodian acts in a fiduciary or representative
capacity and will be specifically allocated on the Custodian's
books to the separate account for the applicable Series.
Prior to the Custodian's accepting, utilizing and acting with
respect to Clearing Member confirmations for Options and
transactions in Options for a Series as provided in this
Agreement, the Custodian shall have received a certified reso-
lution of the Fund's Board of Trustees, substantially in the
form of Exhibit C hereto, approving, authorizing and instruct-
ing the Custodian on a continuous and on-going basis, until
instructed to the contrary by a Certificate actually received
by the Custodian, to accept, utilize and act in accordance
with such confirmations as provided in this Agreement with
respect to such Series.
2. The Custodian shall establish and maintain separate
accounts, in the name of each Series, and shall credit to the
separate account for each Series all money received by it for
the account of the Fund with respect to such Series. Money
credited to a separate account for a Series shall be disbursed
by the Custodian only:
(a) as hereinafter provided;
(b) pursuant to Certificates setting forth the name
and address of the person to whom the payment is to be made,
the Series account from which payment is to be made and the
purpose for which payment is to be made; or
(c) in payment of the fees and in reimbursement of
the expenses and liabilities of the Custodian attributable to
such Series.
3. Promptly after the close of business on each day,
the Custodian shall furnish the Administrator with confirma-
tions and a summary, on a per Series basis, of all transfers
to or from the account of the Fund for a Series, either here-
under or with any co-custodian or sub-custodian appointed in
accordance with this Agreement during said day. Where Securi-
ties are transferred to the account of the Fund for a Series,
the Custodian shall also by book-entry or otherwise identify
as belonging to such Series a quantity of Securities in a fun-
gible bulk of Securities registered in the name of the Custo-
dian (or its nominee) or shown on the Custodian's account on
the books of the Book-Entry System or the Depository. At
least monthly and from time to time, the Custodian shall fur-
nish the Administrator with a detailed statement, on a per
Series basis, of the Securities and money held by the Custo-
dian for the Fund.
- 7
4. Except as otherwise provided in paragraph 7 of this
Article and in Article VIII, all Securities held by the Custo-
dian hereunder, which are issued or issuable only in bearer
form, except such Securities as are held in the Book-Entry
System, shall be held by the Custodian in that form; all other
Securities held hereunder may be registered in the name of the
Fund, in the name of any duly appointed registered nominee of
the Custodian as the Custodian may from time to time deter-
mine, or in the name of the Book-Entry System or the Deposi-
tory or their successor or successors, or their nominee or
nominees. The Fund agrees to furnish or cause to be furnished
to the Custodian appropriate instruments to enable the Custo-
dian to hold or deliver in proper form for transfer, or to
register in the name of its registered nominee or in the name
of the Book-Entry System or the Depository any Securities
which it may hold hereunder and which may from time to time be
registered in the name of the Fund. The Custodian shall hold
all such Securities specifically allocated to a Series which
are not held in the Book-Entry System or in the Depository in
a separate account in the name of such Series physically seg-
regated at all times from those of any other person or per-
sons.
5. Except as otherwise provided in this Agreement and
unless otherwise instructed to the contrary by a Certificate,
the Custodian by itself, or through the use of the Book-Entry
System or the Depository with respect to Securities held here-
under and therein deposited, shall with respect to all Securi-
ties held for the Fund hereunder in accordance with preceding
paragraph 4:
(a) collect all income due or payable;
(b) present for payment and collect the amount pay-
able upon such Securities which are called, but only if either
(i) the Custodian receives a written notice of such call, or
(ii) notice of such call appears in one or more of the publi-
cations listed in Appendix C annexed hereto, which may be
amended at any time by the Custodian without the prior notifi-
cation or consent of the Fund;
(c) present for payment and collect the amount pay-
able upon all Securities which mature;
(d) surrender Securities in temporary form for de-
finitive Securities;
(e) execute, as custodian, any necessary declara-
tions or certificates of ownership under the Federal Income
Tax Laws or the laws or regulations of any other taxing au-
thority now or hereafter in effect; and
- 8
(f) hold directly, or through the Book-Entry System
or the Depository with respect to Securities therein depos-
ited, for the account of a Series, all rights and similar se-
curities issued with respect to any Securities held by the
Custodian for such Series hereunder.
6. Upon receipt of a Certificate and not otherwise, the
Custodian, directly or through the use of the Book-Entry Sys-
tem or the Depository, shall:
(a) execute and deliver to such persons as may be
designated in such Certificate proxies, consents, authoriza-
tions, and any other instruments whereby the authority of the
Fund as owner of any Securities held by the Custodian hereun-
der for the Series specified in such Certificate may be exer-
cised;
(b) deliver any Securities held by the Custodian
hereunder for the Series specified in such Certificate in ex-
change for other Securities or cash issued or paid in con-
nection with the liquidation, reorganization, refinancing,
merger, consolidation or recapitalization of any corporation,
or the exercise of any conversion privilege and receive and
hold hereunder specifically allocated to such Series any cash
or other Securities received in exchange;
(c) deliver any Securities held by the Custodian
hereunder for the Series specified in such Certificate to any
protective committee, reorganization committee or other person
in connection with the reorganization, refinancing, merger,
consolidation, recapitalization or sale of assets of any cor-
poration, and receive and hold hereunder specifically al-
located to such Series such certificates of deposit, interim
receipts or other instruments or documents as may be issued to
it to evidence such delivery;
(d) make such transfers or exchanges of the assets
of the Series specified in such Certificate, and take such
other steps as shall be stated in such Certificate to be for
the purpose of effectuating any duly authorized plan of liqui-
dation, reorganization, merger, consolidation or recapitaliza-
tion of the Fund; and
(e) present for payment and collect the amount pay-
able upon Securities not described in preceding paragraph 5(b)
of this Article which may be called as specified in the Cer-
tificate.
7. Notwithstanding any provision elsewhere contained
herein, the Custodian shall not be required to obtain posses-
sion of any instrument or certificate representing any Futures
Contract, any Option, or any Futures Contract Option until
after it shall have determined, or shall have received a Cer-
tificate from the Fund stating, that any such instruments or
- 9
certificates are available. The Fund shall deliver to the
Custodian such a Certificate no later than the business day
preceding the availability of any such instrument or certifi-
cate. Prior to such availability, the Custodian shall comply
with Section 17(f) of the Investment Company Act of 1940, as
amended, in connection with the purchase, sale, settlement,
closing-out or writing of Futures Contracts, Options, or Fu-
tures Contract Options by making payments or deliveries speci-
fied in Certificates received by the Custodian in connection
with any such purchase, sale, writing, settlement or closing-
out upon its receipt from a broker, dealer, or futures commis-
sion merchant of a statement or confirmation reasonably be-
lieved by the Custodian to be in the form customarily used by
brokers, dealers, or futures commission merchants with respect
to such Futures Contracts, Options, or Futures Contract Op-
tions, as the case may be, confirming that such Security is
held by such broker, dealer or futures commission merchant, in
book-entry form or otherwise, in the name of the Custodian (or
any nominee of the Custodian) as custodian for the Fund, pro-
vided, however, that notwithstanding the foregoing, payments
to or deliveries from the Margin Account and payments with
respect to Securities to which a Margin Account relates, shall
be made in accordance with the terms and conditions of the
Margin Account Agreement. Whenever any such instruments or
certificates are available, the Custodian shall, notwithstand-
ing any provision in this Agreement to the contrary, make pay-
ment for any Futures Contract, Option, or Futures Contract
Option for which such instruments or such certificates are
available only against the delivery to the Custodian of such
instrument or such certificate, and deliver any Futures Con-
tract, Option or Futures Contract Option for which such in-
struments or such certificates are available only against re-
ceipt by the Custodian of payment therefor. Any such instru-
ment or certificate delivered to the Custodian shall be held
by the Custodian hereunder in accordance with, and subject to,
the provisions of this Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the
Fund, other than a purchase of an Option, a Futures Contract,
or a Futures Contract Option, the Fund shall deliver or cause
the Administrator to deliver to the Custodian (i) with respect
to each purchase of Securities which are not Money Market Se-
curities, a Certificate, and (ii) with respect to each pur-
chase of Money Market Securities, a Certificate or Oral In-
structions, specifying with respect to each such purchase:
(a) the Series to which such Securities are to be specifically
- 10
allocated; (b) the name of the issuer and the title of the
Securities; (c) the number of shares or the principal amount
purchased and accrued interest, if any; (d) the date of pur-
chase and settlement; (e) the purchase price per unit; (f) the
total amount payable upon such purchase; (g) the name of the
person from whom or the broker through whom the purchase was
made, and the name of the clearing broker, if any; and (h) the
name of the broker to whom payment is to be made. The Custo-
dian shall, upon receipt of Securities purchased by or for the
Fund, pay to the broker specified in the Certificate out of
the money held for the account of such Series the total amount
payable upon such purchase, provided that the same conforms to
the total amount payable as set forth in such Certificate or
Oral Instructions.
2. Promptly after each sale of Securities by the Fund,
other than a sale of any Option, Futures Contract, Futures
Contract Option, or any Reverse Repurchase Agreement, the Fund
shall deliver or cause the Administrator to deliver to the
Custodian (i) with respect to each sale of Securities which
are not Money Market Securities, a Certificate, and (ii) with
respect to each sale of Money Market Securities, a Certificate
or Oral Instructions, specifying with respect to each such
sale: (a) the Series to which such Securities were specifi-
cally allocated; (b) the name of the issuer and the title of
the Security; (c) the number of shares or principal amount
sold, and accrued interest, if any; (d) the date of sale; (e)
the sale price per unit; (f) the total amount payable to the
Fund upon such sale; (g) the name of the broker through whom
or the person to whom the sale was made, and the name of the
clearing broker, if any; and (h) the name of the broker to
whom the Securities are to be delivered. The Custodian shall
deliver the Securities specifically allocated to such Series
to the broker specified in the Certificate against payment
upon receipt of the total amount payable to the Fund upon such
sale, provided that the same conforms to the total amount pay-
able as set forth in such Certificate or Oral Instructions.
ARTICLE V
OPTIONS
1. Promptly after the purchase of any Option by the
Fund, the Fund shall deliver or cause the Administrator to
deliver to the Custodian a Certificate specifying with respect
to each Option purchased: (a) the Series to which such Option
is specifically allocated; (b) the type of Option (put or
call); (c) the name of the issuer and the title and number of
shares subject to such Option or, in the case of a Stock Index
Option, the stock index to which such Option relates and the
number of Stock Index Options purchased; (d) the expiration
date; (e) the exercise price; (f) the dates of purchase and
- 11
settlement; (g) the total amount payable by the Fund in con-
nection with such purchase; (h) the name of the Clearing Mem-
ber through whom such Option was purchased; and (i) the name
of the broker to whom payment is to be made. The Custodian
shall pay, upon receipt of a Clearing Member's statement con-
firming the purchase of such Option held by such Clearing Mem-
ber for the account of the Custodian (or any duly appointed
and registered nominee of the Custodian) as custodian for the
Fund, out of money held for the account of the Series to which
such Option is to be specifically allocated, the total amount
payable upon such purchase to the Clearing Member through whom
the purchase was made, provided that the same conforms to the
total amount payable as set forth in such Certificate.
2. Promptly after the sale of any Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall de-
liver or cause the Administrator to deliver to the Custodian a
Certificate specifying with respect to each such sale: (a)
the Series to which such Option was specifically allocated;
(b) the type of Option (put or call); (c) the name of the
issuer and the title and number of shares subject to such
Option or, in the case of a Stock Index Option, the stock
index to which such Option relates and the number of Stock
Index Options sold; (d) the date of sale; (e) the sale price;
(f) the date of settlement; (g) the total amount payable to
the Fund upon such sale; and (h) the name of the Clearing
Member through whom the sale was made. The Custodian shall
consent to the delivery of the Option sold by the Clearing
Member which previously supplied the confirmation described in
preceding paragraph 1 of this Article with respect to such
Option against payment to the Custodian of the total amount
payable to the Fund, provided that the same conforms to the
total amount payable as set forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call
Option purchased by the Fund pursuant to paragraph 1 hereof,
the Fund shall deliver or cause the Administrator to deliver
to the Custodian a Certificate specifying with respect to such
Call Option: (a) the Series to which such Call Option was
specifically allocated; (b) the name of the issuer and the
title and number of shares subject to the Call Option; (c) the
expiration date; (d) the date of exercise and settlement; (e)
the exercise price per share; (f) the total amount to be paid
by the Fund upon such exercise; and (g) the name of the
Clearing Member through whom such Call Option was exercised.
The Custodian shall, upon receipt of the Securities underlying
the Call Option which was exercised, pay out of the money held
for the account of the Series to which such Call Option was
specifically allocated the total amount payable to the Clear-
ing Member through whom the Call Option was exercised, pro-
vided that the same conforms to the total amount payable as
set forth in such Certificate.
- 12
4. Promptly after the exercise by the Fund of any Put
Option purchased by the Fund pursuant to paragraph 1 hereof,
the Fund shall deliver or cause the Administrator to deliver
to the Custodian a Certificate specifying with respect to such
Put Option: (a) the Series to which such Put Option was spe-
cifically allocated; (b) the name of the issuer and the title
and number of shares subject to the Put Option; (c) the expi-
ration date; (d) the date of exercise and settlement; (e) the
exercise price per share; (f) the total amount to be paid to
the Fund upon such exercise; and (g) the name of the Clearing
Member through whom such Put Option was exercised. The Custo-
dian shall, upon receipt of the amount payable upon the exer-
cise of the Put Option, deliver or direct the Depository to
deliver the Securities specifically allocated to such Series,
provided the same conforms to the amount payable to the Fund
as set forth in such Certificate.
5. Promptly after the exercise by the Fund of any Stock
Index Option purchased by the Fund pursuant to paragraph 1
hereof, the Fund shall deliver or cause the Administrator to
deliver to the Custodian a Certificate specifying with respect
to such Stock Index Option: (a) the Series to which such
Stock Index Option was specifically allocated; (b) the type of
Stock Index Option (put or call); (c) the number of Options
being exercised; (d) the stock index to which such Option
relates; (e) the expiration date; (f) the exercise price; (g)
the total amount to be received by the Fund in connection with
such exercise; and (h) the Clearing Member from whom such
payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the
Fund shall deliver or cause the Administrator to deliver to
the Custodian a Certificate specifying with respect to such
Covered Call Option: (a) the Series for which such Covered
Call Option was written; (b) the name of the issuer and the
title and number of shares for which the Covered Call Option
was written and which underlie the same; (c) the expiration
date; (d) the exercise price; (e) the premium to be received
by the Fund; (f) the date such Covered Call Option was writ-
ten; and (g) the name of the Clearing Member through whom the
premium is to be received. The Custodian shall deliver or
cause to be delivered, in exchange for receipt of the premium
specified in the Certificate with respect to such Covered Call
Option, such receipts as are required in accordance with the
customs prevailing among Clearing Members dealing in Covered
Call Options and shall impose, or direct the Depository to
impose, upon the underlying Securities specified in the Cer-
tificate specifically allocated to such Series such restric-
tions as may be required by such receipts. Notwithstanding
the foregoing, the Custodian has the right, upon prior written
notification to the Fund, at any time to refuse to issue any
receipts for Securities in the possession of the Custodian and
not deposited with the Depository underlying a Covered Call
Option.
- 13
7. Whenever a Covered Call Option written by the Fund
and described in the preceding paragraph of this Article is
exercised, the Fund shall deliver or cause the Administrator
to deliver to the Custodian a Certificate instructing the Cus-
todian to deliver, or to direct the Depository to deliver, the
Securities subject to such Covered Call Option and specifying:
(a) the Series for which such Covered Call Option was written;
(b) the name of the issuer and the title and number of shares
subject to the Covered Call Option; (c) the Clearing Member to
whom the underlying Securities are to be delivered; and (d)
the total amount payable to the Fund upon such delivery. Upon
the return and/or cancellation of any receipts delivered pur-
suant to paragraph 6 of this Article, the Custodian shall de-
liver, or direct the Depository to deliver, the underlying
Securities as specified in the Certificate against payment of
the amount to be received as set forth in such Certificate.
8. Whenever the Fund writes a Put Option, the Fund
shall deliver or cause the Administrator to deliver to the
Custodian a Certificate specifying with respect to such Put
Option: (a) the Series for which such Put Option was written;
(b) the name of the issuer and the title and number of shares
for which the Put Option is written and which underlie the
same; (c) the expiration date; (d) the exercise price; (e) the
premium to be received by the Fund; (f) the date such Put Op-
tion is written; (g) the name of the Clearing Member through
whom the premium is to be received and to whom a Put Option
guarantee letter is to be delivered; (h) the amount of cash,
and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in the Senior Secu-
rity Account for such Series; and (i) the amount of cash
and/or the amount and kind of Securities specifically al-
located to such Series to be deposited into the Collateral
Account for such Series. The Custodian shall, after making
the deposits into the Collateral Account specified in the Cer-
tificate, issue a Put Option guarantee letter substantially in
the form utilized by the Custodian on the date hereof, and
deliver the same to the Clearing Member specified in the Cer-
tificate against receipt of the premium specified in said Cer-
tificate. Notwithstanding the foregoing, the Custodian shall
be under no obligation to issue any Put Option guarantee let-
ter or similar document if it is unable to make any of the
representations contained therein.
9. Whenever a Put Option written by the Fund and de-
scribed in the preceding paragraph is exercised, the Fund
shall deliver or cause the Administrator to deliver to the
Custodian a Certificate specifying: (a) the Series to which
such Put Option was written; (b) the name of the issuer and
title and number of shares subject to the Put Option; (c) the
Clearing Member from whom the underlying Securities are to be
received; (d) the total amount payable by the Fund upon such
delivery; (e) the amount of cash and/or the amount and kind of
- 14
Securities specifically allocated to such Series to be with-
drawn from the Collateral Account for such Series and (f) the
amount of cash and/or the amount and kind of Securities, spe-
cifically allocated to such Series, if any, to be withdrawn
from the Senior Security Account. Upon the return and/or
cancellation of any Put Option guarantee letter or similar
document issued by the Custodian in connection with such Put
Option, the Custodian shall pay out of the money held for the
account of the Series to which such Put Option was specifi-
cally allocated the total amount payable to the Clearing Mem-
ber specified in the Certificate as set forth in such Certifi-
cate against delivery of such Securities, and shall make the
withdrawals specified in such Certificate.
10. Whenever the Fund writes a Stock Index Option, the
Fund shall deliver or cause the Administrator to deliver to
the Custodian a Certificate specifying with respect to such
Stock Index Option: (a) the Series for which such Stock Index
Option was written; (b) whether such Stock Index Option is a
put or a call; (c) the number of options written; (d) the
stock index to which such Option relates; (e) the expiration
date; (f) the exercise price; (g) the Clearing Member through
whom such Option was written; (h) the premium to be received
by the Fund; (i) the amount of cash and/or the amount and kind
of Securities, if any, specifically allocated to such Series
to be deposited in the Senior Security Account for such Se-
ries; (j) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to
be deposited in the Collateral Account for such Series; and
(k) the amount of cash and/or the amount and kind of Securi-
ties, if any, specifically allocated to such Series to be de-
posited in a Margin Account, and the name in which such ac-
count is to be or has been established. The Custodian shall,
upon receipt of the premium specified in the Certificate, make
the deposits, if any, into the Senior Security Account speci-
fied in the Certificate, and either (1) deliver such receipts,
if any, which the Custodian has specifically agreed to issue,
which are in accordance with the customs prevailing among
Clearing Members in Stock Index Options and make the deposits
into the Collateral Account specified in the Certificate, or
(2) make the deposits into the Margin Account specified in the
Certificate.
