As filed with the Securities and Exchange Commission on April 9, 1998
Securities Act File No. 333-
Investment Company Act File No. 811-
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
SHANKLIN INVESTMENT TRUST
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
Telephone (919) 972-9922
AGENT FOR SERVICE:
C. Frank Watson III, Secretary
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
With copies to:
M. Guy Brooks, III, Esq.
Poyner & Spruill, L.L.P.
3600 Glenwood Avenue
Raleigh, North Carolina 27612
Approximate Date of Proposed Public Offering:
As soon as possible after the effectiveness of the Registration Statement
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a),
may determine.
Pursuant to the provisions of Rule 24f-2 of the Investment Company Act of 1940,
as amended, Registrant hereby elects to register an indefinite number of shares
of Registrant and any series thereof hereinafter created.
<PAGE>
PART A
PROSPECTUS
SCM Strategic Growth Fund Cusip Number 66976M8xx
PROSPECTUS
SCM STRATEGIC GROWTH FUND
The investment objective of the SCM Strategic Growth Fund (the "Fund") is to
provide its shareholders with a maximum total return consisting of any
combination of capital appreciation, both realized and unrealized, and income.
The Fund will seek to achieve this objective by investing primarily in a
flexible portfolio of equity securities, fixed income securities and money
market instruments. While there is no assurance that the Fund will achieve its
investment objective, it endeavors to do so by following the investment policies
described herein.
INVESTMENT ADVISOR
Shanklin Capital Management, Inc.
1420 Osborne Street, Suite B-16
Humboldt, Tennessee 38343
The Fund is a diversified series of the Shanklin Investment Trust (the "Trust"),
a registered open-end management investment company. This Prospectus sets forth
concisely the information about the Fund that a prospective investor should know
before investing. Investors should read this Prospectus and retain it for future
reference. Additional information about the Fund has been filed with the
Securities and Exchange Commission (the "SEC") and is available upon request and
without charge. You may request the Statement of Additional Information, as
amended from time to time, which is incorporated in this Prospectus by
reference, by writing the Fund at 107 North Washington Street, Post Office Box
4365, Rocky Mount, North Carolina 27803-0365, or by calling 1-800-525-3863. The
SEC also maintains an Internet Web site (http://www.sec.gov) that contains the
Statement of Additional Information, material incorporated by reference, and
other information regarding the Fund.
Investment in the Fund involves risks, including the possible loss of principal.
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any financial institution, and such shares are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED ON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus and the Statement of Additional Information is
June **, 1998.
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUMMARY............................................................ 2
FEE TABLE..................................................................... 3
INVESTMENT OBJECTIVE AND POLICIES............................................. 4
RISK FACTORS.................................................................. 8
INVESTMENT LIMITATIONS....................................................... 10
FEDERAL INCOME TAXES......................................................... 10
DIVIDENDS AND DISTRIBUTIONS.................................................. 11
HOW SHARES ARE VALUED........................................................ 11
HOW SHARES MAY BE PURCHASED.................................................. 12
HOW SHARES MAY BE REDEEMED................................................... 14
MANAGEMENT OF THE FUND....................................................... 16
OTHER INFORMATION............................................................ 18
This Prospectus is not an offering of the securities herein described in any
state in which the offering is unauthorized. No sales representative, dealer or
other person is authorized to give any information or make any representations
other than those contained in this Prospectus.
The Fund reserves the right in its sole discretion to withdraw all or any part
of the offering made by this Prospectus or to reject purchase orders. All orders
to purchase shares are subject to acceptance by the Fund and are not binding
until confirmed or accepted in writing.
<PAGE>
PROSPECTUS SUMMARY
The Fund. The SCM Strategic Growth Fund (the "Fund") is a diversified series of
the Shanklin Investment Trust (the "Trust"), a registered open-end management
investment company organized as a Massachusetts business trust. See "Other
Information - Description of Shares."
Offering Price. Shares of the Fund are offered to the general public at net
asset value. The minimum initial investment is $2,000. The minimum subsequent
investment is $500 ($100 for those participating in the Automatic Investment
Plan). See "How Shares May be Purchased."
Investment Objective. The investment objective of the Fund is to provide its
shareholders with a maximum total return consisting of any combination of
capital appreciation, both realized and unrealized, and income. The Fund will
seek to achieve this objective by investing primarily in a flexible portfolio of
equity securities, fixed income securities, and money market instruments. Fixed
income securities and money market instruments will generally comprise not less
than 5% and not more than 35% of the portfolio. See "Investment Objective and
Policies."
Risk Considerations. The Fund is not intended to be a complete investment
program, and there can be no assurance that the Fund will achieve its investment
objective. While the Fund will invest primarily in common stocks traded in U.S.
securities markets, some of the Fund's investments may include foreign
securities generally traded domestically in U.S. securities markets, real estate
securities. illiquid securities, and securities purchased subject to a
repurchase agreement or on a "when-issued" basis, which involve certain risks.
The Fund may also engage in options transactions, which present special risks. A
portion of the Fund will be invested in fixed income securities, which will be
subject to risks associated with movements in interest rates. Up to 15% of the
Fund may be invested in fixed income securities rated below "investment grade."
The Fund may borrow only under certain limited conditions (included to meet
redemption requests) and not to purchase securities. It is not the intent of the
Fund to borrow except for temporary cash requirements. Borrowing, if done, would
tend to exaggerate the effects of market and interest rate fluctuations on the
Fund's net asset value until repaid. See "Risk Factors."
Manager. Subject to the general supervision of the Trust's Board of Trustees and
in accordance with the Fund's investment policies, Shanklin Capital Management,
Inc. of Humboldt, Tennessee (the "Advisor"), manages the Fund's investments. The
Advisor currently manages approximately $10 million in assets. For its advisory
services, the Advisor receives a monthly fee, based on the Fund's average daily
net assets, at the annual rate of 0.85% of net assets. See "Management of the
Fund - The Advisor."
Dividends. Income dividends, if any, are generally paid quarterly; capital
gains, if any, are generally distributed at least once each year. Dividends and
capital gains distributions are automatically reinvested in additional shares of
the same Class at net asset value unless the shareholder elects to receive cash.
See "Dividends and Distributions."
Distributor. Capital Investment Group, Inc. (the "Distributor") serves as
distributor of shares of the Fund. See "How Shares May Be Purchased -
Distributor."
Redemption of Shares. There is no charge for redemptions other than possible
charges for wiring redemption proceeds. Shares may be redeemed at any time at
the net asset value next determined after receipt of a redemption request by a
Fund. A shareholder that submits appropriate written authorization may redeem
shares by telephone. See "How Shares May Be Redeemed."
<PAGE>
FEE TABLE
The following table sets forth certain information in connection with the
expenses of the shares of the Fund anticipated for the current fiscal year. The
information is intended to assist the investor in understanding the various
costs and expenses borne by the shares of the Fund, and therefore indirectly by
its investors, the payment of which will reduce an investor's return on an
annual basis.
Shareholder Transaction Expenses
Maximum sales load imposed on purchases
(as a percentage of offering price)..............................None
Maximum sales load imposed on reinvested dividends.................None
Maximum deferred sales load........................................None
Redemption fees*...................................................None
Exchange fee.......................................................None
* The Fund in its discretion may choose to pass through to redeeming
shareholders any charges imposed by the Custodian for wiring redemption
proceeds. The Custodian currently charges the Fund $10.00 per
transaction for wiring redemption proceeds.
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees...................................................0.85%1
12b-1 Fees ...................................................... None
Total Other Expenses..............................................0.40%1
Total Fund Operating Expenses.....................................1.25%1
EXAMPLE: You would pay the following expenses on a $1,000 investment in shares
of the Fund, whether or not you redeem at the end of the period, and assuming a
5% annual return:
1 year 3 years
-------- --------
$13 $40
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
1 The "Total Fund Operating Expenses" shown above are based upon contractual
amounts and other operating expenses estimated to be incurred by the Fund
for the current fiscal year. The Advisor has voluntarily agreed to a
reduction in the fees payable to it and to reimburse expenses of the Fund,
if necessary, in an amount that limits Total Fund Operating Expenses
(exclusive of interest, taxes, brokerage fees and commissions, and
extraordinary expenses) to not more than 1.25% of the Fund's average daily
net assets. There can be no assurance that the Advisor's voluntary fee
waivers and expense reimbursements will continue in the future.
See "How Shares May Be Purchased" and "Management of the Fund" below for more
information about the fees and costs of operating the Fund. The assumed 5%
annual return in the example is required by the Securities and Exchange
Commission. The hypothetical rate of return is not intended to be representative
of past or future performance of the Fund; the actual rate of return for the
Fund may be greater or less than 5%. Further information about the performance
of the Fund will be contained in the Annual Report of the Fund, a copy of which,
when available, may be obtained at no charge by calling the Fund.
INVESTMENT OBJECTIVE AND POLICIES
Investment Objective. The investment objective of the Fund is to provide its
shareholders with a maximum total return consisting of any combination of
capital appreciation, both realized and unrealized, and income. The Fund's
investment objective and fundamental investment limitations described herein may
not be altered without the prior approval of a majority of the Fund's
shareholders.
Investment Policies. The Fund will seek to achieve its investment objective by
investing primarily in a flexible portfolio of equity securities, fixed income
securities, and money market instruments. The Advisor will vary the percentage
of Fund assets invested in equities, fixed income securities, and money market
instruments according to the Advisor's judgment of market and economic
conditions, and based on the Advisor's view of which asset class can best
achieve the Fund's objectives. The percentage invested in fixed income
securities and money market instruments, in the aggregate, will generally
comprise not less than 5% and not more than 35% of the portfolio.
Selection of equity securities will be based primarily on the expected capital
appreciation potential. The expected income potential of those equity securities
is of secondary importance. Selection of fixed income securities will be
primarily for income. The capital appreciation potential of those fixed income
securities is of secondary importance.
The Advisor is considered a "core" bond manager, generally allocating 100% of
the fixed income portion of the Fund to duration strategies using U.S. Treasury
securities. Occasionally, fixed income securities are selected based upon
investment analysis by the Advisor, attempting to identify securities that are
undervalued. Fixed income securities are identified as undervalued in
circumstances, for instance, where the Advisor believes the credit rating of the
company is subject to an increase, which has the potential to reduce the price
spread to a comparable maturity U.S. Treasury security, and in turn increase in
price. Fixed income securities may also be identified as undervalued if the
spread for a particular security is too large relative to similar fixed income
securities within similar maturities and similar credit quality.
The strategy of attempting to identify undervalued fixed income securities may
result, if successful, in a larger component of total return being the result of
capital gains than may be typical for fixed income investment strategies.
The Advisor will continually review the macroeconomic environment and
alternative expected rates of return between fixed income securities and equity
securities in determining the asset allocation of the Fund. The analytical
process associated with making allocation decisions is based upon a combination
of demonstrated historic financial results, current prices for stocks, and the
current yield to maturity available in the market for bonds. The premium return
available from one category relative to the other determines the actual asset
deployment. The Advisor's asset allocation process is systematic and is based on
current information rather than forecasted change. In structuring the fixed
income portion of the Fund, the Advisor examines spread relationships between
quality grades in determining the quality distribution, and assesses the
expected trends in inflation and interest rates in structuring the maturity
distribution. Not more than 50% of the total fixed income portion of the
portfolio (not more than 15% of the entire Fund) will be invested in fixed
income securities rated below BBB or Baa by the nationally recognized
statistical rating organizations described in the Statement of Additional
Information (or if not rated, deemed by the Advisor to be of equivalent
quality). Securities rated below these ratings (or comparable unrated
securities) are commonly called "junk bonds" and are considered speculative. See
"Risk Factors-Lower-Rated Debt Securities and Associated Risk Factors."
The equity portion of the Fund's portfolio will be generally comprised of common
stocks and, to a lesser extent, securities convertible into common stocks. Such
securities generally will be issued by companies which are listed on a national
securities exchange, such as the New York Stock Exchange, and which usually pay
regular dividends, although the Fund also may invest in securities traded on
regional stock exchanges or on the over-the-counter market. Foreign equity
securities will be limited to those available on domestic U.S. exchanges and
denominated in U.S. currency.
The Fund has not established any minimum investment standards, such as an
issuer's market capitalization, earnings history, type of industry, dividend
payment history, etc. with respect to investments in common stocks. In selecting
common stocks, however, the Advisor generally applies an investment discipline
that seeks to achieve a yield higher than the overall equity market. Therefore,
because smaller companies may be subject to more significant losses, as well as
have the potential for more substantial growth than larger, more established
companies, investors in the Fund should consider that the Fund's investments may
consist in part of securities of smaller companies, which may be deemed to be
speculative.
The Advisor seeks to invest in companies which exhibit a strong financial
position, as measured not only by balance sheet data but also measured by
off-balance sheet liabilities and contingencies (as disclosed in footnotes to
financial statements and as determined through research of public information);
responsible management and control groups, as gauged by managerial competence as
operators and investors as well as by an apparent absence of intent to profit at
the expense of stockholders; and, availability of comprehensive and meaningful
financial and related information which provide the Advisor with reliable
benchmarks to aid in understanding the business, its values and its dynamics.
While portfolio securities are generally acquired for the long term, they may be
sold under some of the following circumstances when the Advisor believes that:
(a) the anticipated price appreciation has been achieved or is no longer
probable; (b) alternative investments offer superior total return prospects; or
(c) fundamentals change adversely.
Money market instruments will typically represent a portion of the Fund's
portfolio, as funds awaiting investment, to accumulate cash for anticipated
purchases of portfolio securities and to provide for shareholder redemptions and
operating expenses of the Fund.
Under normal market conditions the portfolio allocation range for the Fund will
generally be:
% of Total Assets
Equity securities 65 - 95%
Money market instruments
and fixed income securities 5 - 35%
Under certain conditions, the Advisor may choose to temporarily invest up to
100% of the Fund's assets in cash and cash equivalents, investment grade bonds,
U.S. Government Securities, repurchase agreements, or money market instruments
as a temporary defensive position, when the Advisor determines that market
conditions warrant such investments. When the Fund invests in these investments
as a temporary defensive measure, it is not pursuing its stated investment
objective.
Option Transactions. The Fund may invest up to 10% of its total assets in
options on equity securities, options on equity indices, and options on equity
industry sector indices. These options may be utilized to hedge certain market
risks which the Advisor may determine, from time to time, exist in the equity
markets or in individual equity issues, or may be used to provide a viable
substitute for direct investment in, and/or short sales of, specific equity
securities. Investments in call and put options are considered speculative, due
to the time premium imputed in the daily value of options, a premium which
declines with time, independent of the change and/or stability of the underlying
equity security, market index or industry sector index.
A call option gives the holder (buyer) the right to purchase a security at a
specified price (the exercise price) at any time before a certain date (the
expiration date). The writer receives a premium (less a commission) for writing
the option. This premium would partially or completely offset any decline in
price. A put gives the holder (buyer) the right to sell a security to the writer
(seller) at a predetermined price (the exercise price) on or before a set date
(the expiration date). The buyer pays a premium to the writer for the right to
sell the underlying shares at the exercise price instead of at the then
prevailing market price. A stock index option generally operates like an option
covering specific securities, except that delivery of cash rather than the
underlying securities is made. A stock index option obligates the seller
(writer) to deliver, and gives the holder (buyer) the right to take delivery of,
cash upon exercise of the option in an amount equal to the difference between
the exercise settlement value of the underlying index on the day the option is
exercised and the exercise price of the option, multiplied by the specified
index "multiplier". The stock index will fluctuate based on changes in the
market values of the stocks included in the index. The Fund will set aside
permissible liquid assets in a segregated account to secure its potential
obligations under its options positions, and such account will include only
cash, U.S. Government Securities, and other liquid high-grade debt securities.
The Fund's ability to use options transactions successfully depends upon the
degree of correlation between the equity security or index on which the option
is written and the securities that the Fund owns or the market position that it
intends to acquire; the liquidity of the market for options, which cannot be
assured; and the Advisor's skill in predicting the movement of equity securities
and stock indices and implementing options transactions in furtherance of the
Fund's investment objectives. Successful use by the Fund of stock or stock index
options will depend primarily on the Advisor's ability to correctly predict
movements in the direction of an individual stock or the stock markets. For
stock index options, this skill is different from the skills and expertise
needed to predict changes in the prices of individual stocks. If the Advisor
forecasts incorrectly the movement of interest rates, market values and other
economic factors, the Fund would be better off without using this hedging
technique. The Fund will write (sell) stock or stock index options for hedging
purposes or to close out positions in stock or stock index options that the Fund
has purchased. The Fund may only write (sell) "covered" options. Risks
associated with options transactions generally include possible loss of the
entire premium and the inability to effect closing transactions at favorable
prices. Brokerage commissions associated with buying and selling options are
proportionately higher than those associated with general securities
transactions. Additional information on the permitted options transactions of
the Fund and the associates risks is contained in the Statement of Additional
Information. Additional information on the permitted options transactions of the
Fund and the associated risks is contained in the Statement of Additional
Information.
Money Market Instruments. Money market instruments may be purchased when the
Advisor believes interest rates are rising, the prospect for capital
appreciation in the equity and longer term fixed income securities' markets are
not attractive, or when the "yield curve" favors short term fixed income
instruments versus longer term fixed income instruments. Money market
instruments may be purchased for temporary defensive purposes; to accumulate
cash for anticipated purchases of portfolio securities and to provide for
shareholder redemptions and operating expenses of the Fund. Money market
instruments mature in thirteen months or less from the date of purchase and may
include U.S. Government Securities, corporate debt securities (including those
subject to repurchase agreements), bankers acceptances and certificates of
deposit of domestic branches of U.S. banks, and commercial paper (including
variable amount demand master notes). In addition, such securities must be rated
in one of the two highest rating categories by any of the nationally recognized
statistical rating organizations or if not rated, of equivalent quality in the
Advisor's opinion.
U.S. Government Securities. The Fund may invest a portion of its portfolio in
U.S. Government Securities, defined to be U.S. Government obligations such as
U.S. Treasury notes, U.S. Treasury bonds, and U.S. Treasury bills, obligations
guaranteed by the U.S. Government such as Government National Mortgage
Association ("GNMA") as well as obligations of U.S. Government authorities,
agencies and instrumentalities such as Federal National Mortgage Association
("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"), Federal Home
Administration ("FHA"), Federal Farm Credit Bank "FFCB"), Federal Home Loan Bank
("FHLB"), Student Loan Marketing Association ("SLMA"), and The Tennessee Valley
Authority. U.S. Government Securities may be acquired subject to repurchase
agreements. While obligations of some U.S. Government sponsored entities are
supported by the full faith and credit of the U.S. Government (e.g. GNMA),
several are supported by the right of the issuer to borrow from the U.S.
Government (e.g. FNMA, FHLMC), and still others are supported only by the credit
of the issuer itself (e.g. SLMA, FFCB). No assurance can be given that the U.S.
Government will provide financial support to U.S. Government agencies or
instrumentalities in the future, other than as set forth above, since it is not
obligated to do so by law. The guarantee of the U.S. Government does not extend
to the yield or value of the Fund's shares.
Custodial Receipts and Components. Securities issued by the U.S. Government may
be acquired by the Fund in the form of custodial receipts that evidence
ownership of future interest payments, principal payments or both on certain
U.S. Treasury notes or bonds. Such notes and bonds are held in custody by a bank
on behalf of the owners. These custodial receipts are known by various names,
including "Treasury Receipts," "Treasury Investment Growth Receipts" ("TIGRs"),
and "Certificates of Accrual on Treasury Securities" ("CATS"). The Fund may also
invest in separately traded principal and interest components of securities
issued or guaranteed by the U.S. Treasury. The principal and interest components
of selected securities are traded independently under the Separate Trading of
Registered Interest and Principal of Securities program ("STRIPS"). Under the
STRIPS program, the principal and interest components are individually numbered
and separately issued by the U.S. Treasury at the request of depository
financial institutions, which then trade the component parts independently.
Custodian receipts and components are not guaranteed by the U.S. Treasury.
Corporate Debt Securities. The Fund may invest in U.S. dollar denominated
corporate debt securities of domestic issuers limited to corporate debt
securities (corporate bonds, debentures, notes and other similar corporate debt
instruments) that meet the minimum ratings criteria set forth for the Fund, or,
if unrated, are in the Advisor's opinion comparable in quality to corporate debt
securities in that the Fund may invest. The Fund may invest in convertible bonds
of domestic issuers meeting such quality requirements and other corporate debt
securities generally in the form of money market instruments as described above.
Up to 15% of the Fund could be invested in fixed income securities rated below
"investment grade." See "Risk Factors-Lowered-Rated Debt Securities and
Associated Risk Factors."
Foreign Debt Securities. The Fund may invest in foreign denominated debt traded
on domestic U.S. exchanges, or traded over-the-counter by U.S.-based securities
dealers. In some cases these debt securities may be denominated in the native
currency of the issuer. In the event such securities are denominated in foreign
currency those securities will not only be subject to the risks associated with
companies domiciled in foreign countries (as described herein under "Foreign
Securities"), but will also be subject to the volatility and risk associated
with changes in currency exchange rates. Because of this additional risk and
volatility, the Advisor does not anticipate holding more than 5% of the Fund in
foreign denominated debt securities.
Repurchase Agreements. The Fund may acquire U.S. Government Securities or
corporate debt securities subject to repurchase agreements. A repurchase
agreement transaction occurs when the Fund acquires a security and
simultaneously resells it to the vendor (normally a member bank of the Federal
Reserve or a registered Government Securities dealer) for delivery on an agreed
upon future date. The repurchase price exceeds the purchase price by an amount
that reflects an agreed upon market interest rate earned by the Fund effective
for the period of time during which the repurchase agreement is in effect.
Delivery pursuant to the resale typically will occur within one to seven days of
the purchase. The Fund will not enter into any repurchase agreement that will
cause more than 10% of its net assets to be invested in repurchase agreements
that extend beyond seven days. In the event of the bankruptcy of the other party
to a repurchase agreement, the Fund could experience delays in recovering its
cash or the securities lent. To the extent that in the interim the value of the
securities purchased may have declined, the Fund could experience a loss. In all
cases, the creditworthiness of the other party to a transaction is reviewed and
found satisfactory by the Advisor. Repurchase agreements are, in effect, loans
of Fund assets. The Fund will not engage in reverse repurchase transactions,
which are considered to be borrowings under the 1940 Act.
Foreign Securities. The Fund may invest in the securities of foreign private
issuers. The same factors would be considered in selecting foreign securities as
with domestic securities. Foreign securities investment presents special
consideration not typically associated with investment in domestic securities.
Foreign taxes may reduce income. Currency exchange rates and regulations may
cause fluctuations in the value of foreign securities. Foreign securities are
subject to different regulatory environments than in the United States and,
compared to the United States, there may be a lack of uniform accounting,
auditing and financial reporting standards, less volume and liquidity and more
volatility, less public information, and less regulation of foreign issuers.
Countries have been known to expropriate or nationalize assets, and foreign
investments may be subject to political, financial, or social instability, or
adverse diplomatic developments. There may be difficulties in obtaining service
of process on foreign issuers and difficulties in enforcing judgments with
respect to claims under the U.S. Securities laws against such issuers. Favorable
or unfavorable differences between U.S. and foreign economies could affect
foreign securities values. The U.S. Government has, in the past, discouraged
certain foreign investments by U.S. investors through taxation or other
restrictions and it is possible that such restrictions could be imposed again.
The Fund will limit foreign equity investments to those traded domestically on
U.S. securities exchanges and denominated in U.S. currency. The prices of such
securities are denominated in U.S. dollars while the underlying company may
maintains its records in a foreign currency. Such a disparity may result in
greater volatility than would be expected with equities of domestic U.S.
companies. The Fund may also acquire foreign denominated debt traded on domestic
U.S. exchanges, or traded over-the-counter by U.S.-based securities dealers. See
"Foreign Debt Securities." Although the Fund is not limited in the amount of
these types of foreign securities it may acquire, it is not presently expected
that within the next 12 months the Fund will have in excess of 10% of its assets
in foreign securities.
Investment Companies. In order to achieve its investment objective, the Fund may
invest up to 10% of the value of its total assets in securities of other
investment companies whose investment objectives are consistent with the Fund's
investment objective. The Fund will not acquire securities of any one investment
company if, immediately thereafter, the Fund would own more than 3% of such
company's total outstanding voting securities, securities issued by such company
would have an aggregate value in excess of 10% of the Fund's assets, or
securities issued by such company and securities held by the Fund issued by
other investment companies would have an aggregate value in excess of 10% of the
Fund's assets. To the extent a Fund invests in other investment companies, the
shareholders of the Fund would indirectly pay a portion of the operating costs
of the underlying investment companies. These costs include management,
brokerage, shareholder servicing and other operational expenses. Shareholders of
the Fund would then indirectly pay higher operational costs than if they owned
shares of the underlying investment companies directly.
Real Estate Securities. The Fund will not invest in real estate (including
mortgage loans and limited partnership interests), but may invest in readily
marketable securities issued by companies that invest in real estate or
interests therein. The Fund may also invest in readily marketable interests in
real estate investment trusts ("REITs"). REITs are generally publicly traded on
the national stock exchanges and in the over-the-counter market and have varying
degrees of liquidity. Although the Fund is not limited in the amount of these
types of real estate securities it may acquire, it is not presently expected
that within the next 12 months the Fund will have in excess of 10% of its assets
in real estate securities.