11. Whenever a Stock Index Option written by the Fund
and described in the preceding paragraph of this Article is
exercised, the Fund shall deliver or cause the Administrator
to deliver to the Custodian a Certificate specifying with re-
spect to such Stock Index Option: (a) the Series for which
such Stock Index Option was written; (b) such information as
may be necessary to identify the Stock Index Option being ex-
ercised; (c) the Clearing Member through whom such Stock Index
Option is being exercised; (d) the total amount payable upon
such exercise, and whether such amount is to be paid by or to
the Fund; (e) the amount of cash and/or amount and kind of
- 15
Securities, if any, to be withdrawn from the Margin Account;
and (f) the amount of cash and/or amount and kind of Securi-
ties, if any, to be withdrawn from the Senior Security Account
for such Series; and the amount of cash and/or the amount and
kind of Securities, if any, to be withdrawn from the Col-
lateral Account for such Series. Upon the return and/or can-
cellation of the receipt, if any, delivered pursuant to the
preceding paragraph of this Article, the Custodian shall pay
out of the money held for the account of the Series to which
such Stock Index Option was specifically allocated to the
Clearing Member specified in the Certificate the total amount
payable, if any, as specified therein.
12. Whenever the Fund purchases any Option identical to
a previously written Option described in paragraphs, 6, 8 or
10 of this Article in a transaction expressly designated as a
"Closing Purchase Transaction" in order to liquidate its posi-
tion as a writer of an Option, the Fund shall deliver or cause
the Administrator to deliver to the Custodian a Certificate
specifying with respect to the Option being purchased: (a)
that the transaction is a Closing Purchase Transaction; (b)
the Series for which the Option was written; (c) the name of
the issuer and the title and number of shares subject to the
Option, or, in the case of a Stock Index Option, the stock
index to which such Option relates and the number of Options
held; (d) the exercise price; (e) the premium to be paid by
the Fund; (f) the expiration date; (g) the type of Option (put
or call); (h) the date of such purchase; (i) the name of the
Clearing Member to whom the premium is to be paid; and (j) the
amount of cash and/or the amount and kind of Securities, if
any, to be withdrawn from the Collateral Account, a specified
Margin Account, or the Senior Security Account for such Se-
ries. Upon the Custodian's payment of the premium and the
return and/or cancellation of any receipt issued pursuant to
paragraphs 6, 8 or 10 of this Article with respect to the Op-
tion being liquidated through the Closing Purchase Transac-
tion, the Custodian shall remove, or direct the Depository to
remove, the previously imposed restrictions on the Securities
underlying the Call Option.
13. Upon the expiration, exercise or consummation of a
Closing Purchase Transaction with respect to any Option pur-
chased or written by the Fund and described in this Article,
the Custodian shall delete such Option from the statements
delivered to the Fund pursuant to paragraph 3 of Article III
herein, and upon the return and/or cancellation of any re-
ceipts issued by the Custodian, shall make such withdrawals
from the Collateral Account, and the Margin Account and/or the
Senior Security Account as may be specified in a Certificate
received in connection with such expiration, exercise, or con-
summation.
- 16
ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Con-
tract, the Fund shall deliver or cause the Administrator to
deliver to the Custodian a Certificate specifying with respect
to such Futures Contract, (or with respect to any number of
identical Futures Contract(s)): (a) the Series for which the
Futures Contract is being entered; (b) the category of Futures
Contract (the name of the underlying stock index or financial
instrument); (c) the number of identical Futures Contracts
entered into; (d) the delivery or settlement date of the Fu-
tures Contract(s); (e) the date the Futures Contract(s) was
(were) entered into and the maturity date; (f) whether the
Fund is buying (going long) or selling (going short) on such
Futures Contract(s); (g) the amount of cash and/or the amount
and kind of Securities, if any, to be deposited in the Senior
Security Account for such Series; (h) the name of the broker,
dealer, or futures commission merchant through whom the Fu-
tures Contract was entered into; and (i) the amount of fee or
commission, if any, to be paid and the name of the broker,
dealer, or futures commission merchant to whom such amount is
to be paid. The Custodian shall make the deposits, if any, to
the Margin Account in accordance with the terms and conditions
of the Margin Account Agreement. The Custodian shall make
payment out of the money specifically allocated to such Series
of the fee or commission, if any, specified in the Certificate
and deposit in the Senior Security Account for such Series the
amount of cash and/or the amount and kind of Securities
specified in said Certificate.
2. (a) Any variation margin payment or similar payment
required to be made by the Fund to a broker, dealer, or fu-
tures commission merchant with respect to an outstanding Fu-
tures Contract, shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment
from a broker, dealer, or futures commission merchant to the
Fund with respect to an outstanding Futures Contract, shall be
received and dealt with by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian
hereunder is retained by the Fund until delivery or settlement
is made on such Futures Contract, the Fund shall deliver or
cause the Administrator to deliver to the Custodian a Certifi-
cate specifying: (a) the Futures Contract and the Series to
which the same relates; (b) with respect to a Stock Index Fu-
tures Contract, the total cash settlement amount to be paid or
received, and with respect to a Financial Futures Contract,
- 17
the Securities and/or amount of cash to be delivered or re-
ceived; (c) the broker, dealer, or futures commission merchant
to or from whom payment or delivery is to be made or received;
and (d) the amount of cash and/or Securities to be withdrawn
from the Senior Security Account for such Series. The Custo-
dian shall make the payment or delivery specified in the Cer-
tificate, and delete such Futures Contract from the statements
delivered to the Fund pursuant to paragraph 3 of Article III
herein.
4. Whenever the Fund shall enter into a Futures Con-
tract to offset a Futures Contract held by the Custodian here-
under, the Fund shall deliver or cause the Administrator to
deliver to the Custodian a Certificate specifying: (a) the
items of information required in a Certificate described in
paragraph 1 of this Article, and (b) the Futures Contract be-
ing offset. The Custodian shall make payment out of the money
specifically allocated to such Series of the fee or commis-
sion, if any, specified in the Certificate and delete the Fu-
tures Contract being offset from the statements delivered to
the Fund pursuant to paragraph 3 of Article III herein, and
make such withdrawals from the Senior Security Account for
such Series as may be specified in such Certificate. The
withdrawals, if any, to be made from the Margin Account shall
be made by the Custodian in accordance with the terms and con-
ditions of the Margin Account Agreement.
5. Notwithstanding any other provision in this
Agreement to the contrary, the Custodian shall deliver cash
and Securities to a futures commission merchant upon receipt
of a Certificate from the Fund or the Administrator
specifying: (a) the name of the futures commission merchant;
(b) the specific cash and Securities to be delivered; (c) the
date of such delivery; and (d) the date of the agreement
between the Fund and such futures commission merchant entered
pursuant to Rule 17f-6 under the Investment Company Act 1940,
as amended. Each delivery of such a Certificate by the Fund
shall constitute (x) a representation and warranty by the Fund
that the Rule 17f-6 agreement has been duly authorized,
executed and delivered by the Fund and the futures commission
merchant and complies with Rule 17f-6, and (y) an agreement by
the Fund that the Custodian shall not be liable for the acts
or omissions of any such futures commission merchant.
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract
Option by the Fund, the Fund shall deliver or cause the Admin-
istrator to deliver to the Custodian a Certificate specifying
with respect to such Futures Contract Option: (a) the Series
- 18
to which such Option is specifically allocated; (b) the type
of Futures Contract Option (put or call); (c) the type of Fu-
tures Contract and such other information as may be necessary
to identify the Futures Contract underlying the Futures Con-
tract Option purchased; (d) the expiration date; (e) the exer-
cise price; (f) the dates of purchase and settlement; (g) the
amount of premium to be paid by the Fund upon such purchase;
(h) the name of the broker or futures commission merchant
through whom such option was purchased; and (i) the name of
the broker, or futures commission merchant, to whom payment is
to be made. The Custodian shall pay out of the money spe-
cifically allocated to such Series, the total amount to be
paid upon such purchase to the broker or futures commissions
merchant through whom the purchase was made, provided that the
same conforms to the amount set forth in such Certificate.
2. Promptly after the sale of any Futures Contract Op-
tion purchased by the Fund pursuant to paragraph 1 hereof, the
Fund shall deliver or cause the Administrator to deliver to
the Custodian a Certificate specifying with respect to each
such sale: (a) Series to which such Futures Contract Option
was specifically allocated; (b) the type of Futures Contract
Option (put or call); (c) the type of Futures Contract and
such other information as may be necessary to identify the
Futures Contract underlying the Futures Contract Option; (d)
the date of sale; (e) the sale price; (f) the date of settle-
ment; (g) the total amount payable to the Fund upon such sale;
and (h) the name of the broker of futures commission merchant
through whom the sale was made. The Custodian shall consent
to the cancellation of the Futures Contract Option being
closed against payment to the Custodian of the total amount
payable to the Fund, provided the same conforms to the total
amount payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the
Fund pursuant to paragraph 1 is exercised by the Fund, the
Fund shall deliver or cause the Administrator to deliver to
the Custodian a Certificate specifying: (a) the Series to
which such Futures Contract Option was specifically allocated;
(b) the particular Futures Contract Option (put or call) being
exercised; (c) the type of Futures Contract underlying the
Futures Contract Option; (d) the date of exercise; (e) the
name of the broker or futures commission merchant through whom
the Futures Contract Option is exercised; (f) the net total
amount, if any, payable by the Fund; (g) the amount, if any,
to be received by the Fund; and (h) the amount of cash and/or
the amount and kind of Securities to be deposited in the Se-
nior Security Account for such Series. The Custodian shall
make, out of the money and Securities specifically allocated
to such Series, the payments, if any, and the deposits, if
any, into the Senior Security Account as specified in the Cer-
tificate. The deposits, if any, to be made to the Margin Ac-
count shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
- 19
4. Whenever the Fund writes a Futures Contract Option,
the Fund shall deliver or cause the Administrator to deliver
to the Custodian a Certificate specifying with respect to such
Futures Contract Option: (a) the Series for which such
Futures Contract Option was written; (b) the type of Futures
Contract Option (put or call); (c) the type of Futures
Contract and such other information as may be necessary to
identify the Futures Contract underlying the Futures Contract
Option; (d) the expiration date; (e) the exercise price; (f)
the premium to be received by the Fund; (g) the name of the
broker or futures commission merchant through whom the premium
is to be received; and (h) the amount of cash and/or the
amount and kind of Securities, if any, to be deposited in the
Senior Security Account for such Series. The Custodian shall,
upon receipt of the premium specified in the Certificate, make
out of the money and Securities specifically allocated to such
Series the deposits into the Senior Security Account, if any,
as specified in the Certificate. The deposits, if any, to be
made to the Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account
Agreement.
5. Whenever a Futures Contract Option written by the
Fund which is a call is exercised, the Fund shall deliver or
cause the Administrator to deliver to the Custodian a Certifi-
cate specifying: (a) the Series to which such Futures
Contract Option was specifically allocated; (b) the particular
Futures Contract Option exercised; (c) the type of Futures
Contract underlying the Futures Contract Option; (d) the name
of the broker or futures commission merchant through whom such
Futures Contract Option was exercised; (e) the net total
amount, if any, payable to the Fund upon such exercise; (f)
the net total amount, if any, payable by the Fund upon such
exercise; and (g) the amount of cash and/or the amount and
kind of Securities to be deposited in the Senior Security
Account for such Series. The Custodian shall, upon its
receipt of the net total amount payable to the Fund, if any,
specified in such Certificate make the payments, if any, and
the deposits, if any, into the Senior Security Account as
specified in the Certificate. The deposits, if any, to be made
to the Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account
Agreement.
6. Whenever a Futures Contract Option which is written
by the Fund and which is a put is exercised, the Fund shall
deliver or cause the Administrator to deliver to the Custodian
a Certificate specifying: (a) the Series to which such Option
was specifically allocated; (b) the particular Futures Con-
tract Option exercised; (c) the type of Futures Contract un-
derlying such Futures Contract Option; (d) the name of the
broker or futures commission merchant through whom such Fu-
tures Contract Option is exercised; (e) the net total amount,
if any, payable to the Fund upon such exercise; (f) the net
- 20
total amount, if any, payable by the Fund upon such exercise;
and (g) the amount and kind of Securities and/or cash to be
withdrawn from or deposited in, the Senior Security Account
for such Series, if any. The Custodian shall, upon its re-
ceipt of the net total amount payable to the Fund, if any,
specified in the Certificate, make out of the money and Secu-
rities specifically allocated to such Series, the payments, if
any, and the deposits, if any, into the Senior Security Ac-
count as specified in the Certificate. The deposits to and/or
withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of
the Margin Account Agreement.
7. Whenever the Fund purchases any Futures Contract
Option identical to a previously written Futures Contract Op-
tion described in this Article in order to liquidate its posi-
tion as a writer of such Futures Contract Option, the Fund
shall deliver or cause the Administrator to deliver to the
Custodian a Certificate specifying with respect to the Futures
Contract Option being purchased: (a) the Series to which such
Option is specifically allocated; (b) that the transaction is
a closing transaction; (c) the type of Futures Contract and
such other information as may be necessary to identify the
Futures Contract underlying the Futures Option Contract; (d)
the exercise price; (e) the premium to be paid by the Fund;
(f) the expiration date; (g) the name of the broker or futures
commission merchant to whom the premium is to be paid; and (h)
the amount of cash and/or the amount and kind of Securities,
if any, to be withdrawn from the Senior Security Account for
such Series. The Custodian shall effect the withdrawals from
the Senior Security Account specified in the Certificate. The
withdrawals, if any, to be made from the Margin Account shall
be made by the Custodian in accordance with the terms and con-
ditions of the Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a
closing transaction with respect to, any Futures Contract Op-
tion written or purchased by the Fund and described in this
Article, the Custodian shall (a) delete such Futures Contract
Option from the statements delivered to the Fund pursuant to
paragraph 3 of Article III herein and, (b) make such withdraw-
als from and/or in the case of an exercise such deposits into
the Senior Security Account as may be specified in a Certifi-
cate. The deposits to and/or withdrawals from the Margin Ac-
count, if any, shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the
exercise of a Futures Contract Option described in this Ar-
ticle shall be subject to Article VI hereof.
10. Notwithstanding any other provision in this
Agreement to the contrary, the Custodian shall deliver cash
and Securities to a futures commission merchant upon receipt
- 21
of a Certificate from the Fund or the Administrator
specifying: (a) the name of the futures commission merchant;
(b) the specific cash and Securities to be delivered; (c) the
date of such delivery; and (d) the date of the agreement
between the Fund and such futures commission merchant entered
pursuant to Rule 17f-6 under the Investment Company Act 1940,
as amended. Each delivery of such a Certificate by the Fund
shall constitute (x) a representation and warranty by the Fund
that the Rule 17f-6 agreement has been duly authorized,
executed and delivered by the Fund and the futures commission
merchant and complies with Rule 17f-6, and (y) an agreement by
the Fund that the Custodian shall not be liable for the acts
or omissions of any such futures commission merchant.
ARTICLE VIII
SHORT SALES
1. Promptly after any short sales by any Series of the
Fund, the Fund shall deliver or cause the Administrator to
deliver to the Custodian a Certificate specifying: (a) the
Series for which such short sale was made; (b) the name of the
issuer and the title of the Security; (c) the number of shares
or principal amount sold, and accrued interest or dividends,
if any; (d) the dates of the sale and settlement; (e) the sale
price per unit; (f) the total amount credited to the Fund upon
such sale, if any, (g) the amount of cash and/or the amount
and kind of Securities, if any, which are to be deposited in a
Margin Account and the name in which such Margin Account has
been or is to be established; (h) the amount of cash and/or
the amount and kind of Securities, if any, to be deposited in
a Senior Security Account, and (i) the name of the broker
through whom such short sale was made. The Custodian shall
upon its receipt of a statement from such broker confirming
such sale and that the total amount credited to the Fund upon
such sale, if any, as specified in the Certificate is held by
such broker for the account of the Custodian (or any nominee
of the Custodian) as custodian of the Fund, issue a receipt or
make the deposits into the Margin Account and the Senior Secu-
rity Account specified in the Certificate.
2. In connection with the closing-out of any short
sale, the Fund shall deliver or cause the Administrator to
deliver to the Custodian a Certificate specifying with respect
to each such closing-out: (a) the Series for which such
transaction is being made; (b) the name of the issuer and the
title of the Security; (c) the number of shares or the princi-
pal amount, and accrued interest or dividends, if any, re-
quired to effect such closing-out to be delivered to the bro-
ker; (d) the dates of closing-out and settlement; (e) the pur-
chase price per unit; (f) the net total amount payable to the
Fund upon such closing-out; (g) the net total amount payable
- 22
to the broker upon such closing-out; (h) the amount of cash
and the amount and kind of Securities to be withdrawn, if any,
from the Margin Account; (i) the amount of cash and/or the
amount and kind of Securities, if any, to be withdrawn from
the Senior Security Account; and (j) the name of the broker
through whom the Fund is effecting such closing-out. The Cus-
todian shall, upon receipt of the net total amount payable to
the Fund upon such closing-out, and the return and/or cancel-
lation of the receipts, if any, issued by the Custodian with
respect to the short sale being closed-out, pay out of the
money held for the account of the Fund to the broker the net
total amount payable to the broker, and make the withdrawals
from the Margin Account and the Senior Security Account, as
the same are specified in the Certificate.
ARTICLE IX
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase
Agreement with respect to Securities and money held by the
Custodian hereunder, the Fund shall deliver or cause the Ad-
ministrator to deliver to the Custodian a Certificate, or in
the event such Reverse Repurchase Agreement is a Money Market
Security, a Certificate or Oral Instructions specifying: (a)
the Series for which the Reverse Repurchase Agreement is en-
tered; (b) the total amount payable to the Fund in connection
with such Reverse Repurchase Agreement and specifically al-
located to such Series; (c) the broker or dealer through or
with whom the Reverse Repurchase Agreement is entered; (d) the
amount and kind of Securities to be delivered by the Fund to
such broker or dealer; (e) the date of such Reverse Repurchase
Agreement; and (f) the amount of cash and/or the amount and
kind of Securities, if any, specifically allocated to such
Series to be deposited in a Senior Security Account for such
Series in connection with such Reverse Repurchase Agreement.
The Custodian shall, upon receipt of the total amount payable
to the Fund specified in the Certificate or Oral Instructions
make the delivery to the broker or dealer, and the deposits,
if any, to the Senior Security Account, specified in such Cer-
tificate or Oral Instructions.
2. Upon the termination of a Reverse Repurchase Agree-
ment described in preceding paragraph 1 of this Article, the
Fund shall deliver or cause the Administrator to deliver a
Certificate or, in the event such Reverse Repurchase Agreement
is a Money Market Security, a Certificate or Oral Instructions
to the Custodian specifying: (a) the Reverse Repurchase
Agreement being terminated and the Series for which same was
entered; (b) the total amount payable by the Fund in
connection with such termination; (c) the amount and kind of
Securities to be received by the Fund and specifically
- 23
allocated to such Series in connection with such termination;
(d) the date of termination; (e) the name of the broker or
dealer with or through whom the Reverse Repurchase Agreement
is to be terminated; and (f) the amount of cash and/or the
amount and kind of Securities to be withdrawn from the Senior
Securities Account for such Series. The Custodian shall, upon
receipt of the amount and kind of Securities to be received by
the Fund specified in the Certificate or Oral Instructions,
make the payment to the broker or dealer, and the withdrawals,
if any, from the Senior Security Account, specified in such
Certificate or Oral Instructions.
ARTICLE X
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities
specifically allocated to a Series held by the Custodian here-
under, the Fund shall deliver or cause the Administrator to
deliver to the Custodian a Certificate specifying with respect
to each such loan: (a) the Series to which the loaned Securi-
ties are specifically allocated; (b) the name of the issuer
and the title of the Securities, (c) the number of shares or
the principal amount loaned, (d) the date of loan and deliv-
ery, (e) the total amount to be delivered to the Custodian
against the loan of the Securities, including the amount of
cash collateral and the premium, if any, separately identi-
fied, and (f) the name of the broker, dealer, or financial
institution to which the loan was made. The Custodian shall
deliver the Securities thus designated to the broker, dealer
or financial institution to which the loan was made upon re-
ceipt of the total amount designated as to be delivered
against the loan of Securities. The Custodian may accept pay-
ment in connection with a delivery otherwise than through the
Book-Entry System or Depository only in the form of a certi-
fied or bank cashier's check payable to the order of the Fund
or the Custodian drawn on New York Clearing House funds and
may deliver Securities in accordance with the customs prevail-
ing among dealers in securities.
2. Promptly after each termination of the loan of Secu-
rities by the Fund, the Fund shall deliver or cause the Admin-
istrator to deliver to the Custodian a Certificate specifying
with respect to each such loan termination and return of Secu-
rities: (a) the Series to which the loaned Securities are
specifically allocated; (b) the name of the issuer and the
title of the Securities to be returned, (c) the number of
shares or the principal amount to be returned, (d) the date of
termination, (e) the total amount to be delivered by the Cus-
todian (including the cash collateral for such Securities mi-
nus any offsetting credits as described in said Certificate),
- 24
and (f) the name of the broker, dealer, or financial institu-
tion from which the Securities will be returned. The Custo-
dian shall receive all Securities returned from the broker,
dealer, or financial institution to which such Securities were
loaned and upon receipt thereof shall pay, out of the money
held for the account of the Fund, the total amount payable
upon such return of Securities as set forth in the Certifi-
cate.
ARTICLE XI
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such
deposits to, or withdrawals from, a Senior Security Account as
specified in a Certificate received by the Custodian. Such
Certificate shall specify the Series for which such deposit or
withdrawal is to be made and the amount of cash and/or the
amount and kind of Securities specifically allocated to such
Series to be deposited in, or withdrawn from, such Senior Se-
curity Account for such Series. In the event the Certificate
fails to specify the Series, the name of the issuer, the title
and the number of shares or the principal amount of any par-
ticular Securities to be deposited by the Custodian into, or
withdrawn from, a Senior Securities Account, the Custodian
shall be under no obligation to make any such deposit or with-
drawal and shall so notify the Administrator.
2. The Custodian shall make deliveries or payments from
a Margin Account to the broker, dealer, futures commission
merchant or Clearing Member in whose name, or for whose ben-
efit, the account was established as specified in the Margin
Account Agreement.
3. Amounts received by the Custodian as payments or
distributions with respect to Securities deposited in any Mar-
gin Account shall be dealt with in accordance with the terms
and conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and secu-
rity interest in and to any property at any time held by the
Custodian in any Collateral Account described herein. In ac-
cordance with applicable law the Custodian may enforce its
lien and realize on any such property whenever the Custodian
has made payment or delivery pursuant to any Put Option guar-
antee letter or similar document or any receipt issued hereun-
der by the Custodian. In the event the Custodian should real-
ize on any such property net proceeds which are less than the
Custodian's obligations under any Put Option guarantee letter
or similar document or any receipt, such deficiency shall be a
- 25
debt owed the Custodian by the Fund within the scope of Ar-
ticle XIV herein.
5. On each business day the Custodian shall furnish the
Fund with a statement with respect to each Margin Account in
which money or Securities are held specifying as of the close
of business on the previous business day: (a) the name of the
Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The Custo-
dian shall make available upon request to any broker, dealer,
or futures commission merchant specified in the name of a Mar-
gin Account a copy of the statement furnished the Fund with
respect to such Margin Account.
6. Promptly after the close of business on each busi-
ness day in which cash and/or Securities are maintained in a
Collateral Account for any Series, the Custodian shall furnish
the Administrator with a statement with respect to such Col-
lateral Account specifying the amount of cash and/or the
amount and kind of Securities held therein. No later than the
close of business next succeeding the delivery to the Fund of
such statement, the Fund shall deliver or cause the Adminis-
trator to deliver to the Custodian a Certificate specifying
the then market value of the Securities described in such
statement. In the event such then market value is indicated
to be less than the Custodian's obligation with respect to any
outstanding Put Option guarantee letter or similar document,
the Fund shall promptly specify or cause the Administrator to
promptly specify in a Certificate the additional cash and/or
Securities to be deposited in such Collateral Account to
eliminate such deficiency.
ARTICLE XII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall deliver or cause the Administrator to
deliver to the Custodian a copy of the resolution of the Board
of Trustees of the Fund, certified by the Secretary, the
Clerk, any Assistant Secretary or any Assistant Clerk, either
(i) setting forth with respect to the Series specified therein
the date of the declaration of a dividend or distribution, the
date of payment thereof, the record date as of which share-
holders entitled to payment shall be determined, the amount
payable per Share of such Series to the shareholders of record
as of that date and the total amount payable to the Dividend
Agent and any sub-dividend agent or co-dividend agent of the
Fund on the payment date, or (ii) authorizing with respect to
the Series specified therein the declaration of dividends and
distributions on a daily basis and authorizing the Custodian
to rely on Oral Instructions or a Certificate setting forth
the date of the declaration of such dividend or distribution,
- 26
the date of payment thereof, the record date as of which
shareholders entitled to payment shall be determined, the
amount payable per Share of such Series to the shareholders of
record as of that date and the total amount payable to the
Dividend Agent on the payment date.
2. Upon the payment date specified in such resolution,
Oral Instructions or Certificate, as the case may be, the Cus-
todian shall pay out of the money held for the account of each
Series the total amount payable to the Dividend Agent and any
sub-dividend agent or co-dividend agent of the Fund with
respect to such Series.
ARTICLE XIII
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall
deliver or cause the Administrator to deliver to the Custodian
a Certificate duly specifying:
(a) The Series, the number of Shares sold, trade
date, and price; and
(b) The amount of money to be received by the Cus-
todian for the sale of such Shares and specifically allocated
to the separate account in the name of such Series.
2. Upon receipt of such money from the Transfer Agent,
the Custodian shall credit such money to the separate account
in the name of the Series for which such money was received.
3. Upon issuance of any Shares of any Series described
in the foregoing provisions of this Article, the Custodian
shall pay, out of the money held for the account of such Se-
ries, all original issue or other taxes required to be paid by
the Fund in connection with such issuance upon the receipt of
a Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund
desires the Custodian to make payment out of the money held by
the Custodian hereunder in connection with a redemption of any
Shares, it shall deliver or cause the Administrator to deliver
to the Custodian a Certificate specifying:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice
setting forth the Series and number of Shares received by the
Transfer Agent for redemption and that such Shares are in good
- 27
form for redemption, the Custodian shall make payment to the
Transfer Agent out of the money held in the separate account
in the name of the Series the total amount specified in the
Certificate delivered pursuant to the foregoing paragraph 4 of
this Article.
6. Notwithstanding the above provisions regarding the
redemption of any Shares, whenever any Shares are redeemed
pursuant to any check redemption privilege which may from time
to time be offered by the Fund, the Custodian, unless other-
wise instructed by a Certificate, shall, upon receipt of an
advice from the Fund or its agent setting forth that the re-
demption is in good form for redemption in accordance with the
check redemption procedure, honor the check presented as part
of such check redemption privilege out of the money held in
the separate account of the Series of the Shares being re-
deemed.
ARTICLE XIV
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian, should in its sole discretion ad-
vance funds on behalf of any Series which results in an over-
draft because the money held by the Custodian in the separate
account for such Series shall be insufficient to pay the total
amount payable upon a purchase of Securities specifically al-
located to such Series, as set forth in a Certificate or Oral
Instructions, or which results in an overdraft in the separate
account of such Series for some other reason, or if the Fund
is for any other reason indebted to the Custodian with respect
to a Series, including any indebtedness to The Bank of New
York under the Fund's Cash Management and Related Services
Agreement, (except a borrowing for investment or for temporary
or emergency purposes using Securities as collateral pursuant
to a separate agreement and subject to the provisions of para-
graph 2 of this Article), such overdraft or indebtedness shall
be deemed to be a loan made by the Custodian to the Fund for
such Series payable on demand and shall bear interest from the
date incurred at a rate per annum (based on a 360-day year for
the actual number of days involved) equal to 1/2% over
Custodian's prime commercial lending rate in effect from time
to time, such rate to be adjusted on the effective date of any
change in such prime commercial lending rate but in no event
to be less than 6% per annum, or at such other rate per annum,
if any, as the Fund and the Custodian may agree upon in
writing from time to time. In addition, the Fund hereby
agrees that the Custodian shall have a continuing lien and
security interest in and to any property specifically al-
located to such Series at any time held by it for the benefit
of such Series or in which the Fund may have an interest which
- 28
is then in the Custodian's possession or control or in posses-
sion or control of any third party acting in the Custodian's
behalf. The Fund authorizes the Custodian, in its sole dis-
cretion, at any time to charge any such overdraft or indebted-
ness together with interest due thereon against any balance of
account standing to such Series' credit on the Custodian's
books. In addition, the Fund hereby covenants that on each
Business Day on which either it intends to enter a Reverse
Repurchase Agreement and/or otherwise borrow from a third
party, or which next succeeds a Business Day on which at the
close of business the Fund had outstanding a Reverse Repur-
chase Agreement or such a borrowing, it shall prior to 9 a.m.,
New York City time, advise the Custodian, in writing, of each
such borrowing, shall specify the Series to which the same
relates, and shall not incur any indebtedness not so specified
other than from the Custodian.
2. The Fund will cause to be delivered to the Custodian
by any bank (including, if the borrowing is pursuant to a
separate agreement, the Custodian) from which it borrows money
for investment or for temporary or emergency purposes using
Securities held by the Custodian hereunder as collateral for
such borrowings, a notice or undertaking in the form currently
employed by any such bank setting forth the amount which such
bank will loan to the Fund against delivery of a stated amount
of collateral. The Fund shall promptly deliver to the Custo-
dian a Certificate specifying with respect to each such bor-
rowing: (a) the Series to which such borrowing relates; (b)
the name of the bank, (c) the amount and terms of the borrow-
ing, which may be set forth by incorporating by reference an
attached promissory note, duly endorsed by the Fund, or other
loan agreement, (d) the time and date, if known, on which the
loan is to be entered into, (e) the date on which the loan
becomes due and payable, (f) the total amount payable to the
Fund on the borrowing date, (g) the market value of Securities
to be delivered as collateral for such loan, including the
name of the issuer, the title and the number of shares or the
principal amount of any particular Securities, and (h) a
statement specifying whether such loan is for investment pur-
poses or for temporary or emergency purposes and that such
loan is in conformance with the Investment Company Act of 1940
and the Fund's prospectus. The Custodian shall deliver on the
borrowing date specified in a Certificate the specified col-
lateral and the executed promissory note, if any, against de-
livery by the lending bank of the total amount of the loan
payable, provided that the same conforms to the total amount
payable as set forth in the Certificate. The Custodian may,
at the option of the lending bank, keep such collateral in its
possession, but such collateral shall be subject to all rights
therein given the lending bank by virtue of any promissory
note or loan agreement. The Custodian shall deliver such Se-
curities as additional collateral as may be specified in a
Certificate to collateralize further any transaction described
- 29
in this paragraph. The Fund shall cause all Securities re-
leased from collateral status to be returned directly to the
Custodian, and the Custodian shall receive from time to time
such return of collateral as may be tendered to it. In the
event that the Fund fails to specify in a Certificate the Se-
ries, the name of the issuer, the title and number of shares
or the principal amount of any particular Securities to be
delivered as collateral by the Custodian, the Custodian shall
not be under any obligation to deliver any Securities.
ARTICLE XV
INSTRUCTIONS
1. With respect to any software provided by the
Custodian to the Administrator in order for the Administrator
to transmit Instructions to the Custodian (the "Software"),
the Custodian grants to the Administrator a personal,
nontransferable and nonexclusive license to use the Software
solely for the purpose of transmitting Instructions on behalf
of the Fund to, and receiving communications from, the
Custodian in connection with its account(s). The
Administrator agrees not to sell, reproduce, lease or
otherwise provide, directly or indirectly, the Software or any
portion thereof to any third party without the prior written
consent of the Custodian.
2. The Administrator shall obtain and maintain at its
own cost and expense all equipment and services, including but
not limited to communications services, necessary for it to
utilize the Software and transmit Instructions to the
Custodian. The Custodian shall not be responsible for the
reliability, compatibility with the Software or availability
of any such equipment or services or the performance or
nonperformance by any nonparty to this Custody Agreement.
3. The Administrator acknowledges for itself and the
Fund that the Software, all data bases made available to the
Administrator by utilizing the Software (other than data bases
relating solely to the assets of the Fund and transactions
with respect thereto), and any proprietary data, processes,
information and documentation (other than which are or become
part of the public domain or are legally required to be made
available to the public) (collectively, the "Information"),
are the exclusive and confidential property of the Custodian.
The Administrator shall keep the Information confidential by
using the same care and discretion that the Administrator uses
with respect to its own confidential property and trade
secrets and shall neither make nor permit any disclosure
without the prior written consent of the Custodian. Upon
termination of this Agreement or the Software license granted
hereunder for any reason, the Fund shall return to the
Custodian all copies of the Information which are in its
- 30
possession or under its control or which the Fund distributed
to third parties.
4. The Custodian reserves the right to modify the
Software from time to time upon reasonable prior notice and
the Administrator shall install new releases of the Software
as the Custodian may direct. The Administrator agrees not to
modify or attempt to modify the Software without the
Custodian's prior written consent. The Administrator
acknowledges that any modifications to the Software, whether
by the Administrator or the Custodian and whether with or
without the Custodian's consent, shall become the property of
the Custodian.
5. The Custodian makes no warranties or representations
of any kind with regard to the Software or the method(s) by
which the Administrator may transmit Instructions to the
Custodian, express or implied, including but not limited to
any implied warranties of merchantability or fitness for a
particular purpose.
6. Where the method for transmitting Instructions by
the Administrator on behalf of the Fund involves an automatic
systems acknowledgment by the Custodian of its receipt of such
Instructions, then in the absence of such acknowledgment the
Custodian shall not be liable for any failure to act pursuant
to such Instructions, neither the Administrator nor the Fund
may claim that such Instructions were received by the
Custodian, and the Administrator or the Fund shall deliver a
Certificate by some other means.
7. (a) The Administrator and the Fund agree that where
the Administrator delivers to the Custodian Instructions
hereunder, it shall be the Administrator's sole responsibility
to ensure that only persons duly authorized by the
Administrator transmit such Instructions to the Custodian.
The Administrator will cause all persons transmitting
Instructions to the Custodian to treat applicable user and
authorization codes, passwords and authentication keys with
extreme care, and irrevocably authorizes the Custodian to act
in accordance with and rely upon Instructions received by it
pursuant hereto.
(b) The Administrator hereby represents,
acknowledges and agrees that it is fully informed of the
protections and risks associated with the various methods of
transmitting Instructions to the Custodian and that there may
be more secure methods of transmitting instructions to the
Custodian than the method(s) selected by the Administrator on
behalf of the Fund. The Fund hereby agree that the security
procedures (if any) to be followed in connection with the
Fund's transmission of Instructions provide a commercially
reasonable degree of protection in light of its particular
needs and circumstances.
- 31
8. The Administrator and the Fund hereby represent,
warrant and covenant to the Custodian that this Agreement has
been duly approved by a resolution of the Fund's Board of
Trustees, and that its transmission of Instructions pursuant
hereto shall at all times comply with the Investment Company
Act of 1940, as amended.
9. The Fund shall notify the Custodian of any errors,
omissions or interruptions in, or delay or unavailability of,
its ability to send Instructions as promptly as practicable,
and in any event within 24 hours after the earliest of (i)
discovery thereof, (ii) the Business Day on which discovery
should have occurred through the exercise of reasonable care
and (iii) in the case of any error, the date of actual receipt
of the earliest notice which reflects such error, it being
agreed that discovery and receipt of notice may only occur on
a business day. The Custodian shall promptly advise the
Administrator whenever the Custodian learns of any errors,
omissions or interruption in, or delay or unavailability of,
the Fund's ability to send Instructions.
ARTICLE XVI
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
1. The Custodian is authorized and instructed to
employ, as sub-custodian for each Series' Foreign Securities
(as such term is defined in paragraph (c)(1) of Rule 17f-5
under the Investment Company Act of 1940, as amended) and
other assets, the foreign banking institutions and foreign
securities depositories and clearing agencies designated on
Schedule I hereto ("Foreign Sub-Custodians") to carry out
their respective responsibilities in accordance with the terms
of the sub-custodian agreement between each such Foreign Sub-
Custodian and the Custodian, copies of which have been
previously delivered to the Fund and receipt of which is
hereby acknowledged (each such agreement, a "Foreign Sub-
Custodian Agreement"). Upon receipt of a Certificate,
together with a certified resolution acceptable to the
Custodian of the Fund's Board of Trustees, the Fund may
designate any additional foreign sub-custodian with which the
Custodian has an agreement for such entity to act as the
Custodian's agent, as its sub-custodian and any such
additional foreign sub-custodian shall be deemed added to
Schedule I. Upon receipt of a Certificate from the Fund, the
Custodian shall cease the employment of any one or more
Foreign Sub-Custodians for maintaining custody of the Fund's
assets and such Foreign Sub-Custodian shall be deemed deleted
from Schedule I.
- 32
2. Each Foreign Sub-Custodian Agreement shall be
substantially in the form previously delivered to the Fund and
will not be amended in a way that materially adversely affects
the Fund without the Fund's prior written consent.
3. The Custodian shall identify on its books as
belonging to each Series of the Fund the Foreign Securities of
such Series held by each Foreign Sub-Custodian. At the
election of the Fund, it shall be entitled to be subrogated to
the rights of the Custodian with respect to any claims by the
Fund or any Series against a Foreign Sub-Custodian as a
consequence of any loss, damage, cost, expense, liability or
claim sustained or incurred by the Fund or any Series if and
to the extent that the Fund or such Series has not been made
whole for any such loss, damage, cost, expense, liability or
claim.
4. Upon request of the Fund, the Custodian will,
consistent with the terms of the applicable Foreign Sub-
Custodian Agreement, use reasonable efforts to arrange for the
independent accountants of the Fund to be afforded access to
the books and records of any Foreign Sub-Custodian insofar as
such books and records relate to the performance of such
Foreign Sub-Custodian under its agreement with the Custodian
on behalf of the Fund.
5. The Custodian will supply to the Fund from time to
time, as mutually agreed upon, statements in respect of the
securities and other assets of each Series held by Foreign
Sub-Custodians, including but not limited to, an
identification of entities having possession of each Series'
Foreign Securities and other assets, and advices or
notifications of any transfers of Foreign Securities to or
from each custodial account maintained by a Foreign Sub-
Custodian for the Custodian on behalf of the Series.
6. The Custodian shall furnish annually to the Fund, as
mutually agreed upon, information concerning the Foreign Sub-
Custodians employed by the Custodian. Such information shall
be similar in kind and scope to that furnished to the Fund in
connection with the Fund's initial approval of such Foreign
Sub-Custodians and, in any event, shall include information
pertaining to (i) the Foreign Custodians' financial strength,
general reputation and standing in the countries in which they
are located and their ability to provide the custodial
services required, and (ii) whether the Foreign Sub-Custodians
would provide a level of safeguards for safekeeping and
custody of securities not materially different form those
prevailing in the United States. The Custodian shall monitor
the general operating performance of each Foreign Sub-
Custodian. The Custodian agrees that it will use reasonable
care in monitoring compliance by each Foreign Sub-Custodian
with the terms of the relevant Foreign Sub-Custodian Agreement
- 33
and that if it learns of any breach of such Foreign Sub-
Custodian Agreement believed by the Custodian to have a
material adverse effect on the Fund or any Series it will
promptly notify the Fund of such breach. The Custodian also
agrees to use reasonable and diligent efforts to enforce its
rights under the relevant Foreign Sub-Custodian Agreement.
7. The Custodian shall transmit promptly to the Fund
all notices, reports or other written information received
pertaining to the Fund's Foreign Securities, including without
limitation, notices of corporate action, proxies and proxy
solicitation materials.