RISK FACTORS
Investment Policies and Techniques. Reference should be made to "Investment
Objective and Policies" above for a description of special risks presented by
the investment policies of the Fund and the specific securities and investment
techniques that may be employed by the Fund, including the risks associated with
corporate and foreign debt securities, options transactions, repurchase
agreements, and foreign securities. A more complete discussion of certain of
these securities and investment techniques and their associated risks is
contained in the Statement of Additional Information.
Fluctuations in Value. To the extent that the major portion of the Fund's
portfolio consists of common stocks, it may be expected that its net asset value
will be subject to greater fluctuation than a portfolio containing mostly fixed
income securities. The Fund may invest in securities of smaller companies, which
may exhibit more volatility than securities of medium and large companies. The
fixed income securities in which the Fund will invest are also subject to
fluctuation in value. Such fluctuations may be based on movements in interest
rates or from changes in the creditworthiness of the issuers, which may result
from adverse business and economic developments or proposed corporate
transactions, such as a leveraged buy-out or recapitalization of the issuer. The
value of the Fund's fixed income securities will generally vary inversely with
the direction of prevailing interest rate movements. Should interest rates
increase or the creditworthiness of an issuer deteriorates the value of the
Fund's fixed income securities would decrease in value, which would have a
depressing influence on the Fund's net asset value. The Fund may also invest up
to 15% of its total assets in fixed income securities rated below BBB or Baa by
the nationally recognized statistical rating organizations described in the
Statement of Additional Information. See "Lower-Rated Debt Securities and
Associated Risk Factors" below. Although certain of the U.S. Government
Securities in which the Fund may invest are guaranteed as to timely payment of
principal and interest, the market value of the securities, upon which the
Fund's net asset value is based, will fluctuate due to the interest rate risks
described above. Additionally, not all U.S. Government Securities are backed by
the full faith and credit of the U.S. Government. Because there is risk in any
investment, there can be no assurance that the Fund will achieve its investment
objective.
Lower-Rated Debt Securities and Associated Risk Factors. The Fund may invest up
to 15% of its total assets in debt securities which may be rated below Baa by
Moody's Investors Service, Inc. ("Moody's") or BBB by Standard & Poor's Ratings
Groups ("Standard & Poor's") or Fitch Investors Service, Inc. ("Fitch") or
which, if unrated, are of comparable quality as determined by the Advisor. Debt
securities rated Ba or below by Moody's or BB or below by Standard & Poor's or
Fitch (or comparable unrated securities), commonly called "junk bonds," are
considered speculative, and payment of principal and interest thereon may be
questionable. In some cases, such securities may be highly speculative, have
poor prospects for reaching investment grade standing, and be in default. As a
result, investment in such bonds will entail greater speculative risks than
those associated with investment in investment-grade debt securities (i.e., debt
securities rated Baa or higher by Moody's or BBB or higher by Standard & Poor's
or Fitch). The Fund will not invest in debt securities rated lower than Caa by
Moody's or CCC by Standard & Poor's or Fitch or equivalent unrated securities.
Debt securities rated Caa by Moody's or CCC by Standard & Poor's or Fitch, and
equivalent unrated securities, are speculative and may be in default. These
securities may present significant elements of danger with respect to the
repayment of principal or interest. A description of the corporate debt ratings
assigned by Moody's, Standard & Poor's, and Fitch is contained in the Statement
of Additional Information.
Corporate debt securities are subject to the risk of an issuer's inability to
meet principal and interest payments on the obligations (credit risk) and may
also be subject to price volatility due to such factors as interest rate
sensitivity, market perception of the creditworthiness of the issuer and general
market liquidity (market risk). Lower rated or unrated (i.e., junk bond)
securities are more likely to react to developments affecting market and credit
risk than are more highly rated securities, which react primarily to movements
in the general level of interest rates. The Advisor considers both credit risk
and market risk in making investment decisions for the Fund.
Portfolio Turnover. The Fund may sell portfolio securities without regard to the
length of time they have been held in order to take advantage of new investment
opportunities. Portfolio turnover generally involves some expense to the Fund,
including brokerage commissions or dealer mark-ups and other transaction costs
on the sale of securities and the reinvestment in other securities. Portfolio
turnover may also have capital gains tax consequences. Portfolio turnover is not
expected to exceed 100% per year.
Illiquid Investments. The Fund may invest up to 10% of its net assets in
illiquid securities. Illiquid securities are those that may not be sold or
disposed of in the ordinary course of business within seven days at
approximately the price at which they are valued. Under the supervision of the
Board of Trustees, the Advisor determines the liquidity of the Fund's
investments. The absence of a trading market can make it difficult to ascertain
a market value for illiquid investments. Disposing of illiquid securities before
maturity may be time consuming and expensive and it may be difficult or
impossible for the Fund to sell illiquid investments promptly at an acceptable
price.
Borrowing. The Fund may borrow, temporarily, up to 5% of its total assets for
extraordinary or emergency purposes and 15% of its total assets to meet
redemption requests, which might otherwise require untimely disposition of
portfolio holdings. To the extent the Fund borrows for these purposes, the
effects of market price fluctuations on the portfolio's net asset value will be
exaggerated. If, while such borrowing is in effect, the value of the Fund's
assets declines, the Fund could be forced to liquidate portfolio securities when
it is disadvantageous to do so. The Fund would incur interest and other
transaction costs in connection with borrowing. The Fund will borrow only from a
bank. The Fund will not make any further investments if the borrowing exceeds 5%
of its total assets until such time as repayment has been made to bring the
total borrowing below 5% of its total assets.
Forward Commitments and When-Issued Securities. The Fund may purchase
when-issued securities and commit to purchase securities for a fixed price at a
future date beyond customary settlement time. The Fund is required to hold and
maintain in a segregated account until the settlement date, cash, U.S.
Government Securities or high-grade debt obligations in an amount sufficient to
meet the purchase price. Purchasing securities on a when-issued or forward
commitment basis involves a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in addition to
the risk of decline in value of the Fund's other assets. In addition, no income
accrues to the purchaser of when-issued securities during the period prior to
issuance. Although the Fund would generally purchase securities on a when-issued
or forward commitment basis with the intention of acquiring securities for its
portfolio, the Fund may dispose of a when-issued security or forward commitment
prior to settlement if the Advisor deems it appropriate to do so. The Fund may
realize short-term gains or losses upon such sales.
Advisor Experience. The Fund, organized in 1998, has no prior operating history.
The assets of the Fund are managed by the Advisor, a Tennessee corporation
established in 1993. While the Advisor has no previous experience managing a
mutual fund, it has been rendering investment counsel, utilizing investment
strategies similar to that of the Fund, to other individuals, banks and thrift
institutions, pension and profit sharing plans, trusts, estates, charitable
organizations, and corporations since its formation.
INVESTMENT LIMITATIONS
To limit the Fund's exposure to risk, the Fund has adopted certain investment
limitations. Some of these restrictions are that the Fund will not: (1) issue
senior securities, borrow money or pledge its assets, except that it may borrow
from banks as a temporary measure (a) for extraordinary or emergency purposes,
in amounts not exceeding 5% of the Fund's total assets, or (b) to meet
redemption requests, in amounts not exceeding 15% of its total assets (the Fund
will not make any investments if borrowing exceeds 5% of its total assets); (2)
make loans of money or securities, except that the Fund may invest in repurchase
agreements (but repurchase agreements having a maturity of longer than seven
days, together with other not readily marketable securities, are limited to 10%
of the Fund's net assets), money market instruments and other debt securities;
(3) invest in securities of issuers which have a record of less than three
years' continuous operation (including predecessors and, in the case of bonds,
guarantors), if more than 5% of its total assets would be invested in such
securities; (4) purchase foreign securities, except that the Fund may purchase
foreign securities traded on domestic U.S. exchanges and other foreign debt
securities as described in the Prospectus, all without limit; and (5) with
respect to 75% of its total assets, invest more than 5% of its total assets at
cost in the securities of any one issuer nor hold more than 10% of the voting
stock of any issuer. Investment restrictions (1), (2), and (5) are fundamental
investment limitations that cannot be altered without the prior approval of a
majority of the Fund's shareholders. The other investment restrictions listed
above are non-fundamental and can be changed without shareholder approval. See
"Investment Limitations" in the Fund's Statement of Additional Information for a
complete list of investment limitations.
If the Board of Trustees of the Trust determines that the Fund's investment
objectives can best be achieved by a substantive change in a non-fundamental
investment limitation, the Board can make such change without shareholder
approval and will disclose any such material changes in the then current
Prospectus. Any limitation that is not specified in the Fund's Prospectus, or in
the Statement of Additional Information, as being fundamental, is
non-fundamental. If a percentage limitation is satisfied at the time of
investment, a later increase or decrease in such percentage resulting from a
change in the value of the Fund's portfolio securities generally will not
constitute a violation of such limitation. If the limitation on illiquid
securities is exceeded, however, through a change in values, net assets, or
other circumstances, the Fund would take appropriate steps to protect liquidity
by changing its portfolio.
FEDERAL INCOME TAXES
Taxation of the Fund. The Internal Revenue Code of 1986, as amended (the
"Code"), treats each series in the Trust as a separate regulated investment
company. Each series of the Trust (including the Fund) intends to qualify or
remain qualified as a regulated investment company under the Code by
distributing substantially all of its "net investment income" to shareholders
and meeting other requirements of the Code. For the purpose of calculating
dividends, net investment income consists of income accrued on portfolio assets,
less accrued expenses. Upon qualification, the Fund will not be liable for
federal income taxes to the extent earnings are distributed. The Board of
Trustees retains the right for any series of the Trust to determine for any
particular year if it is advantageous not to qualify as a regulated investment
company. Regulated investment companies, such as each series of the Trust, are
subject to a non-deductible 4% excise tax to the extent they do not distribute
the statutorily required amount of investment income, determined on a calendar
year basis, and capital gain net income, using an October 31 year end measuring
period. The Fund intends to declare or distribute dividends during the calendar
year in an amount sufficient to prevent imposition of the 4% excise tax.
Taxation of Shareholders. For federal income tax purposes, any dividends and
distributions from short-term capital gains that a shareholder receives in cash
from the Fund or which are re-invested in additional shares will be taxable
ordinary income. If a shareholder is not required to pay a tax on income, he
will not be required to pay federal income taxes on the amounts distributed to
him. A dividend declared in October, November or December of a year and paid in
January of the following year will be considered to be paid on December 31 of
the year of declaration.
Distributions paid by the Fund from long-term capital gains, whether received in
cash or reinvested in additional shares, are taxable as long-term capital gains,
regardless of the length of time an investor has owned shares in the Fund.
Capital gain distributions are made when the Fund realizes net capital gains on
sales of portfolio securities during the year. Dividends and capital gain
distributions paid by the Fund shortly after shares have been purchased,
although in effect a return of investment, are subject to federal income
taxation.
The sale of shares of the Fund is a taxable event and may result in a capital
gain or loss. Capital gain or loss may be realized from an ordinary redemption
of shares or an exchange of shares between two mutual funds (or two series of a
mutual fund).
The Trust will inform shareholders of the Fund of the source of its dividends
and capital gains distributions at the time they are paid and, promptly after
the close of each calendar year, will issue an information return to advise
shareholders of the federal tax status of such distributions and dividends.
Dividends and distributions may also be subject to state and local taxes.
Shareholders should consult their tax advisors regarding specific questions as
to federal, state or local taxes.
Federal income tax law requires investors to certify that the social security
number or taxpayer identification number provided to the Fund is correct and
that the investor is not subject to 31% withholding for previous under-reporting
to the Internal Revenue Service (the "IRS"). Investors will be asked to make the
appropriate certification on their application to purchase shares. If a
shareholder of the Fund has not complied with the applicable statutory and IRS
requirements, the Fund is generally required by federal law to withhold and
remit to the IRS 31% of reportable payments (which may include dividends and
redemption amounts).
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to distribute substantially all of its net investment income,
if any, in the form of dividends. The Fund will generally pay income dividends,
if any, quarterly, and will generally distribute net realized capital gains, if
any, at least annually.
Unless a shareholder elects to receive cash, dividends and capital gains will be
automatically reinvested in additional full and fractional shares of the Fund at
the net asset value per share next determined. Shareholders wishing to receive
their dividends or capital gains in cash may make their request in writing to
the Fund at 107 North Washington Street, Post Office Box 4365, Rocky Mount,
North Carolina 27803-0365. That request must be received by the Fund prior to
the record date to be effective as to the next dividend. If cash payment is
requested, checks will be mailed within five business days after the last day of
each quarter or the Fund's fiscal year end, as applicable. Each shareholder of
the Fund will receive a quarterly summary of his or her account, including
information as to reinvested dividends from the Fund. Tax consequences to
shareholders of dividends and distributions are the same if received in cash or
in additional shares of the Fund.
In order to satisfy certain requirements of the Code, the Fund may declare
special year-end dividend and capital gains distribution during December. Such
distributions, if received by shareholders by January 31, are deemed to have
been paid by the Fund and received by shareholders on December 31 of the prior
year.
There is no fixed dividend rate, and there can be no assurance as to the payment
of any dividends or the realization of any gains.
HOW SHARES ARE VALUED
Net asset value for the Fund is determined at the time trading closes on the New
York Stock Exchange (currently 4:00 p.m., New York time, Monday through Friday),
except on business holidays when the New York Stock Exchange is closed. The net
asset value of the shares of the Fund for purposes of pricing sales and
redemptions is equal to the total market value of its investments and other
assets, less all of its liabilities, divided by the number of its outstanding
shares.
Securities that are listed on a securities exchange are valued at the last
quoted sales price at the time the valuation is made. Price information on
listed securities is taken from the exchange where the security is primarily
traded by the Fund. Securities that are listed on an exchange and which are not
traded on the valuation date are valued at the bid price. Unlisted securities
for which market quotations are readily available are valued at the latest
quoted sales price, if available, at the time of valuation, otherwise, at the
latest quoted bid price. Temporary cash investments with maturities of 60 days
or less will be valued at amortized cost, which approximates market value.
Securities for which no current quotations are readily available are valued at
fair value as determined in good faith using methods approved by the Board of
Trustees of the Trust. Securities may be valued on the basis of prices provided
by a pricing service when such prices are believed to reflect the fair market
value of such securities.
Fixed income securities will ordinarily be traded on the over-the-counter
market. When market quotations are not readily available, fixed income
securities may be valued based on prices provided by a pricing service. The
prices provided by the pricing service are generally determined with
consideration given to institutional bid and last sale prices and take into
account securities prices, yields, maturities, call features, ratings,
institutional trading in similar groups of securities, and developments related
to specific securities. Such fixed income securities may also be priced based
upon a matrix system of pricing similar bonds and other fixed income securities.
Such matrix system may be based upon the considerations described above used by
other pricing services and information obtained by the pricing agent from the
Advisor and other pricing sources deemed relevant by the pricing agent.
HOW SHARES MAY BE PURCHASED
Assistance in opening accounts and a purchase application may be obtained from
the Fund by calling 1-800-525-3863, or by writing to the Fund at the address
shown below for purchases by mail. Assistance is also available through any
broker-dealer authorized to sell shares in the Fund. Payment for shares
purchased may also be made through your account at the broker-dealer processing
your application and order to purchase. Your investment will purchase shares at
the Fund's net asset value next determined after your order is received by the
Fund in proper form as indicated herein.
The minimum initial investment is $2,000. The minimum subsequent investment is
$500. The Fund may, in the Advisor's sole discretion, accept certain accounts
with less than the stated minimum initial investment. Shareholders establishing
an Automatic Investment Plan account may open an account with an initial
investment of $100 if they agree to make regular, minimum purchases of at least
$100. You may invest in the following ways:
Regular Mail Orders. Please complete and sign the Fund Shares Application
accompanying this Prospectus and mail it, with your check made payable to the
Fund, to:
SCM Strategic Growth Fund
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Applications must contain social security and Taxpayer Identification Numbers
("TINs"). If you have applied for a social security or TIN at the time of
completing your account application, the application should so indicate. Taxes
are not withheld from distributions to U.S. investors if certain IRS
requirements regarding TINs are met.
Bank Wire Orders. Investments can be made directly by bank wire. To establish a
new account or to add to an existing account by wire, please call the Fund at
1-800-525-3863, before wiring funds, to advise it of the investment, the dollar
amount of the investment, and the account identification number. This
notification will ensure prompt and accurate handling of your investment. Please
have your bank use the following wire instructions to purchase by wire:
First Union National Bank of North Carolina
ABA # 053000219
Further Credit Acct # 200000_______
For The SCM Strategic Growth
Fund For further credit to (shareholder's
name and SS# or EIN#)
It is important that the wire message contain all the relevant information and
that the Fund receive prior telephone notification to ensure proper credit. Upon
opening an account by wire order, you must, as soon as possible, complete and
mail your Fund Shares Application to the Fund as described under "Regular Mail
Orders" above. Investors should be aware that some banks might impose a wire
service fee.
General. All purchases of shares are subject to acceptance and are not binding
until accepted. The Fund reserves the right to reject any application or
investment. Orders received by the Fund and effective prior to the time trading
closes on the New York Stock Exchange (currently 4:00 p.m., New York time,
Monday through Friday) will purchase shares at the net asset value determined at
that time. Orders received by the Fund and effective after the close of trading,
or on a day when the New York Stock Exchange is not open for business, will
purchase shares at the net asset value next determined. For orders placed
through a qualified broker-dealer, such firm is responsible for promptly
transmitting purchase orders to the Fund. Investors may be charged a fee if they
effect transactions in Fund shares through a broker or agent.
The Fund may enter into agreements with one or more brokers or other agents,
including discount brokers and other brokers associated with investment
programs, including mutual fund "supermarkets," and agents for qualified
employee benefit plans, pursuant to which such brokers or other agents may be
authorized to accept on the Fund's behalf purchase and redemption orders that
are in "good form." Such brokers or other agents may be authorized to designate
other intermediaries to accept purchase and redemption orders on the Fund's
behalf. Under such circumstances, the Fund will be deemed to have received a
purchase or redemption order when an authorized broker, agent, or, if
applicable, other designee, accepts the order. Such orders will be priced at the
Fund's net asset value next determined after they are accepted by an authorized
broker, agent, or other designee. The Fund may pay fees to such brokers or other
agents for their services, including without limitation, administrative,
accounting, and recordkeeping services.
If checks are returned unpaid due to insufficient funds, stop payment or other
reasons, the Trust will charge $20. To recover any such loss or charge, the
Trust reserves the right, without further notice, to redeem shares of any fund
of the Trust already owned by any purchaser whose order is canceled, and such a
purchaser may be prohibited from placing further orders unless investments are
accompanied by full payment by wire or cashier's check.
Payment must be made by check or money order drawn on a U.S. bank and payable in
U.S. dollars. Under certain circumstances the Fund, at its sole discretion, may
allow payment in kind for Fund shares purchased by accepting securities in lieu
of cash. Any securities so accepted would be valued on the date received and
included in the calculation of the net asset value of the Fund. See the
Statement of Additional Information for additional information on purchases in
kind.
The Fund is required by federal law to withhold and remit to the IRS 31% of the
dividends, capital gains distributions and, in certain cases, proceeds of
redemptions paid to any shareholder who fails to furnish the Fund with a correct
taxpayer identification number, who under-reports dividend or interest income or
who fails to provide certification of tax identification number. Instructions to
exchange or transfer shares held in established accounts will be refused until
the certification has been provided. In order to avoid this withholding
requirement, you must certify on your application, or on a separate W-9 Form
supplied by the Fund, that your taxpayer identification number is correct and
that you are not currently subject to backup withholding or you are exempt from
backup withholding. For individuals, your taxpayer identification number is your
social security number.
Distributor. Capital Investment Group, Inc., Post Office Box 32249, Raleigh,
North Carolina 27622 (the "Distributor"), is the national distributor for the
Fund under a Distribution Agreement with the Trust. The Distributor may sell
Fund shares to or through qualified securities dealers or others.
The Distributor, at its expense, may provide additional compensation to dealers
in connection with sales of shares of the Fund. Compensation may include
financial assistance to dealers in connection with conferences, sales or
training programs for their employees, seminars for the public, advertising
campaigns regarding the Fund, and/or other dealer-sponsored special events. In
some instances, this compensation may be made available only to certain dealers
whose representatives have sold or are expected to sell a significant amount of
such shares. Compensation may include payment for travel expenses, including
lodging, incurred in connection with trips taken by invited registered
representatives and members of their families to locations within or outside of
the United States for meetings or seminars of a business nature. Dealers may not
use sales of the Fund shares to qualify for this compensation to the extent such
may be prohibited by the laws of any state or any self-regulatory agency, such
as the National Association of Securities Dealers, Inc. None of the
aforementioned compensation is paid for by the Fund or its shareholders.
Exchange Feature. Investors will have the privilege of exchanging shares of the
Fund for shares of any other series of the Trust established by the Advisor. An
exchange is a taxable transaction that involves the simultaneous redemption of
shares of one series and purchase of shares of another series at the respective
closing net asset value next determined after a request for redemption has been
received plus applicable sales charge. Each series of the Trust will have a
different investment objective, which may be of interest to investors in each
series. Shares of the Fund may be exchanged for shares of another series of the
Trust affiliated with the Advisor at the net asset value plus the percentage
difference between that series' sales charge, if any, and any sales charge, if
any, previously paid in connection with the shares being exchanged. For example,
if a 2% sales charge were paid on shares that are exchanged into a series with a
3% sales charge, there would be an additional sales charge of 1% on the
exchange. Exchanges may only be made by investors in states where shares of the
other series are qualified for sale. An investor may direct the Fund to exchange
his shares by writing to the Fund at its principal office. The request must be
signed exactly as the investor's name appears on the account, and it must also
provide the account number, number of shares to be exchanged, the name of the
other series to which the exchange will take place and a statement as to whether
the exchange is a full or partial redemption of existing shares. Notwithstanding
the foregoing, exchanges of shares may only be within the same class or type of
class of shares involved.
A pattern of frequent exchange transactions may be deemed by the Advisor to be
an abusive practice that is not in the best interests of the shareholders of the
Fund. Such a pattern may, at the discretion of the Advisor, be limited by a
Fund's refusal to accept further purchase and/or exchange orders from an
investor, after providing the investor with 60 days prior notice. The Advisor
will consider all factors it deems relevant in determining whether a pattern of
frequent purchases, redemptions and/or exchanges by a particular investor is
abusive and not in the best interests of a Fund or its other shareholders.
A shareholder should consider the investment objectives and policies of any
other series into which the shareholder will be making an exchange, as described
in the prospectus for that other Fund or series. The Board of Trustees of the
Trust reserves the right to suspend or terminate, or amend the terms of, the
exchange privilege upon 60 days written notice to the shareholders.
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investments in shares through automatic
charges to their checking account. With shareholder authorization and bank
approval, the Fund will automatically charge the checking account for the amount
specified ($100 minimum), which will be automatically invested in shares at the
public offering price on or about the 21st day of the month. The shareholder may
change the amount of the investment or discontinue the plan at any time by
writing to the Fund.
Stock Certificates. Stock certificates will not be issued for your shares.
Evidence of ownership will be given by issuance of periodic account statements
that will show the number of shares owned.
HOW SHARES MAY BE REDEEMED
Shares of the Fund may be redeemed (the Fund will repurchase them from
shareholders) by mail or telephone. Any redemption may be more or less than the
purchase price of your shares depending on the market value of the Fund's
portfolio securities. Redemption orders received in proper form, as indicated
herein, by the Fund, whether by mail or telephone, prior to the time trading
closes on the New York Stock Exchange (currently 4:00 p.m. New York time, Monday
through Friday), will redeem shares at the net asset value determined at that
time. Redemption orders received in proper form by the Fund after the close of
trading, or on a day when the New York Stock Exchange is not open for business,
will redeem shares at the net asset value next determined. There is no charge
for redemptions from the Fund other than possible charges for wiring redemption
proceeds. You may also redeem your shares through a broker-dealer or other
institution, which may charge you a fee for its services.
The Board of Trustees reserves the right to involuntarily redeem any account
having a net asset value of less than $1,000 (due to redemptions, exchanges or
transfers, and not due to market action) upon 30 days written notice. If the
shareholder brings his account net asset value up to $1,000 or more during the
notice period, the account will not be redeemed. Redemptions from retirement
plans may be subject to tax withholding.
If you are uncertain of the requirements for redemption, please contact the
Fund, at 1-800-525-3863, or write to the address shown below.
Regular Mail Redemptions. Your request should be addressed to the SCM Strategic
Growth Fund, 107 North Washington Street, Post Office Box 4365, Rocky Mount,
North Carolina 27803-0365. Your request for redemption must include:
1) Your letter of instruction specifying the Fund, the account number, and
the number of shares or dollar amount to be redeemed. This request must be
signed by all registered shareholders in the exact names in which they are
registered;
2) Any required signature guarantees (see "Signature Guarantees" below); and
3) Other supporting legal documents, if required in the case of estates,
trusts, guardianships, custodianships, corporations, partnerships, pension
or profit sharing plans, and other organizations.
Your redemption proceeds will be sent to you within seven days after receipt of
your redemption request. However, the Fund may delay forwarding a redemption
check for recently purchased shares while it determines whether the purchase
payment will be honored. Such delay (which may take up to 15 days from the date
of purchase) may be reduced or avoided if the purchase is made by certified
check or wire transfer. In all cases the net asset value next determined after
the receipt of the request for redemption will be used in processing the
redemption. The Fund may suspend redemption privileges or postpone the date of
payment (i) during any period that the New York Stock Exchange is closed, or
trading on the New York Stock Exchange is restricted as determined by the
Securities and Exchange Commission (the "Commission"), (ii) during any period
when an emergency exists as defined by the rules of the Commission as a result
of which it is not reasonably practicable for a Fund to dispose of securities
owned by it, or to fairly determine the value of its assets, and (iii) for such
other periods as the Commission may permit.
Telephone and Bank Wire Redemptions. The Fund offers shareholders the option of
redeeming shares by telephone under certain limited conditions. A Fund will
redeem shares when requested by the shareholder if, and only if, the shareholder
confirms redemption instructions in writing.
A Fund may rely upon confirmation of redemption requests transmitted via
facsimile (FAX# 919-972-1908). The confirmation instructions must include:
1) Designation of the Fund name;
2) Shareholder names and account number;
3) Number of shares or dollar amount to be redeemed;
4) Instructions for transmittal of redemption funds to the shareholder; and
5) Shareholder signature as it appears on the application then on file with the
Fund.
The net asset value used in processing the redemption will be the net asset
value next determined after the telephone request is received. Redemption
proceeds will not be distributed until written confirmation of the redemption
request is received, per the instructions above. You can choose to have
redemption proceeds mailed to you at your address of record, your bank, or to
any other authorized person, or you can have the proceeds sent by bank wire to
your bank ($5,000 minimum). Shares of the Fund may not be redeemed by wire on
days on which your bank is not open for business. You can change your redemption
instructions anytime you wish by filing a letter including your new redemption
instructions with the Fund. (See "Signature Guarantees" below). The Fund
reserves the right to restrict or cancel telephone and bank wire redemption
privileges for shareholders, without notice, if the Fund believes it to be in
the best interest of the shareholders to do so. During drastic economic and
market conditions, telephone redemption privileges may be difficult to
implement.
The Fund in its discretion may choose to pass through to redeeming shareholders
any charges by the Custodian for wire redemptions. The Custodian currently
charges $10.00 per transaction for wiring redemption proceeds. If this cost is
passed through to redeeming shareholders by the Fund, the charge will be
deducted automatically from the shareholder's account by redemption of shares in
the account. The shareholder's bank or brokerage firm may also impose a charge
for processing the wire. If wire transfer of funds is impossible or impractical,
the redemption proceeds will be sent by mail to the designated address of
record.
You may redeem shares, subject to the procedures outlined above, by calling the
Fund at 1-800-525-3863. Redemption proceeds will only be sent to the bank
account or person named in your Fund Shares Application currently on file with
the Fund. Telephone redemption privileges authorize the Fund to act on telephone
instructions from any person representing him or herself to be the investor and
reasonably believed by the Fund to be genuine. The Fund will employ reasonable
procedures, such as requiring a form of personal identification, to confirm that
instructions are genuine, and, if it does not follow such procedures, the Fund
will be liable for any losses due to fraudulent or unauthorized instructions.
The Fund will not be liable for following telephone instructions reasonably
believed to be genuine.
Systematic Withdrawal Plan. A shareholder who owns shares of the Fund valued at
$5,000 or more at current net asset value may establish a Systematic Withdrawal
Plan to receive a monthly or quarterly check in a stated amount not less than
$100. Each month or quarter as specified, the Fund will automatically redeem
sufficient shares from your account to meet the specified withdrawal amount.
Call or write the Fund for an application form. See the Statement of Additional
Information for further details.
Signature Guarantees. To protect your account and the Fund from fraud, signature
guarantees are required to be sure that you are the person who has authorized a
change in registration, or standing instructions, for your account. Signature
guarantees are required for (1) change of registration requests, (2) requests to
establish or change exchange privileges or telephone redemption service other
than through your initial account application, and (3) requests for redemptions
in excess of $50,000. Signature guarantees are acceptable from a member bank of
the Federal Reserve System, a savings and loan institution, credit union (if
authorized under state law), registered broker-dealer, securities exchange or
association clearing agency, and must appear on the written request for
redemption, establishment or change in exchange privileges, or change of
registration.
MANAGEMENT OF THE FUND
Trustees and Officers. The Fund is a diversified series of the Shanklin
Investment Trust (the "Trust"), an investment company organized as a
Massachusetts business trust on April 8, 1998. The Board of Trustees of the
Trust is responsible for the management of the business and affairs of the
Trust. The Trustees and executive officers of the Trust and their principal
occupations for the last five years are set forth in the Statement of Additional
Information under "Management of the Fund - Trustees and Officers." The Board of
Trustees of the Trust is primarily responsible for overseeing the conduct of the
Trust's business. The Board of Trustees elects the officers of the Trust who are
responsible for its and the Fund's day-to-day operations.
The Advisor. Subject to the authority of the Board of Trustees, Shanklin Capital
Management, Inc. (the "Advisor") provides the Fund with a continuous program of
supervision of the Fund's assets, including the composition of its portfolio,
and furnishes advice and recommendations with respect to investments, investment
policies and the purchase and sale of securities, pursuant to an Investment
Advisory Agreement (the "Advisory Agreement") with the Trust.
The Advisor is registered under the Investment Advisors Act of 1940, as amended.
Registration of the Advisor does not involve any supervision of management or
investment practices or policies by the Securities and Exchange Commission. The
Advisor, established as a Tennessee corporation in 1993, is controlled by Tim L.
Shanklin and Dan P. Shanklin. Both serve as Trustees of the Trust. The Advisor
currently serves as investment advisor to approximately $10 million in assets.
The Advisor's address is 1420 Osborne Street, Suite B-16, Humboldt, Tennessee
38343.
Mr. Tim L. Shanklin, the Fund's portfolio manager, is responsible for the
day-to-day investment management of the Fund. Mr. Shanklin has in excess of
seven years of experience in the financial services industry, including
approximately two years as a Registered Representative in the brokerage
business, another two years as a financial analyst for a government entity, and,
most recently, three years as Principal of a Registered Investment Advisory
Firm. Shareholders should understand that while Mr. Shanklin has extensive
experience advising clients as to their investment strategies and managing
portfolios, using investment strategies similar to that of the Fund, the Fund
has no operating history and managing a mutual fund portfolio is a new position
for Mr. Shanklin. Mr. Shanklin has been with the Advisor since its formation.
The Advisor has served as investment advisor to the Fund since the Fund's
inception.
Compensation of the Advisor with regard to the Fund, based upon the Fund's daily
average net assets, is at the annual rate of 0.85%. The Advisor may periodically
voluntarily waive or reduce its advisory fee to increase the net income the
Fund.
The Advisor supervises and implements the investment activities of the Fund,
including the making of specific decisions as to the purchase and sale of
portfolio investments. Among the responsibilities of the Advisor under the
Advisory Agreement is the selection of brokers and dealers through whom
transactions in the Fund's portfolio investments will be effected. The Advisor
attempts to obtain the best execution for all such transactions. If it is
believed that more than one broker is able to provide the best execution, the
Advisor will consider the receipt of quotations and other market services and of
research, statistical and other data and the sale of shares of the Fund in
selecting a broker. The Advisor may also utilize a brokerage firm affiliated
with the Trust or the Advisor if it believes it can obtain the best execution of
transactions from such broker. Research services obtained through Fund brokerage
transactions may be used by the Advisor for its other clients and, conversely,
the Fund may benefit from research services obtained through the brokerage
transactions of the Advisor's other clients. For further information, see
"Investment Objective and Policies Investment Transactions" in the Statement of
Additional Information.
Administrator. The Nottingham Company (the "Administrator") serves as the Fund's
administrator. The Administrator, subject to the authority of the Board of
Trustees, provides administrative services to and is generally responsible for
the overall management and day-to-day administrative operations of the Fund,
pursuant to an administration agreement with the Trust.
The Administrator, whose address is 105 North Washington Street, Post Office
Drawer 69, Rocky Mount, North Carolina 27802-0069, provides the Fund with office
space and facilities; provides certain executive personnel to the Fund;
maintains the Fund's accounting records; computes daily the Fund's net asset
value; supervises the preparation of tax returns, financial reports,
prospectuses, and proxy statements; and monitors compliance with certain
recordkeeping and regulatory requirements.
Transfer Agent. NC Shareholder Services, LLC (the "Transfer Agent") serves as
the Fund's transfer, dividend paying, and shareholder servicing agent. The
Transfer Agent, subject to the authority of the Board of Trustees, provides
transfer agency and related services pursuant to an agreement with the Trust.
The Transfer Agent, whose address is 107 North Washington Street, Post Office
Box 4365, Rocky Mount, North Carolina 27803-0365, was established as a North
Carolina limited liability company in 1997. John D. Marriott, Jr., is the firm's
controlling member.
The Transfer Agent maintains the records of each shareholder's account, answers
shareholder inquiries concerning accounts, processes purchases and redemptions
of the Fund's shares, acts as dividend and distribution disbursing agent, and
performs other shareholder servicing functions.
Custodian. The custodian of the Fund's assets is First Union National Bank of
North Carolina (the "Custodian"). The Custodian's mailing address is Two First
Union Center, Charlotte, North Carolina 28288-1151. The Advisor, Administrator,
Transfer Agent, Distributor, or interested persons thereof, may have banking
relationships with the Custodian.
Other Expenses. The Fund is responsible for the payment of its expenses. These
include, for example, the fees payable to the Advisor, or expenses otherwise
incurred in connection with the management of the investment of the Fund's
assets, the fees and expenses of the Custodian, Administrator, and Transfer
Agent, the fees and expenses of Trustees, outside auditing and legal expenses,
all taxes and corporate fees payable by the Fund, Securities and Exchange
Commission fees, state securities qualification fees, costs of preparing and
printing prospectuses for regulatory purposes and for distribution to
shareholders, costs of shareholder reports and shareholder meetings, and any
extraordinary expenses. The Fund also pays for brokerage commissions and
transfer taxes (if any) in connection with the purchase and sale of portfolio
securities. Expenses attributable to a particular series of the Trust, including
the Fund, will be charged to that series, and expenses not readily identifiable
as belonging to a particular series will be allocated by or under procedures
approved by the Board of Trustees among one or more series in such a manner as
it deems fair and equitable.
OTHER INFORMATION
Description of Shares. The Trust was organized as a Massachusetts business trust
on April 8, 1998 under a Declaration of Trust. The Declaration of Trust permits
the Board of Trustees to issue an unlimited number of full and fractional shares
and to create an unlimited number of series of shares. The Board of Trustees may
also classify and reclassify any unissued shares into one or more classes of
shares. The Trust currently has the number of authorized series of shares,
including the Fund, and classes of shares, described in the Statement of
Additional Information under "Description of the Trust." Pursuant to its
authority under the Declaration of Trust, the Board of Trustees has authorized
the issuance of an unlimited number of shares in a single class of shares
representing equal pro rata interests in the Fund.
When issued, the shares of each series of the Trust, including the Fund, and
each class of shares, will be fully paid, nonassessable and redeemable. The
Trust does not intend to hold annual shareholder meetings; it may, however, hold
special shareholder meetings for purposes such as changing fundamental policies
or electing Trustees. The Board of Trustees shall promptly call a meeting for
the purpose of electing or removing Trustees when requested in writing to do so
by the record holders of a least 10% of the outstanding shares of the Trust. The
term of office of each Trustee is of unlimited duration. The holders of at least
two-thirds of the outstanding shares of the Trust may remove a Trustee from that
position either by declaration in writing filed with the Custodian or by votes
cast in person or by proxy at a meeting called for that purpose.
The Trust's shareholders will vote in the aggregate and not by series (fund) or
class, except where otherwise required by law or when the Board of Trustees
determines that the matter to be voted on affects only the interests of the
shareholders of a particular series or class. Matters affecting an individual
series, such as the Fund, include, but are not limited to, the investment
objectives, policies and restrictions of that series. Shares have no
subscription, preemptive or conversion rights. Share certificates will not be
issued. Each share is entitled to one vote (and fractional shares are entitled
to proportionate fractional votes) on all matters submitted for a vote, and
shares have equal voting rights except that only shares of a particular series
or class are entitled to vote on matters affecting only that series or class.
Shares do not have cumulative voting rights. Therefore, the holders of more than
50% of the aggregate number of shares of all series of the Trust may elect all
the Trustees.
Under Massachusetts's law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
trust. The Declaration of Trust, therefore, contains provisions that are
intended to mitigate such liability. See "Description of the Trust" in the
Statement of Additional Information for further information about the Trust and
its shares.
Reporting to Shareholders. The Fund will send to its shareholders Annual and
Semi-Annual Reports; the financial statements appearing in Annual Reports for
the Fund will be audited by independent accountants. In addition, the Fund will
send to each shareholder having an account directly with the Fund a quarterly
statement showing transactions in the account, the total number of shares owned
and any dividends or distributions paid. Inquiries regarding the Fund may be
directed in writing to 107 North Washington Street, Post Office Box 4365, Rocky
Mount, North Carolina 27803-0365 or by calling 1-800-525-3863.
Calculation of Performance Data. From time to time the Fund may advertise its
average annual total return. The "average annual total return" refers to the
average annual compounded rates of return over 1-, 5- and 10- year periods that
would equate an initial amount invested at the beginning of a stated period to
the ending redeemable value of the investment. The calculation assumes the
reinvestment of all dividends and distributions includes all recurring fees that
are charged to all shareholder accounts and deducts all nonrecurring charges at
the end of each period. If a Fund has been operating less than 1, 5 or 10 years,
the time period during which the Fund has been operating is substituted.
In addition, the Fund may advertise other total return performance data other
than average annual total return. This data shows as a percentage rate of return
encompassing all elements of return (i.e. income and capital appreciation or
depreciation); it assumes reinvestment of all dividends and capital gain
distributions. Such other total return data may be quoted for the same or
different periods as those for which average annual total return is quoted. This
data may consist of a cumulative percentage rate of return, actual year-by-year
rates or any combination thereof. Cumulative total return represents the
cumulative change in value of an investment in the Fund for various periods.
The total return of the Fund could be increased to the extent the Advisor may
waive all or a portion of its fees or may reimburse all or a portion of the
Fund's expenses. Total return figures are based on the historical performance of
the Fund, show the performance of a hypothetical investment, and are not
intended to indicate future performance. The Fund's quotations may from time to
time be used in advertisements, sales literature, shareholder reports, or other
communications. For further information, see "Additional Information on
Performance" in the Statement of Additional Information.
<PAGE>
SCM STRATEGIC GROWTH FUND
PROSPECTUS
June *, 1998
SCM Strategic Growth Fund
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
1-800-525-3863
Investment Advisor
Shanklin Capital Management, Inc.
1420 Osborne Street, Suite B-16
Humboldt, Tennessee 38343
Custodian
First Union National Bank of North Carolina
Two First Union Center
Charlotte, North Carolina 28288-1151
Distributor
Capital Investment Group, Inc.
Post Office Box 32249
Raleigh, North Carolina 27622
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
SCM STRATEGIC GROWTH FUND
June **, 1998
A Series of
SHANKLIN INVESTMENT TRUST
107 North Washington Street, Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Telephone 1-800-525-3863
Table of Contents
INVESTMENT OBJECTIVE AND POLICIES........................................... 2
INVESTMENT LIMITATIONS...................................................... 6
NET ASSET VALUE............................................................. 7
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION.............................. 8
DESCRIPTION OF THE TRUST.................................................... 8
ADDITIONAL INFORMATION CONCERNING TAXES..................................... 9
MANAGEMENT OF THE FUND...................................................... 10
SPECIAL SHAREHOLDER SERVICES................................................ 13
ADDITIONAL INFORMATION ON PERFORMANCE....................................... 14
APPENDIX A - DESCRIPTION OF RATINGS......................................... 17
This Statement of Additional Information (the "Additional Statement") is meant
to be read in conjunction with the Prospectus, dated the same date as this
Additional Statement, for the SCM Strategic Growth Fund (the "Fund"), as the
Prospectus may be amended or supplemented from time to time, and is incorporated
by reference in its entirety into the Prospectus. Because this Additional
Statement is not itself a prospectus, no investment in shares of the Fund should
be made solely upon the information contained herein. Copies of the Fund's
Prospectus may be obtained at no charge by writing or calling the Fund at the
address and phone number shown above. This Additional Statement is not a
prospectus but is incorporated by reference in the Prospectus in its entirety.
Capitalized terms used but not defined herein have the same meanings as in the
Prospectus.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The following policies supplement the Fund's investment objective and policies
as set forth in the Prospectus for the Fund. The Fund has no prior operating
history.
Additional Information on Fund Instruments. Attached to this Additional
Statement is Appendix A, which contains descriptions of the rating symbols used
by Rating Agencies for securities in which the Fund may invest.
Investment Transactions. Subject to the general supervision of the Trust's Board
of Trustees, the Advisor is responsible for, makes decisions with respect to,
and places orders for all purchases and sales of portfolio securities for the
Fund.
The annualized portfolio turnover rate for the Fund is calculated by dividing
the lesser of purchases or sales of portfolio securities for the reporting
period by the monthly average value of the portfolio securities owned during the
reporting period. The calculation excludes all securities whose maturities or
expiration dates at the time of acquisition are one year or less. Portfolio
turnover of the Fund may vary greatly from year to year as well as within a
particular year, and may be affected by cash requirements for redemption of
shares and by requirements that enable the Fund to receive favorable tax
treatment. Portfolio turnover will not be a limiting factor in making Fund
decisions, and the Fund may engage in short term trading to achieve its
investment objectives.
Purchases of money market instruments by the Fund are made from dealers,
underwriters and issuers. The Fund currently does not expect to incur any
brokerage commission expense on such transactions because money market
instruments are generally traded on a "net" basis by a dealer acting as
principal for its own account without a stated commission. The price of the
security, however, usually includes a profit to the dealer. Securities purchased
in underwritten offerings include a fixed amount of compensation to the
underwriter, generally referred to as the underwriter's concession or discount.
When securities are purchased directly from or sold directly to an issuer, no
commissions or discounts are paid.
Transactions on U.S. stock exchanges involve the payment of negotiated brokerage
commissions. On exchanges on which commissions are negotiated, the cost of
transactions may vary among different brokers. Transactions in the
over-the-counter market are generally on a net basis (i.e., without commission)
through dealers, or otherwise involve transactions directly with the issuer of
an instrument. The Fund's fixed income portfolio transactions will normally be
principal transactions executed in over-the-counter markets and will be executed
on a "net" basis, which may include a dealer markup. With respect to securities
traded only in the over-the-counter market, orders will be executed on a
principal basis with primary market makers in such securities except where
better prices or executions may be obtained on an agency basis or by dealing
with other than a primary market maker.
The Fund may participate, if and when practicable, in bidding for the purchase
of Fund securities directly from an issuer in order to take advantage of the
lower purchase price available to members of a bidding group. The Fund will
engage in this practice, however, only when the Advisor, in its sole discretion,
believes such practice to be otherwise in the Fund's interest.
In executing Fund transactions and selecting brokers or dealers, the Advisor
will seek to obtain the best overall terms available for the Fund. In assessing
the best overall terms available for any transaction, the Advisor shall consider
factors it deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution capability of
the broker or dealer, and the reasonableness of the spread or commission, if
any, both for the specific transaction and on a continuing basis. The sale of
Fund shares may be considered when determining the firms that are to execute
brokerage transactions for the Fund. In addition, the Advisor is authorized to
cause the Fund to pay a broker-dealer which furnishes brokerage and research
services a higher spread or commission than that which might be charged by
another broker-dealer for effecting the same transaction, provided that the
Advisor determines in good faith that such spread or commission is reasonable in
relation to the value of the brokerage and research services provided by such
broker-dealer, viewed in terms of either the particular transaction or the
overall responsibilities of the Advisor to the Fund. Such brokerage and research
services might consist of reports and statistics relating to specific companies
or industries, general summaries of groups of stocks or bonds and their
comparative earnings and yields, or broad overviews of the stock, bond and
government securities markets and the economy. Supplementary research
information so received is in addition to, and not in lieu of, services required
to be performed by the Advisor and does not reduce the advisory fees payable by
the Fund. The Trustees will periodically review any spread or commissions paid
by the Fund to consider whether the spread or commissions paid over
representative periods of time appear to be reasonable in relation to the
benefits inuring to the Fund. It is possible that certain of the supplementary
research or other services received will primarily benefit one or more other
investment companies or other accounts for which the Advisor exercises
investment discretion. Conversely, the Fund may be the primary beneficiary of
the research or services received as a result of securities transactions
effected for such other account or investment company.
The Advisor may also utilize a brokerage firm affiliated with the Trust or the
Advisor (including the Distributor), if it believes it can obtain the best
execution of transactions from such broker. The Fund will not execute portfolio
transactions through, acquire securities issued by, make savings deposits in or
enter into repurchase agreements with the Advisor or an affiliated person of the
Advisor (as such term is defined in the 1940 Act) acting as principal, except to
the extent permitted by the Securities and Exchange Commission ("SEC"). In
addition, the Fund will not purchase securities during the existence of any
underwriting or selling group relating thereto of which the Advisor, or an
affiliated person of the Advisor, is a member, except to the extent permitted by
the SEC. Under certain circumstances, the Fund may be at a disadvantage because
of these limitations in comparison with other investment companies that have
similar investment objectives but are not subject to such limitations.
Investment decisions for the Fund will be made independently from those for any
other series of the Trust, if any, and for any other investment companies and
accounts advised or managed by the Advisor. Such other investment companies and
accounts may also invest in the same securities as the Fund. To the extent
permitted by law, the Advisor may aggregate the securities to be sold or
purchased for the Fund with those to be sold or purchased for other investment
companies or accounts in executing transactions. When a purchase or sale of the
same security is made at substantially the same time on behalf of the Fund and
another investment company or account, the transaction will be averaged as to
price and available investments allocated as to amount, in a manner which the
Advisor believes to be equitable to the Fund and such other investment company
or account. In some instances, this investment procedure may adversely affect
the price paid or received by the Fund or the size of the position obtained or
sold by the Fund.
Repurchase Agreements. The Fund may acquire U.S. Government Securities or
corporate debt securities subject to repurchase agreements. A repurchase
transaction occurs when, at the time the Fund purchases a security (normally a
U.S. Treasury obligation), it also resells it to the vendor (normally a member
bank of the Federal Reserve or a registered Government Securities dealer) and
must deliver the security (and/or securities substituted for them under the
repurchase agreement) to the vendor on an agreed upon date in the future. The
repurchase price exceeds the purchase price by an amount which reflects an
agreed upon market interest rate effective for the period of time during which
the repurchase agreement is in effect. Delivery pursuant to the resale will
occur within one to five days of the purchase.
Repurchase agreements are considered "loans" under the Investment Company Act of
1940, as amended (the "1940 Act"), collateralized by the underlying security.
The Trust will implement procedures to monitor on a continuous basis the value
of the collateral serving as security for repurchase obligations. Additionally,
the Advisor to the Fund will consider the creditworthiness of the vendor. If the
vendor fails to pay the agreed upon resale price on the delivery date, the Fund
will retain or attempt to dispose of the collateral. The Fund's risk is that
such default may include any decline in value of the collateral to an amount
which is less than 100% of the repurchase price, any costs of disposing of such
collateral, and any loss resulting from any delay in foreclosing on the
collateral. The Fund will not enter into any repurchase agreement which will
cause more than 10% of its net assets to be invested in repurchase agreements
which extend beyond seven days.
Description of Money Market Instruments. Money market instruments may include
U.S. Government Securities or corporate debt securities (including those subject
to repurchase agreements), provided that they mature in thirteen months or less
from the date of acquisition and are otherwise eligible for purchase by the
Fund. Money market instruments also may include Banker's Acceptances and
Certificates of Deposit of domestic branches of U.S. banks, Commercial Paper and
Variable Amount Demand Master Notes ("Master Notes"). Banker's Acceptances are
time drafts drawn on and "accepted" by a bank. When a bank "accepts" such a time
draft, it assumes liability for its payment. When the Fund acquires a Banker's
Acceptance the bank which "accepted" the time draft is liable for payment of
interest and principal when due. The Banker's Acceptance carries the full faith
and credit of such bank. A Certificate of Deposit ("CD") is an unsecured
interest bearing debt obligation of a bank. Commercial Paper is an unsecured,
short-term debt obligation of a bank, corporation or other borrower. Commercial
Paper maturity generally ranges from two to 270 days and is usually sold on a
discounted basis rather than as an interest-bearing instrument. The Fund will
invest in Commercial Paper only if it is rated one of the top two rating
categories by Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's
Ratings Group ("S&P"), Fitch Investors Service, Inc. ("Fitch") or Duff & Phelps
("D&P") or, if not rated, of equivalent quality in the Advisor's opinion.