8. Notwithstanding any provision of this Agreement to
the contrary, settlement and payment for securities received
for the account of any Series and delivery of securities
maintained for the account of such Series may be effected in
accordance with the customary or established securities
trading or securities processing practices and procedures in
the jurisdiction or market in which the transaction occurs,
including, without limitation, delivery of securities to the
purchaser thereof or to a dealer therefor (or an agent for
such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities
from such purchaser or dealer.
9. Notwithstanding any other provision in this
Agreement to the contrary, with respect to any losses or
damages arising out of or relating to any actions or omissions
of any Foreign Sub-Custodian the sole responsibility and
liability of the Custodian shall be to take appropriate action
at the Fund's expense to recover such loss or damage from the
Foreign Sub-Custodian. It is expressly understood and agreed
that the Custodian's sole responsibility and liability shall
be limited to amounts so recovered from the Foreign Sub-
Custodian.
ARTICLE XVII
FX TRANSACTIONS
1. Whenever the Fund shall enter into an FX
Transaction, the Fund shall promptly deliver or cause the
Administrator to deliver to the Custodian a Certificate or
Oral Instructions specifying with respect to such FX
Transaction: (c) the Series to which such FX Transaction is
specifically allocated; (b) the type and amount of Currency to
be purchased by the Fund; (c) the type and amount of Currency
to be sold by the Fund; (d) the date on which the Currency to
be purchased is to be delivered; (e) the date on which the
Currency to be sold is to be delivered; and (f) the name of
the person from whom or through whom such currencies are to be
purchased and sold. Unless otherwise instructed by a
- 34
Certificate or Oral Instructions, the Custodian shall deliver,
or shall instruct a Foreign Sub-Custodian to deliver, the
Currency to be sold on the date on which such delivery is to
be made, as set forth in the Certificate, and shall receive,
or instruct a Foreign Sub-Custodian to receive, the Currency
to be purchased on the date as set forth in the Certificate.
2. Where the Currency to be sold is to be delivered on
the same day as the Currency to be purchased, as specified in
the Certificate or Oral Instructions, the Custodian or a
Foreign Sub-Custodian may arrange for such deliveries and
receipts to be made in accordance with the customs prevailing
from time to time among brokers or dealers in Currencies, and
such receipt and delivery may not be completed simultaneously.
The Fund assumes all responsibility and liability for all
credit risks involved in connection with such receipts and
deliveries, which responsibility and liability shall continue
until the Currency to be received by the Fund has been
received in full.
3. Any FX Transaction effected by the Custodian in
connection with this Agreement may be entered with the
Custodian, any office, branch or subsidiary of The Bank of New
York Company, Inc., or any Foreign Sub-Custodian acting as
principal or otherwise through customary banking channels.
The Fund may issue a standing Certificate with respect to FX
Transaction but the Custodian may establish rules or
limitations concerning any foreign exchange facility made
available to the Fund. The Fund shall bear all risks of
investing in Securities or holding Currency. Without limiting
the foregoing, the Fund shall bear the risks that rules or
procedures imposed by a Foreign Sub-Custodian or foreign
depositories, exchange controls, asset freezes or other laws,
rules, regulations or orders shall prohibit or impose burdens
or costs on the transfer to, by or for the account of the Fund
of Securities or any cash held outside the Fund's jurisdiction
or denominated in Currency other than its home jurisdiction or
the conversion of cash from one Currency into another
currency. The Custodian shall not be obligated to substitute
another Currency for a Currency (including a Currency that is
a component of a Composite Currency Unit) whose
transferability, convertibility or availability has been
affected by such law, regulation, rule or procedure. Neither
the Custodian nor any Foreign Sub-Custodian shall be liable to
the Fund for any loss resulting from any of the foregoing
events.
ARTICLE XVIII
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, or as provided in
Article XVI neither the Custodian nor its nominee shall be
- 35
liable for any loss or damage, including reasonable counsel
fees, resulting from its action or omission to act or
otherwise, either hereunder or under any Margin Account
Agreement, except for any such loss or damage arising out of
its own negligence or willful misconduct. The Custodian
agrees to indemnify and hold harmless the Trust and Trust's
Trustees and officers to the extent described below against
any loss as a result of any breach or violation of this
Agreement by the Custodian or its officers, employees and
agents or its nominees, resulting from their negligence or
willful misconduct. The Custodian may, with respect to ques-
tions of law arising hereunder or under any Margin Account
Agreement, apply for and obtain the advice and opinion of
counsel to the Fund, or of its own counsel, at the expense of
the Fund, and shall be fully protected with respect to any-
thing done or omitted by it in good faith in conformity with
such advice or opinion. The Custodian shall be liable to the
Fund for any loss or damage resulting from the use of the
Book-Entry System or any Depository arising by reason of any
negligence or willful misconduct on the part of the Custodian
or any of its employees or agents. Notwithstanding the
foregoing, or any other provision contained in this Agreement,
in no event shall the Custodian be liable to the Trust, its
Trustees or officers, or any third party, for special,
indirect or consequential damages, or lost profits or loss of
business, arising under or in connection with this Agreement,
even if previously informed of the possibility of such damages
and regardless of the form of action.
2. Without limiting the generality of the foregoing,
the Custodian shall be under no obligation to inquire into,
and shall not be liable for:
(a) The validity of the issue of any Securities
purchased, sold, or written by or for the Fund, the legality
of the purchase, sale or writing thereof, or the propriety of
the amount paid or received therefor;
(b) The legality of the sale or redemption of any
Shares, or the propriety of the amount to be received or paid
therefor;
(c) The legality of the declaration or payment of
any dividend by the Fund;
(d) The legality of any borrowing by the Fund using
Securities as collateral;
(e) The legality of any loan of portfolio Securi-
ties, nor shall the Custodian be under any duty or obligation
to see to it that any cash collateral delivered to it by a
broker, dealer, or financial institution or held by it at any
time as a result of such loan of portfolio Securities of the
Fund is adequate collateral for the Fund against any loss it
- 36
might sustain as a result of such loan. The Custodian spe-
cifically, but not by way of limitation, shall not be under
any duty or obligation periodically to check or notify the
Fund that the amount of such cash collateral held by it for
the Fund is sufficient collateral for the Fund, but such duty
or obligation shall be the sole responsibility of the Fund.
In addition, the Custodian shall be under no duty or obliga-
tion to see that any broker, dealer or financial institution
to which portfolio Securities of the Fund are lent pursuant to
Article XIV of this Agreement makes payment to it of any divi-
dends or interest which are payable to or for the account of
the Fund during the period of such loan or at the termination
of such loan, provided, however, that the Custodian shall
promptly notify the Fund in the event that such dividends or
interest are not paid and received when due; or
(f) The sufficiency or value of any amounts of
money and/or Securities held in any Margin Account, Senior
Security Account or Collateral Account in connection with
transactions by the Fund. In addition, the Custodian shall be
under no duty or obligation to see that any broker, dealer,
futures commission merchant or Clearing Member makes payment
to the Fund of any variation margin payment or similar payment
which the Fund may be entitled to receive from such broker,
dealer, futures commission merchant or Clearing Member, to see
that any payment received by the Custodian from any broker,
dealer, futures commission merchant or Clearing Member is the
amount the Fund is entitled to receive, or to notify the Fund
of the Custodian's receipt or non-receipt of any such pay-
ment.
3. The Custodian shall not be liable for, or considered
to be the Custodian of, any money, whether or not represented
by any check, draft, or other instrument for the payment of
money, received by it on behalf of the Fund until the Custo-
dian actually receives and collects such money directly or by
the final crediting of the account representing the Fund's
interest at the Book-Entry System or the Depository.
4. The Custodian shall have no responsibility and shall
not be liable for ascertaining or acting upon any calls, con-
versions, exchange offers, tenders, interest rate changes or
similar matters relating to Securities held in the Depository,
unless the Custodian shall have actually received timely no-
tice from the Depository. In no event shall the Custodian
have any responsibility or liability for the failure of the
Depository to collect, or for the late collection or late
crediting by the Depository of any amount payable upon Securi-
ties deposited in the Depository which may mature or be re-
deemed, retired, called or otherwise become payable. However,
upon receipt of a Certificate from the Fund of an overdue
amount on Securities held in the Depository the Custodian
shall make a claim against the Depository on behalf of the
- 37
Fund, except that the Custodian shall not be under any obliga-
tion to appear in, prosecute or defend any action, suit or
proceeding in respect to any Securities held by the Depository
which in its opinion may involve it in expense or liability,
unless indemnity satisfactory to it against all expense and
liability be furnished as often as may be required.
5. The Custodian shall not be under any duty or obliga-
tion to take action to effect collection of any amount due to
the Fund from the Transfer Agent of the Fund nor to take any
action to effect payment or distribution by the Transfer Agent
of the Fund of any amount paid by the Custodian to the Trans-
fer Agent of the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obliga-
tion to take action to effect collection of any amount if the
Securities upon which such amount is payable are in default,
or if payment is refused after due demand or presentation,
unless and until (i) it shall be directed to take such action
by a Certificate and (ii) it shall be assured to its satisfac-
tion of reimbursement of its costs and expenses in connection
with any such action.
7. The Custodian may in addition to the employment of
Foreign Sub-Custodians pursuant to Article XVI appoint one or
more banking institutions as Depository or Depositories, as
Sub-Custodian or Sub-Custodians, or as Co-Custodian or
Co-Custodians including, but not limited to, banking institu-
tions located in foreign countries, of Securities and money at
any time owned by the Fund, upon such terms and conditions as
may be approved in a Certificate or contained in an agreement
executed by the Custodian, the Fund and the appointed
institution.
8. The Custodian shall not be under any duty or obliga-
tion (a) to ascertain whether any Securities at any time de-
livered to, or held by it or by any Foreign Sub-Custodian, for
the account of the Fund and specifically allocated to a Series
are such as properly may be held by the Fund or such Series
under the provisions of its then current prospectus, or (b) to
ascertain whether any transactions by the Fund, whether or not
involving the Custodian, are such transactions as may properly
be engaged in by the Fund.
9. The Custodian shall be entitled to receive and the
Fund agrees to pay to the Custodian all out-of-pocket expenses
and such compensation as may be agreed upon from time to time
between the Custodian and the Fund. The Fund represents that
the Administrator has agreed to pay such compensation and ex-
penses promptly upon receipt of statements therefor, and
hereby directs the Custodian to (i) send all statements for
compensation to its attention care of FPS at the following
address: FPS Services, Inc., 3200 Horizon Drive, King of
Prussia, PA 19406-0903, Attention: Mr. Elmer Gardner, Senior
- 38
Vice President, and (ii) accept all payments made by Fund/Plan
in the Fund's name as if such payments were made directly by
the Fund. The Fund shall pay to FPS fees for services
(including custodian services provided by the Custodian) in
accordance with the Administration Agreement. The Custodian's
compensation for services rendered hereunder is set forth in a
separate agreement between the Custodian and Fund/Plan.
Should Fund/Plan fail to pay or remit such compensation to the
Custodian within 20 days of the date the same is due and pay-
able, Custodian shall notify the Fund. If such payment or
remittance is not received from FPS within 15 days of such
notice, then the Custodian will be entitled to debit the
Custody Account directly for such compensation. The Custodian
may charge compensation with respect to which it has properly
sent a notice to the Fund, as provided in the preceding sen-
tence, and any expenses with respect to a Series incurred by
the Custodian in the performance of its duties pursuant to
such agreement against any money specifically allocated to
such Series. Unless and until the Fund or the Administrator
instructs the Custodian by a Certificate to apportion any
loss, damage, liability or expense among the Series in a
specified manner, the Custodian shall also be entitled to
charge against any money held by it for the account of a Se-
ries such Series' pro rata share (based on such Series, net
asset value at the time of the charge to the aggregate net
asset value of all Series at that time) of the amount of any
loss, damage, liability or expense, including counsel fees,
for which it shall be entitled to reimbursement under the pro-
visions of this Agreement. The expenses for which the Custo-
dian shall be entitled to reimbursement hereunder shall in-
clude, but are not limited to, the expenses of sub-custodians
and foreign branches of the Custodian incurred in settling
outside of New York City transactions involving the purchase
and sale of Securities of the Fund.
10. The Custodian shall be entitled to rely upon any
Certificate, notice or other instrument in writing received by
the Custodian and reasonably believed by the Custodian to be a
Certificate. The Custodian shall be entitled to rely upon any
Oral Instructions actually received by the Custodian. The
Fund agrees to forward or cause the Administrator to forward
to the Custodian a Certificate or facsimile thereof confirming
such Oral Instructions in such manner so that such Certificate
or facsimile thereof is received by the Custodian, whether by
hand delivery, telecopier or other similar device, or other-
wise, by the close of business of the same day that such Oral
Instructions are given to the Custodian. The Fund agrees that
the fact that such confirming instructions are not received by
the Custodian shall in no way affect the validity of the
transactions or enforceability of the transactions hereby au-
thorized by the Fund. The Fund agrees that the Custodian
shall incur no liability to the Fund in acting upon Oral In-
structions given to the Custodian hereunder concerning such
- 39
transactions provided such instructions reasonably appear to
have been received from an Officer.
11. The Custodian shall be entitled to rely upon any
instrument, instruction or notice received by the Custodian
and reasonably believed by the Custodian to be given in ac-
cordance with the terms and conditions of any Margin Account
Agreement. Without limiting the generality of the foregoing,
the Custodian shall be under no duty to inquire into, and
shall not be liable for, the accuracy of any statements or
representations contained in any such instrument or other no-
tice including, without limitation, any specification of any
amount to be paid to a broker, dealer, futures commission mer-
chant or Clearing Member.
12. The books and records pertaining to the Fund which
are in the possession of the Custodian shall be the property
of the Fund. Such books and records shall be prepared and
maintained as required by the Investment Company Act of 1940,
as amended, and other applicable securities laws and rules and
regulations. The Fund, or the Fund's authorized representa-
tives, shall have access to such books and records during the
Custodian's normal business hours. Upon the reasonable re-
quest of the Fund, copies of any such books and records shall
be provided by the Custodian to the Fund or the Fund's autho-
rized representative, and the Fund shall reimburse the Custo-
dian its expenses of providing such copies. Upon reasonable
request of the Fund, the Custodian shall provide in hard copy
or on micro-film, whichever the Custodian elects, any records
included in any such delivery which are maintained by the Cus-
todian on a computer disc, or are similarly maintained, and
the Fund shall reimburse the Custodian for its expenses of
providing such hard copy or micro-film.
13. The Custodian shall provide the Fund with any report
obtained by the Custodian on the system of internal accounting
control of the Book-Entry System, the Depository or O.C.C.,
and with such reports on its own systems of internal account-
ing control as the Fund may reasonably request from time to
time.
14. The Fund agrees to indemnify the Custodian against
and save the Custodian harmless from all liability, claims,
losses and demands whatsoever, including attorney's fees, how-
soever arising or incurred because of or in connection with
this Agreement, including the Custodian's payment or
non-payment of checks pursuant to paragraph 6 of Article XIII
as part of any check redemption privilege program of the Fund,
except for any such liability, claim, loss and demand arising
out of the Custodian's own negligence or willful misconduct.
For any legal proceeding giving rise to the indemnification
set forth above in this paragraph, the Fund shall be entitled
to defend or prosecute any claim in the name of the Custodian
at its own expense and through counsel of its own choosing
- 40
reasonably acceptable to the Custodian if it gives written
notice to the Custodian within ten (10) Business days of re-
ceiving notice of such claim. Notwithstanding the foregoing,
the Custodian may participate in the litigation at its own
expense and with counsel of its own choosing.
15. Subject to the foregoing provisions of this Agree-
ment, including, without limitation, those contained in Ar-
ticle XVI the Custodian may deliver and receive Securities,
and receipts with respect to such Securities, and arrange for
payments to be made and received by the Custodian in ac-
cordance with the customs prevailing from time to time among
brokers or dealers in such Securities. When the Custodian is
instructed to deliver Securities against payment, delivery of
such Securities and receipt of payment therefor may not be
completed simultaneously. The Fund assumes all responsibility
and liability for all credit risks involved in connection with
the Custodian's delivery of Securities pursuant to Certifi-
cates or instructions of the Fund or the Administrator which
responsibility and liability shall continue until final pay-
ment in full has been received by the Custodian.
16. In the event the Custodian is advised by the Fund
that the Fund is no longer utilizing the services of the Ad-
ministrator, then the Custodian shall furnish or give to the
Fund the statements or notices described above as to be fur-
nished or given to the Administrator.
17. The Custodian shall have no duties or responsibili-
ties whatsoever except such duties and responsibilities as are
specifically set forth in this Agreement, and no covenant or
obligation shall be implied in this Agreement against the Cus-
todian. Without limiting the generality of the foregoing, the
Custodian shall have no duties or responsibilities by reason
of any terms or provisions in the Administration Agreement,
and if such Administration Agreement shall cease to be in ef-
fect the Custodian shall have no additional duties hereunder.
ARTICLE XIX
TERMINATION
1. Either of the parties hereto may terminate this
Agreement by giving to the other party a notice in writing
specifying the date of such termination, which shall be not
less than ninety (90) days after the date of giving of such
notice, provided, however, that if such notice is sent by the
Fund and recites that it is being given contemporaneously with
a termination of the Custody Administration any Agency
Agreement with FPS, such notice may specify any date of
termination selected by the Fund. In the event such notice is
given by the Fund, it shall be accompanied by a copy of a
- 41
resolution of the Board of Trustees of the Fund, certified by
the Secretary, the Clerk, any Assistant Secretary or any
Assistant Clerk, electing to terminate this Agreement and
designating a successor custodian or custodians, each of which
shall be a bank or trust company having not less than
$2,000,000 aggregate capital, surplus and undivided profits.
In the event such notice is given by the Custodian, the Fund
shall, on or before the termination date, deliver to the Cus-
todian a copy of a resolution of the Board of Trustees of the
Fund, certified by the Secretary, the Clerk, any Assistant
Secretary or any Assistant Clerk, designating a successor cus-
todian or custodians. In the absence of such designation by
the Fund, the Custodian may designate a successor custodian
which shall be a bank or trust company having not less than
$2,000,000 aggregate capital, surplus and undivided profits.
Upon the date set forth in such notice this Agreement shall
terminate, and the Custodian shall upon receipt of a notice of
acceptance by the successor custodian on that date deliver
directly to the successor custodian all Securities and money
then owned by the Fund and held by it as Custodian, after de-
ducting all fees, expenses and other amounts for the payment
or reimbursement of which it shall then be entitled.
2. If a successor custodian is not designated by the
Fund or the Custodian in accordance with the preceding para-
graph, the Fund shall upon the date specified in the notice of
termination of this Agreement and upon the delivery by the
Custodian of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and
money then owned by the Fund be deemed to be its own custodian
and the Custodian shall thereby be relieved of all duties and
responsibilities pursuant to this Agreement, other than the
duty with respect to Securities held in the Book Entry System
which cannot be delivered to the Fund to hold such Securities
hereunder in accordance with this Agreement.
ARTICLE XX
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed
by two of the present Officers of the Fund under its seal,
setting forth the names and the signatures of the present Of-
ficers. The Fund agrees to furnish to the Custodian a new
Certificate in similar form in the event that any such present
Officer ceases to be an Officer or in the event that other or
additional Officers are elected or appointed. Until such new
Certificate shall be received, the Custodian shall be fully
protected in acting under the provisions of this Agreement
upon Oral Instructions or signatures of the present Officers
as set forth in the last delivered Certificate.
- 42
2. Any notice or other instrument in writing, autho-
rized or required by this Agreement to be given to the Custo-
dian, shall be sufficiently given if addressed to the Custo-
dian and mailed or delivered to it at its offices at 90 Wash-
ington Street, New York, New York 10286, or at such other
place as the Custodian may from time to time designate in
writing.