Commercial Paper may include Master Notes of the same quality. Master Notes are
unsecured obligations which are redeemable upon demand of the holder and which
permit the investment of fluctuating amounts at varying rates of interest.
Master Notes are acquired by the Fund only through the Master Note program of
the Fund's custodian bank, acting as administrator thereof. The Advisor will
monitor, on a continuous basis, the earnings power, cash flow and other
liquidity ratios of the issuer of a Master Note held by the Fund.
Illiquid Investments. The Fund may invest up to 10% of its net assets in
illiquid securities, which are investments that cannot be sold or disposed of in
the ordinary course of business within seven days at approximately the prices at
which they are valued. Under the supervision of the Board of Trustees, the
Advisor determines the liquidity of the Fund's investments and, through reports
from the Advisor, the Board monitors investments in illiquid instruments. In
determining the liquidity of the Fund's investments, the Advisor may consider
various factors including (1) the frequency of trades and quotations, (2) the
number of dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including any
demand or tender features) and (5) the nature of the marketplace for trades
(including the ability to assign or offset the Fund's rights and obligations
relating to the investment). Investments currently considered by the Fund to be
illiquid include repurchase agreements not entitling the holder to payment of
principal and interest within seven days. If through a change in values, net
assets or other circumstances, the Fund were in a position where more than 10%
of its net assets were invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity.
Restricted Securities. Within its limitation on investment in illiquid
securities, the Fund may purchase restricted securities that generally can be
sold in privately negotiated transactions, pursuant to an exemption from
registration under the federal securities laws, or in a registered public
offering. Where registration is required, the Fund may be obligated to pay all
or part of the registration expense and a considerable period may elapse between
the time it decides to seek registration and the time the Fund may be permitted
to sell a security under an effective registration statement. If during such a
period, adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to seek registration of the
security.
Options Trading. The Fund may also purchase or sell certain put and call options
for hedging purposes. This is a highly specialized activity that entails greater
than ordinary investment risks. Regardless of how much the market price of the
underlying security increases or decreases, the option buyer's risk is limited
to the amount of the original investment for the purchase of the option.
However, options may be more volatile than the underlying securities, and
therefore, on a percentage basis, an investment in options may be subject to
greater fluctuation than an investment in the underlying securities. A listed
call option gives the purchaser of the option the right to buy from a clearing
corporation, and a writer has the obligation to sell to the clearing
corporation, the underlying security at the stated exercise price at any time
prior to the expiration of the option, regardless of the market price of the
security. The premium paid to the writer is in consideration for undertaking the
obligations under the option contract. A listed put option gives the purchaser
the right to sell to a clearing corporation the underlying security at the
stated exercise price at any time prior to the expiration date of the option,
regardless of the market price of the security. Put and call options purchased
by the Fund will be valued at the last sale price or, in the absence of such a
price, at the mean between bid and asked prices.
The obligation of the Fund to sell a security subject to a covered call option
written by it, or to purchase a security subject to a secured put option written
by it, may be terminated prior to the expiration date of the option by the Fund
executing a closing purchase transaction, which is effected by purchasing on an
exchange an option of the same series (i.e., same underlying security, exercise
price and expiration date) as the option previously written. Such a purchase
does not result in the ownership of an option. A closing purchase transaction
will ordinarily be effected to realize a profit on an outstanding option, to
prevent an underlying security from being called, to permit the sale of the
underlying security or to permit the writing of a new option containing
different terms on such underlying security. The cost of such a liquidation
purchase plus transaction costs may be greater than the premium received upon
the original option, in which event the Fund will have incurred a loss in the
transaction. An option position may be closed out only on an exchange that
provides a secondary market for an option of the same series. There is no
assurance that a liquid secondary market on an exchange will exist for any
particular option. A covered call option writer, unable to effect a closing
purchase transaction, will not be able to sell the underlying security until the
option expires or the underlying security is delivered upon exercise with the
result that the writer in such circumstances will be subject to the risk of
market decline in the underlying security during such period. The Fund will
write an option on a particular security only if the Advisor believes that a
liquid secondary market will exist on an exchange for options of the same series
which will permit the Fund to make a closing purchase transaction in order to
close out its position.
When the Fund writes a covered call option, an amount equal to the net premium
(the premium less the commission) received by the Fund is included in the
liability section of the Fund's statement of assets and liabilities as a
deferred credit. The amount of the deferred credit will be subsequently
marked-to-market to reflect the current value of the option written. The current
value of the traded option is the last sale price or, in the absence of a sale,
the average of the closing bid and asked prices. If an option expires on the
stipulated expiration date or if the Fund enters into a closing purchase
transaction, it will realize a gain (or loss if the cost of a closing purchase
transaction exceeds the net premium received when the option is sold), and the
deferred credit related to such option will be eliminated. Any gain on a covered
call option may be offset by a decline in the market price of the underlying
security during the option period. If a covered call option is exercised, the
Fund may deliver the underlying security held by it or purchase the underlying
security in the open market. In either event, the proceeds of the sale will be
increased by the net premium originally received, and the Fund will realize a
gain or loss. If a secured put option is exercised, the amount paid by the Fund
for the underlying security will be partially offset by the amount of the
premium previously paid to the Fund. Premiums from expired options written by
the Fund and net gains from closing purchase transactions are treated as
short-term capital gains for federal income tax purposes, and losses on closing
purchase transactions are short-term capital losses.
Stock Index Options. The Fund may purchase or sell put and call stock index
options for hedging purposes. Stock index options are put options and call
options on various stock indexes. In most respects, they are identical to listed
options on common stocks. The primary difference between stock options and index
options occurs when index options are exercised. In the case of stock options,
the underlying security, common stock, is delivered. However, upon the exercise
of an index option, settlement does not occur by delivery of the securities
comprising the index. The option holder who exercises the index option receives
an amount of cash if the closing level of the stock index upon which the option
is based is greater than, in the case of a call, or less than, in the case of a
put, the exercise price of the option. This amount of cash is equal to the
difference between the closing price of the stock index and the exercise price
of the option expressed in dollars times a specified multiple. A stock index
fluctuates with changes in the market values of the stocks included in the
index.
The Fund may purchase call and put stock index options in an attempt to either
hedge against the risk of unfavorable price movements adversely affecting the
value of the Fund's securities, or securities the Fund intends to buy, or
otherwise in furtherance of the Fund's investment objectives. The Fund will sell
(write) stock index options for hedging purposes or in order to close out
positions in stock index options which the Fund has purchased.
The Fund's use of stock index options is subject to certain risks. Successful
use by the Fund of options on stock indexes will be subject to the ability of
the Advisor to correctly predict movements in the directions of the stock
market. This requires different skills and techniques than predicting changes in
the prices of individual securities. In addition, the Fund's ability to
effectively hedge all or a portion of the securities in its portfolio, in
anticipation of or during a market decline through transactions in put options
on stock indexes, depends on the degree to which price movements in the
underlying index correlate with the price movements in the Fund's portfolio
securities. Inasmuch as the Fund's portfolio securities will not duplicate the
components of an index, the correlation will not be perfect. Consequently, the
Fund will bear the risk that the prices of its portfolio securities being hedged
will not move in the same amount as the prices of the Fund's put options on the
stock indexes. It is also possible that there may be a negative correlation
between the index and the Fund's portfolio securities that would result in a
loss on both such portfolio securities and the options on stock indexes acquired
by the Fund.
Lower Rated Debt Securities. The Fund may invest in debt securities which are
rated Caa or higher by Moody's or CCC or higher by S&P or Fitch or equivalent
unrated securities. However, the Fund may not invest more than 15% of its assets
in debt securities rated lower than Baa by Moody's or BBB by S&P or Fitch or
securities not rated by Moody's, S&P or Fitch which the Advisor deems to be of
equivalent quality. Bonds rated BB or Ba or below (or comparable unrated
securities) are commonly referred to as "junk bonds" and are considered
speculative and may be questionable as to principal and interest payments. In
some cases, such bonds may be highly speculative, have poor prospects for
reaching investment standing, and be in default. As a result, investment in such
bonds will entail greater risks than those associated with investment in
investment-grade bonds (i.e., bonds rated BBB or better by S&P or Fitch or Baa
or better by Moody's).
An economic downturn could severely affect the ability of highly leveraged
issuers to service their debt obligations or to repay their obligations upon
maturity. Factors having an adverse impact on the market value of lower rated
securities will have an adverse effect on the Fund's net asset value to the
extent it invests in such securities. In addition, the Fund may incur additional
expenses to the extent it is required to seek recovery upon a default in payment
of principal or interest on its portfolio holdings.
The secondary market for junk bond securities, which is concentrated in
relatively few market makers, may not be as liquid as the secondary market for
more highly rated securities, a factor which may have an adverse effect on the
Fund's ability to dispose of a particular security when necessary to meet its
liquidity needs. Under adverse market or economic conditions, the secondary
market for junk bond securities could contract further, independent of any
specific adverse changes in the condition of a particular issuer. As a result,
the Advisor could find it more difficult to sell these securities or may be able
to sell the securities only at prices lower than if such securities were widely
traded. Prices realized upon the sale of such lower rated or unrated securities,
under these circumstances, may be less than the prices used in calculating the
Fund's net asset value.
Since investors generally perceive that there are greater risks associated with
the medium to lower rated securities of the type in which the Fund may invest,
the yields and prices of such securities may tend to fluctuate more than those
for higher rated securities. In the lower quality segments of the fixed-income
securities market, changes in perceptions of issuers' creditworthiness tend to
occur more frequently and in a more pronounced manner than do changes in higher
quality segments of the fixed-income securities market resulting in greater
yield and price volatility.
Another factor which causes fluctuations in the prices of fixed-income
securities is the supply and demand for similarly rated securities. In addition,
the prices of fixed-income securities fluctuate in response to the general level
of interest rates. Fluctuations in the prices of portfolio securities subsequent
to their acquisition will not affect cash income from such securities but will
be reflected in a Fund's net asset value.
Medium to lower rated and comparable non-rated securities tend to offer higher
yields than higher rated securities with the same maturities because the
historical financial condition of the issuers of such securities may not have
been as strong as that of other issuers. In addition to the risk of default,
there are the related costs of recovery on defaulted issues. The Advisor will
attempt to reduce these risks through diversification of the Fund's portfolio
and by analysis of each issuer and its ability to make timely payments of income
and principal, as well as broad economic trends in corporate developments.
INVESTMENT LIMITATIONS
The Fund has adopted the following fundamental investment limitations, which
cannot be changed without approval by holders of a majority of the outstanding
voting shares of the Fund. A "majority" for this purpose means the lesser of (i)
67% of the Fund's outstanding shares represented in person or by proxy at a
meeting at which more than 50% of its outstanding shares are represented, or
(ii) more than 50% of its outstanding shares. Unless otherwise indicated,
percentage limitations apply at the time of purchase.
As a matter of fundamental policy, the Fund may not:
1. Issue senior securities, borrow money, or pledge its assets, except that it
may borrow from banks as a temporary measure (a) for extraordinary or
emergency purposes, in amounts not exceeding 5% of its total assets or (b)
to meet redemption requests, in amounts not exceeding 15% of its total
assets. The Fund will not make any investments if borrowing exceeds 5% of
its total assets until such time as total borrowing represents less than 5%
of Fund assets;
2. With respect to 75% of its total assets, invest more than 5% of the value
of its total assets in the securities of any one issuer or purchase more
than 10% of the outstanding voting securities of any class of securities of
any one issuer (except that securities of the U.S. government, its
agencies, and instrumentalities are not subject to this limitation);
3. Invest 25% or more of the value of its total assets in any one industry
(except that securities of the U.S. Government, its agencies, and
instrumentalities are not subject to this limitation);
4. Invest for the purpose of exercising control or management of another
issuer;
5. Purchase or sell commodities or commodities contracts; real estate
(including limited partnership interests, but excluding readily marketable
interests in real estate investment trusts or other securities secured by
real estate or interests therein or readily marketable securities issued by
companies that invest in real estate or interests therein); or interests in
oil, gas, or other mineral exploration or development programs or leases
(although it may invest in readily marketable securities of issuers that
invest in or sponsor such programs or leases);
6. Underwrite securities issued by others except to the extent that the
disposition of portfolio securities, either directly from an issuer or from
an underwriter for an issuer, may be deemed to be an underwriting under the
federal securities laws;
7. Participate on a joint or joint and several basis in any trading account in
securities;
8. Invest its assets in the securities of one or more investment companies
except to the extent permitted by the 1940 Act; or
9. Make loans of money or securities, except that the Fund may invest in
repurchase agreements, money market instruments, and other debt securities.
The following investment limitations are not fundamental and may be changed
without shareholder approval. As a matter of non-fundamental policy, the Fund
may not:
1. Invest in securities of issuers which have a record of less than three
years' continuous operation (including predecessors and, in the case of
bonds, guarantors) if more than 5% of its total assets would be invested in
such securities;
2. Invest more than 10% of its net assets in illiquid securities. For this
purpose, illiquid securities include, among others,
(a) securities for which no readily available market exists or which have
legal or contractual restrictions on resale,
(b) fixed-time deposits that are subject to withdrawal penalties and have
maturities of more than seven days, and
(c) repurchase agreements not terminable within seven days;
3. Invest in the securities of any issuer if those officers or Trustees of the
Trust and those officers and directors of the Advisor who individually own
more than 1/2 of 1% of the outstanding securities of such issuer together
own more than 5% of such issuer's securities;
4. Write, purchase, or sell puts, calls, straddles, spreads, or combinations
thereof or futures contracts or related options (except that the Fund may
engage in options transactions to the extent described in the Prospectus);
5. Make short sales of securities or maintain a short position, except short
sales "against the box." (A short sale is made by selling a security the
Fund does not own. A short sale is "against the box" to the extent that the
Fund contemporaneously owns or has the right to obtain at no additional
cost securities identical to those sold short.) While the Fund has reserved
the right to make short sales "against the box," the Advisor has no present
intention of engaging in such transactions at this time or during the
coming year; or
6. Purchase foreign securities other than those traded on domestic U.S.
exchanges and other foreign debt securities as described in the Prospectus.
NET ASSET VALUE
The net asset value per share of the Fund is determined at the time trading
closes on the New York Stock Exchange, typically 4:00 p.m., New York time,
Monday through Friday, except on business holidays when the New York Stock
Exchange is closed or days on which the NYSE closes early for holidays or
trading limitations. The New York Stock Exchange recognizes the following
holidays: New Year's Day, President's Day, Martin Luther King, Jr. Day, Good
Friday, Memorial Day, Fourth of July, Labor Day, Thanksgiving Day, and Christmas
Day. Any other holiday recognized by the New York Stock Exchange will be
considered a business holiday on which the net asset value of the Fund will not
be calculated.
The net asset value per share of the Fund is calculated by adding the value of
the Fund's securities and other assets belonging to the Fund, subtracting the
liabilities charged to the Fund, and dividing the result by the number of
outstanding shares. "Assets belonging to" the Fund consist of the consideration
received upon the issuance of shares of the Fund together with all net
investment income, realized gains/losses and proceeds derived from the
investment thereof, including any proceeds from the sale of such investments,
any funds or payments derived from any reinvestment of such proceeds, and a
portion of any general assets of the Trust not belonging to a particular
investment Fund. Assets belonging to the Fund are charged with the direct
liabilities of the Fund and with a share of the general liabilities of the
Trust, which are normally allocated in proportion to the number of or the
relative net asset values of all of the Trust's series at the time of allocation
or in accordance with other allocation methods approved by the Board of
Trustees. Subject to the provisions of the Declaration of Trust, determinations
by the Board of Trustees as to the direct and allocable liabilities, and the
allocable portion of any general assets, with respect to the Fund are
conclusive.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Purchases. Shares of the Fund are offered and sold on a continuous basis and may
be purchased through authorized investment dealers or directly by contacting the
Distributor or the Fund. Selling dealers have the responsibility of transmitting
orders promptly to the Fund. The public offering price of shares of the Fund
equals net asset value. Capital Investment Group, Inc. (the "Distributor"),
serves as distributor of shares of the Fund.
Redemptions. Under the 1940 Act, the Fund may suspend the right of redemption or
postpone the date of payment for shares during any period when (a) trading on
the New York Stock Exchange is restricted by applicable rules and regulations of
the SEC; (b) the Exchange is closed for other than customary weekend and holiday
closings; (c) the SEC has by order permitted such suspension; or (d) an
emergency exists as determined by the SEC. The Fund may also suspend or postpone
the recordation of the transfer of shares upon the occurrence of any of the
foregoing conditions.
In addition to the situations described in the Prospectus under "How Shares May
Be Redeemed," the Fund may redeem shares involuntarily to reimburse the Fund for
any loss sustained by reason of the failure of a shareholder to make full
payment for shares purchased by the shareholder or to collect any charge
relating to a transaction effected for the benefit of a shareholder which is
applicable to Fund shares as provided in the Prospectus from time to time.
DESCRIPTION OF THE TRUST
The Trust is an unincorporated business trust organized under Massachusetts law
on April 8, 1998. The Trust's Declaration of Trust authorizes the Board of
Trustees to divide shares into series, each series relating to a separate
portfolio of investments, and to classify and reclassify any unissued shares
into one or more classes of shares of each such series. The Declaration of Trust
currently provides for the shares of one series, the subject of the Prospectus
and this Additional Statement. The number of shares of each series shall be
unlimited. The Trust does not intend to issue share certificates.
In the event of a liquidation or dissolution of the Trust or an individual
series, such as the Fund, shareholders of a particular series would be entitled
to receive the assets available for distribution belonging to such series.
Shareholders of a series are entitled to participate equally in the net
distributable assets of the particular series involved on liquidation, based on
the number of shares of the series that are held by each shareholder. If there
are any assets, income, earnings, proceeds, funds or payments, that are not
readily identifiable as belonging to any particular series, the Trustees shall
allocate them among any one or more of the series as they, in their sole
discretion, deem fair and equitable.
Shareholders of all of the series of the Trust, including the Fund, will vote
together and not separately on a series-by-series or class-by-class basis,
except as otherwise required by law or when the Board of Trustees determines
that the matter to be voted upon affects only the interests of the shareholders
of a particular series or class. Rule 18f-2 under the 1940 Act provides that any
matter required to be submitted to the holders of the outstanding voting
securities of an investment company such as the Trust shall not be deemed to
have been effectively acted upon unless approved by the holders of a majority of
the outstanding shares of each series or class affected by the matter. A matter
affects a series or class unless it is clear that the interests of each series
or class in the matter are substantially identical or that the matter does not
affect any interest of the series or class. Under Rule 18f-2, the approval of an
investment advisory agreement or any change in a fundamental investment policy
would be effectively acted upon with respect to a series only if approved by a
majority of the outstanding shares of such series. However, the Rule also
provides that the ratification of the appointment of independent accountants,
the approval of principal underwriting contracts and the election of Trustees
may be effectively acted upon by shareholders of the Trust voting together,
without regard to a particular series or class.
When used in the Prospectus or this Additional Statement, a "majority" of
shareholders means the vote of the lesser of (1) 67% of the shares of the Trust
or the applicable series or class present at a meeting if the holders of more
than 50% of the outstanding shares are present in person or by proxy, or (2)
more than 50% of the outstanding shares of the Trust or the applicable series or
class.
When issued for payment as described in the Prospectus and this Additional
Statement, shares of the Fund will be fully paid and non-assessable.
The Declaration of Trust provides that the Trustees of the Trust will not be
liable in any event in connection with the affairs of the Trust, except as such
liability may arise from his or her own bad faith, willful misfeasance, gross
negligence, or reckless disregard of duties. It also provides that all third
parties shall look solely to the Trust property for satisfaction of claims
arising in connection with the affairs of the Trust. With the exceptions stated,
the Declaration of Trust provides that a Trustee or officer is entitled to be
indemnified against all liability in connection with the affairs of the Trust.
ADDITIONAL INFORMATION CONCERNING TAXES
The following summarizes certain additional tax considerations generally
affecting the Fund and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Fund or its shareholders, and the discussion here and in the
Prospectus is not intended as a substitute for careful tax planning and is based
on tax laws and regulations that are in effect on the date hereof; such laws and
regulations may be changed by legislative, judicial, or administrative action.
Investors are advised to consult their tax advisors with specific reference to
their own tax situations.
Each series of the Trust, including the Fund, will be treated as a separate
corporate entity under the Code and intends to qualify or remain qualified as a
regulated investment company. In order to so qualify, each series must elect to
be a regulated investment company or have made such an election for a previous
year and must satisfy, in addition to the distribution requirement described in
the Prospectus, certain requirements with respect to the source of its income
for a taxable year. At least 90% of the gross income of each series must be
derived from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stocks, securities or foreign
currencies, and other income derived with respect to the series' business of
investing in such stock, securities or currencies. Any income derived by a
series from a partnership or trust is treated as derived with respect to the
series' business of investing in stock, securities or currencies only to the
extent that such income is attributable to items of income that would have been
qualifying income if realized by the series in the same manner as by the
partnership or trust.
An investment company may not qualify as a regulated investment company for any
taxable year unless it satisfies certain requirements with respect to the
diversification of its investments at the close of each quarter of the taxable
year. In general, at least 50% of the value of its total assets must be
represented by cash, cash items, government securities, securities of other
regulated investment companies and other securities which, with respect to any
one issuer, do not represent more than 5% of the total assets of the investment
company nor more than 10% of the outstanding voting securities of such issuer.
In addition, not more than 25% of the value of the investment company's total
assets may be invested in the securities (other than government securities or
the securities of other regulated investment companies) of any one issuer. The
Fund intends to satisfy all requirements on an ongoing basis for continued
qualification as a regulated investment company.
Each series of the Trust, including the Fund, will designate any distribution of
long term capital gains as a capital gain dividend in a written notice mailed to
shareholders within 60 days after the close of the series' taxable year.
Shareholders should note that, upon the sale or exchange of series shares, if
the shareholder has not held such shares for at least six months, any loss on
the sale or exchange of those shares will be treated as long term capital loss
to the extent of the capital gain dividends received with respect to the shares.
A 4% nondeductible excise tax is imposed on regulated investment companies that
fail to currently distribute an amount equal to specified percentages of their
ordinary taxable income and capital gain net income (excess of capital gains
over capital losses). Each series of the Trust, including the Fund, intends to
make sufficient distributions or deemed distributions of its ordinary taxable
income and any capital gain net income prior to the end of each calendar year to
avoid liability for this excise tax.
If for any taxable year a series does not qualify for the special federal income
tax treatment afforded regulated investment companies, all of its taxable income
will be subject to federal income tax at regular corporate rates (without any
deduction for distributions to its shareholders). In such event, dividend
distributions (whether or not derived from interest on tax-exempt securities)
would be taxable as ordinary income to shareholders to the extent of the series'
current and accumulated earnings and profits, and would be eligible for the
dividends received deduction for corporations.
Each series of the Trust, including the Fund, will be required in certain cases
to withhold and remit to the U.S. Treasury 31% of taxable dividends or 31% of
gross proceeds realized upon sale paid to shareholders who have failed to
provide a correct tax identification number in the manner required, or who are
subject to withholding by the Internal Revenue Service for failure properly to
include on their return payments of taxable interest or dividends, or who have
failed to certify to the Fund that they are not subject to backup withholding
when required to do so or that they are "exempt recipients."
Depending upon the extent of the Fund's activities in states and localities in
which its offices are maintained, in which its agents or independent contractors
are located or in which it is otherwise deemed to be conducting business, the
Fund may be subject to the tax laws of such states or localities. In addition,
in those states and localities that have income tax laws, the treatment of the
Fund and its shareholders under such laws may differ from their treatment under
federal income tax laws.
MANAGEMENT OF THE FUND
Trustees and Officers. The Trustees and executive officers of the Trust, their
ages, and their principal occupations for the last five years are as follows:
Name, Age, Position(s) Principal Occupation(s)
and Address During Past 5 Years
Julian G. Winters, 29 Legal and Compliance Director
Trustee* The Nottingham Company
Treasurer and Assistant Secretary Rocky Mount, North Carolina
105 North Washington Street Since 1996; previously
Rocky Mount, North Carolina Operations Manager,
Tar Heel Medical,
Nashville, North Carolina
C. Frank Watson III, 27 Vice President
Secretary The Nottingham Company
105 North Washington Street Rocky Mount, North Carolina
Rocky Mount, North Carolina 27802
[add additional trustees when elected]
* Indicates that Trustee is an "interested person" of the Trust for purposes of
the 1940 Act because of his position with the Trust or the Advisor.
The officers of the Trust will not receive compensation from the Trust for
performing the duties of their offices. Each Trustee who is not an "interested
person" of the Trust receives a fee of $2,000 each year plus $250 per series of
the Trust per meeting attended in person and $100 per series of the Trust per
meeting attended by telephone. All Trustees are reimbursed for any out-of-pocket
expenses incurred in connection with attendance at meetings.
Compensation Table*
Pension
Retirement Total
Aggregate Benefits Estimated Compensation
Compensation Accrued As Annual from the Trust
Name of Person, from the Part of Fund Benefits Upon Paid to
Position Trust Expenses Retirement Trustees
Julian G. Winters 0 0 0 0
Trustee
Investment Advisor. Information about Shanklin Capital Management, Inc. (the
"Advisor") and its duties and compensation as Advisor are contained in the
Prospectus.
The Advisor will receive a monthly management fee equal to an annual rate of
0.85% of the average daily net assets of the Fund.
Under the Advisory Agreement, the Advisor is not liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the performance of such Agreement, except a loss resulting from 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 the Advisor in the performance of its duties or from its reckless
disregard of its duties and obligations under the Agreement.
Fund Accountant and Administrator. The Trust has entered into a Fund Accounting
and Administration Agreement with The Nottingham Company (the "Administrator"),
105 North Washington Street, Post Office Drawer 69, Rocky Mount, North Carolina
27802-0069, pursuant to which the Administrator receives a fee at the annual
rate of 0.15% of the average daily net assets of the Fund on the first $100
million; and 0.125% of its average daily net assets in excess of $100 million.
In addition, the Administrator currently receives a base monthly fee of $2,000
for accounting and recordkeeping services for the Fund. The Administrator also
charges the Fund for certain costs involved with the daily valuation of
investment securities and is reimbursed for out-of-pocket expenses. The
Administrator charges a minimum fee of $3,000 per month for all of its fees
taken in the aggregate, analyzed monthly.
The Administrator will perform the following services for the Fund: (1)
coordinate with the Custodian and monitor the services it provides to the Fund;
(2) coordinate with and monitor any other third parties furnishing services to
the Fund; (3) provide the Fund with necessary office space, telephones and other
communications facilities and personnel competent to perform administrative and
clerical functions for the Fund; (4) supervise the maintenance by third parties
of such books and records of the Fund as may be required by applicable federal
or state law; (5) prepare or supervise the preparation by third parties of all
federal, state and local tax returns and reports of the Fund required by
applicable law; (6) prepare and, after approval by the Trust, file and arrange
for the distribution of proxy materials and periodic reports to shareholders of
the Fund as required by applicable law; (7) prepare and, after approval by the
Trust, arrange for the filing of such registration statements and other
documents with the Securities and Exchange Commission and other federal and
state regulatory authorities as may be required by applicable law; (8) review
and submit to the officers of the Trust for their approval invoices or other
requests for payment of Fund expenses and instruct the Custodian to issue checks
in payment thereof; and (9) take 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. The Administrator will also provide certain accounting and
pricing services for the Fund.
Transfer Agent. The Trust has contracted with NC Shareholder Services, LLC (the
"Transfer Agent"), a North Carolina limited liability company, to serve as
transfer, dividend paying, and shareholder servicing agent for the Fund. The
Transfer Agent is compensated based upon a $15.00 fee per shareholder per year,
subject to a minimum fee of $750 per month. The address of the Transfer Agent is
107 North Washington Street, Post Office Box 4365, Rocky Mount, North Carolina
27803-0365.
Distributor. Capital Investment Group, Inc. (the "Distributor"), Post Office Box
32249, Raleigh, North Carolina 27622, acts as an underwriter and distributor of
the Fund's shares for the purpose of facilitating the registration of shares of
the Fund under state securities laws and to assist in sales of Fund shares
pursuant to a Distribution Agreement (the "Distribution Agreement") approved by
the Board of Trustees of the Trust.
In this regard, the Distributor 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 Distributor as states in which
it wishes to offer its shares for sale, in order that state registrations may be
maintained for the Fund.
The Distributor is a broker-dealer registered with the Securities and Exchange
Commission and a member in good standing of the National Association of
Securities Dealers, Inc.
Either party upon 60 days prior written notice to the other party may terminate
the Distribution Agreement.
Custodian. First Union National Bank of North Carolina (the "Custodian") serves
as custodian for the Fund's assets. The Custodian's mailing address is Two First
Union Center, Charlotte, North Carolina 28288. The Custodian acts as the
depository for the Fund, safekeeps its portfolio securities, collects all income
and other payments with respect to portfolio securities, disburses monies at the
Fund's request and maintains records in connection with its duties as Custodian.
For its services as Custodian, the Custodian is entitled to receive from the
Fund an annual fee based on the average net assets of the Fund held by the
Custodian.
Independent Auditors. The firm of Deloitte & Touche, LLP, 2500 One PPG Place,
Pittsburgh, Pennsylvania 15222-5401, serves as independent auditors for the
Fund, and will audit the annual financial statements of the Fund and prepare the
Fund's federal and state tax returns.
SPECIAL SHAREHOLDER SERVICES
The Fund offers the following shareholder services:
Regular Account. The regular account allows for voluntary investments to be made
at any time. Available to individuals, custodians, corporations, trusts,
estates, corporate retirement plans and others, investors are free to make
additions and withdrawals to or from their account as often as they wish. When
an investor makes an initial investment in the Fund, a shareholder account is
opened in accordance with the investor's registration instructions. Each time
there is a transaction in a shareholder account, such as an additional
investment or the reinvestment of a dividend or distribution, the shareholder
will receive a confirmation statement showing the current transaction and all
prior transactions in the shareholder account during the calendar year to date,
along with a summary of the status of the account as of the transaction date. As
stated in the Prospectus, share certificates are not issued.
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investment in shares through automatic charges
to their checking account. With shareholder authorization and bank approval, the
Administrator will automatically charge the checking account for the amount
specified ($100 minimum) which will be automatically invested in shares at the
public offering price on or about the 21st day of the month. The shareholder may
change the amount of the investment or discontinue the plan at any time by
writing to the Fund.
Systematic Withdrawal Plan. Shareholders owning shares with a value of $5,000 or
more may establish a Systematic Withdrawal Plan. A shareholder may receive
monthly or quarterly payments, in amounts of not less than $100 per payment, by
authorizing the Fund to redeem the necessary number of shares periodically (each
month, or quarterly in the months of March, June, September and December) in
order to make the payments requested. The Fund has the capacity of
electronically depositing the proceeds of the systematic withdrawal directly to
the shareholder's personal bank account ($5,000 minimum per bank wire).
Instructions for establishing this service are included in the Fund Shares
Application, enclosed in the Prospectus, or available by calling the Fund. If
the shareholder prefers to receive his systematic withdrawal proceeds in cash,
or if such proceeds are less than the $5,000 minimum for a bank wire, checks
will be made payable to the designated recipient and mailed within 7 days of the
valuation date. If the designated recipient is other than the registered
shareholder, the signature of each shareholder must be guaranteed on the
application (see "Signature Guarantees" in the Prospectus). A corporation (or
partnership) must also submit a "Corporate Resolution" (or "Certification of
Partnership") indicating the names, titles and required number of signatures
authorized to act on its behalf. The application must be signed by a duly
authorized officer(s) and the corporate seal affixed. No redemption fees are
charged to shareholders under this plan. Costs in conjunction with the
administration of the plan are borne by the Fund. Shareholders should be aware
that such systematic withdrawals may deplete or use up entirely their initial
investment and may result in realized long-term or short-term capital gains or
losses. The Systematic Withdrawal Plan may be terminated at any time by the Fund
upon sixty days written notice or by a shareholder upon written notice to the
Fund. Applications and further details may be obtained by calling the Fund at
1-800-525-3863, or by writing to:
SCM Strategic Growth Fund
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
Purchases in Kind. The Fund may accept securities in lieu of cash in payment for
the purchase of shares in the Fund. The acceptance of such securities is at the
sole discretion of the Advisor based upon the suitability of the securities
accepted for inclusion as a long term investment of the Fund, the marketability
of such securities, and other factors which the Advisor may deem appropriate. If
accepted, the securities will be valued using the same criteria and methods as
described in "How Shares are Valued" in the Prospectus.
Redemptions in Kind. The Fund does not intend, under normal circumstances, to
redeem its securities by payment in kind. It is possible, however, that
conditions may arise in the future, which would, in the opinion of the Trustees,
make it undesirable for the Fund to pay for all redemptions in cash. In such
case, the Board of Trustees may authorize payment to be made in readily
marketable portfolio securities of the Fund. Securities delivered in payment of
redemptions would be valued at the same value assigned to them in computing the
net asset value per share. Shareholders receiving them would incur brokerage
costs when these securities are sold. An irrevocable election has been filed
under Rule 18f-1 of the 1940 Act, wherein the Fund committed itself to pay
redemptions in cash, rather than in kind, to any shareholder of record of the
Fund who redeems during any ninety-day period, the lesser of (a) $250,000 or (b)
one percent (1%) of the Fund's net asset value at the beginning of such period.
Transfer of Registration. To transfer shares to another owner, send a written
request to the Fund at the address shown herein. Your request should include the
following: (1) the Fund name and existing account registration; (2) signature(s)
of the registered owner(s) exactly as the signature(s) appear(s) on the account
registration; (3) the new account registration, address, social security or
taxpayer identification number and how dividends and capital gains are to be
distributed; (4) signature guarantees (See the Prospectus under the heading
"Signature Guarantees"); and (5) any additional documents which are required for
transfer by corporations, administrators, executors, trustees, guardians, etc.
If you have any questions about transferring shares, call or write the Fund.
ADDITIONAL INFORMATION ON PERFORMANCE
From time to time, the total return of the Fund may be quoted in advertisements,
sales literature, shareholder reports or other communications to shareholders.
The Fund computes the "average annual total return" of the Fund by determining
the average annual compounded rates of return during specified periods that
equate the initial amount invested to the ending redeemable value of such
investment. This is done by determining the ending redeemable value of a
hypothetical $1,000 initial payment. This calculation is as follows:
P(1+T)n = ERV
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 payment made
at the beginning of the period.
P = hypothetical initial payment of $1,000 from which the
maximum sales load is deducted.
n = Period covered by the computation, expressed in terms of
years.
The Fund may also compute the aggregate total return of the Fund, which is
calculated in a similar manner, except that the results are not annualized.
The calculation of average annual total return and aggregate total return assume
that there is a reinvestment of all dividends and capital gain distributions on
the reinvestment dates during the period. The ending redeemable value 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.
The Fund's performance may be compared in advertisements, sales literature,
shareholder reports, and other communications to the performance of other mutual
funds having similar objectives or to standardized indices or other measures of
investment performance. In particular, the Fund may compare its performance to
the S&P 500 Index, the Lehman Aggregate Bond Index, or a combination of such
indices. Comparative performance may also be expressed by reference to a ranking
prepared by a mutual fund monitoring service or by one or more newspapers,
newsletters or financial periodicals. The Fund may also occasionally cite
statistics to reflect its volatility and risk.
The Fund's performance fluctuates on a daily basis largely because net earnings
and net asset value per share fluctuate daily. Both net earnings and net asset
value per share are factors in the computation of total return as described
above. As indicated, from time to time, the Fund may advertise its performance
compared to similar funds or portfolios using certain indices, reporting
services, and financial publications. These may include the following:
o Lipper Analytical Services, Inc. ranks funds in various fund categories
by making comparative calculations using total return. Total return
assumes the reinvestment of all capital gains distributions and income
dividends and takes into account any change in net asset value over a
specific period of time.
o Morningstar, Inc., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.
Investors may use such indices in addition to the Fund's Prospectus to obtain a
more complete view of the Fund's performance before investing. Of course, when
comparing the Fund's performance to any index, factors such as composition of
the index and prevailing market conditions should be considered in assessing the
significance of such comparisons. When comparing funds using reporting services,
or total return, investors should take into consideration any relevant
differences in funds such as permitted portfolio compositions and methods used
to value portfolio securities and compute offering price. Advertisements and
other sales literature for the Fund may quote total returns that are calculated
on non-standardized base periods. The total returns represent the historic
change in the value of an investment in the Fund based on monthly reinvestment
of dividends over a specified period of time.
From time to time the Fund may include in advertisements and other
communications information, charts, and illustrations relating to inflation and
the reflects of inflation on the dollar, including the purchasing power of the
dollar at various rates of inflation. The Fund may also disclose from time to
time information about its portfolio allocation and holdings at a particular
date (including ratings of securities assigned by independent rating services
such as S&P and Moody's). The Fund may also depict the historical performance of
the securities in which the Fund may invest over periods reflecting a variety of
market or economic conditions either alone or in comparison with alternative
investments, performance indices of those investments, or economic indicators.
The Fund may also include in advertisements and in materials furnished to
present and prospective shareholders statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
to meet specific financial goals, such as saving for retirement, children's
education, or other future needs.
<PAGE>
APPENDIX A
DESCRIPTION OF RATINGS
The Fund may acquire from time to time fixed income securities that meet the
following minimum rating criteria ("Investment-Grade Debt Securities") (or if
not rated, of equivalent quality as determined by the Advisor). Not more than
50% of the total fixed income portion of the portfolio (not more than 15% of the
entire Fund) will be invested in fixed income securities that are not
Investment-Grade Debt Securities. The various ratings used by the nationally
recognized securities rating services are described below.
A rating by a rating service represents the service's opinion as to the credit
quality of the security being rated. However, the ratings are general and are
not absolute standards of quality or guarantees as to the creditworthiness of an
issuer. Consequently, the Advisor believes that the quality of fixed income
securities in which the Fund may invest should be continuously reviewed and that
individual analysts give different weightings to the various factors involved in
credit analysis. A rating is not a recommendation to purchase, sell or hold a
security, because it does not take into account market value or suitability for
a particular investor. When a security has received a rating from more than one
service, each rating is evaluated independently. Ratings are based on current
information furnished by the issuer or obtained by the rating services from
other sources that they consider reliable. Ratings may be changed, suspended or
withdrawn as a result of changes in or unavailability of such information, or
for other reasons.
Standard & Poor's Ratings Services. The following summarizes the highest four
ratings used by Standard & Poor's Ratings Services ("S&P") for bonds which are
deemed to be "Investment-Grade Debt Securities" by the Advisor:
AAA - This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity of the obligor to meet its
financial commitment on the obligation.
AA - Debt rated AA differs from AAA issues only in a small degree. The
obligor's capacity to meet its financial commitment on the obligation is
very strong.
A - Debt rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in
higher-rated categories. However, the obligor's capacity to meet its
financial commitment on the obligation is still strong.
BBB - Debt rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
Bonds rated BB, B, CCC, CC and C are not considered by the Advisor to be
"Investment-Grade Debt Securities" and are regarded, on balance, as having
significant speculative characteristics with respect to the obligor's capacity
to meet its financial commitment on the obligation. BB indicates the lowest
degree of speculation and C the highest degree of speculation. While such bonds
may have some quality and protective characteristics, these may be outweighed by
large uncertainties or major risk exposures to adverse conditions.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.
The rating SP-1 is the highest rating assigned by S&P to short term notes and
indicates strong capacity to pay principal and interest. An issue determined to
possess a very strong capacity to pay debt service is given a plus (+)
designation. The rating SP-2 indicates a satisfactory capacity to pay principal
and interest, with some vulnerability to adverse financial and economic changes
over the term of the notes.
Moody's Investors Service, Inc. The following summarizes the highest four
ratings used by Moody's Investors Service, Inc. ("Moody's") for bonds which are
deemed to be "Investment-Grade Debt Securities" by the Advisor:
Aaa - Bonds that 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 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 that 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 - Debt which is rated A possesses many favorable investment attributes
and is to be considered as an upper medium grade obligation. 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 - Debt which is rated Baa is considered as a medium grade obligation,
i.e., it is 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 debt lacks outstanding
investment characteristics and in fact has speculative characteristics as
well.
Moody's applies numerical modifiers (l, 2 and 3) with respect to bonds rated Aa,
A and Baa. The modifier 1 indicates that the bond being rated ranks in the
higher end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the bond ranks in the lower end of
its generic rating category. Bonds which are rated Ba, B, Caa, Ca or C by
Moody's are not considered "Investment-Grade Debt Securities" by the Advisor.
Bonds rated Ba are judged to have speculative elements because their future
cannot be considered as well assured. Uncertainty of position characterizes
bonds in this class, because the protection of interest and principal payments
often may be very moderate and not well safeguarded.
Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the security over any long period for time may be small. Bonds
which are rated Caa are of poor standing. Such securities may be in default or
there may be present elements of danger with respect to principal or interest.
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
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.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or supporting institutions) are considered to have a
superior ability for repayment of short-term promissory obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structures with
moderate reliance on debt and ample asset protection; broad margins in earning
coverage of fixed financial charges and high internal cash generation; and well
established access to a range of financial markets and assured sources of
alternative liquidity. Issuers rated Prime-2 (or supporting institutions) are
considered to have a strong ability for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics of
issuers rated Prime-1 but to a lesser degree. Earnings' trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriated may be more affected by external
conditions. Ample alternate liquidity is maintained.
The following summarizes the two highest ratings used by Moody's for short-term
notes and variable rate demand obligations:
MIG-l; VMIG-l - Obligations bearing these designations are of the best
quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
MIG-2; VMIG-2 - Obligations bearing these designations are of a high
quality with ample margins of protection.
Duff & Phelps Credit Rating Co. The following summarizes the highest four
ratings used by Duff & Phelps Credit Rating Co. ("D&P") for bonds which are
deemed to be "Investment-Grade Debt Securities" by the Advisor:
AAA - Bonds that are rated AAA are of the highest credit quality. The
risk factors are considered to be negligible, being only slightly more
than for risk-free U.S. Treasury debt.
AA - Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to
time because of economic conditions.
A - Bonds rated A have average but adequate protection factors. The risk
factors are more variable and greater in periods of economic stress.
BBB - Bonds rated BBB have below-average protection factors but are still
considered sufficient for prudent investment. There is considerable
variability in risk during economic cycles.
Bonds rated BB, B and CCC by D&P are not considered "Investment-Grade Debt
Securities" and are regarded, on balance, as predominantly speculative with
respect to the issuer's ability to pay interest and make principal payments in
accordance with the terms of the obligations. BB indicates the lowest degree of
speculation and CCC the highest degree of speculation.
The rating Duff l is the highest rating assigned by D&P for short-term debt,
including commercial paper. D&P employs three designations, Duff l+, Duff 1 and
Duff 1- within the highest rating category. Duff l+ indicates highest certainty
of timely payment. Short-term liquidity, including internal operating factors
and/or access to alternative sources of funds, is judged to be "outstanding, and
safety is just below risk-free U.S. Treasury short-term obligations." Duff 1
indicates very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
considered to be minor. Duff 1- indicates high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small.
Fitch Investors Service, Inc. The following summarizes the highest four ratings
used by Fitch Investors Service, Inc. ("Fitch") for bonds which are deemed to be
"Investment-Grade Debt Securities" by the Advisor:
AAA - Bonds are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA - Bonds are considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Because
bonds rated in the AAA and AA categories are not significantly vulnerable
to foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
A - Bonds that are rated A are considered to be investment grade and of
high credit quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more vulnerable to
adverse changes in economic conditions and circumstances than bonds with
higher ratings.
BBB - Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and
repay principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have adverse
impact on these bonds, and therefore impair timely payment. The
likelihood that the ratings of these bonds will fall below investment
grade is higher than for bonds with higher ratings.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within a rating category. A "ratings outlook" is used to describe the
most likely direction of any rating change over the intermediate term. It is
described as "Positive" or "Negative". The absence of a designation indicates a
stable outlook.
Bonds rated BB, B and CCC by Fitch are not considered "Investment-Grade Debt
Securities" and are regarded, on balance, as predominantly speculative with
respect to the issuer's ability to pay interest and make principal payments in
accordance with the terms of the obligations. BB indicates the lowest degree of
speculation and CCC the highest degree of speculation.
The following summarizes the two highest ratings used by Fitch for short-term
notes, municipal notes, variable rate demand instruments and commercial paper:
F-1+ - Instruments assigned this rating are regarded as having the
strongest degree of assurance for timely payment.
F-1 - Instruments assigned this rating reflect an assurance of timely
payment only slightly less in degree than issues rated F-1+.
The term symbol "LOC" indicates that the rating is based on a letter of credit
issued by a commercial bank.
<PAGE>
PART C
SHANKLIN INVESTMENT TRUST
FORM N-1A
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
a) Financial Statements: To be filed by amendment.
b) Exhibits:
(1) Declaration of Trust of Registrant - Enclosed Exhibit 1
(2) By-Laws - Enclosed Exhibit 2
(3) Not applicable
(4) Not applicable - the series of the Registrant do not issue
certificates (see Exhibit 1 and 2 for the relevant portions of the
Declaration of Trust and By-Laws)
(5) Form of Investment Advisory Agreement between the Registrant and
Shanklin Capital Management, Inc., as Advisor - Enclosed Exhibit 5
(6) Form of Distribution Agreement between the Registrant and Capital
Investment Group, Inc., as distributor - Enclosed Exhibit 6
(7) Not applicable
(8) Form of Custody Agreement between the Registrant and First Union
National Bank of North Carolina, as Custodian - Enclosed Exhibit 8
(9) (A) Form of Fund Accounting and Compliance Administration Agreement
Between the Registrant and The Nottingham Company. - Enclosed
Exhibit 9A
(B) Form of Dividend Disbursing and Transfer Agent Agreement
between the Registrant and NC Shareholder Services, Inc. -
Enclosed Exhibit 9B
(10) Opinion and Consent of Counsel - To be filed by amendment.
(11) Consent of Auditors - To be filed by amendment.
(12) Not Applicable
(13) Form of Initial Share Purchase Agreement - Enclosed Exhibit 13
(14) Not applicable
(15) Form of Distribution Plan- Not applicable
(16) Computation of Performance - To be filed by amendment
(17) Financial Data Schedule - To be filed by amendment
(18) Not applicable
(19) Copies of Powers of Attorney - To be filed by amendment
ITEM 25. Persons Controlled by or Under Common Control with Registrant
Not applicable
ITEM 26. Number of Holders of Securities
Number of
Title of Class Record Holders
SCM Strategic Growth Fund............... ................1
ITEM 27. Indemnification
The Declaration of Trust and Bylaws of the Registrant contain
provisions covering indemnification of the officers and trustees.
The following are summaries of the applicable provisions.
The Registrant's Declaration of Trust provides that every person
who is or has been a trustee, officer, employee or agent of the
Registrant and every person who serves at the trustees' request as
director, officer, employee or agent of another enterprise will be
indemnified by the Registrant to the fullest extent permitted by
law against all liabilities and against all expenses reasonably
incurred or paid by him in connection with any debt, claim, action,
demand, suit, proceeding, judgment, decree, liability or obligation
of any kind in which he becomes involved as a party or otherwise or
is threatened by virtue of his being or having been a trustee,
officer, employee or agent of the Registrant or of another
enterprise at the request of the Registrant and against amounts
paid or incurred by him in the compromise or settlement thereof.
No indemnification will be provided to a trustee or officer: (i)
against any liability to the Registrant or its shareholders by
reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his
office ("disabling conduct"); (ii) with respect to any matter as to
which he shall, by the court or other body by or before which the
proceeding was brought or engaged, have been finally adjudicated to
be liable by reason of disabling conduct; (iii) in the absence of a
final adjudication on the merits that such trustee or officer did
not engage in disabling conduct, unless a reasonable determination,
based upon a review of the facts that the person to be indemnified
is not liable by reason of such conduct, is made by vote of a
majority of a quorum of the trustees who are neither interested
persons nor parties to the proceedings, or by independent legal
counsel, in a written opinion.
The rights of indemnification may be insured against by policies
maintained by the Registrant, will be severable, will not affect
any other rights to which any trustee, officer, employee or agent
may now or hereafter be entitled, will continue as to a person who
has ceased to be such trustee, officer, employee, or agent and will
inure to the benefit of the heirs, executors and administrators of
such a person; provided, however, that no person may satisfy any
right of indemnity or reimbursement except out of the property of
the Registrant, and no other person will be personally liable to
provide indemnity or reimbursement (except an insurer or surety or
person otherwise bound by contract).
Article XIV of the Registrant's Bylaws provides that the Registrant
will indemnify each trustee and officer to the full extent
permitted by applicable federal, state and local statutes, rules
and regulations and the Declaration of Trust, as amended from time
to time. With respect to a proceeding against a trustee or officer
brought by or on behalf of the Registrant to obtain a judgment or
decree in its favor, the Registrant will provide the officer or
trustee with the same indemnification, after the same
determination, as it is required to provide with respect to a
proceeding not brought by or on behalf of the Registrant.
This indemnification will be provided with respect to an
action, suit proceeding arising from an act or omission or alleged
act or omission, whether occurring before or after the adoption of
Article XIV of the Registrant's Bylaws.
ITEM 28. Business and other Connections of Investment Advisor
See the Statement of Additional Information section entitled
"Management" of the Fund and the Investment Advisor's Form ADV
filed with the Commission for the activities and affiliations of
the officers and directors of the Investment Advisor of the
Registrant. Except as so provided, to the knowledge of Registrant,
none of the directors or executive officers of the Investment
Advisor is or has been at any time during the past two fiscal years
engaged in any other business, profession, vocation or employment
of a substantial nature. The Investment Advisor currently serves as
investment advisor to numerous institutional and individual
clients.