3. Any notice or other instrument in writing, autho-
rized or required by this Agreement to be given to the Fund
shall be sufficiently given if addressed to the Fund and
mailed or delivered to it at its office at the address for the
Fund first above written, or at such other place as the Fund
may from time to time designate in writing, and any notice or
other instrument in writing authorized or required to be given
to the Administrator shall be sufficiently given if addressed
to the Administrator at such address as the Administrator may
from time to time designate in writing.
4. This Agreement may not be amended or modified in any
manner except by a written agreement executed by both parties
with the same formality as this Agreement and approved by a
resolution of the Board of Trustees of the Fund.
5. This Agreement shall extend to and shall be binding
upon the parties hereto, and their respective successors and
assigns; provided, however, that this Agreement shall not be
assignable by the Fund without the written consent of the Cus-
todian, or by the Custodian without the written consent of the
Fund, authorized or approved by a resolution of the Fund's
Board of Trustees.
6. This Agreement shall be construed in accordance with
the laws of the State of New York without giving effect to
conflict of laws principles thereof. Each party hereby con-
sents to the jurisdiction of a state or federal court situated
in New York City, New York in connection with any dispute
arising hereunder and hereby waives its right to trial by
jury.
7. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original,
but such counterparts shall, together, constitute only one
instrument.
- 43
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective Officers,
thereunto duly authorized and their respective seals to be
hereunto affixed, as of the day and year first above written.
THE SPORTS FUNDS TRUST
[SEAL] By:_______________________
Attest:
_______________________
THE BANK OF NEW YORK
[SEAL] By:_______________________
Attest:
______________________
APPENDIX A
I, , President and I,
, of THE SPORTS
FUNDS TRUST, a Delaware business trust (the "Fund"), do hereby
certify that:
The following individuals including officers and employ-
ees of the Administrator have been duly authorized by the
Board of Trustees of the Fund in conformity with the Fund's
Declaration of Trust and By-Laws to give Certificates or Oral
Instructions on behalf of the Fund, and the signatures set
forth opposite their respective names are their true and cor-
rect signatures:
Name Signature
_____________________ ________________________
APPENDIX B
PORTFOLIO
THE MOTORSPORTS GROWTH AND INCOME FUN
APPENDIX C
I, Vincent Blazewicz, a Vice President with THE BANK OF
NEW YORK do hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journa
EXHIBIT A
CERTIFICATION
The undersigned, , hereby certifies
that he or she is the duly elected and acting
of THE SPORTS FUNDS TRUST, a Delaware business
trust (the "Fund"), and further certifies that the following
resolution was adopted by the Board of Trustees of the Fund at
a meeting duly held on , 1998, at which a
quorum was at all times present and that such resolution has
not been modified or rescinded and is in full force and effect
as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to a Custody Agreement between The Bank of New
York and the Fund dated as of , 1998,
(the "Custody Agreement") is authorized and instructed on
a continuous and ongoing basis to deposit in the Book-
Entry System, as defined in the Custody Agreement, all
securities eligible for deposit therein, regardless of
the Series to which the same are specifically allocated,
and to utilize the Book-Entry System to the extent pos-
sible in connection with its performance thereunder, in-
cluding, without limitation, in connection with settle-
ments of purchases and sales of securities, loans of se-
curities, and deliveries and returns of securities col-
lateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of THE SPORTS FUNDS TRUST, as of the day of
, 1998.
[SEAL
EXHIBIT B
CERTIFICATION
The undersigned, , hereby certifies
that he or she is the duly elected and acting
of THE SPORTS FUNDS TRUST, a Delaware
business trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of
the Fund at a meeting duly held on , 1998,
at which a quorum was at all times present and that such
resolution has not been modified or rescinded and is in full
force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to a Custody Agreement between The Bank of New
York and the Fund dated as of , 1998,
(the "Custody Agreement") is authorized and instructed on
a continuous and ongoing basis until such time as it re-
ceives a Certificate, as defined in the Custody Agree-
ment, to the contrary to deposit in the Depository, as
defined in the Custody Agreement, all securities eligible
for deposit therein, regardless of the Series to which
the same are specifically allocated, and to utilize the
Depository to the extent possible in connection with its
performance thereunder, including, without limitation, in
connection with settlements of purchases and sales of
securities, loans of securities, and deliveries and re-
turns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of THE SPORTS FUNDS TRUST, as of the day of
, 1998.
[SEAL
EXHIBIT B-1
CERTIFICATION
The undersigned, , hereby certifies
that he or she is the duly elected and acting
of THE SPORTS FUNDS TRUST, a Delaware
business trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of
the Fund at a meeting duly held on , 1998,
at which a quorum was at all times present and that such
resolution has not been modified or rescinded and is in full
force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to a Custody Agreement between The Bank of New
York and the Fund dated as of , 1998,
(the "Custody Agreement") is authorized and instructed on
a continuous and ongoing basis until such time as it re-
ceives a Certificate, as defined in the Custody Agree-
ment, to the contrary to deposit in the Participants
Trust Company as Depository, as defined in the Custody
Agreement, all securities eligible for deposit therein,
regardless of the Series to which the same are specifi-
cally allocated, and to utilize the Participants Trust
Company to the extent possible in connection with its
performance thereunder, including, without limitation, in
connection with settlements of purchases and sales of
securities, loans of securities, and deliveries and re-
turns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of THE SPORTS FUNDS TRUST, as of the day of
, 1998.
[SEAL
EXHIBIT C
CERTIFICATION
The undersigned, , hereby
certifies that he or she is the duly elected and acting
of THE SPORTS FUNDS TRUST, a Delaware
business trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of
the Fund at a meeting duly held on ,
1998, at which a quorum was at all times present and that such
resolution has not been modified or rescinded and is in full
force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to a Custody Agreement between The Bank of New
York and the Fund dated as of , 1998,
(the "Custody Agreement") is authorized and instructed on
a continuous and ongoing basis until such time as it re-
ceives a Certificate, as defined in the Custody Agree-
ment, to the contrary, to accept, utilize and act with
respect to Clearing Member confirmations for Options and
transaction in Options, regardless of the Series to which
the same are specifically allocated, as such terms are
defined in the Custody Agreement, as provided in the Cus-
tody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of THE SPORTS FUNDS TRUST, as of the day of
, 1998.
[SEAL
EXHIBIT D
The undersigned, , hereby
certifies that he or she is the duly elected and acting
President of THE SPORTS FUNDS TRUST, a Delaware business trust
(the "Fund"), further certifies that the following resolutions
were adopted by the Board of Trustees of the Fund at a meeting
duly held on , 1998, at which a quorum was at
all times present and that such resolutions have not been
modified or rescinded and are in full force and effect as of
the date hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to the Custody Agreement between The Bank of New
York and the Fund dated as of , 1998 (the
"Custody Agreement") is authorized and instructed on a
continuous and ongoing basis to act in accordance with,
and to rely on Instructions (as defined in the Custody
Agreement).
RESOLVED, that the Fund shall establish access codes
and grant use of such access codes only to Officers of
the Fund as defined in the Custody Agreement, shall
establish internal safekeeping procedures to safeguard
and protect the confidentiality and availability of user
and access codes, passwords and authentication keys, and
shall use Instructions only in a manner that does not
contravene the Investment Company Act of 1940, as
amended, or the rules and regulations thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of THE SPORTS FUNDS TRUST, as of the day of
, 1998.
[SEAL]
INVESTMENT COMPANY SERVICES AGREEMENT
This AGREEMENT, dated as of the day of
, 1998, made by and between Sports Funds Trust, (the
?Trust"), a business trust operating as an open-end, management
investment company registered under the Investment Company Act of
1940, as amended (the ?Act?), duly organized and existing under the
laws of the State of Delaware and First Data Investor Services Group.
("FDISG"), a corporation duly organized under the laws of the State
of Delaware (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Trust Instrument to
issue separate series of shares representing interests in separate
investment portfolios which are identified on Schedule ?C? attached
hereto and which Schedule ?C? may be amended from time to time by
mutual agreement of the Trust and FDISG; and
WHEREAS, the Parties desire to enter into an agreement whereby
FDISG will provide the services to the Trust as specified herein and
set forth in particular in Schedule ?A? which is attached hereto and
made a part hereof.
NOW THEREFORE, in consideration of the premises and mutual
covenants contained herein, and in exchange of good and valuable
consideration, the sufficiency and receipt of which are hereby
acknowledged, the Parties hereto, intending to be legally bound, do
hereby agree as follows:
GENERAL PROVISIONS
Section 1. Appointment. The Trust hereby appoints FDISG as
servicing agent and FDISG hereby accepts such appointment. In order
that FDISG may perform its duties under the terms of this Agreement,
the Board of Trustees of the Trust shall direct the officers,
investment adviser, legal counsel, independent accountants and
custodian of the Trust to cooperate fully with FDISG and, upon
request of FDISG, to provide such information, documents and advice
relating to the Trust which FDISG requires to execute its
responsibilities hereunder. In connection with its duties, FDISG
shall be entitled to rely, and will be held harmless by the Trust
when acting in reasonable reliance, upon any instruction, advice or
document relating to the Trust as provided to FDISG by any of the
aforementioned persons on behalf of the Trust. All fees charged by
any such persons acting on behalf of the Trust will be deemed an
expense of the Trust.
Any services performed by FDISG under this Agreement will
conform to the requirements of:
(a) the provisions of the Act and the Securities Act of 1933,
as amended, and any rules or regulations in force thereunder;
(b) any other applicable provision of state and federal law;
(c) the provisions of the Trust Instrument and the By-Laws as
amended from time to time and delivered to FDISG;
(d) any policies and determinations of the Board of Trustees
of the Trust which are communicated to FDISG; and
(e) the policies of the Trust as reflected in the Trust's
registration statement as filed with the U.S. Securities and Exchange
Commission.
Nothing in this Agreement will prevent FDISG or any officer
thereof from providing the same or comparable services for or with
any other person, firm or corporation. While the services supplied
to the Trust may be different than those supplied to other persons,
firms or corporations, FDISG will provide the Trust equitable
treatment in supplying services. The Trust recognizes that it will
not receive preferential treatment from FDISG as compared with the
treatment provided to other FDISG clients.
Section 2. Duties and Obligations of FDISG.
Subject to the provisions of this Agreement, FDISG will provide
to the Trust the specific services as set forth in Schedule "A"
attached hereto.
Section 3. Definitions. For purposes of this Agreement:
?Certificate? will mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement. To
be effective, such Certificate shall be given to and received by the
custodian and shall be signed on behalf of the Trust by any two of
its designated officers, and the term Certificate shall also include
instructions communicated to the custodian by FDISG.
?Custodian? will refer to that agent which provides safekeeping
of the assets of the Trust.
?Instructions? will mean communications containing instructions
transmitted by electronic or telecommunications media including, but
not limited to, Industry Standardization for Institutional Trade
Communications, computer-to-computer interface, dedicated
transmission line, facsimile transmission (which may be signed by an
officer or unsigned) and tested telex.
?Oral Instruction? will mean an authorization, instruction,
approval, item or set of data, or information of any kind transmitted
to FDISG in person or by telephone, telegram, telecopy or other
mechanical or documentary means lacking original signature, by a
person or persons reasonably identified to FDISG to be a person or
persons so authorized by a resolution of the Board of Trustees of the
Trust to give Oral Instructions to FDISG on behalf of the Trust.
?Shareholders? will mean the registered owners of the shares of
the Trust in accordance with the share registry records maintained by
FDISG for the Trust.
?Shares? will mean the issued and outstanding shares of the
Trust.
?Signature Guarantee? will mean the guarantee of signatures by
an "eligible guarantor institution" as defined in Rule 17Ad-15 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Eligible guarantor institutions include banks, brokers, dealers,
credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations. Broker-
dealers guaranteeing signatures must be members of a clearing
corporation or maintain net capital of at least $100,000. Signature
guarantees will be accepted from any eligible guarantor institution
which participates in a signature guarantee program.
?Written Instruction? will mean an authorization, instruction,
approval, item or set of data or information of any kind transmitted
to FDISG in an original writing containing an original signature or a
copy of such document transmitted by telecopy including transmission
of such signature reasonably identified to FDISG to be the signature
of a person or persons so authorized by a resolution of the Board of
Trustees of the Trust, or so identified by the Trust to give Written
Instructions to FDISG on behalf of the Trust.
Concerning Oral and Written Instructions For all
purposes under this Agreement, FDISG is authorized to act
upon receipt of the first of any Written or Oral
Instruction it receives from the Trust or its agents. In
cases where the first instruction is an Oral Instruction
that is not in the form of a document or written record,
a confirmatory Written Instruction or Oral Instruction in
the form of a document or written record shall be
delivered. In cases where FDISG receives an Instruction,
whether Written or Oral, to enter a portfolio transaction
onto the Trust?s records, the Trust shall cause the
broker/dealer executing such transaction to send a
written confirmation to the Custodian.
FDISG shall be entitled to rely on the first Instruction
received. For any act or omission undertaken by FDISG in
compliance therewith, it shall be free of liability and
fully indemnified and held harmless by the Trust,
provided however, that in the event a Written or Oral
Instruction received by FDISG is countermanded by a
subsequent Written or Oral Instruction received prior to
acting upon such countermanded Instruction, FDISG shall
act upon such subsequent Written or Oral Instruction.
The sole obligation of FDISG with respect to any follow-
up or confirmatory Written Instruction or Oral
Instruction in documentary or written form shall be to
make reasonable efforts to detect any such discrepancy
between the original Instruction and such confirmation
and to report such discrepancy to the Trust. The Trust
shall be responsible and bear the expense of its taking
any action, including any reprocessing, necessary to
correct any discrepancy or error. To the extent such
action requires FDISG to act, the Trust shall give FDISG
specific Written Instruction as to the action required.
The Trust will file with FDISG a certified copy of each
resolution of the Trust?s Board of Trustees authorizing execution of
Written Instructions or the transmittal of Oral Instructions as
provided above.
Section 4. Indemnification.
(a) FDISG, its directors, officers, employees, shareholders,
and agents will be liable for any loss suffered by the Trust
resulting from the willful misfeasance, bad faith, gross negligence
or reckless disregard on the part of FDISG in the performance of its
obligations and duties under this Agreement.
(b) Any director, officer, employee, shareholder or agent of
FDISG, who may be or become an officer, director, employee or agent
of the Trust, will be deemed, when rendering services to the Trust,
or acting on any business of the Trust (other than services or
business in connection with FDISG' duties hereunder), to be rendering
such services to or acting solely for the Trust and not as a
director, officer, employee, shareholder or agent of, or under the
control or direction of FDISG even though such person may be
receiving compensation from FDISG.
(c) The Trust agrees to indemnify and hold FDISG harmless,
together with its directors, officers, employees, shareholders and
agents 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 FDISG may sustain or incur or which may be
asserted against FDISG by any person by reason of, or as a result of:
(i) any action taken or omitted to be taken by FDISG
except claims, demands, expenses and liabilities arising from willful
misfeasance, bad faith, gross negligence or reckless disregard on the
part of FDISG in the performance of its obligations and duties under
this Agreement; or
(ii) any action taken or omitted to be taken by FDISG in
reliance upon any Certificate, instrument, order or stock certificate
or other document reasonably believed by FDISG to be genuine and
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 written opinion of legal counsel for the Trust
or FDISG; or
(iii) the offer or sale of shares of the Trust to any
person, natural or otherwise, which is in violation of any state or
federal law.
If a claim is made against FDISG as to which FDISG may seek
indemnity under this Section, FDISG will notify the Trust promptly
after receipt of any written assertion of such claim threatening to
institute an action or proceeding with respect thereto and will
notify the Trust promptly of any action commenced against FDISG
within ten (10) days after FDISG has been served with a summons or
other legal process. Failure to notify the Trust will not, however,
relieve the Trust from any liability which it may have on account of
the indemnity under this Section so long as the Trust has not been
prejudiced in any material respect by such failure.
The Trust and FDISG will cooperate in the control of the
defense of any action, suit or proceeding in which FDISG is involved
and for which indemnity is being provided by the Trust to FDISG. The
Trust may negotiate the settlement of any action, suit or proceeding
subject to FDISG? approval, which will not be unreasonably withheld.
FDISG reserves the right, but not the obligation, to participate in
the defense or settlement of a claim, action or proceeding with its
own counsel. Costs or expenses incurred by FDISG in connection with,
or as a result of such participation, will be borne solely by the
Trust if:
(i) FDISG has received an opinion of counsel from
counsel to the Trust stating that the use of counsel to the Trust by
FDISG would present an impermissible conflict of interest;
(ii) the defendants in, or targets of, any such action
or proceeding include both FDISG and the Trust, and legal counsel to
FDISG has reasonably concluded that there are legal defenses
available to it which are different from or additional to those
available to the Trust or which may be adverse to or inconsistent
with defenses available to the Trust (in which case the Trust will
not have the right to direct the defense of such action on behalf of
FDISG); or
(iii) the Trust authorize FDISG to employ separate
counsel at the expense of the Trust.
(d) The terms of this Section will survive the termination of
this Agreement.
Section 5. Representations and Warranties.
(a) FDISG represents and warrants that:
(i) it is a corporation duly organized and existing and
in good standing under the laws of Delaware;
(ii) it is empowered under applicable laws and by its
Certificate of Incorporation and By-Laws to enter into and perform
this Agreement;
(iii) all requisite corporate proceedings have been taken
to authorize FDISG to enter into and perform this Agreement;
(iv) it has and will continue to have access to the
facilities, personnel and equipment required to fully perform its
duties and obligations hereunder;
(v) no legal or administrative proceeding have been
instituted or threatened which would impair FDISG? ability to perform
its duties and obligations under this Agreement;
(vi) its entrance into this Agreement shall not cause a
material breach or be in material conflict with any other agreement
or obligation of FDISG or any law or regulation applicable to it;
(vii) it is registered as a transfer agent under Section
17A(c)(2) of the Exchange Act;
(viii) this Agreement has been duly authorized by
FDISG and, when executed and delivered, will constitute valid, legal
and binding obligation of FDISG, enforceable in accordance with its
terms.
(b) The Trust represents and warrants that:
(i) it is a business trust duly organized and existing
and in good standing under the laws of the State of Delaware;
(ii) it is empowered under applicable laws and by its
Trust Instrument and By-Laws to enter into and perform this
Agreement;
(iii) all requisite proceedings have been taken to
authorize the Trust to enter into and perform this Agreement;
(iv) no legal or administrative proceedings have been
instituted or threatened which would impair the Trust?s ability to
perform its duties and obligations under this Agreement;
(v) the Trust?s entrance into this Agreement shall not
cause a material breach or be in material conflict with any other
agreement or obligations of the Trust, or any law or regulation
applicable to either;
(vi) this Agreement has been duly authorized by the
Trust and, when executed and delivered, will constitute valid, legal
and binding obligation of the Trust, enforceable in accordance with
its terms.
(c) Record Keeping and Other Information
FDISG will create and maintain all records required of it
pursuant to its duties hereunder and as set forth in Schedule ?A? in
accordance with all applicable laws, rules and regulations, including
records required by Section 31(a) of the Act. All such records will
be the property of the Trust and will be available during regular
business hours for inspection, copying and use by the Trust. Where
applicable, such records will be maintained by FDISG for the periods
and in the places required by Rule 31a-2 under the Act. Upon
termination of this Agreement, FDISG will deliver all such records to
the Trust or such person as the Trust may designate.
In case of any request or demand for the inspection of the
Share records of the Trust, FDISG shall notify the Trust and secure
instructions as to permitting or refusing such inspection. FDISG
may, however, exhibit such records to any person in any case where it
is advised by its counsel that it may be held liable for failure to
do so.