<PAGE>
ITEM 29. Principal Underwriter
(a) Capital Investment Group., Inc. is underwriter and distributor
for Fund,
Name and Principal Position(s) and Offices Position(s) and Offices
Business Address with Underwriter with Registrant
Richard K. Bryant President None
17 Glenwood Ave.
Raleigh, NC
E.O. Edgerton, Jr. Vice President None
17 Glenwood Ave.
Raleigh, NC
ITEM 30. Location of Accounts and Records
All account books and records not normally held by First Union
National Bank of North Carolina, the Custodian to the Registrant, are
held by the Registrant, in the offices of The Nottingham Company,
Fund Accountant and Administrator to the Registrant, North Carolina
Shareholder Services, Transfer Agent to the Registrant,. or by
Shanklin Capital Management, Inc., the Advisor to the Registrant.
The address of The Nottingham Company is 105 North Washington Street,
Post Office Drawer 69, Rocky Mount, North Carolina 27802-0069. The
address of North Carolina Shareholder Services is 107 North
Washington Street, Post Office Box 4365, Rocky Mount, North Carolina
27803-0365. The address of Shankliln Capital Management, Inc. is 1420
Osborne Street, Suite B-16 Humboldt, Tennessee 38343. The address of
First Union National Bank of North Carolina is Two First Union
Center, Charlotte, North Carolina 28288-1151.
ITEM 31. Management Services
Not Applicable
ITEM 32. Undertakings
The Registrant hereby undertakes to file a post-effective amendment
to this Registration Statement, containing financial statements that
need not be certified, within four to six months following the
effective date of this Registration Statement.
The Registrant hereby undertakes to comply with Section 16(c) of the
Investment Company Act of 1940.
The Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report to
shareholders upon request and without charge.
NOTICE
A copy of the Declaration of Trust for Shanklin Investment Trust is
on file with the Secretary of State of The Commonwealth of Massachusetts and
notice is hereby given that this Registration Statement has been executed on
behalf of the Trust by an officer of the Trust as an officer and by its Trustee
as trustee and not individually and the obligations of or arising out of this
Registrations Statement are not binding upon any of the Trustees, officers, or
Shareholders individually but are binding only upon the assets and property of
the Trust.
<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, thereto duly authorized, in the
City of Rocky Mount, State of North Carolina on the 9th day of April 1998.
SHANKLIN INVESTMENT TRUST
By: /s/ Julian G. Winters
________________________
Julian G. Winters
Trustee
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.
/s/ Julian G. Winters
__________________________
Julian G. Winters, Trustee
Dated: April 9, 1998
<PAGE>
SHANKLIN INVESTMENT TRUST
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
EXHIBIT 1 DECLARATION OF TRUST
EXHIBIT 2 BY-LAWS
EXHIBIT 5 INVESTMENT ADVISORY AGREEMENT
EXHIBIT 6 DISTRIBUTION AGREEMENT
EXHIBIT 8 CUSTODY AGREEMENT
EXHIBIT 9A FUND ACCOUNTING AND COMPLIANCE ADMINISTRATION AGREEMENT
EXHIBIT 9B DIVIDEND DISBURSING AND TRANSFER AGENT AGREEMENT
EXHIBIT 13 INITIAL SHARE PURCHASE AGREEMENT
EXHIBIT 1
DECLARATION OF TRUST
OF
SHANKLIN INVESTMENT TRUST
THIS DECLARATION OF TRUST of SHANKLIN INVESTMENT TRUST is made as of
the 9th day of April 1998 by the parties signatory hereto, as trustees (such
persons, so long as they shall continue in office in accordance with the terms
of this Declaration of Trust, and all other persons who at the time in question
have been duly elected or appointed as trustees in accordance with the
provisions of this Declaration of Trust and are then in office, being
hereinafter called the "Trustees").
WHEREAS, the Trustees hereby established a trust fund under the laws of
Massachusetts for the investment and reinvestment of funds contributed thereto
under this Declaration of Trust;
NOW, THEREFORE, the Trustees hereby declare that all money and property
contributed to the trust fund under said Declaration of Trust shall be held and
managed under this Declaration of Trust as herein set forth below.
1 ARTICLE I
1.1 The Trust
1.2 The name of the trust created hereby (the "Trust", which term shall be
deemed to include any Series of the Trust when the context requires) shall
be "SHANKLIN INVESTMENT TRUST", and so far as may be practicable the
Trustees shall conduct the activities of the Trust, execute all documents
and sue or be sued under that name, which name (and the word "Trust"
wherever hereinafter used) shall refer to the Trustees as Trustees, and
not individually, and shall not refer to the officers, agents, employees
or Shareholders of the Trust or any Series thereof. Each Series of the
Trust that shall be established and designated by the Trustees pursuant to
Section 6.2 shall conduct its activities under such name as the Trustees
shall determine and set forth in the instrument establishing such Series.
Should the Trustees determine that the use of the name of the Trust or any
Series is not advisable, they may select such other name for the Trust or
such Series as they deem proper, and the Trust or Series may conduct its
activities under such other name. Any name change shall be effective upon
the execution by a majority of the then Trustees (or by an officer of the
Trust pursuant to the vote of a majority of the then Trustees) of an
instrument setting forth the new name. Any such instrument shall have the
status of an amendment to this Declaration.
1.3 Definitions. As used in this Declaration, the following terms have the
following meanings:
1.3.1 The terms "Affiliated Person", "Assignment", "Commission", "Interested
Person", "Investment Advisor", "Majority Shareholder" (the 67% or 50%
requirement of the third sentence of Section 2(a) (42) of the 1940 Act,
whichever may be applicable) and "Principal Underwriter" shall have the
meanings given them in the 1940 Act.
1.3.2 "By-Laws" shall mean the By-Laws of the Trust as amended from time to
time.
1.3.3 "Class" shall mean the separate classes into which the Shares of any
Series may be divided as provided in Section 6.2.
1.3.4 "Commission" shall mean the United States Securities and Exchange
Commission.
1.3.5 "Declaration" shall mean this Declaration of Trust as amended from time
to time. References in this Declaration to "Declaration", "hereof",
"herein" and "hereunder" shall be deemed to refer to the Declaration
rather than the article or section in which such words appear.
1.3.6 "Net Asset Value" shall mean the net asset value of each Series or Class
of the Trust determined in the manner provided in Article IX, Section 9.1
hereof.
1.3.7 "Person" shall mean and include individuals, corporations, partnerships,
trusts, associations, limited liability companies, joint ventures and
other entities, whether or not legal entities, and governments and
agencies and political subdivisions thereof.
1.3.8 "Prospectus" shall mean the currently effective Prospectus of any Series
or Class of the Trust under the Securities Act of 1933, as amended.
1.3.9 "Series" shall mean the separate series that may be established and
designated pursuant to Section 6.2.
1.3.10 "Shareholders" shall mean as of any particular time all holders of record
of outstanding Shares at such time.
1.3.11 "Shares" shall mean the transferable units of interest into which the
beneficial interest in any Series or Class of the Trust shall be divided
from time to time and includes fractions of Shares as well as whole
Shares. All reference to Shares shall be deemed to be Shares of any or
all Series or Classes as the context may require.
1.3.12 "Trust" shall have the meaning set forth in Article I, Section 1.1
hereof.
1.3.13 "Trustees" shall mean the signatories to this Declaration of Trust, so
long as they shall continue in office in accordance with the terms
hereof, and all other persons who at the time in question have been duly
elected or appointed and have qualified as Trustees in accordance with
the provisions hereof and are then in office, and reference in this
Declaration to a Trustee or Trustees shall refer to such person or
persons in their capacity as Trustees hereunder.
1.3.14 "Trust Property" shall mean as of any particular time any and all
property, real or personal, tangible or intangible, which at such time is
owned or held by or for the account of the Trust, any Series thereof or
the Trustees.
1.3.15 The "1940 Act" shall mean the Investment Company Act of 1940 and the
rules and regulations promulgated thereunder, as amended from time to
time including exemptions granted therefrom.
1.4 The Trust is a Massachusetts business trust of the type described in
Section 1 of Chapter 102 of the General Law of the Commonwealth of
Massachusetts formed for the purpose of acting as a management investment
company under the 1940 Act; provided, however, that the Trust may exercise
all powers that are ordinarily exercised by or permissible for
Massachusetts business trusts.
2 ARTICLE II
2.1 Trustees
2.2 Management of the Trust. The Trustees shall manage the business and
affairs of the Trust, and they shall have all powers necessary and
desirable to carry out that responsibility. Each Trustee named herein (or
his successor appointed hereunder) shall serve until the election of
Trustees at the first meeting of Shareholders of the Trust called for the
purpose of electing Trustees after the date hereof, and until his
successor is elected and qualified, or until he sooner dies, resigns or is
removed.
2.3 Election of Trustees. Shareholders of the Trust shall elect Trustees at
Shareholder meetings called for that purpose. The Trustees need not be
elected annually or at regular intervals. Except as provided in Section
10.2, the Trustees shall not be required to call a meeting of Shareholders
for the purpose of electing Trustees; provided, however, that if at any
time, other than the time preceding the first meeting of Shareholders for
the purpose of electing Trustees, less than a majority of the Trustees
holding office at that time were elected by the Shareholders, a meeting of
the Shareholders for the purpose of electing Trustees shall be held
promptly and in any event within 60 days (unless the Commission shall by
order extend such period). No election of a Trustee shall become
effective, however, until the person elected shall have accepted such
election and agreed in writing to be bound by the terms of this
Declaration. If re-elected, a Trustee may succeed himself. Trustees need
not own Shares. During any period in which the Trust may act as
distributor of the securities of which it is the issuer, the selection and
nomination of Trustees who are not interested persons shall be made by
disinterested Trustees in accordance with the 1940 Act.
2.4 Term of Office of Trustees. Each Trustee shall hold office during the
lifetime of this Trust and until its termination as hereinafter provided
or, if sooner, until the next meeting of Shareholders called for the
purpose of electing Trustees and the election and qualification of his
successor; except (a) that any Trustee may resign his trust by written
instrument signed by him and delivered to the other Trustees, 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 become mentally or physically incapacitated may be retired by
written instrument signed by a majority of the other Trustees, specifying
the date of his retirement; and (d) a Trustee may be removed at any
meeting of Shareholders of the Trust by a vote of two-thirds of the
outstanding Shares.
2.5 Termination of Service and Appointment of Trustees. In case of death,
resignation, retirement, removal or mental or physical incapacity of any
of the Trustees, or in case a vacancy shall, by reason of an increase in
number, or for any other reason, exist, the remaining Trustees shall fill
such vacancy by appointing for the remaining term of the predecessor
Trustee such other person as they in their discretion shall see fit. Such
appointment shall be effective upon the signing of a written instrument by
a majority of the Trustees in office and the written acceptance to this
Declaration by the appointee. 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 and the written acceptance
of this Declaration by the appointee. As soon as any Trustee so appointed
shall have accepted this Trust, the trust estate shall vest in the new
Trustee or Trustees, together with the continuing Trustees, without any
further act or conveyance, and he shall be deemed a Trustee hereunder. Any
appointment authorized by this Section 2.4 is subject to the provisions of
Section 16(a) of the 1940 Act.
2.6 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 of the Trustees personally exercise the power hereunder except as
herein otherwise expressly provided.
2.7 Number of Trustees. The Trustees themselves shall determine the number of
Trustees serving hereunder at any time.
2.8 Vacancy in Board of Trustees. Whenever a vacancy on the Board of Trustees
shall occur and until such vacancy is filled, or while any Trustee is
physically or mentally incapacitated by reason of disease or otherwise,
the other Trustees, regardless of their number, shall have all the powers
granted to the Trustees and shall discharge all the duties imposed upon
them by this Declaration. The certificate of the other Trustees of such
vacancy or incapacity shall be conclusive.
2.9 Effect of Death, Resignation etc. of a Trustee. The death, resignation,
retirement, removal, or mental or physical incapacity of the Trustees, or
any one of them, shall not operate to annul the Trust or to revoke any
existing agency created pursuant to the terms of this Declaration.
2.10 Ownership of Trust. The assets of the Trust shall be held separate and
apart from any assets now or hereafter held in any capacity other than as
Trustee hereunder by the Trustees or by any successor Trustees. All of the
assets of the Trust shall at all times be considered as vested in the
Trustees. No Shareholder shall be deemed to have a severable ownership in
any individual asset of the Trust or any right of partition or possession
thereof, but each Shareholder shall have a proportionate undivided
beneficial interest in the Trust.
2.11 Meetings. Meetings of the Trustees shall be held from time to time upon
the call of the Chairman, the Secretary, such other officers as may be
thereunto authorized by the By-Laws or vote of the Trustees, or any two
Trustees, or pursuant to a vote of the Trustees adopted at a duly
constituted meeting of the Trustees. Regular meetings of the Trustees may
be held without call or notice at a time and place fixed by the By-Laws or
by resolution of the Trustees. Notice of any other meeting shall be mailed
or otherwise given not less than 48 hours before the meeting but may be
waived in person or in writing by any Trustee either before or after such
meeting. The attendance of a Trustee at a meeting shall constitute a
waiver of notice of such meeting except where a Trustee attends a meeting
for the express purpose of objecting to the transaction of any business on
the ground that the meeting has not been lawfully called or convened. The
Trustees may act with or without a meeting. A quorum for all meetings of
the Trustees shall be a majority of the Trustees. Unless provided
otherwise in this Declaration, any action of the Trustees may be taken at
a meeting by vote of a majority of the Trustees present (a quorum being
present) or without a meeting by written consents of a majority of the
Trustees.
2.11.1 Any committee of the Trustees, including an executive committee, if any,
may act with or without a meeting. A quorum for all meetings of any such
committee shall be a majority of the members thereof. Unless provided
otherwise in this Declaration, any action of any such committee may be
taken at a meeting by vote of a majority of the members present (a quorum
being present) or without a meeting by written consent of a majority of
the members.
2.11.2 With respect to actions of the Trustees and any committee of the
Trustees, Trustees who are Interested Persons of the Trust within the
meaning of Section 1.2 hereof or otherwise interested in any action to be
taken may be counted for quorum purposes under this Section and shall be
entitled to vote to the extent permitted by the 1940 Act.
2.11.3 All or any one or more Trustees may participate in a meeting of the
Trustees or any committee thereof by means of a conference telephone or
similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a
meeting pursuant to such communications systems shall constitute presence
in person at such meeting.
2.12 Officers. The Trustees shall elect such officers or agents, who shall have
such powers, duties, and responsibilities as the Trustees may deem to be
advisable, and as they shall specify by resolution or in the By-Laws.
Except as may be provided in the By-Laws, any officer or agent elected by
the Trustees may be removed at any time with or without cause. The same
individual may hold any two or more offices.
2.13 By-Laws. The Trustees may adopt, and from time to time amend or repeal,
By-Laws for the conduct of the business of the Trust.
2.14 Other Activities of Trustees. Trustees may also serve as officers,
employees, and agents of the Trust, and may hold multiple offices within
the Trust; and may hold any office or be employed by any other business
entity, and engage in any other business activity.
3 ARTICLE III
3.1 Powers of Trustees
3.2 General. 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 not be bound or limited by present or future laws or
customs with regard to investment by trustees or fiduciaries. The
enumeration of any specific power herein shall not be construed as
limiting the aforesaid powers.
3.3 Investments. The Trustees shall have power to:
3.3.1 conduct, operate and carry on the business of an investment company,
including any activity incidental to the business of an investment
company or conducive to or expedient for the benefit or protection of the
Trust or its Shareholders;
3.3.2 subscribe for, invest in, reinvest in, purchase or otherwise acquire,
hold, pledge, sell, assign, transfer, exchange, lend, mortgage,
hypothecate, purchase or sell options on, lease, distribute or otherwise
deal in or dispose of any or all of the assets of the Trust, including,
but not limited to, cash, negotiable or non-negotiable instruments,
obligations, evidences of indebtedness, certificates of deposit or
indebtedness, commercial paper, repurchase agreements, reverse repurchase
agreements, equity securities, option contracts, futures contracts,
indices of securities and other securities, including, without
limitation, those issued, guaranteed or sponsored by any state, territory
or possession of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities, or by the United
States Government or its agencies or instrumentalities, or international
instrumentalities, or by any bank, savings institution, corporation or
other business entity organized under the laws of the United States or
organized under foreign laws; and to exercise any and all rights, powers
and privileges of ownership or interest in respect of any and all such
investments of every kind and description, including, without limitation,
the right to vote, execute and deliver proxies or powers of attorney,
consent and otherwise act with respect thereto, with power to designate
one or more persons, firms, associations or corporations to exercise any
of said rights, powers and privileges in respect of any of said
instruments;
3.3.3 hold any security or property in a form not indicating any trust, whether
in bearer, unregistered or other negotiable form, or in the name of the
Trustees or of the Trust or in the name of a custodian, sub-custodian or
other depositary or a nominee or nominees or otherwise;
3.3.4 consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer, any security or
property of which is or was held in the Trust; to consent to any
contract, lease, mortgage, purchase or sale of property by such
corporation or issuer, and to pay calls or subscriptions with respect to
any security held in the Trust;
3.3.5 join with other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to
deposit any security with, or transfer any security to, any such
committee, depositary or trustee, and to delegate to them such power and
authority with relation to any security (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to agree to pay, and
to pay, such portion of the expenses and compensation of such committee,
depositary or trustee as the Trustees shall deem proper;
3.3.6 act as distributor of Shares, and as underwriter of, or broker or dealer
in, securities or other property.
3.3.7 The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust or any Series or Class, nor
shall the Trustees be limited by any law limiting the investments that
may be made by fiduciaries.
3.4 Legal Title. Legal title to all the Trust Property shall be vested in the
Trustees as joint tenants except that the Trustees shall have power to
cause legal title to any Trust Property to be held by or in the name of
one or more of the Trustees, or in the name of the Trust or any Series
thereof, or in the name of any other Person as nominee, on such terms as
the Trustees may determine, provided that the interest therein of the
Trust or any Series thereof is appropriately protected. The right, title
and interest of the Trustees in the Trust Property shall vest
automatically in each person who may hereafter become a Trustee upon his
due election and qualification. Upon the resignation, removal or death of
a Trustee he shall automatically cease to have any right, title or
interest in any of the Trust Property, and the right, title and interest
of such Trustee in the Trust Property shall vest automatically in the
remaining Trustees. Such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered.
3.5 Issuance and Repurchase of Securities. The Trustees shall have the power
to issue, sell, repurchase, redeem, retire, cancel, acquire, hold, resell,
dispose of, transfer, and otherwise deal in, Shares, including shares in
fractional denominations, and, subject to the more detailed provisions set
forth in Articles VIII and IX, to apply to any such repurchase,
redemption, retirement, cancellation or acquisition of Shares any funds or
property of the applicable Series of the Trust.
3.6 Borrow Money. The Trustees shall have power to borrow money or otherwise
obtain credit and to secure the same by mortgaging, pledging or otherwise
subjecting as security the assets of the Trust or any Series thereof,
including the lending of portfolio securities, and to endorse, guarantee,
or undertake the performance of any obligation, contract or engagement of
any other person, firm, association or corporation.
3.7 Delegation; Committees. The Trustees shall have power, consistent with
their continuing exclusive authority over the management of the Trust and
the Trust Property, to delegate from time to time to such of their number
or to officers, employees or agents of the Trust the doing of such things
and the execution of such instruments either in the name of the Trust or
the names of the Trustees or otherwise as the Trustees may deem expedient.
The Trustees may appoint committees consisting in each case of such number
of Trustees (but not less than the minimum required by any applicable law)
and having and exercising, to the extent permitted by law, such powers as
the Trustees may determine in the resolution appointing any such
committees. The Trustees shall have power to appoint members and alternate
members of any such committee, and, to the extent permitted by law, at any
time to change the members, alternate members, and powers of any such
committee.
3.8 Collection and Payment. The Trustees shall have power to collect all
property due to the Trust or any Series thereof; to pay all claims,
including taxes, against the Trust Property; to prosecute, defend,
compromise or abandon any claims relating to the Trust Property; to
foreclose any security interest securing any obligations, by virtue of
which any property is owed to the Trust or any Series thereof; and to
enter into releases, agreements and other instruments.
3.9 Expenses. The Trustees shall have power to incur and pay any expenses
which in the opinion of the Trustees are necessary or incidental to carry
out any of the purposes of this Declaration, and to pay reasonable
compensation from the funds of the Trust to themselves as Trustees. The
Trustees shall fix the compensation of all officers, agents, employees and
Trustees. The Trustees may pay themselves such compensation for special
services, including legal, underwriting, syndicating and brokerage
services, as they in good faith may deem reasonable and reimbursement for
expenses reasonably incurred by themselves on behalf of the Trust.
3.10 Miscellaneous Powers. The Trustees shall have the power to: (a) employ or
contract with such Persons as the Trustees may deem desirable for the
transaction of the business of the Trust or any Series or Class thereof;
(b) enter into joint ventures, partnerships and any other combinations or
associations; (c) purchase, and pay for out of Trust Property, insurance
policies insuring the Shareholders, Trustees, officers, employees, agents,
investment advisors, distributors, selected dealers or independent
contractors of the Trust or any Series or Class thereof against all claims
arising by reason of holding any such position or by reason of any action
taken or omitted by any such Person in such capacity, whether or not
constituting negligence, or whether or not the Trust would have the power
to indemnify such Person against such liability; (d) establish pension,
profit-sharing, share purchase, and other retirement, incentive and
benefit plans for any Trustees, officers, employees and agents of the
Trust; (e) make donations, irrespective of benefit to the Trust, for
charitable, religious, educational, scientific, civic or similar purposes;
(f) guarantee indebtedness or contractual obligations of others; (g)
determine and change the fiscal year of the Trust and the method in which
its accounts shall be kept; (h) act as distributor of Shares and as
underwriter of, or broker or dealer in, securities or other property; (i)
determine in accordance with generally accepted accounting principles and
practices what constitutes net profits or net earnings and to determine
what accounting periods shall be used by the Trust for any purpose,
whether annual or any other period, including daily; (j) remove officers
and terminate agents as the Trustees deem appropriate; (k) adopt a seal
for the Trust but the absence of such seal shall not impair the validity
of any instrument executed on behalf of the Trust; and (l) engage in any
other lawful activity in which trusts organized under Massachusetts
General Laws, Chapter 182, or any successor statute thereto, may engage.
3.11 Further Powers. The Trustees shall have power to conduct the business of
the Trust or any Series thereof and carry on its operations in any and all
of its branches and maintain offices both within and without the
Commonwealth of Massachusetts, in any and all states of the United States
of America, in the District of Columbia, and in any and all commonwealths,
territories, dependencies, colonies, possessions, agencies or
instrumentalities of the United States of America and of foreign
governments, 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 or any Series or Class thereof although
such things are not herein specifically mentioned. Any determination as to
what is in the interests of the Trust or any Series or Class thereof made
by the Trustees in good faith shall be conclusive. In construing the
provisions of this Declaration, the presumption shall be in favor of a
grant of power to the Trustees. The Trustees will not be required to
obtain any court order to deal with the Trust Property. No Trustee shall
be required to give any bond or other security for the performance of any
of his duties hereunder.
3.12 Ownership of Shares by Trustees, Officers, and Agents. Any Trustee,
officer or other agent of the Trust may acquire, own and dispose of Shares
to the same extent as if he 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 he is
interested, subject only to the general limitations herein contained as to
the sale and purchase of such Shares; and all subject to any restrictions
which may be contained in the By-Laws.
4 ARTICLE IV
4.1 Advisory, Service, Management and Distribution Arrangements
4.2 Advisory, Service, and Management Arrangements. The Trustees may in their
discretion from time to time enter into advisory, service, administration
or management contracts whereby the other party to such contract shall
undertake to furnish the Trustees such advisory, administrative,
management or other services, with respect to one or more Series or
Classes as the Trustees shall from time to time consider desirable and all
upon such terms and conditions as the Trustees may in their discretion
determine, subject to Majority Shareholder Vote to the extent required by
the 1940 Act. The investment advisor may enter into a sub-investment
advisory contract to receive investment advice from a sub-investment
advisor upon such terms and conditions and for such compensation as the
Trustees may in their discretion approve, subject to Majority Shareholder
Vote to the extent required by the 1940 Act. Notwithstanding any
provisions of this Declaration, the Trustees may authorize any advisor,
sub-investment advisor, administrator or manager (subject to such general
or specific instructions as the Trustees may from time to time adopt) to
effect purchases, sales, loans or exchanges of portfolio securities of any
Series of the Trust on behalf of the Trustees or may authorize any
officer, employee or Trustee to effect such purchases, sales, loans or
exchanges pursuant to recommendations of any such advisor, sub-investment
advisor, administrator or manager (and all without further action by the
Trustees). Any such purchases, sales, loans and exchanges shall be deemed
to have been authorized by all of the Trustees.
4.3 Distribution Arrangements. The Trustees may in their discretion from time
to time enter into a contract providing for the sale of the Shares of the
Trust or any Series or Class of the Trust to net the Trust not less than
the par value per share, whereby the Trust may either agree to sell the
Shares to the other party to the contract or appoint such other party its
sales agent for such Shares. In either case, the contract shall be on such
terms and conditions as the Trustees may in their discretion determine not
inconsistent with the provisions of this Article IV or the By-Laws; and
such contract may also provide for the repurchase or sale of Shares by
such other party as principal or as agent of the Trust and may provide
that such other party may enter into selected dealer agreements with
registered securities dealers to further the purpose of the distribution
or repurchase of the Shares.