Section 6. Compensation. The Trust agrees to pay FDISG
compensation for its services, and to reimburse it for expenses at
the rates, times, manner and amounts as set forth in Schedule "B"
attached hereto and incorporated herein by reference and as will be
set forth in any amendments to such Schedule "B" agreed upon in
writing by the Parties. Upon receipt of an invoice therefor, FDISG
is authorized to collect such fees by debiting the Trust?s custody
account. In addition, the Trust agrees to reimburse FDISG for any
out-of-pocket expenses paid by FDISG on behalf of the Trust within
ten (10) calendar days of the Trust?s receipt of an invoice therefor.
For the purpose of determining fees payable to FDISG, the value
of the Trust?s net assets will be computed at the times and in the
manner specified in the Trust?s Prospectus and Statement of
Additional Information then in effect.
During the term of this Agreement, should the Trust seek
services or functions in addition to those outlined below or in
Schedule ?A? attached hereto, a written amendment to this Agreement
specifying the additional services and corresponding compensation
will be executed by the Parties.
In the event that the Trust is more than sixty (60) days
delinquent in its payments of monthly billings in connection with
this Agreement (with the exception of specific amounts which may be
contested in good faith by the Trust), this Agreement may be
terminated upon thirty (30) days? written notice to the Trust by
FDISG. The Trust must notify FDISG in writing of any contested
amounts within thirty (30) days of receipt of a billing for such
amounts. Disputed amounts are not due and payable while they are
being disputed.
Section 7. Days of Operation. Nothing contained in this
Agreement is intended to or will require FDISG, in any capacity
hereunder, to perform any functions or duties on any holiday, day of
special observance or any other day on which the New York Stock
Exchange (?NYSE?) is closed. Functions or duties normally scheduled
to be performed on such days will be performed on and as of the next
succeeding business day on which the NYSE is open. Notwithstanding
the foregoing, FDISG will compute the net asset value of the Trust on
each day required pursuant to Rule 22c-1 promulgated under the Act.
Section 8. Acts of God, etc. FDISG will not be liable or
responsible for delays or errors caused by acts of God or by reason
of circumstances beyond its control including, acts of civil or
military authority, national emergencies, labor difficulties,
mechanical breakdown, insurrection, war, riots, or failure or
unavailability of transportation, communication or power supply,
fire, flood or other catastrophe.
In the event of equipment failures beyond FDISG? control, FDISG
will, at no additional expense to the Trust, take reasonable steps to
minimize service interruptions but will have no liability with
respect thereto. The foregoing obligation will not extend to
computer terminals located outside of premises maintained by FDISG.
FDISG has entered into and maintains in effect agreements making
reasonable provision for emergency use of electronic data processing
equipment to the extent appropriate equipment is available.
Section 9. Inspection and Ownership of Records. In the event
of a request or demand for the inspection of the records of the
Trust, FDISG will use its best efforts to notify the Trust and to
secure instructions as to permitting or refusing such inspection.
FDISG may, however, make such
records available for inspection to any person in any case where it
is advised in writing by its counsel that it may be held liable for
failure to do so after notice to the Trust.
FDISG recognizes that the records it maintains for the Trust
are the property of the Trust and will be surrendered to the Trust
upon written notice to FDISG as outlined under Section 10(c) below.
The Trust is responsible for the payment in advance of any fees owed
to FDISG. FDISG agrees to maintain the records and all other
information of the Trust in a confidential manner and will not use
such information for any purpose other than the performance of FDISG?
duties under this Agreement.
Section 10. Duration and Termination.
(a) The initial term of this Agreement will be for the period
of three (3) years, commencing on the date hereinabove first written
(the ?Effective Date?) and will continue thereafter subject to
termination by either Party as set forth in subsection (c) below.
(b) The fee schedules set forth in Schedule "B" attached
hereto will be fixed for two (2) years commencing on the Effective
Date of this Agreement and will continue thereafter subject to their
review and any adjustment.
(c) After the initial term of this Agreement, a Party may
give written notice to the other (the day on which the notice is
received by the Party against which the notice is made shall be the
?Notice Date?) of a date on which this Agreement shall be terminated
(?Termination Date?). The Termination Date shall be set on a day not
less than one hundred eighty (180) days after the Notice Date. The
period of time between the Notice Date and the Termination Date is
hereby identified as the ?Notice Period?. Any time up to, but not
later than fifteen (15) days prior to the Termination Date, the Trust
will pay to FDISG such compensation as may be due as of the
Termination Date and will likewise reimburse FDISG for any out-of-
pocket expenses and disbursements reasonably incurred or expected to
by incurred by FDISG up to and including the Termination Date.
(d) In connection with the termination of this Agreement, if
a successor to any of FDISG? duties or responsibilities under this
Agreement is designated by the Trust by written notice to FDISG,
FDISG will promptly, on the Termination Date and upon receipt by
FDISG of any payments owed to it as set forth in Section 10.(c)
above, transfer to the successor, at the Trust?s expense, all records
which belong to the Trust and will provide appropriate, reasonable
and professional cooperation in transferring such records to the
named successor.
(e) Should the Trust desire to move any of the services
outlined in this Agreement to a successor service provider prior to
the Termination Date, FDISG shall make a good faith effort to
facilitate the conversion on such prior date, however, there can be
no guarantee that FDISG will be able to facilitate a conversion of
services prior to the end of the Notice Period. Should services be
converted to a successor service provider prior to the end of the
Notice Period, or if the Trust is liquidated or its assets merged or
purchased or the like with another entity, payment of fees to FDISG
shall be accelerated to a date prior to the conversion or termination
of services and calculated as if the services had remained at FDISG
until the expiration of the Notice Period and shall be calculated at
the asset levels on the Notice Date.
(f) Notwithstanding the foregoing, this Agreement may be
terminated at any time by either Party in the event of a material
breach by the other Party involving gross negligence, willful
misfeasance, bad faith or a reckless disregard of its obligations and
duties under this Agreement provided that such breach shall have
remained unremedied for sixty (60) days or more after receipt of
written specification thereof.
Section 11. Rights of Ownership. All computer programs and
procedures developed to perform services required to be provided by
FDISG under this Agreement are the property of FDISG. All records
and other data except such computer programs and procedures are the
exclusive property of the Trust and all such other records and data
will be furnished to the Trust in appropriate form as soon as
practicable after termination of this Agreement for any reason.
Section 12. Amendments to Documents. The Trust will furnish
FDISG written copies of any amendments to, or changes in, the Trust
Instrument, By-Laws, Prospectus or Statement of Additional
Information in a reasonable time prior to such amendments or changes
becoming effective. In addition, the Trust agrees that no amendments
will be made to the Prospectus or Statement of Additional Information
of the Trust which might have the effect of changing the procedures
employed by FDISG in providing the services agreed to hereunder or
which amendment might affect the duties of FDISG hereunder unless the
Trust first obtains FDISG? approval of such amendments or changes.
Section 13. Confidentiality. Both Parties hereto agree that
any non-public information obtained hereunder concerning the other
Party is confidential and may not be disclosed to any other person
without the consent of the other Party, except as may be required by
applicable law or at the request of the U.S. Securities and Exchange
Commission or other governmental agency. FDISG agrees that it will
not use any non-public information for any purpose other than
performance of its duties or obligations hereunder. The obligations
of the Parties under this Section will survive the termination of
this Agreement. The Parties further agree that a breach of this
Section would irreparably damage the other Party and accordingly
agree that each of them is entitled, without bond or other security,
to an injunction or injunctions to prevent breaches of this
provision.
Section 14. Notices. Except as otherwise provided in this
Agreement, any notice or other communication required by or permitted
to be given in connection with this Agreement will be in writing and
will be delivered in person or sent by first class mail, postage
prepaid or by prepaid overnight delivery service to the respective
parties as follows:
If to the Trust: If to FDISG:
Sports Funds Trust FDISG Services,
Inc.
5-H Oak Branch Drive 3200 Horizon Drive
Greensboro, NC 27407 King of Prussia, PA
19406-0903
Attention: Jack R. Plymale Attention: Kenneth J. Kempf
Sole Trustee Senoir Vice-President
Section 15. Amendment. No provision of this Agreement may be
amended or modified in any manner except by a written agreement
properly authorized and executed by the Parties. This Agreement may
be amended from time to time by supplemental agreement executed by
the Parties and the compensation stated in Schedule "B" attached
hereto may be adjusted accordingly as mutually agreed upon.
Section 16. Authorization. The Parties represent and warrant
to each other that the execution and delivery of this Agreement by
the undersigned officer of each Party has been duly and validly
authorized; and when duly executed, this Agreement will constitute a
valid and legally binding enforceable obligation of each Party.
Section 17. Counterparts. This Agreement may be executed in
two or more counterparts, each of which when so executed will be
deemed to be an original, but such counterparts will together
constitute but one and the same instrument.
Section 18. Assignment. This Agreement will extend to and be
binding upon the Parties hereto and their respective successors and
assigns; provided, however, that this Agreement will not be
assignable by the Trust without the written consent of FDISG or by
FDISG without the written consent of the Trust which consent shall be
authorized or approved by a resolution by its respective Boards of
Trustees.
Section 19. Governing Law. This Agreement will be governed by
the laws of the State of Pennsylvania and the exclusive venue of any
action arising under this Agreement will be Montgomery County,
Commonwealth of Pennsylvania.
Section 20. Severability. If any part, term or provision of
this Agreement is held by any court to be illegal, in conflict with
any law or otherwise invalid, the remaining portion or portions will
be considered severable and not be affected and the rights and
obligations of the parties will be construed and enforced as if the
Agreement did not contain the particular part, term or provision held
to be illegal or invalid, provided that the basic agreement is not
thereby materially impaired.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement
consisting of twelve (12) typewritten pages, together with Schedules
?A,? ?B? and ?C? to be signed by their duly authorized officers as of
the day and year first above written.
Sports Funds Trust FDISG Services,
Inc.
By: By:
Jack R. Plymale, Sole Trustee Kenneth Kempf,
Senoir Vice-President
SCHEDULE A
SERVICES TO BE PROVIDED BY FDISG SERVICES, INC.
FDISG Services, Inc. (?FDISG?) will (i) provide its own office space,
facilities, equipment and personnel for the performance of its duties
under this Agreement; and (ii) take all actions it deems necessary to
properly execute its responsibilities hereunder.
1. SERVICES RELATED TO ADMINISTRATIVE SERVICES
I. Regulatory Compliance
A. Compliance - Federal Investment Company Act of 1940
1. Review, report and renew
a. investment advisory contracts
b. fidelity bond
c. underwriting contracts
d. distribution (12b-1) plans
e administration contracts
f. accounting contracts
g. custody administration contracts
h. transfer agent and shareholder services
2. Filings
a. N-SAR (semi-annual report)
b. N-1A (prospectus), post-effective amendments
and
supplements ("stickers")
c. 24f-2 indefinite registration of shares
d. filing fidelity bond under 17g-1
e. filing shareholder reports under 30b2-1
3. Annual up-dates of biographical information
and questionnaires for Directors/Trustees and Officers
II. Corporate Business and Shareholder/Public Information
A. Directors/Trustees/Management
1. Preparation of meetings
a. agendas - all necessary items of compliance
b. arrange and conduct meetings
c. prepare minutes of meetings
d. keep attendance records
e. maintain corporate records/minute book
B. Coordinate Proposals
1. Printers
2. Auditors
3. Literature fulfillment
4. Insurance
C. Maintain Corporate Calendars and Files
D. Release Corporate Information
1. To shareholders
2. To financial and general press
3. To industry publications
a. distributions (dividends and capital gains)
b. tax information
c. changes to prospectus
d. letters from management
e. funds' performance
4. Respond to:
a. financial press
b. miscellaneous shareholders inquiries
c. industry questionnaires
E. Communications to Shareholders
1. Coordinate printing and distribution of annual, semi-
annual reports,
and prospectus
III. Financial and Management Reporting
A. Income and Expenses
1. Monitoring of expense accruals, budgets, expense
payments and expense caps
2. Approve and coordinate payment of expenses
3. Establish Funds' operating expense checking account
and perform monthly reconciliation of checking account
4. Calculation of advisory fee, 12b-1 fee and
reimbursements to fund, (if applicable)
5. Authorize the recording and amortization of
organizational costs and pre-paid expenses (supplied
by advisor), for start-up funds and reorganizations
6. Calculation of average net assets
7. Expense ratios calculated
B. Distributions to Shareholders
1. Calculations of dividends and capital gain
distributions (in conjunction with the fund and their
auditors)
a. compliance with income tax provisions
b. compliance with excise tax provisions
c. compliance with Investment Company Act of
1940
2. Book/Tax identification and adjustments at required
distribution periods (in conjunction with the funds'
auditors)
C. Financial Reporting
1. Liaison between fund management, independent auditors
and printers for semi-annual and annual shareholder
reports
2. Preparation of semi-annual and annual reports to
shareholders
3. Preparation of semi-annual and annual NSAR's
(Financial Data)
4. Preparation of Financial Statements for required SEC
Post Effective filings (if applicable)
5. Preparation of required performance graph (annually)
(based on advisor supplied indices)
D. Subchapter M Compliance (monthly)
1. Asset diversification and gross income tests
E. Other Financial Analyses
1. Upon request from fund management, other budgeting and
analyses can be constructed to meet the fund's
specific needs (additional fees may apply)
2. Sales information, portfolio turnover (monthly)
3. Work closely with independent auditors on tax
reporting schedules we prepare on return of capital
presentation, excise tax calculation
4. Performance (total return) calculation (monthly)
5. 1099 Miscellaneous - prepared and filed for
Directors/Trustees (annual)
6. Analysis of interest derived from various Government
obligations (annual) (if interest income was
distributed in a calendar year)
7. Analysis of interest derived, by state, for Municipal
Bond Funds
8. Review and characterize 1099-Dividend Forms
9. Prepare and coordinate with printer the printing and
mailing of 1099-Dividend Insert Cards
F. Review and Monitoring Functions (monthly)
1. Review expense and reclassification entries to ensure
proper update
2. Perform various reviews to ensure accuracy of
Accounting (the monthly expense analysis) and Custody
(review of daily bank statements to ensure accurate
expense money movement for expense payments)
3. Review accruals, budgets and expenditures (where
applicable)
G. Preparation and distribution of monthly operational reports
to management by 10th business day
1. Management Statistics (Recap)
a. portfolio summary
b. book gains/losses/per share
c. net income, book income/per share
d. capital stock activity
e. distributions
2. Performance Analysis (faxed to Fund 1st workday of
month)
a. total return
b. monthly, quarterly, year to date, average annual
3. Expense Analysis
a. schedule
b. summary of due to/from advisor
c. expenses paid
d. expense cap
e. accrual monitoring
f. advisory fee
4. Portfolio Turnover
a. market value
b. cost of purchases
c. net proceeds of sales
d. average market value
5. Asset Diversification and Gross Income Tests
a. gross assets
b. non-qualifying assets
c. gross income test
6. Activity Summary
a. shares sold, redeemed and reinvested
b. change in investment
H. Provide rating agencies statistical data as requested
(monthly/quarterly)
I. For Money-Market Funds - Rule 2-A-7 Weekly Compliance
J. Standard schedules for Board Package (Quarterly)
1. Activity Summary (III-G-7 from above)
2. Expense analysis
3. Other schedules can be provided (additional fees may
apply)
IV. Blue Sky Administration
A. Sales Data
1. Receive daily sales figures through SUNGARD interface
with Price Waterhouse Blue 2 System.
2. Receive daily sales figures broken down by state from
Charles Schwab or other mutual fund marketplaces (if
applicable).
3. Produce daily warning report for sales in excess of
pre-determined percentage.
4. Analysis of all sales data to determine trends within
any state.
B. Filings
1. Produce and mail the following required filings:
a. Initial Filings - produce all required forms
including notification of SEC Effectiveness.
b. Renewals - produce all renewal documents and
mail to states, includes follow-up to ensure
all is in order to continue selling in
states.
c. Sales Reports - produce all relevant sales
reports for the states and complete necessary
documents to properly file sales reports with
states.
d. Prospectus Filings - file all copies of
Definitive SAI & Prospectuses with the states
which require notification.
e. Post-Effective Amendment Filing - file all
Post-Effective Amendments with the states
which require notification, as well as, any
other required documents.
2. On demand additional states - complete filing for any
states that you would like to add. This includes all
of the items in 1(a).
3. Amendments to current permits - file in a timely
manner any amendment to registered share amounts.
4. Update and file hard copy of all data pertaining to
individual permits.
C. Consulting and Analysis - We will supply you with the most
current fee structure for each state and help you decide
what course of action to take in each state to minimize the
amount of money spent on Blue Sky Registration.
2. SERVICES RELATED TO SHAREHOLDERS AND SHARE TRANSACTIONS
A. Shareholder File
1. Establish new accounts and enter demographic data into
shareholder base. Includes
in-house processing and National Securities Clearing
Corporation (NSCC) - Fund/SERV and/or Networking
transmissions.
2. Create Customer Information File (CIF) to link accounts within
the Fund and across funds within the Fund Group. Facilitates
account maintenance, lead tracking, quality control, household
mailings and combined statements.
3. 100% quality control of new account information including
verification of initial investment.
4. Maintain account and customer file records based on
shareholder request and routine quality review.
5. Maintain tax ID certification and Non Resident Agent (NRA)
records for each account, including backup withholding.
6. Provide written confirmation of address changes.
7. Produce shareholder statements for daily activity, dividends,
on-request, interested party and periodic mailings.
8. Establish and maintain deal file by Fund Group, including
dealer, branch, representative number and name.
9. Automated processing of dividends and capital gains with
daily, monthly, quarterly or annual distributions. Payment
options include reinvestment, directed payment to another
fund, cash via mail, Fed wire or ACH.
10. Image all applications, account documents, data changes,
correspondence, monetary transactions and other pertinent
shareholder documents.
B. Shareholder Services
1. Provide quality service through a staff of highly trained NASD
licensed customer service personnel, including phone, research
and correspondence representatives.
2. Answer shareholder calls: provide routine account information,
transaction details including direct and wire purchases,
redemptions, exchanges, systematic withdrawals, pre-authorized
drafts, Fund/SERV and wire order trades, problem solving and
process telephone transactions.
3. Silent monitoring of telephone representative calls by the
phone supervisor during live conversations to ensure
exceptional customer service.
4. Record and maintain tape recordings of all shareholder calls
for a six month period.
5. Phone Supervisor produces daily management reports of
shareholder calls which include tracking volume, call length,
average wait time and abandoned call rates to ensure quality
service.
6. Phone representatives are thoroughly trained through in-house
training programs on the techniques of providing Exceptional
Customer Service.
7. Customer inquiries received by letter or telephone are
researched by a correspondence team. These inquires include
such items as account/customer file information, complete
historical account information, stop payments on checks,
transaction details and lost certificates.
8. Provide written correspondence in response to shareholder
inquiries and request through the CORRO Letter Writer system.
Whenever possible, unclear shareholder instructional letters
are handled by a phone call to the shareholder from our phone
representatives to avoid delay in processing of the request.
C. Investment Processing
1. Establish and maintain Rights of Accumulation and Letter of
Intent files
2. Initial investment (checks or Fed wires)
3. Subsequent investments processed through lock box
4. Pre-authorized investments (PAD) through ACH system
5. Government allotments through ACH system
6. Wire order and NSCC - Fund/SERV trades
7. Prepare and process daily bank deposit of shareholder
investments
D. Redemption Processing
1. Process mail redemption requests
2. Process telephone redemption transactions
3. Establish Systematic Withdrawal file and process automated
transactions on monthly basis
4. Provide wire order and NSCC - Fund/SERV trade processing
5. Distribute redemption proceeds to shareholder by check, wire
or ACH processing
E. Exchange & Transfer Processing
1. Process legal transfers
2. Process ACATS transfers
3. Issue and cancel certificates
4. Replace certificates through surety bonds (separate charge to
shareholder)
5. Process exchange transactions (letter and/or telephone
requests)
F. Retirement Plan Services
1. Fund sponsored IRAs offered using Semper Trust Company as
custodian. Services include:
a. Contribution processing
b. Distribution processing
c. Apply rollover transactions
d. Process Transfer of Assets
e. Letters of Acceptance to prior custodians
f. Notify IRA holders of 70 ? requirements
g. Calculate Required Minimum Distributions (RMD)
h. Maintain beneficiary information file
i. Solicit birth date information
2. Fund sponsored SEP-IRA plans offered using Semper Trust
Company as custodian. Services include those listed under
IRAs and:
a. Identification of employer contributions
3. Fund sponsored Qualified plans offered:
a. Plan document available
b. Omnibus/master account processing only
c. Produce annual statements
d. Process contributions
e. Process distributions
f. Process rollover and Transfer of Assets transactions
G. Commission Processing
1. Settlement and payment of dealer commission fees on the 10th
and 25th of each month for front end load funds
2. Settlement and payment of CDSC fees on the 1st of each month
for back end load funds
H. Settlement & Control
1. Daily review of processed shareholder transactions to assure
input was processed correctly. Accurate trade activity
figures passed to the Fund's Accounting Agent.
2. Preparation of daily cash movement sheets to be passed to the
Fund's Accounting Agent and Custodian Bank for use in
determining the Fund's daily cash availability.
3. Prepare a daily share reconcilement which balances the shares
on the Transfer Agent system to those on the books of the
Fund.
4. Resolve any outstanding share or cash issues that are not
cleared by trade date + 2.
5. Process shareholder adjustments to also include the proper
notification of any booking entries needed, as well as any
necessary cash movement.
6. Settlement and review of the Fund's declared dividends and
capital gains will include the following:
a. Review of record date report for accuracy of shares
b. Prepare dividend settlement report after dividend is posted
c. Verify the posting date shares, the rate used and the NAV
price of reinvest date to ensure dividend was posted
properly
d. Distribute copies to the Fund's Accounting Agent
e. Prepare the checks prior to being mailed
f. Send any dividends via wire, if requested
g. Prepare cash movement sheets for the cash portion of the
dividend payout on payable date
7. Placement of stop payments on dividend and liquidation checks
as well as the issuance of their replacements.
8. Maintain inventory control for stock certificates and dividend
check form.
9. Aggregate tax filings for all FDISG clients. Monthly deposits
are made to the IRS for all taxes withheld from shareholder
disbursements, distributions and foreign account
distributions. Correspond with the IRS concerning any of the
above issues.
10. Timely settlement and cash movement for all NSCC - Fund/SERV
activity.
I. Year-End Processing
1. Maintain shareholder records in accordance with IRS notices
for under-reporting and invalid tax IDs. This includes
initiating 31% backup withholding and notifying shareholders
of their tax status and the corrective action which is needed.
2. Conduct annual W-9 solicitation of all uncertified accounts.
Update account tax status to reflect backup withholding or
certified status depending upon responses.
3. Conduct periodic W-8 solicitation of all non-resident alien
shareholder accounts. Update account tax status with updated
shareholder information and treaty rates for NRA tax.
4. Review IRS Revenue Procedures for changes in transaction and
distribution reporting and specifications for the production
of forms to ensure compliance.
5. Coordinate year-end activity with client. Activities include
producing year-end statements, scheduling record dates for
year-end dividends and capital gains, production of combined
statements and printing of inserts to be mailed with tax
forms.
6. Distribute Dividend Letter to funds for them to sign off on
all distributions paid
year-to-date. Dates and rates must be authorized so that they
can be used for reporting to the IRS.
7. Coordinate the ordering of forms and envelopes from vendors in
preparation of tax reporting. Compare forms with IRS
requirements to ensure accuracy. Upon receipt of forms and
envelopes, allocate space for storage.
8. Prepare form flashes for the microfiche vendor. Test and
oversee the production of fiche for year-end statements and
tax forms.
9. Match and settle tax reporting totals to fund records and on-
line data from INVESTAR.
10. Produce forms 1099R, 1099B, 1099Div, 5498, 1042S and year-end
valuations. Quality assure forms before mailing to
shareholders.
11. Monitor IRS deadlines and special events such as crossover
dividends and prior year IRA contributions.
12. Prepare magnetic tapes and appropriate forms for the filing of
all reportable activity to the IRS.
J. Client Services
1. An Account Manager is assigned to each relationship and is the
liaison between the Fund and the Transfer Agency staff.
Responsibilities include scheduling of events, system
enhancement implementation, special promotion/event
implementation and follow-up and constant fund interaction on
daily operational issues.
Specifically:
a. Scheduling of dividends, proxies, report mailings and
special mailings
b. Coordinating with the Fund the shipment of materials for
scheduled mailings
c. Acting as liaison between the Fund and support services for
preparation of proofs and eventual printing of statement
forms, certificates, proxy cards, envelopes, etc.
d. Handling all notification to the client regarding proxy
tabulation through the meeting - coordinate scheduling of
materials, including voted cards, tabulation letters and
shareholder list to be available for the meeting
e. Ordering special reports, tapes and/or discs for special
systems requests received
f. Implementing new operational procedures, i.e., check
writing feature, load discounts, minimum waivers, sweeps,
telephone options, PAD promotions, etc.
g. Coordinating with systems, services and operations, special
events, i.e., mergers, new fund start ups, small account
liquidations, combined statements, household mailings,
additional mail files
h. Preparing standard operating procedures and review
prospectuses - coordinate implementation of suggested
changes with the Fund
i. Acting as liaison between the Fund and the Transfer Agency
staff regarding all service and operational issues
2. Blue Sky Processing
a. Maintain file with additions, deletions, changes and
updates at the Fund's direction
K. Other Related Services (not included in this Agreement)
1. Systematic linkage of shareholder accounts with exact matches
on SSN and address for the purpose of consolidated account
history reporting. Periodic production of laser printed
combined statements.
2. Production of household mailing labels which enable the Fund
to do special mailings to each address in the Fund Group
rather than each account.
3. Produce shareholder lists, labels and ad hoc reports to Fund
management as requested.
DAILY REPORTS
REPORT NUMBER REPORT DESCRIPTION
- -- Daily Activity Register
024 Tax Reporting Proof
051 Cash Receipts and
Disbursement Proof
053 Daily Share Proof
091 Daily Gain/Loss Report
104 Maintenance Register
044 Transfer/Certificate
Register
056 Blue Sky Warning Report
MONTHLY REPORTS
REPORT DESCRIPTION
Blue Sky
Certificate Listing
State Sales and Redemption
Monthly Statistical Report
Account Demographic Analysis
MTD Sales - Demographics by Account Group
Account Analysis by Type
3. SERVICES RELATED TO PORTFOLIO VALUATION AND MUTUAL FUND ACCOUNTING
All financial data provided to, processed and reported by FDISG under
this Agreement shall be in United States dollars. FDISG? obligation
to convert, equate or deal in foreign currencies or values extends
only to the accurate transposition of information received from the
various pricing and information services.
A. Daily Accounting Services
1. Calculate Net Asset Value ("NAV") and Offering Price Per Share
("POP"):
? Update the daily market value of securities held by the Fund
using FDISG's standard agents for pricing U.S. equity and bond
securities. The U.S. equity pricing services are Reuters,
Inc., Muller Data Corporation, J.J. Kenny Co., Inc. and
Interactive Data Corporation (IDC). Muller Data, Dow Jones
Markets (formerly Telerate Systems, Inc.), J.J. Kenny Co.,
Inc., Municipal Market Data and IDC are also used for bond and
money market prices/yields. Bloomberg is available and used
for price research.
? Enter limited number of manual prices supplied by Sports Funds
Trust and/or broker.
? Prepare NAV proof sheet. Review components of change in NAV
for reasonableness.
? Review variance reporting on-line and in hard copy for price
changes in individual securities using variance levels
established by Sports Funds Trust. Verify U.S. dollar
security prices exceeding variance levels by notifying Sports
Funds Trust and pricing sources of noted variances.
? Review for ex-dividend items indicated by pricing sources;
trace to Fund's general ledger for agreement.
? Communicate pricing information (NAV) to Sports Funds Trust,
Fund's transfer agent ("Transfer Agent") and electronically to
NASDAQ.
2. Determine and Report Cash Availability to Sports Funds Trust by
approximately 9:30 a.m. Eastern Time:
? Receive daily cash and transaction statements from the agent
responsible for the safekeeping of the Fund's assets (the
"Custodian") by 8:30 a.m. Eastern time.
? Receive previous day shareholder activity reports from the
Transfer Agent by 8:30 a.m. Eastern time.
? Fax hard copy Cash Availability calculations with all details
to Sports Funds Trust.
? Supply Sports Funds Trust with 3-day cash projection report.
? Prepare daily bank cash reconciliations. Notify the Custodian
and Sports Funds Trust of any reconciling items.
3. Reconcile and Record All Daily Expense Accruals:
? Accrue expenses based on budget supplied by Sports Funds Trust
either as percentage of net assets or specific dollar amounts.
? If applicable, monitor expense limitations established by
Sports Funds Trust.
? If applicable, accrue daily amortization of organizational
expense.
? If applicable, complete daily accrual of 12b-1 expenses.
4. Verify and Record All Daily Income Accruals for Debt Issues:
? Review and verify all system generated Interest and
Amortization reports.
? Establish unique security codes for bond issues to permit
segregated trial balance income reporting.
5. Monitor Securities Held for Cash Dividends, corporate actions and
capital changes such as splits, mergers, spinoffs, etc. and
process appropriately.
? Monitor electronically received information from Muller Data
Corporation for all domestic securities.
? Review current daily security trades for dividend activity.
? Monitor collection and postings of corporate actions,
dividends and interest.
6. Enter All Security Trades on Investment Accounting System (IAS)
based on written instructions from the Fund's Advisor.
? Review system verification of trade and interest calculations.
? Verify settlement through statements supplied by the
Custodian.
? Maintain security ledger transaction reporting.
? Maintain tax lot holdings.
? Determine realized gains or losses on security trades.
? Provide broker commission reporting.
7. Enter All Fund Share Transactions on IAS:
? Process activity identified on reports supplied by the
Transfer Agent.
? Verify settlement through statements supplied by the
Custodian.
? Reconcile to FDISG's Transfer Agent report balances.
8. Prepare and Reconcile/Prove Accuracy of the Daily Trial Balance
(listing all asset, liability, equity, income and expense
accounts).
? Post manual entries to the general ledger.
? Post Custodian activity.
? Post security transactions.
? Post and verify system generated activity, i.e. income and
expense accruals.
? Prepare general ledger net cash proof used in NAV calculation.
9. Review and Reconcile with Custodian Statements:
? Verify all posted interest, dividends, expenses and
shareholder and security payments/receipts, etc.
(Discrepancies will be reported to the Custodian).
? Post all cash settlement activity to the trial balance.
? Reconcile to ending cash balance accounts.
? Clear IAS subsidiary reports with settled amounts.
? Track status of past due items and failed trades as reported
by the Custodian.
10. Submission of Daily Accounting Reports to Sports Funds Trust:
(Additional reports readily available)
? Trial Balance.
? Portfolio Valuation (listing inclusive of holdings, costs,
market values, unrealized appreciation/depreciation and
percentage of portfolio comprised of each security).
? NAV Calculation Report.
? Cash Availability
? 3-Day Cash Projection Report.
B. Monthly Accounting Services
1. Full Financial Statement Preparation (automated Statements of
Assets and Liabilities, of Operations and of Changes in Net
Assets) and submission to Sports Funds Trust by 10th business
day.
2. Submission of Monthly Automated IAS Reports to Sports Funds
Trust:
? Security Purchase/Sales Journal.
? Interest and Maturity Report.
? Brokers Ledger (Commission Report).
? Security Ledger Transaction Report with Realized Gains/Losses.
? Security Ledger Tax Lot Holdings Report.
? Additional reports available upon request.
3. Reconcile Accounting Asset Listing to Custodian Asset Listing:
? Report any security balance discrepancies to the
Custodian/Sports Funds Trust.
4. Provide Monthly Analysis and Reconciliation of Additional Trial
Balance Accounts,
such as:
? Security cost and realized gains/losses.
? Interest/dividend receivable and income.
? Payable/receivable for securities purchased and sold.
? Payable/receivable for fund shares; issued and redeemed.
? Expense payments and accruals analysis.
C. Annual (and Semi-Annual) Accounting Services
1. Annually assist and supply Fund's auditors with schedules
supporting securities and shareholder transactions, income and
expense accruals, etc. during the year in accordance with
standard audit assistance requirements.
2. Provide N-SAR Reporting (Accounting Questions) on a Semi-Annual
Basis:
If applicable, answer the following items:
2, 12B, 20, 21, 22, 23, 28, 30A, 31, 32, 35, 36, 37, 43, 53, 55,
62, 63, 64B, 71, 72, 73, 74, 75 and 76
D. Accounts and Records
On each day the NYSE is open for regular trading and subject to
the proper receipt (via Oral or Written Instructions) by FDISG of
all information required to fulfill its duties under this
Agreement, FDISG will maintain and keep current the following
Accounts and Records and any other records required to be kept
pursuant to Rule 31a-1 of the Act relating to the business of
the Series in such form as may be mutually agreed upon between
the Trust and FDISG:
(1) Net Asset Value Calculation Reports;
(2) Cash Receipts Report;
(3) Cash Disbursements Report;
(4) Dividends Paid and Payable Schedule;
(5) Purchase and Sales Journals - Portfolio Securities;
(6) Subscription and Redemption Reports;
(7) Security Ledgers - Transaction Report and Tax Lot
Holdings Report;
(8) Broker Ledger - Commission Report;
(9) Daily Expense Accruals;
(10) Daily Interest Accruals;
(11) Daily Trial Balance;
(12) Portfolio Interest Receivable and Income Reports;
(13) Portfolio Dividend Receivable and Income Reports;
(14) Listing of Portfolio Holdings - showing cost,
market value and percentage of portfolio comprised
of each security; and
(15) Average Daily Net assets provided on monthly basis.
E. Protocol concerning accuracy of Pricing Portfolio Securities
FDISG shall perform the ministerial calculations necessary to
calculate the net asset value each day that the New York Stock
Exchange is open for business, in accordance with; (i) the
current Prospectus and Statement of Additional Information for
each Series, and (ii) procedures with respect thereto approved by
the Board of Trustees of the Trust and supplied in writing to
FDISG. Portfolio items for which market quotations are available
by FDISG? use of an automated financial information service (the
?Service?) shall be based on the closing prices of such Service
except where a Series or the Advisor has given or caused to be
given specific Written or Oral Instructions to utilize a
different value subject to the appropriate provisions in each
Series? Prospectus and Statement of Additional Information then
in effect. All of the portfolio securities shall be given such
values as the applicable Series or the Advisor provides by
Written or Oral Instructions including all restricted securities
and other securities requiring valuation not readily
ascertainable solely by such Service subject to the appropriate
provisions in the Series? Prospectus and Statement of Additional
Information then in effect.
FDISG will have no responsibility or liability for (i) the
accuracy of prices quoted by such Service; (ii) the accuracy of
the information supplied by the a Series; or (iii) any loss,
liability, damage, or cost arising out of any inaccuracy of such
data. FDISG will have no responsibility or duty to include
information or valuations to be provided by a Series in any
computation unless and until it is timely supplied to FDISG in
usable form. FDISG will record corporate action information as
received from the Custodians, the Service or a Series. FDISG
will not have any duty to gather or record corporate action
information not supplied by these sources.
FDISG will assume no liability for price changes caused by the
Advisor or any subadvisor, Custodian, suppliers of security
prices, corporate action and dividend information, or any party
other than FDISG itself.
F. Protocol regarding Receipt of Instructions
For all purposes under this Agreement, FDISG is authorized to
act upon receipt of the first of any Written or Oral Instruction
it receives from the Trust on behalf of a Series or its agents on
behalf of the Trust. In cases where the first instruction is an
Oral Instruction that is not in the form of a document or written
record, a confirmatory Written Instruction or Oral Instruction in
the form of a document or written record will be delivered, and
in cases where FDISG receives an Instruction, whether Written or
Oral, to enter a portfolio transaction on the records, the Trust
will cause the broker/dealer to send a written confirmation to
the Custodian. FDISG will be entitled to rely on the first
Oral or Written Instruction received and any act or omission
undertaken in compliance therewith will be free of liability and
fully indemnified and held harmless by the applicable Series,
provided, however, that in the event a Written or Oral
Instruction received by FDISG is countermanded by a subsequent
Written or Oral Instruction received by FDISG prior to acting
upon such countermanded Instruction, FDISG will act upon such
subsequent Written or Oral Instruction. The sole obligation of
FDISG with respect to any follow-up or confirmatory Written
Instruction or Oral Instruction in documentary or written form
will be to make reasonable efforts to detect any such discrepancy
between the original Instruction and such confirmation and to
report such discrepancy to the applicable Series. The Series
will be responsible, at the Series? expense, for taking any
action, including any reprocessing, necessary to correct any
discrepancy or error. To the extent such action requires FDISG
to act, the Trust will give FDISG specific Written Instruction as
to the action required.
G. Accounting Services Basic Assumptions for the Funds
The Accounting Fees as set forth in Schedule ?B? are based on the
following assumptions. To the extent these assumptions are
inaccurate or requirements change, fee revisions may be
necessary.
1. The Fund's portfolio asset composition will be primarily domestic
equities. Trading activity is expected to be moderate, with an
annual turnover rate not to exceed 100%.
2. The Fund has a tax year-end which coincides with its fiscal year-
end. No additional accounting requirements are necessary to
identify or maintain book-tax differences. FDISG does not
provide security tax accounting which differs from its book
accounting under this fee schedule.
3. The Fund agrees to the use of FDISG? standard current pricing
services for domestic equity, debt, ADR and foreign securities.
It is assumed that FDISG will work closely with the Fund to
ensure the accuracy of the Fund's NAV and to obtain the most
satisfactory pricing sources and specific methodologies prior to
the actual start-up date. The Fund will establish security
variance procedures to minimize NAV miscalculations.
4. To the extent the Fund requires a limited number of daily
security prices from specific brokers (as opposed to pricing
information received electronically), these manual prices will be
obtained by the Fund?s Advisor and faxed to FDISG by 4:00 p.m.
Eastern time for inclusion in the NAV calculations. The Advisor
will supply FDISG with the appropriate pricing contacts for these
manual quotes.
5. FDISG will supply daily Portfolio Valuation Reports to the Fund's
Advisor identifying current security positions,
original/amortized cost, security market values and changes in
unrealized appreciation/depreciation. It will be the
responsibility of the Advisor to review these reports and to
promptly notify FDISG of any possible problems, trade
discrepancies, incorrect security prices or corporate
action/capital change information that could result in a
misstated NAV.
6. The Fund does not currently expect to invest in Open-end
Regulated Investment Company's (RIC's), REIT's, Swaps, Futures,
Hedges, Derivatives or foreign (non-U.S. dollar denominated)
securities and currency. To the extent these investment
strategies should change, additional fees may apply after the
appropriate procedural discussions
have taken place between FDISG and Fund management. (Two weeks
advance notice is required should the Fund commence trading in
these investments.)
7. The Fund will supply FDISG with income information such as
accrual methods, interest payment frequency details, coupon
payment dates, floating rate reset dates, and complete security
descriptions with issue types and CUSIP/Sedol numbers for all debt
issues. The Fund?s Advisor shall supply the yield to maturity,
related cash flow schedules and principal repayment factors for
any mortgage/asset-backed securities held in the Fund not
available on Bloomberg.
Any income accrual adjustments (to the extent necessary) based
upon initial estimates will be completed by FDISG when actual
principal/income payments are collected by the Custodian and
reported to FDISG.
8. The Fund is responsible for the establishment and monitoring of
any segregated accounts pertaining to any line of credit for
temporary administrative purposes, and/or leveraging/hedging the
portfolio. FDISG will reflect appropriate trial balance account
entries and interest expense accrual charges on the daily trial
balance adjusting as necessary at month-end.