4.4 Parties to Contract. Any contract of the character described in Sections
4.1 and 4.2 of this Article IV or in Article VII hereof may be entered
into with any corporation, firm, company, trust or association, although
one or more of the Trustees or officers of the Trust may be an officer,
director, trustee, shareholder, manager, or member of such other party to
the contract, and no such contract shall be invalidated or rendered
voidable by reason of the existence of any such relationship, nor shall
any person holding such relationship be liable merely by reason of such
relationship for any loss or expense to the Trust under or by reason of
said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was
reasonable and fair and not inconsistent with the provisions of this
Article IV or the By-Laws. The same person (including a firm, corporation,
trust, company, or association) may be the other party to contracts
entered into pursuant to Sections 4.1 and 4.2 above or Article VII, 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 4.3.
4.5 Provisions and Amendments. Any contract entered into pursuant to Sections
4.1 and 4.2 of this Article IV shall be consistent with and subject to the
requirements of the 1940 Act with respect to its continuance in effect,
its termination, and the method of authorization and approval of such
contract or renewal thereof, and any amendment to any contract entered
into pursuant to Section 4.1 shall be assented to by a Majority
Shareholder Vote of the applicable Series or Class to the extent required
by the 1940 Act.
5 ARTICLE V
5.1 Limitations of Liability of Shareholders, Trustees and Others
5.2 Limitation of Personal Liability and Indemnification of Shareholders. The
Trustees, officers, employees or agents of the Trust 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 agree to pay by way of subscription to any
Shares or otherwise.
5.2.1 No Shareholder or former Shareholder of the Trust shall be liable solely
by reason of his being or having been a Shareholder for any debt, claim,
action, demand, suit, proceeding, judgment, decree, liability or
obligation of any kind, against, or with respect to, the Trust arising
out of any action taken or omitted for or on behalf of the Trust, and the
Trust shall be solely liable therefor and resort shall be had solely to
the Trust Property for the payment or performance thereof.
5.2.2 Each Shareholder or former Shareholder of the Trust (or their heirs,
executors, administrators or other legal representatives or, in case of a
corporate entity, its corporate or general successor) shall be entitled
to indemnity and reimbursement out of the Trust Property to the full
extent of such liability and the costs of any litigation or other
proceedings in which such liability shall have been determined,
including, without limitation, the fees and disbursements of counsel if,
contrary to the provisions hereof, such Shareholder or former Shareholder
of the Trust shall be held to personal liability.
5.3 Limitation of Personal Liability of Trustees, Officers, Employees or
Agents of the Trust. No Trustee, officer, employee or agent of the Trust
shall have the power to bind any other Trustee, officer, employee or agent
of the Trust personally. The Trustees, officers, employees or agents of
the Trust in incurring any debts, liabilities or obligations, or in taking
or omitting any other actions for or in connection with the Trust, are,
and each shall be deemed to be, acting as Trustee, officer, employee or
agent of the Trust and not in his own individual capacity.
5.3.1 Provided they have acted under the belief that their actions are in the
best interest of the Trust, the Trustees and officers shall not be
responsible for or liable in any event for neglect or wrongdoing by them
or any officer, agent, employee, investment advisor or principal
underwriter of the Trust or of any entity providing administrative
services for the Trust, but nothing herein contained shall protect any
Trustee or officer against any liability to which he would otherwise be
subject by reason of willful malfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office.
5.4 Express Exculpatory Clauses and Instruments. The Trustees shall use every
reasonable means to assure that all persons having dealings with the Trust
shall be informed that the property of the Shareholders and the Trustees,
officers, employees and agents of the Trust shall not be subject to claims
against or obligations of the Trust to any extent whatsoever. The Trustees
shall cause to be inserted in any written agreement, undertaking or
obligation made or issued on behalf of the Trust (including certificates,
if any, for Shares of the Trust) an appropriate reference to this
Declaration, providing that neither the Shareholders, the Trustees, the
officers, the employees nor any agent of the Trust shall be liable
thereunder, and that the other parties to such instrument shall look
solely to the Trust Property for the payment of any claim thereunder or
for the performance thereof; but the omission of such provisions from any
such instrument shall not render any Shareholder, Trustee, officer,
employee or agent liable, nor shall the Trustees, or any officer, agent or
employee of the Trust be liable, to anyone for such omission. If,
notwithstanding this provision, any Shareholder, Trustee, officer,
employee or agent shall be held liable to any other person by reason of
the omission of such provision from any such agreement, undertaking or
obligation, the Shareholder, Trustee, officer, employee or agent shall be
entitled to indemnity and reimbursement out of the Trust Property, as
provided in this Article V.
5.5 Mandatory Indemnification
5.5.1 Subject only to the provisions hereof, every person who is or has been a
Trustee, officer, employee or agent of the Trust and every person who
serves at the Trustees request as director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise shall be indemnified by the Trust to the fullest extent
permitted by law against all liabilities and against all expenses
reasonably incurred or paid by him in connection with any debt, claim,
action, demand, suit, proceeding, judgment, decree, liability or
obligation of any kind in which he becomes involved as a party or
otherwise or is threatened by virtue of his being or having been a
Trustee, officer, employee or agent of the Trust or of another
corporation, partnership, joint venture, trust or other enterprise at the
request of the Trust and against amounts paid or incurred by him in the
compromise or settlement thereof.
5.5.2 The words "claim", "action", "suit", or "proceeding" shall apply to all
claims, actions, suits or proceedings (civil, criminal, administrative,
legislative, investigative or other, including appeals), actual or
threatened, and the words "liabilities" and "expenses" shall include,
without limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
5.5.3 No indemnification shall be provided hereunder to a Trustee or officer:
5.5.3.1 against any liability to the Trust or the Shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office ("disabling
conduct");
5.5.3.2 with respect to any matter as to which he shall, by the court or other
body by or before which the proceeding was brought or engaged, have been
finally adjudicated to be liable by reason of disabling conduct;
5.5.3.3 in the absence of a final adjudication on the merits that such Trustee
or officer did not engage in disabling conduct, unless a reasonable
determination, based upon a review of the facts that the person to be
indemnified is not liable by reason of such conduct, is made:
5.5.3.3.1 by vote of a majority of a quorum of the Trustees who are neither
Interested Persons nor parties to the proceedings; or
5.5.3.3.2 by independent legal counsel, in a written opinion.
5.5.4 The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect
any other rights to which any Trustee, officer, employee or agent may now
or hereafter be entitled, shall continue as to a person who has ceased to
be such Trustee, officer, employee, or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person;
provided, however, that no person may satisfy any right of indemnity or
reimbursement granted herein except out of the property of the Trust, and
no other person shall be personally liable to provide indemnity or
reimbursement hereunder (except an insurer or surety or person otherwise
bound by contract).
5.5.5 Expenses in connection with the preparation and presentation of a defense
to any claim, action, suit or proceeding of the character described in
paragraph (a) of this Section 5.4 may be paid by the Trust prior to final
disposition thereof upon receipt of a written undertaking by or on behalf
of the Trustee, officer, employee or agent to reimburse the Trust if it
is ultimately determined under this Section 5.4 that he is not entitled
to indemnification. Such undertaking shall be secured by a surety bond or
other suitable insurance or such security as the Trustees shall require
unless a majority of a quorum of the Trustees who are neither Interested
Persons nor parties to the proceeding, or independent legal counsel in a
written opinion, shall have determined, based on readily available facts,
that there is reason to believe that the indemnitee ultimately will be
found to be entitled to indemnification.
5.6 No Bond Required of Trustees. No Trustee shall, as such, be obligated to
give any bond or surety or other security for the performance of any of
his duties hereunder.
5.7 No Duty of Investigation; Notice in Trust Instruments, etc. No purchaser,
lender, transfer agent or other person dealing with the Trustees or any
officer, employee or agent of the Trust shall be bound to make any inquiry
concerning the validity of any transaction purporting to be made by the
Trustees or by said officer, employee or agent or be liable for the
application of money or property paid, loaned, or delivered to or on the
order of the Trustees or of said officer, employee or agent. Every
obligation, contract, undertaking, instrument, certificate, Share, other
security of the Trust or any Series or Class, and every other act or thing
whatsoever executed in connection with the Trust or any Series or Class
shall be conclusively taken to have been executed or done by the executors
thereof only in their capacity as Trustees under this Declaration or in
their capacity as officers, employees or agents of the Trust. Every
written obligation, contract, undertaking, instrument, certificate, Share,
other security of the Trust or any Series or Class made or issued by the
Trustees or by any officers, employees or agents of the Trust, in their
capacity as such, shall contain an appropriate recital to the effect that
the Shareholders, Trustees, officers, employees and agents of the Trust
shall not personally be bound by or liable thereunder, nor shall resort be
had to their private property for the satisfaction of any obligation or
claim thereunder, and appropriate references shall be made therein to this
Declaration, and may contain any further recital which they may deem
appropriate, but the omission of such recital shall not operate to impose
personal liability on any of the Trustees, Shareholders, officers,
employees or agents of the Trust. The Trustees may maintain insurance for
the protection of the Trust Property, its Shareholders, Trustees,
officers, employees and agents in such amount as the Trustees shall deem
adequate to cover possible tort liability, and such other insurance as the
Trustees in their sole judgment shall deem advisable.
5.8 Reliance on Experts, etc. Each Trustee and officer or employee of the
Trust shall, in the performance of his duties, be fully and completely
justified and protected with regard to any act or any failure to act
resulting from reliance in good faith upon the books of account or other
records of the Trust, upon an opinion of counsel, or upon reports made to
the Trust by any of its officers or employees or by any advisor,
administrator, manager, distributor, selected dealer, accountant,
appraiser or other expert or consultant selected with reasonable care by
the Trustees, officers or employees of the Trust, regardless of whether
such counsel or expert may also be a Trustee.
6 ARTICLE VI
6.1 Shares of Beneficial Interest
6.2 Beneficial Interest. The interest of the beneficiaries hereunder shall be
divided into transferable shares of beneficial interest with par value
$.01 per share. The number of such shares of beneficial interest
authorized hereunder is unlimited. All Shares issued hereunder including,
without limitation, Shares issued in connection with a dividend in Shares
or a split of Shares, shall be fully paid and nonassessable.
6.3 Series Designation. The Trustees, in their discretion from time to time
and without Shareholder approval, may authorize the division of Shares
into two or more Series, each Series relating to a separate portfolio of
investments; and may further authorize the division of the Shares of any
Series into two or more Classes. The different Series and Classes shall be
established and designated, and the variations in the relative rights and
preferences as between the different Series and Classes shall be fixed and
determined, by the Trustees; provided, that all Shares shall be identical
except that there may be variations between different Series and Classes
as to purchase price, determination of net asset values, the price terms
and manner of redemption, special and relative rights as to dividends and
on liquidation, conversion rights, and conditions under which the several
Series and Classes shall have separate voting rights. All references to
Shares in this Declaration shall be deemed to be shares of any or all
Series or Classes as the context may require. If the Trustees shall divide
the Shares into two or more Series, or divide the Shares of any Series
into two or more Classes, the following provisions shall be applicable:
6.3.1 The number of Shares of each Series and Class that may be issued shall be
unlimited.
6.3.2 The power of the Trustees to invest and reinvest the Trust Property of
each Series that may be established shall be governed by Section 3.2 of
this Declaration.
6.3.3 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 irrevocably belong to that Series for all purposes, subject only to
the rights of creditors, and shall be so recorded upon the books of
account of the Trust. If there are any assets, income, earnings, profits,
and proceeds thereof, funds, or payments that are not readily
identifiable as belonging to any particular Series, the Trustees shall
allocate them among any one or more of the Series established and
designated from time to time in such manner and on such basis as they, in
their sole discretion, deem fair and equitable. Each such allocation by
the Trustees shall be conclusive and binding upon the Shareholders of all
Series for all purposes.
6.3.4 The assets belonging to each particular Series shall be charged with the
liabilities of the Trust in respect of that Series and all expenses,
costs, charges and reserves attributable to that Series, and any general
liabilities, expenses, costs, charges or reserves of the Trust that are
not readily identifiable as belonging to any particular Series shall be
allocated and charged by the Trustees to and among any one or more of the
Series established and designated from time to time in such manner and on
such basis as the Trustees in their sole discretion deem fair and
equitable. Each allocation of liabilities, expenses, costs, charges and
reserves by the Trustees shall be conclusive and binding upon the holders
of all Series for all purposes. The Trustees shall have full discretion,
to the extent not inconsistent with the 1940 Act, to determine which
items shall be treated as income and which items as capital; and each
such determination and allocation shall be conclusive and binding upon
the Shareholders.
6.3.5 To the extent necessary or appropriate to give effect to the relative
rights and preferences of the Classes of Shares into which any Series may
be divided, the income, earnings, profits, and proceeds thereof, or the
liabilities, expenses, costs, charges and reserves, belonging to any
Series may be allocated to a particular Class of Shares, or apportioned
among two or more Classes of Shares, of that Series. Each such allocation
or apportionment by the Trustees shall be conclusive and binding upon the
Shareholders of all Classes for all purposes.
6.3.6 The power of the Trustees to pay dividends and make distributions with
respect to any one or more Series or Classes shall be governed by Section
9.2 of this Declaration. Dividends and distributions on Shares of a
particular Series or Class may be paid with such frequency as the
Trustees may determine, which may be daily or otherwise, pursuant to a
standing resolution or resolutions adopted only once or with such
frequency as the Trustees may determine, to the holders of Shares of that
Series or Class, from such of the income and capital gains, accrued or
realized, from the assets belonging to that Series (or attributable to
that Class, as the case may be), as the Trustees may determine, after
providing for actual and accrued liabilities belonging to that Series (or
attributable to that Class). All dividends and distributions on Shares of
a particular Series shall be distributed pro rata to the holders of that
Series in proportion to the number of Shares of that Series held by such
holders at the date and time of record established for the payment of
such dividends or distributions, except to the extent otherwise required
or permitted by the relative rights and preferences of any Classes of
that Series, and any dividends and distributions on shares of a
particular Class shall be distributed pro rata to the holders of that
Class in proportion to the number of Shares of that Class held by such
holders at the date and time of record established for the payment of
such dividends or distributions.
6.3.7 Without limiting the authority of the Trustees to establish and designate
further Series, there is hereby established the following Series:
Shanklin Growth Fund. The establishment and designation of any further
Series or Class of Shares shall be effective upon the execution by a
majority of the then Trustees (or by an officer of the Trust pursuant to
the vote of a majority of the then Trustees) of an instrument setting
forth the establishment and designation of such Series or Class. Such
instrument shall also set forth any rights and preferences of such Series
or Class that are in addition to the rights and preferences of Shares set
forth in this Declaration. At any time that there are no Shares
outstanding of any particular Series or Class previously established and
designated, the Trustees may by an instrument executed by a majority of
their number (or by an officer of the Trust pursuant to the vote of a
majority of the then Trustees) abolish that Series or Class and the
establishment and designation thereof.
6.4 Rights of Shareholders. The ownership of the Trust Property of every
description and the right to conduct any business hereinbefore described
are vested exclusively in the Trustees, and the Shareholders shall have no
interest therein other than the beneficial interest conferred by their
Shares with respect to a particular Series or Class, and they shall have
no right to call for any partition or division of any property, profits,
rights or interests of the Trust nor can they be called upon to share or
assume any losses of the Trust or suffer an assessment of any kind by
virtue of their ownership of Shares. The Shares shall be personal property
giving only the rights in this Declaration specifically set forth. The
Shares shall not entitle the holder to preference, preemptive, appraisal,
conversion or exchange rights.
6.5 Trust Only. It is the intention of the Trustees to create only the
relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to
create a general partnership, limited partnership, joint stock
association, corporation, limited liability company, bailment or any form
of legal relationship other than a business trust. Nothing in this
Declaration shall be construed to make the Shareholders, either by
themselves or with the Trustees, partners or members of a joint stock
association.
6.6 Issuance of Shares. The Trustees, in their discretion, may from time to
time without vote of the Shareholders issue Shares with respect to any
Series or Class that may have been established pursuant to Section 6.2, in
addition to the then issued and outstanding Shares and Shares held in the
treasury, to such party or parties and for such amount not less than par
value and type of consideration, including cash or property, at such time
or times (including, without limitation, each business day in accordance
with the maintenance of a constant net asset value per share as set forth
in Section 9.3 hereof), and on such terms as the Trustees may deem best,
and may in such manner acquire other assets (including the acquisition of
assets subject to, and in connection with the assumption of, liabilities)
and businesses. In connection with any issuance of Shares, the Trustees
may issue fractional Shares. 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 such
Series or Class of the Trust. Reductions in the number of outstanding
Shares may be made pursuant to the constant net asset value per share
formula set forth in Section 9.3. Contributions to the Trust may be
accepted for, and Shares shall be redeemed as, whole Shares and/or
1/1,000ths of a Share or multiples thereof.
6.7 Register of Shares. A register shall be kept at the Trust or any transfer
agent duly appointed by the Trustees under the direction of the Trustees
that shall contain the names and addresses of the Shareholders and the
number of Shares (with respect to each Series and Class that may have been
established) held by them respectively and a record of all transfers
thereof. Separate registers shall be established and maintained for each
Series and Class of the Trust. Each such register shall be conclusive as
to who are the holders of the Shares of the applicable Series or Class and
who shall be entitled to receive dividends or distributions or otherwise
to exercise or enjoy the rights of Shareholders. No Shareholder shall be
entitled to receive payment of any dividend or distribution, nor to have
notice given to him as herein provided, until he has given his address to
a transfer agent or such other officer or agent of the Trustees as shall
keep the register for entry thereon. It is not contemplated that
certificates will be issued for the Shares; however, the Trustees, in
their discretion, may authorize the issuance of share certificates and
promulgate appropriate rules and regulations as to their use.
6.8 Transfer Agent and Registrar. The Trustees shall have power to employ a
transfer agent or transfer agents, and a registrar or registrars, with
respect to the Shares of the various Series and Classes. The transfer
agent or transfer agents may keep the applicable register and record
therein the original issues and transfers, if any, of the said Shares of
the applicable Series or Class. Any such transfer agent and registrars
shall perform the duties usually performed by transfer agents and
registrars of certificates of stock in a corporation, except as modified
by the Trustees.
6.9 Transfer of Shares. Shares shall be transferable on the records of the
Trust only by the record holder thereof or by his agent thereto duly
authorized in writing, upon delivery to the Trustees or a transfer agent
of the Trust of a duly executed instrument of transfer, together with such
evidence of the genuineness of each such execution and authorization and
of other matters as may reasonably be required. Upon such delivery the
transfer shall be recorded on the applicable 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 hereof, and neither the Trustees
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.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation
of law, shall be recorded on the applicable register of Shares as the
holder of such Shares upon production of the proper evidence thereof to
the Trustees or a transfer agent of the Trust, but until such record is
made, the Shareholder of record shall be deemed to be the holder of such
Shares for all purposes hereof, and neither the Trustees nor any transfer
agent or registrar nor any officer or agent of the Trust shall be affected
by any notice of such death, bankruptcy or incompetence, or other
operation of law.
6.10 Notices. Any and all notices to which any Shareholder hereunder may be
entitled and any and all communications shall be deemed duly served or
given if mailed, postage prepaid, addressed to any Shareholder of record
at his last known address as recorded on the applicable register of the
Trust.
7 ARTICLE VII
7.1 Custodians
7.2 Appointment and Duties. The Trustees shall at all times employ a custodian
or custodians, meeting the qualifications for custodians for portfolio
securities of investment companies contained in the 1940 Act, as custodian
or custodians with respect to each Series of the Trust. Separate
custodians may but need not be employed for the different Series of the
Trust. Each Series may, but need not, employ more than one custodian. Any
custodian, acting with respect to one or more Series, or portions thereof,
shall have authority as agent of the Trust or the Series with respect to
which it is acting, but subject to such restrictions, limitations and
other requirements, if any, as may be contained in the By-Laws and the
1940 Act:
7.2.1 to hold the securities owned by the Trust or the Series and deliver the
same upon written order;
7.2.2 to receive and receipt for any moneys due to the Trust or the Series and
deposit the same in its own banking department (if a bank) or elsewhere
as the Trustees may direct;
7.2.3 to disburse such funds upon orders or vouchers;
7.2.4 if authorized by the Trustees, to keep the books and accounts of the
Trust or the Series or any Class and furnish clerical and accounting
services; and
7.2.5 if authorized to do so by the Trustees, to compute the net income of the
Trust or the Series or any Class;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. If so directed by a Majority Shareholder Vote of any Series
with respect to which the custodian is acting, the custodian shall deliver and
pay over all property of the Trust held by it as specified in such vote.
The Trustees may also authorize each 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, provided that in
every case such sub-custodian shall meet the qualifications for custodians
contained in the 1940 Act.
7.3 Action Upon Termination of Custodian Agreement. Upon termination of any
custodian agreement with respect to any Series or inability of any
custodian to continue to serve, the Trustees shall promptly appoint a
successor custodian, but if no successor custodian can be found who has
the required qualifications and is willing to serve, the Trustees shall
call as promptly as possible a special Shareholders' meeting to determine
whether said Series shall function without a custodian or shall be
liquidated.
7.4 Central Certificate System. Subject to such rules, regulations and orders
as the Commission may adopt, the Trustees may direct the custodian to
deposit all or any part of the securities owned by the Trust or any Series
in a system for the central handling of securities established by a
national securities exchange or a national securities association
registered with the Commission under the Securities Exchange Act of 1934,
or such other person as may be permitted by the Commission, or otherwise
in accordance with the 1940 Act, 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 duly authorized agents (which may include an
investment advisor).
7.5 Acceptance of Receipts in Lieu of Certificates. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may
direct the custodian to accept written receipts or other written evidences
indicating purchases of securities held in book-entry form in the Federal
Reserve System in accordance with regulations promulgated by the Board of
Governors of the Federal Reserve System, and the local Federal Reserve
Banks in lieu of receipt of certificates representing such securities.
8 ARTICLE VIII
8.1 Redemption
8.2 Redemptions. All outstanding Shares of any Series of the Trust may be
redeemed at the option of the holders thereof, upon and subject to the
terms and conditions provided in this Article VIII. The Trust shall, upon
application of any Shareholder or pursuant to authorization from any
Shareholder of a particular Series, redeem or repurchase from such
Shareholder outstanding Shares of such Series or Class for an amount per
share determined by the application of a formula adopted for such purpose
by the Trustees with respect to such Series or Class (which formula shall
be consistent with the 1940 Act); provided that (a) such amount per Share
shall not exceed the cash equivalent of the proportionate interest of each
Share in the assets of the Series or of the assets of that Series
attributable to the Shares of the particular Class) of the Trust at the
time of the purchase or redemption and (b) if so authorized by the
Trustees, the Trust may, at any time and from time to time, charge fees
for effecting such redemption, at such rates as the Trustees may
establish, as and to the extent permitted under the 1940 Act, and may, at
any time and from time to time, pursuant to such Act, suspend such right
of redemption. The procedures for effecting redemption shall be as set
forth in the Prospectus with respect to the applicable Series or Class
from time to time.
8.3 Redemption of shares; Disclosure of Holding. If the Trustees shall, at any
time and in good faith, be of the opinion that direct or indirect
ownership of Shares or other securities of the Trust has or may become
concentrated in any person to an extent that would disqualify the Trust as
a regulated investment company under the Internal Revenue Code, then the
Trustees shall have the power by lot or other means deemed equitable by
them (i) to call for redemption a number, or principal amount, of Shares
or other securities of the Trust sufficient, in the opinion of the
Trustees, to maintain or bring the direct or indirect ownership of Shares
or other securities of the Trust into conformity with the requirements for
such qualification and (ii) to refuse to transfer or issue Shares or other
securities of the Trust to any Person whose acquisition of the Shares or
other securities of the Trust in question would in the opinion of the
Trustees result in such disqualification. The redemption shall be effected
at a redemption price determined in accordance with Section 8.1.
The holders of Shares or other securities of the Trust shall upon demand
disclose to the Trustees in writing such information with respect to
direct and indirect ownership of Shares or other securities of the Trust
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.
8.4 Redemptions of Accounts of Less than an Amount Specified by the Trustees.
Due to the relatively high cost of maintaining small investment accounts,
the Trustees shall have the power to redeem shares at a redemption price
determined in accordance with Section 8.1 if at any time the total
investment in such account does not have a value in excess of any minimum
account size that the Trustees may from time to time establish; provided,
however, that the Trustees may not exercise such power with respect to
Shares of any Series or Class if the Prospectus of such Series or Class
does not describe such power. If the Trustees determine to exercise their
power to redeem Shares provided in this Section 8.3, Shareholders shall be
notified that the value of their account is less than the minimum account
size then in effect and allowed at least 14 days to make an additional
investment before redemption is processed.
8.5 Redemptions Pursuant to Constant Net Asset Value. The Trust may also
reduce the number of outstanding Shares of any Series or Class pursuant to
the provisions of Section 9.3.