9. If the Fund commences participation in security lending or short
sales within its portfolio securities, additional fees may
apply. Should the Fund require these additional services,
procedural discussions must take place between FDISG and the
Fund?s Advisor to clarify responsibilities. (Two weeks advance
notice to FDISG is required should the Fund desire to participate
in the above.)
10. The following specific deadlines will be met and complete
information will be supplied by the Fund in order to minimize any
settlement problems, NAV miscalculations or income accrual
adjustments.
The Fund will direct its Advisor to provide Trade Authorization
Forms to FDISG with the appropriate officer?s signature on all
security trades placed by the Fund no later than 12:30 p.m.
Eastern time on settlement/value date for short term money market
securities issues (assuming that trade date equals settlement
date); and by 11:00 a.m. Eastern time on trade date plus one for
non-money market securities. Receipt by FDISG of trade
information within these identified deadlines may be made via
telex, fax or on-line system access. The Advisor will supply
FDISG with the trade details in accordance with the above stated
deadlines.
The Advisor will provide all information required by FDISG,
including CUSIP/Sedol numbers and/or ticker symbols for all trades
on the Trade Authorization, telex or on-line support. FDISG will
supply the Advisor with recommended trade ticket documents to
minimize receipt of incomplete information. FDISG will not be
responsible for NAV changes or distribution rate adjustments that
result from incomplete trade information.
11. To the extent the Fund utilizes purchases in-kind (U.S. dollar
denominated securities only) as a method for shareholder
subscriptions, FDISG will provide the Fund with procedures to
properly handle and process such transactions. Should the Fund
prefer procedures other than those provided by FDISG, additional
fees may apply. Discussions shall take place at least two weeks
in advance between FDISG and the Fund to clarify the appropriate
in-kind operational procedures to be followed.
12. The Parties will establish mutually agreed upon amortization
procedures and accretion requirements for debt issues held by the
Fund prior to commencement of operations. Adjustments for
financial statements regarding any issues with original issue
discount (OID) are not included under this Agreement. The Fund
will direct its independent auditors to complete the necessary
OID adjustments for financial statements and/or tax reporting.
13. The Accounting Fees assume FDISG will provide Transfer Agency and
Custody Administration Services.
4. SERVICES RELATED TO CUSTODY ADMINISTRATION
? Assign a Custody Administrator to accept, control and process
Sports Funds Trust's daily portfolio transactions through direct
computer link with the Custodian.
? Match and review DTC eligible ID's and trade information with
Sports Funds Trust's instructions for accuracy and coordinating
with the Custodian and Sports Funds Trust's Accounting agent for
recording and affirmation processing with the depository.
? Systematically settle all depository eligible issues.
Transactions requiring physical delivery will be settled through
the Custodian's New York office.
? Assist Sports Funds Trust in placing cash management trades
through Custodian, such as commercial paper, CD's and repurchase
agreements.
? Provide Sports Funds Trust's Fund Accounting agent and Investment
Advisor with daily custodian statements reflecting all prior day
cash activity on behalf of each portfolio by 8:30 a.m. Eastern
time. Complete descriptions of any posting, inclusive of
Sedol/CUSIP numbers, interest/dividend payment date, capital stock
details, expense authorizations, beginning/ending cash balances,
etc., will be provided by the Custodian's reports or system.
? Provide monthly activity statements combining both cash changes
and security trades, and a full portfolio listing.
? Communicate to Sports Funds Trust and Sports Funds Trust's Fund
Accounting agent on any corporate actions, capital changes and
interest rate changes supported by appropriate supplemental
reports received from the Custodian. Follow-up will be made with
the Custodian to ensure all necessary actions and/or paperwork is
completed.
? Work with Fund Accounting and the Custodian on monthly asset
reconciliations.
? Coordinate and resolve unsettled dividends, interest, paydowns
and capital changes. Assist in resolution of failed transactions
and any settlement problems.
? Arrange for securities lending, lines of credit and/or letters of
credit through the Custodian.
? Provide automated mortgage-backed processing through the
Custodian.
? Provide broker interface ensuring trade settlement with fail
trade follow-up.
? Provide Sports Funds Trust's auditors with trade documentation to
help expedite the fund's audit.
? Cooperation and communication between Fund Accounting, Custodian
and Transfer Agent is facilitated smoothly when Custody
Administration is performed by FDISG Services, Inc.
SCHEDULE ?B?
FEE SCHEDULE
FOR
SPORTS FUNDS TRUST
(All fees are quoted for a period of 90 days and will be for a term
of two (2) years
from effective date, a third year term will be offered at fees that
shall be
increased at a rate that is less than or equal to 10%.)
I. Fees Related to Fund Administration (1/12th payable monthly)
..0015 On the First $ 50 Million of
Average Net Assets
..0010 On the Next $ 50 Million of Average Net
Assets
..0005 Over $100 Million of Average Net
Assets
The above fee schedule is applicable to Total Net Assets of all
series portfolios within a group. Annual minimum fees are
$55,000 for the first series/portfolio, $12,000 for each
additional domestic series/portfolio or class.
II. Fees Related to Shareholder Servicing (1/12th payable monthly)
A. $20.00 per account per year per portfolio
Minimum monthly fee - $2,250 per portfolio*
Each additional class minimum monthly fee is $1,250.
*This fee is reduced to $24,000/year for the first two years
of a three year contract.
B. IRA's, 403(b) Plans, Defined Contribution/Benefit Plans:
Annual Maintenance Fee - $12.00 per account per year
(Normally charged to participants)
C. FUND/SERV Processing (If Applicable)
$1,000 One time start-up fee
$50.00 Per month/per Fund monthly maintenance fee
D. Networking Processing (If Applicable)
$1,000 One time start-up fee
$75.00 Per month/per fund monthly maintenance fee
III. Fees Related to Fund Accounting and Portfolio Valuation Fees
A. Annual Fee Schedule Per Domestic Portfolio: U.S. Dollar
Denominated Securities only (1/12th payable monthly)
$25,000 Minimum to $ 20 Million of Average Net
Assets*
..0003 On Next $ 30 Million of Average Net
Assets*
..0002 On Next $ 50 Million of Average Net
Assets*
..0001 Over $100 Million of Average Net
Assets*
Each additional class is $10,000 minimum per year.
*For multiple class portfolios, fees are based on combined
classes Average Net Assets.
B. Pricing Services Quotation Fee
Specific costs will be identified based upon options selected
by Sports Funds Trust and will be billed monthly.
FDISG does not currently pass along the charges for the U.S.
equity prices supplied by Muller Data. Should the Fund invest
in security types other than domestic equities supplied by
Muller, the following fees would apply.
Security Types
Muller
Data
Corp.*
Interactiv
e Data
Corp.*
J.J.
Kenny
Co.,
Inc.*
Government Bonds
$ .50
$ .50
$ .25 (a)
Mortgage-Backed (evaluated,
seasoned, closing)
.50
.50
.25 (a)
Corporate Bonds (short and long
term)
.50
.50
.25 (a)
U.S. Municipal Bonds (short and
long term)
.55
.80
.50 (b)
CMO's/ARM's/ABS
1.00
.80
1.00 (a)
Convertible Bonds
.50
.50
1.00 (a)
High Yield Bonds
.50
.50
1.00 (a)
Mortgage-Backed Factors (per
Issue per Month)
1.00
n/a
n/a
U.S. Equities
(d)
..15
n/a
U.S. Options
n/a
.15
n/a
Domestic Dividends & Capital
Changes
(per Issue per Month)
(d)
3.50
n/a
Foreign Securities
.50
.50
n/a
Foreign Securities Dividends &
Capital Changes
(per Issue per Month)
2.00
4.00
n/a
Set-up Fees
n/a
n/a (e)
.25 (c)
All Added Items
n/a
n/a
..25 (c)
* Based on current Vendor costs, subject to change. Costs
are quoted based on individual security CUSIP/identifiers
and are per issue per day.
(a) $35.00 per day minimum
(b) $25.00 per day minimum
(c) $ 1.00, if no CUSIP
(d) At no additional cost to FDISG clients
(e) Interactive Data also charges monthly transmission
costs and disk storage charges.
1) Futures and Currency Forward Contracts $2.00 per Issue per Day
2) Dow Jones Markets (formerly Telerate Systems, Inc.)* (if
applicable)
*Based on current vendor costs, subject to change.
Specific costs will be identified based upon options
selected by Sports Funds Trust and will be billed monthly.
3) Reuters, Inc.*
*Based on current vendor costs, subject to change.
FDISG does not currently pass along the charges for the
domestic security prices supplied by Reuters, Inc.
4) Municipal Market Data* (if applicable)
*Based on current vendor costs, subject to change.
Specific costs will be identified based upon options
selected by Sports Funds Trust and will be billed monthly.
C. SEC YIELD CALCULATION: (if applicable)
Provide up to 12 reports per year to reflect the yield
calculations for non-money market Funds required by the SEC,
$1,000 per year per Fund. For multiple class Funds, $1,000
per year per class. (US dollar denominated securities only).
IV. Fees Related to Custody Administration of Fund Assets Using
Bank of New York
A. Domestic Securities and ADRS Per Portfolio : (1/12th payable
monthly)
U.S. Dollar Denominated Securities only
..0002 On First $ 50 Million of Average Net
Assets
..00015 On the Next $150 Million of Average Net
Assets
..000125 Over $200 Million of Average Net
Assets
Minimum monthly fee is $500 per portfolio.
B. Custody Domestic Securities Transactions Charge: (billed
monthly)
Book Entry DTC, Federal Book Entry, PTC $12.00
Physical Securities, Options/Futures $20.00
RIC's $24.50
P & I Paydowns $ 7.00
Wires $ 7.00
Check Request $ 6.00
Euro C/D's $45.00
Eurotime Deposit $15.00
A transaction includes buys, sells, maturities or free
security movements.
Cedel/Euroclear
4 BPS safekeeping charge, $20 transaction charge.
Fee expressed in basis points per annum based upon month end
market value.
C. When Issued, Securities Lending, Index Futures, etc.:
Should any investment vehicle require a separate segregated
custody account, a fee of $250 per account per month will
apply.
D. Custody Miscellaneous Fees
Administrative fees incurred in certain local markets will be
passed onto the customer with a detailed description of the
fees. Fees include income collection, corporate action
handling, overdraft charges, funds transfer, special local
taxes, stamp duties, registration fees, messenger and courier
services and other out-of-pocket expenses.
V. Out-of-Pocket Expenses
The Fund will reimburse FDISG Services, Inc. monthly for all
reasonable out-of-pocket expenses, including telephone, postage,
EDGAR filings, Fund/SERV and Networking expenses, incoming wire
charges, telecommunications, special reports, record retention,
special transportation costs, copying and sending materials to
auditors and/or regulatory agencies as incurred and approved.
VI. Additional Services
To the extent the Fund commences using investment techniques such as
Security Lending, Swaps, Leveraging, Short Sales, Derivatives,
Precious Metals, or foreign (non-U.S.D.) securities and currency,
additional fees will apply. Activities of a non-recurring nature
such as shareholder inkinds, fund consolidations, mergers or
reorganizations will be subject to negotiation. Any
additional/enhanced services, programming requests, or reports will
be quoted upon request.
SCHEDULE C
IDENTIFICATION OF ACCOUNT
Below are listed the separate accounts of Sports Funds Trust to which
services under this Agreement are to be performed as of the Execution
Date of this Agreement.
Motorsports Growth & Income Fund
This Schedule C may be amended from time to time by agreement of
the Parties.
Distribution Plan
of
The Sports Funds Trust
The Motorsports Growth & Income Fund
The following Distribution Plan (the "Plan") has been adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended (the "Act"), by The Sports Funds Trust (the "Trust") for The
Motorsports Growth & Income Fund (the "Fund") of the Trust and any
separate series of the Trust hereinafter organized. The Plan has
been approved by a majority of the Trust's Board of Trustees,
including a majority of the trustees who are not interested persons
of the Trust and who have no direct or indirect financial interest in
the operation of the Plan (the "non-interested trustees"), cast in
person at a meeting called for the purpose of voting on such Plan.
In reviewing the Plan, the Board of Trustees determined that
the adoption of the Plan would be prudent and in the best interests
of the Trust and its shareholders. Such approval included a
determination that in the exercise of their reasonable business
judgment and in light of their fiduciary duties, there is a
reasonable likelihood that the Plan will benefit the Trust and its
shareholders. The Plan has also been approved by a vote of the sole
initial shareholder of the the Fund.
The Provisions of the Plan are:
1. The Fund of the Trust shall reimburse the Advisor, the
Distributor or others for all expenses incurred by such parties in
the promotion and distribution of shares of the Fund of the Trust,
including but not limited to, the printing of prospectuses and
reports used for sales purposes, expenses of preparation of sales
literature and related expenses, advertisements, and other
distribution-related expenses, as well as any distribution or service
fees paid to securities dealers or others who have executed a
servicing agreement with the Trust on behalf of the Fund or the
Distributor, which form of agreement has been approved by the
Trustees, including the non-interested trustees. The monies to be
paid pursuant to any such servicing agreement shall be used to pay
dealers or others for, among other things, furnishing personal
services and maintaining shareholder accounts, which services
include, among other things, assisting in establishing and
maintaining customer accounts and records; assisting with the
purchase and redemption requests; arranging for bank wires;
monitoring dividend payments from the Trust on behalf of customers;
forwarding certain shareholder communications from the Trust to
customers; receiving and answering correspondence; and aiding in
maintaining the investment of their respective customers in the Fund.
2. The maximum aggregate amount which may be reimbursed by
the Fund of the Trust to such parties pursuant to paragraph 1 shall
be 0.25% per annum of the average daily net assets of the Fund.
3. The Advisor and the Distributor shall collect and monitor
the documentation of payments made under paragraph 1, and shall
furnish to the Board of Trustees of the Trust, for their review, on a
quarterly basis, a written report of the monies reimbursed to them
and others under the Plan as to the Trust's Retail Class, and shall
furnish the Board of Trustees of the Trust with such other
information as the Board may reasonably request in connection with
the payments made under the Plan as to the Trust's Retail Class in
order to enable the Board to make an informed determination of
whether the Plan should be continued.
4. The Plan shall continue in effect for a period of more
than one year only so long as such continuance is specifically
approved at least annually by the Trust's Board of Trustees,
including the non-interested trustees, cast in person at a meeting
called for the purpose of voting on the Plan.
5. The Plan, or any agreements entered into pursuant to this
Plan, may be terminated at any time, without penalty, by vote of a
majority of the outstanding voting securities of the Trust, or by
vote of a majority of the non-interested Trustees, on not more than
sixty (60) days' written notice, and shall terminate automatically in
the event of any act that constitutes an assignment of the management
agreement between the Trust and the Manager.
6. The Plan and any agreements entered into pursuant to this
Plan may not be amended to increase materially the amount to be spent
by the Trust's Retail Class for distribution pursuant to Paragraph 1
hereof without approval by a majority of the Fund outstanding voting
securities.
7. All material amendments to the Plan, or any agreements
entered into pursuant to this Plan, shall be approved by the non-
interested trustees cast in person at a meeting called for the
purpose of voting on any such amendment.
8. So long as the Plan is in effect, the selection and
nomination of the Trust's non-interested trustees shall be committed
to the discretion of such non-interested trustees.
9. This Plan shall take effect on the day of
, 199 .
This Plan and the terms and provisions thereof are hereby
accepted and agreed to by the Trust, the Advisor and the Distributor
as evidenced by their execution hereof.
The Sports Funds Trust Pegasus Advisory Group, Inc.
By: By:
Jack R. Plymale, Sole Trustee Jack R. Plymale,President
FPS Broker Services, Inc.
By:
Gerald J. Holland, Principal
POWER-OF-ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints William J. Baltrus, Gerald J. Holland, and Michelle A.
Whalen and each of them, with full power to act without the other,
as a true and lawful attorney-in-fact and agent, with full and
several power of substitution, to take any appropriate action to
execute and file with the U.S. Securities and Exchange Commission,
any amendment to the registration statement of The Sports Funds Trust
(the "Trust"), file any request for exemptive relief from state and
federal regulations, to file the prescribed notices in the various
states regarding the sale of shares of the Trust, to perform on
behalf of the Trust any and all such acts as such attorneys-in-fact
may deem necessary or advisable in order to comply with the
applicable laws of the United States or any such state, and in
connection therewith to execute and file all requisite papers and
documents, including but not limited to, applications, reports,
surety bonds, irrevocable consents and appointments of attorneys for
service of process; granting to such attorneys-in-fact and agents,
and each of them, full power and authority to do and perform each and
every act requisite and necessary to be done in connection therewith,
as fully as each might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents or any of them,
or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power-of-
Attorney on the day of ____________, 1998.
Ken Melton, Trustee
Name and Title
<PAGE>
POWER-OF-ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints William J. Baltrus, Gerald J. Holland, and Michelle A.
Whalen and each of them, with full power to act without the other,
as a true and lawful attorney-in-fact and agent, with full and
several power of substitution, to take any appropriate action to
execute and file with the U.S. Securities and Exchange Commission,
any amendment to the registration statement of The Sports Funds Trust
(the "Trust"), file any request for exemptive relief from state and
federal regulations, to file the prescribed notices in the various
states regarding the sale of shares of the Trust, to perform on
behalf of the Trust any and all such acts as such attorneys-in-fact
may deem necessary or advisable in order to comply with the
applicable laws of the United States or any such state, and in
connection therewith to execute and file all requisite papers and
documents, including but not limited to, applications, reports,
surety bonds, irrevocable consents and appointments of attorneys for
service of process; granting to such attorneys-in-fact and agents,
and each of them, full power and authority to do and perform each and
every act requisite and necessary to be done in connection therewith,
as fully as each might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents or any of them,
or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power-of-
Attorney on the day of ____________, 1998.
Jack Plymale, President & Trustee
Name and Title
<PAGE>
POWER-OF-ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints William J. Baltrus, Gerald J. Holland, and Michelle A.
Whalen and each of them, with full power to act without the other,
as a true and lawful attorney-in-fact and agent, with full and
several power of substitution, to take any appropriate action to
execute and file with the U.S. Securities and Exchange Commission,
any amendment to the registration statement of The Sports Funds Trust
(the "Trust"), file any request for exemptive relief from state and
federal regulations, to file the prescribed notices in the various
states regarding the sale of shares of the Trust, to perform on
behalf of the Trust any and all such acts as such attorneys-in-fact
may deem necessary or advisable in order to comply with the
applicable laws of the United States or any such state, and in
connection therewith to execute and file all requisite papers and
documents, including but not limited to, applications, reports,
surety bonds, irrevocable consents and appointments of attorneys for
service of process; granting to such attorneys-in-fact and agents,
and each of them, full power and authority to do and perform each and
every act requisite and necessary to be done in connection therewith,
as fully as each might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents or any of them,
or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power-of-
Attorney on the day of ____________, 1998.
Dixon R. Johnston, Trustee
Name and Title
<PAGE>
POWER-OF-ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints William J. Baltrus, Gerald J. Holland, and Michelle A.
Whalen and each of them, with full power to act without the other,
as a true and lawful attorney-in-fact and agent, with full and
several power of substitution, to take any appropriate action to
execute and file with the U.S. Securities and Exchange Commission,
any amendment to the registration statement of The Sports Funds Trust
(the "Trust"), file any request for exemptive relief from state and
federal regulations, to file the prescribed notices in the various
states regarding the sale of shares of the Trust, to perform on
behalf of the Trust any and all such acts as such attorneys-in-fact
may deem necessary or advisable in order to comply with the
applicable laws of the United States or any such state, and in
connection therewith to execute and file all requisite papers and
documents, including but not limited to, applications, reports,
surety bonds, irrevocable consents and appointments of attorneys for
service of process; granting to such attorneys-in-fact and agents,
and each of them, full power and authority to do and perform each and
every act requisite and necessary to be done in connection therewith,
as fully as each might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents or any of them,
or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power-of-
Attorney on the day of ____________, 1998.
Charlie Criss, Trustee
Name and Title