8.6 Redemptions in Kind. Subject to any generally applicable limitation
imposed by the Trustees, any payment on redemption, purchase or repurchase
by the Trust of Shares may, if authorized by the Trustees, be made wholly
or partly in kind, instead of in cash. Such payment in kind shall be made
by distributing securities or other property, constituting, in the opinion
of the Trustees, a fair representation of the various types of securities
and other property then held by the Series of Shares being redeemed,
purchased or repurchased (but not necessarily involving a portion of each
of the Series' holdings) and taken at their value used in determining the
net asset value of the Shares in respect of which payment is made.
9 ARTICLE IX
9.1 Determination of Net Asset Value,
9.2 Net Income and Distributions
9.3 Net Asset Value. The net asset value of each outstanding Share of each
Series and Class of the Trust shall be determined at such time or times on
such days as the Trustees may determine, in accordance with the 1940 Act,
with respect to each Series and Class. The method of determination of net
asset value shall be determined by the Trustees and shall be as set forth
in the Prospectus with respect to the applicable Series or Class. The
power and duty to make the daily calculations for any Series or Class may
be delegated by the Trustees to the advisor, administrator, manager,
custodian, transfer agent or such other person as the Trustees may
determine. The Trustees may suspend the daily determination of net asset
value to the extent permitted by the 1940 Act.
9.4 Distributions to Shareholders. The Trustees may from time to time
distribute among the Shareholders of any Series or Class such proportion
of the assets belonging to such Series (or attributable to the particular
Class) held by the Trustees as they may deem proper. Such distribution may
be made in cash or property (including without limitation any type of
obligations of the Trust or any assets thereof), and the Trustees may
distribute among the Shareholders of any Series or Class additional Shares
of such Series or Class in such manner, at such times, and on such terms
as the Trustees may deem proper. Such distributions may be among the
Shareholders of record at the time of declaring a distribution or among
the Shareholders of record at such later date as the Trustees shall
determine. Except as necessary or appropriate to give effect to the
relative rights and preferences of the Classes of Shares into which any
Series may be divided, all distributions shall be made ratably among the
Shareholders of the relative Series or Class based on the number of Shares
of the relative Series or Class held by such Shareholder. The Trustees may
always retain such amount as they may deem necessary to pay the debts or
expenses of the Trust or to meet obligations of the Trust, or as they may
deem desirable to use in the conduct its affairs or to retain for future
requirements or extensions of the business. The Trustees may adopt and
offer to Shareholders of any Series or Class such dividend reinvestment
plans, cash dividend payout plans or related plans at the Trustees shall
deem appropriate for such Series or Class.
9.4.1 Inasmuch as the computation of net income and gains for Federal income
tax purposes may vary from the computation thereof on the books, the
above provisions shall be interpreted to give the Trustees the power in
their discretion to distribute for any fiscal year as ordinary dividends
and as capital gains distributions, respectively, additional amounts
sufficient to enable the Trust to avoid or reduce liability for taxes.
9.4.2 The Trustees shall be authorized to withhold from the payment of any
dividend an amount necessary to pay the expenses of the Trust that are
not deductible for Federal income tax purposes or otherwise to afford the
Trust the full tax benefits of a regulated investment company as defined
in the Internal Revenue Code of 1986.
9.5 Constant Net Asset Value; Reduction on Outstanding Shares. The Trustees
shall have the power, but shall not be required, to determine the net
income of any Series or Class of the Trust on each day the net asset value
of such Series or Class is determined as provided in Section 9.1 and at
each such determination declare such net income for such Series or Class
as dividends with the result that the net asset value per share of the
Series or Class of the Trust, taking into account withholdings authorized
by Section 9.2 hereof, shall remain at a constant dollar value. The
determination of net income and the resultant declaration of dividends
shall be as set forth in the Prospectus. In such event fluctuations in
value may be effected in the number of outstanding Shares in each
Shareholder's account. It is expected that each Series or Class of the
Trust will have a positive net income at the time of each determination.
If for any reason such net income is a negative amount, the Trust may
offset such amount against dividends accrued in the account of the
Shareholder of the applicable Series or Class. If and to the extent such
negative amount exceeds such accrued dividends, the Trust shall have
authority to reduce the number of outstanding Shares of the Series or
Class. Having each Shareholder proportionately contribute to the Series or
Class capital the necessary Shares that represent the amount of the excess
upon such determination will effect such reduction. Each Shareholder will
be deemed to have agreed to such contribution in these circumstances by
his investment in the Series or Class of the Trust. This procedure will
permit the net asset value per share of the Series or Class of the Trust
to be maintained at a constant dollar value per share.
The Trustees, by resolution, may discontinue or amend the practice of
maintaining the net asset value per share at a constant dollar amount with
respect to any Series or Class at any time, and such modification shall be
evidenced by appropriate changes in the Prospectus.
9.6 Power to Modify Foregoing Procedures. Notwithstanding any of the foregoing
provisions of this Article IX, the Trustees may prescribe, in their
absolute discretion, such other bases and times for determining the per
share net asset value of the Trust's Shares or net income, or the
declaration and payment of dividends and distributions as they may deem
necessary or desirable to enable the Trust to comply with any provision or
rule of the 1940 Act, or any securities association registered under the
Securities Exchange Act of 1934, or any order of exemption issued by the
Commission, all as in effect now or hereafter amended or modified.
ARTICLE X
10.1 Shareholders
10.2 Voting Powers. The Shareholders shall have the power to vote (i) for the
election of Trustees as provided in Article II, Section 2.2; (ii) for the
removal of Trustees as provided in Article II, Section 2.3(d); (iii) with
respect to any investment advisor as provided in Article IV, Section 4.1;
(iv) with respect to the amendment of this Declaration as provided in
Article XI, Section 11.4; (v) to the same extent as the shareholders of a
Massachusetts business corporation as to whether or not a court action,
proceeding or claim should be brought or maintained derivatively or as a
class action on behalf of the Trust or the Shareholders (except that a
Shareholder of a particular Series shall not in any event be entitled to
maintain a derivative or class action on behalf of any other Series or the
Shareholders thereof); and (vi) with respect to such additional matters
relating to the Trust as may be required by law, by this Declaration, or
the By-Laws of the Trust or any regulation of the Trust by the Commission
or any State, or as the Trustees may consider desirable. Any matter
affecting a particular Series, including, without limitation, matters
affecting the investment advisory arrangements or investment policies or
restrictions of a Series, shall not be deemed to have been effectively
acted upon unless approved by the required vote of the Shareholders of
such Series. To the extent required by the 1940 Act or necessary or
appropriate to give effect to the relative rights and preferences of the
Classes of Shares into which any Series may be divided, any matter
affecting a particular Class (unless the interests of each Class of such
Series in the matter are substantially identical), including, without
limitation, matters affecting the distribution plan of that Class shall
not be deemed to have been effectively acted upon unless approved by the
required vote of the Shareholders of such Class. Notwithstanding the
foregoing, to the extent permitted by the 1940 Act, each Series and Class
shall not be required to vote separately on the selection of independent
public accountants, the election of Trustees and any submission with
respect to a contract with a principal underwriter or distributor. 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. Until Shares are issued, the Trustees may exercise
all rights of Shareholders and may take any action to be taken by
Shareholders which is required or permitted by law, this Declaration or
any By-Laws of the Trust.
10.3 Meetings. Shareholder meetings shall be held as specified in the By-Laws
and in Section 2.2 hereof at the principal office of the Trust or at such
other place as the Trustees may designate. Meetings of the Shareholders
may be called by the Trustees or by officers of the Trust given such
authority in the By-Laws and shall be called by the Trustees at a place
designated by them upon written request specifying the purpose of such
meeting and submitted by Shareholders of any Series or Class holding in
the aggregate not less than 10% of the outstanding Shares of such Series
or Class having voting rights.
10.4 Quorum and Required Vote. Except as otherwise provided by law, the holders
of a majority of the outstanding Shares of the Trust, or, as to any matter
to be voted on by a Series or Class, a majority of the outstanding Shares
of such Series or Class, present in person or by proxy shall constitute a
quorum for the transaction of any business at any meeting of Shareholders.
If a quorum, as above defined, shall not be present for the purpose of any
vote that may properly come before the meeting, the Shareholders present
in person or by proxy and entitled to vote at such meeting on such matter
holding a majority of the Shares present entitled to vote on such matter
may vote to adjourn the meeting from time to time to be held at the same
place without further notice than by announcement to be given at the
meeting until a quorum, as above defined, entitled to vote on such matter
shall be present, whereupon any such matter may be voted upon at the
meeting as though held when originally convened. Subject to any applicable
requirement of law, this Declaration or the By-Laws, a plurality of the
votes cast shall elect a Trustee and all other matters shall be decided by
a majority of the votes cast entitled to vote thereon.
10.5 Record Date for Meetings. For the purpose of determining the Shareholders
who are entitled to notice of and to vote at any meeting, or to
participate in any distribution, or for the purpose of any other action,
the Trustees may from time to time close the transfer books for such
period, not exceeding 30 days, as the Trustees may determine; or without
closing the transfer books the Trustees may fix a date not more than 90
days prior to the date of any meeting of Shareholders or declaration of
daily dividends or other action as a record date for the determination of
the persons to be treated as Shareholders of record for such purposes,
except for dividend payments, which shall be governed by Section 9.2
hereof.
10.6 Proxies. Any vote by a Shareholder of the Trust may be made in person or
by proxy, provided that no proxy shall be voted at any meeting unless it
shall have been placed on file with the Trustees or their designee prior
to the time the vote is taken. Pursuant to a resolution of a majority of
the Trustees, proxies may be solicited in the name of one or more Trustees
or one or more officers of the Trust. Only Shareholders of record shall be
entitled to vote. A proxy purporting to be executed by or on behalf of a
Shareholder shall be deemed valid unless challenged at or prior to its
exercise, and the burden of proving invalidity shall rest on the
challenger.
10.7 Additional Provisions. The By-Laws may include further provisions for
Shareholders, votes, meetings and related matters.
10.8 Reports. The Trustees shall cause to be prepared with respect to each
Series and Class at least annually a report of operations containing a
balance sheet and statement of income and undistributed income of the
applicable Series or Class of the Trust prepared in conformity with
generally accepted accounting principles and an opinion of an independent
public accountant on such financial statements. It is contemplated that
separate reports may be prepared for the various Series and Classes.
Copies of such reports shall be mailed to all Shareholders of record of
the applicable Series or Class within the time required by the 1940 Act.
The Trustees shall, in addition, furnish to the Shareholders at least
semiannually, interim reports containing an unaudited balance sheet of the
Series or Class as of the end of such period and an unaudited statement of
income and surplus for the period from the beginning of the current fiscal
year to the end of such period.
10.9 Shareholder Action by Written Consent. Any action that may be taken by
Shareholders may be taken without a meeting if a majority of Shareholders
of each Series or Class entitled to vote on the matter (or such larger
proportion thereof as shall be required by any express provision of this
Declaration) consent to the action in writing and the written consents are
filed with the records of the meetings of Shareholders. Such consent shall
be treated for all purposes as a vote taken at a meeting of Shareholders.
10.10 Inspection of Records. 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.
11 ARTICLE XI
11.1 Duration; Termination of Trust; Amendment; Mergers; Etc.
11.2 Duration. Subject to the provisions of Sections 11.2 and 11.3 hereof, the
Trust created hereby shall continue without limitation of time.
11.3 Termination
11.3.1 The Trust may be terminated by the affirmative vote of the holders of not
less than a majority of the Shares of each Series of the Trust at any
meeting of Shareholders or by an instrument in writing, without a
meeting, signed by a majority of the Trustees (or by an officer of the
Trust pursuant to a vote of a majority of the Trustees) and consented to
by the holders of not less than a majority of such Shares. Any Series or
Class may be so terminated by vote or written consent of not less than a
majority of the Shares of such Series or Class. Upon the termination of
the Trust or any Series or Class:
11.3.1.1 The Trust or such Series or Class shall carry on no business except for
the purpose of winding up its affairs.
11.3.1.2 The Trustees shall proceed to wind up the affairs of the Trust or such
Series or Class and all of the powers of the Trustees under this
Declaration shall continue until the affairs of the Trust or such
Series or Class shall have been wound up, including the power to
fulfill or discharge the contracts of the Trust or such Series or
Class, collect its assets, sell, convey, assign, exchange, transfer or
otherwise dispose of all or any part of the remaining Trust Property to
one or more persons at public or private sale for consideration that
may consist in whole or in part of cash, securities or other property
of any kind, discharge or pay its liabilities, and do all other acts
appropriate to liquidate its business; provided that any sale,
conveyance, assignment, exchange, transfer or other disposition of all
or substantially all the Trust Property shall require approval of the
consideration by vote or consent of the holders of a majority of the
Shares entitled to vote; and
11.3.1.3 After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and
refunding agreements, as they deem necessary for their protection, the
Trustees may distribute remaining Trust Property of any Series (or
attributable to the Shares of any Class), in cash or in kind or partly
each, among the Shareholders of such Series or Class according to their
respective rights.
11.3.2 After termination of the Trust or any Series or Class and distribution to
the Shareholders as herein provided, a majority of the Trustees (or an
officer of the Trust pursuant to a vote of a majority of the Trustees)
shall execute and lodge among the records of the Trust an instrument in
writing setting forth the fact of such termination. Upon termination of
the Trust, the Trustees shall thereupon be discharged from all further
liabilities and duties hereunder, and the rights and interests of all
Shareholders shall thereupon cease. Upon termination of any Series or
Class, the Trustees shall thereupon be discharged from all further
liabilities and duties with respect to such Series or Class, and the
rights and interests of all Shareholders of such Series or Class shall
thereupon cease.
11.4 Merger, Consolidation and Sale of Assets. The Trust may merge or
consolidate with any other corporation, association, trust or other
organization or may sell, lease or exchange all or substantially all of
the Trust Property, including its good will, upon such terms and
conditions and for such consideration when and as authorized at any
meeting of Shareholders called for that purpose by the affirmative vote of
the holders of not less than a majority of the Shares of each Series, or
by an instrument or instruments in writing without a meeting, consented to
by the holders of not less than a majority of such Shares of each Series.
Any Series may so merge, consolidate or effect a sale or exchange of
assets by the vote or written consent of not less than a majority of the
Shares of such Series.
11.5 Amendment Procedure
11.5.1 This Declaration may be amended by the affirmative vote of the holders of
not less than a majority of the Shares at any meeting of Shareholders or
by an instrument in writing, without a meeting, signed by a majority of
the Trustees (or by an officer of the Trust pursuant to the vote of a
majority of the Trustees) and consented to by the holders of not less
than a majority of such Shares. The Shareholders of each Series and Class
shall have the right to vote separately on amendments to this Declaration
to the extent provided by Section 10.1. The Trustees may also amend this
Declaration at any time (whether or not related to the rights of
Shareholders) without the vote or consent of Shareholders if they deem it
necessary to conform this Declaration to the requirements of applicable
federal laws or regulations or the requirements of the regulated
investment company provisions of the Internal Revenue Code (but the
Trustees shall not be liable for failing so to do), or for any other
reason determined by the Trustees so long as such amendment does not
adversely affect the rights of any Shareholder with respect to matters to
which such amendment is or purports to be applicable and so long as such
amendment is not in contravention of applicable law, including the 1940
Act.
11.5.2 All rights granted to the Shareholders under this Declaration are granted
subject to the reservation of the right to amend this Declaration as
hereinabove provided, subject to the following limitations. No amendment
may be made, under Section 11.4(a) above, which would change any rights
with respect to all Shares of the Trust by reducing the amount payable
thereon upon liquidation of the Trust, by diminishing or eliminating any
voting rights pertaining thereto, or by otherwise adversely affecting the
rights of Shareholders, except with the vote or consent of the holders of
a majority of all the Shares of the Trust without regard to Series, or if
said amendment adversely affects the rights of the Shareholders of less
than all of the Series, except with the vote or consent of the holders of
a majority of all the Shares of each Series or Class so affected. An
instrument establishing and designating any Series or Class of Shares and
authorizing the Shares thereof shall not constitute an amendment to this
Declaration that adversely affects the rights of any Shareholder. Nothing
contained in this Declaration shall permit the amendment of this
Declaration to impair the exemption from personal liability of the
Shareholders, Trustees, officers, employees and agents of the Trust or to
permit assessments upon Shareholders (otherwise than as permitted under
Section 9.3).
11.5.3 A certification in recordable form signed by a majority of the Trustees
(or by an officer of the Trust pursuant to the vote of a majority of the
Trustees) setting forth an amendment and reciting that it was duly
adopted by the Shareholders or by the Trustees as aforesaid or a copy of
the Declaration, as amended, in recordable form, and executed by a
majority of the Trustees, shall be conclusive evidence of such amendment
when lodged among the records of the Trust.
11.5.4 Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended,
covering the first public offering of Shares of the Trust shall have
become effective, this Declaration may be terminated or amended in any
respect by the affirmative vote of a majority of the Trustees or by an
instrument signed by an officer of the Trust pursuant to the vote of a
majority of the Trustees.
11.6 Incorporation. With the approval of the holders of a majority of the
Shares, the Trustees may cause to be organized or assist in organizing a
corporation or corporations under the laws of any jurisdiction or any
other trust, partnership, association or other organization to take over
all of the Trust Property or to carry on any business in which the Trust
shall directly or indirectly have any interest, and to sell, convey and
transfer the Trust Property to any such corporation, trust, association or
organization in exchange for the shares or securities thereof or otherwise
and to lend money to, subscribe for the shares or securities thereof or
otherwise, and to lend money to, subscribe for the shares or securities
of, and enter into any contracts with any such corporation, trust,
partnership, association or organization, or any corporation, partnership,
trust, association or organization in which the Trust holds or is about to
acquire shares or any other interest. The Trustees may also cause a merger
or consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and
to the extent permitted by law, as provided under the law then in effect.
Nothing contained herein shall be construed as requiring approval of
Shareholders for the Trustees to organize or assist in organizing one or
more corporations, trusts, partnerships, associations or other
organizations and selling, conveying or transferring a portion of the
Trust Property to such organizations or entities.
12 ARTICLE XII
12.1 Miscellaneous
12.2 Filing. This Declaration and any amendment hereto shall be filed in the
office of the Secretary of the Commonwealth of Massachusetts and in such
other places as may be required under the laws of Massachusetts and may
also be filed or recorded in such other places as the Trustees deem
appropriate. Each amendment so filed shall be accompanied by a certificate
signed and acknowledged by a Trustee or officer of the Trust stating that
such action was duly taken in a manner provided herein, and unless such
amendment or such certificate sets forth some later time for the
effectiveness of such amendment, such amendment shall be effective upon
its filing. A restated Declaration, containing the original Declaration
and all amendments theretofore made, may be executed from time to time by
a majority of the Trustees and shall, upon filing with the Secretary of
the Commonwealth of Massachusetts, be conclusive evidence of all
amendments contained therein and may thereafter be referred to in lieu of
the original Declaration and the various amendments thereto.
12.3 Resident Agent. The Trust shall maintain a resident agent in the
Commonwealth of Massachusetts, which agent shall initially be CT
Corporation System, Two Oliver Street, Boston, Massachusetts 02109. The
Trustees may designate a successor resident agent; provided, however, that
such appointment shall not become effective until written notice thereof
is delivered to the office of Secretary of the Commonwealth of
Massachusetts.
12.4 Governing Law. This Declaration is executed by the Trustees and delivered
in the Commonwealth of Massachusetts and with reference to the laws
thereof, and the rights of all parties and the validity and construction
of every provision hereof shall be subject to and construed according to
the laws of said Commonwealth, and reference shall be specifically made to
the business corporation law of the Commonwealth of Massachusetts as to
the construction of matters not specifically covered herein or as to which
an ambiguity exists.
12.5 Counterparts. This Declaration may be simultaneously executed in several
counterparts, each of which shall be deemed to be an original, and such
counterparts, together, shall constitute one and the same instrument,
which shall be sufficiently evidenced by any such original counterpart.
12.6 Reliance by Third Parties. Any certificate executed by an individual who,
according to the records of the Trust, or of any recording office in which
this Declaration may be recorded, appears to be a Trustee hereunder,
certifying to: (a) the number or identity of Trustees or Shareholders, (b)
the name of the Trust or any Series or Class thereof, (c) the
establishment of any Series or Class, (d) the due authorization of the
execution of any instrument or writing, (e) the form of any vote passed at
a meeting of Trustees or Shareholders, (f) the fact that the number of
Trustees or Shareholders present at any meeting or executing any written
instrument satisfies the requirements of this Declaration, (g) the form of
any By-Laws adopted by or the identity of any officers elected by the
Trustees, or (h) the existence of any fact or facts that in any manner
relate to the affairs of the Trust or any Series or Class, shall be
conclusive evidence as to the matters so certified in favor of any person
dealing with the Trustees and their successors.
12.7 Provisions in Conflict With Law or Regulations.
12.7.1 The provisions of this Declaration are severable, and if the Trustees
shall determine, with the advice of counsel, that any of such provisions
is in conflict with 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 Declaration; provided however, that such
determination shall not affect any of the remaining provisions of this
Declaration or render invalid or improper any action taken or omitted
prior to such determination.
12.7.2 If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability
shall attach only to such provision in such jurisdiction and shall not in
any manner affect such provision in any other jurisdiction or any other
provision of this Declaration in any jurisdiction.
This Declaration of Trust establishing Shanklin Investment Trust provides
that the name Shanklin Investment Trust refers to the Trustees under the
Declaration collectively as Trustees, but not as individuals or personally; and
no Trustee, shareholder, officer, employee or agent of Shanklin Investment
Trust, shall be held to any personal liability, nor shall resort be had to their
private property for the satisfaction of any obligation or claim or otherwise in
connection with the affairs of Shanklin Investment Trust, but the Trust Property
only shall be liable.
IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.
/s/ Julian G. Winters
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Julian G. Winters, Trustee
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The address of the principal place of business of the Trust is:
105 North Washington Street
PO Drawer 69
Rocky Mount, North Carolina 27802
EXHIBIT 2
BYLAWS
OF
SHANKLIN INVESTMENT TRUST
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I TRANSACTION CONFIRMATIONS, ACCOUNT STATEMENTS,
CERTIFICATES AND DIVIDEND DISTRIBUTIONS ................ 1
ARTICLE II FISCAL YEAR............................................... 1
ARTICLE III SEAL...................................................... 2
ARTICLE IV SHAREHOLDER MEETINGS...................................... 2
ARTICLE V TRUSTEES.................................................. 3
ARTICLE VI COMMITTEES................................................ 5
ARTICLE VII NOTICES................................................... 5
ARTICLE VIII OFFICERS.................................................. 6
ARTICLE IX INVESTMENT AND OTHER RESTRICTIONS......................... 8
ARTICLE X CUSTODIAN................................................. 8
ARTICLE XI INVESTMENT ADVISOR........................................ 10
ARTICLE XII DISTRIBUTOR............................................... 11
ARTICLE XIII TRANSACTIONS OF TRUSTEES, OFFICERS AND OTHERS............. 11
ARTICLE XIV INDEMNIFICATION........................................... 12
ARTICLE XV AUDITOR................................................... 13
ARTICLE XVI AMENDMENTS................................................ 13
ARTICLE XVII MISCELLANEOUS............................................. 14
<PAGE>
BYLAWS
OF
SHANKLIN INVESTMENT TRUST
ARTICLE I
TRANSACTION CONFIRMATIONS, ACCOUNT STATEMENTS,
CERTIFICATES AND DIVIDEND DISTRIBUTIONS
1. Every shareholder of record will receive a confirmation of each new
transaction in their account with the Trust, and an account statement at
least quarterly, which will show the total number of shares of the Trust
owned by the shareholder and being held by the transfer agent for the
account of the shareholder. Shareholders may rely on these confirmations
and statements in lieu of certificates, which will not be issued, except as
may be authorized from time to time as determined by the Board of Trustees
of the Trust for any particular series of the Trust.
2. Certificates evidencing shares of a particular series of the Trust shall be
in the form prescribed by the Board of Trustees and shall be signed by the
Chairman and the Secretary or Treasurer or such officers as the Board of
Trustees may designate in authorizing such certificates. The signature of
any officer of the Trust and the seal of the Trust thereon may be
facsimiles.
3. In the event any officer authorized to sign certificates of shares shall
die, resign or be removed from office, otherwise valid certificates bearing
the signature, or facsimile thereof, of such officer shall remain valid and
may be issued.
ARTICLE II
FISCAL YEAR
The fiscal year of the Trust or any particular series of the Trust shall be as
provided by the Board of Trustees.
ARTICLE III
SEAL
The Trust seal shall, subject to alteration by the Board of Trustees, consist of
a flat-faced circular die upon which shall be engraved or cut the word,
"Massachusetts," together with the name of the particular series of the Trust
and the year of its Declaration (Viz., 1998).
ARTICLE IV
SHAREHOLDER MEETINGS
1. Meetings of shareholders will only be held as necessary to approve
fundamental policy changes, elect trustees and other matters requiring
approval of the shareholders in accordance with the Investment Company Act
of 1940, as amended.
2. Meetings of shareholders of the Trust shall be held at such time and on
such day as shall be designated in the notice of said meeting. At such
meetings, shareholders may elect a Board of Trustees or transact such other
business as may properly be brought before the meeting and which is stated
in the notice of the meeting.
3. Special meetings of shareholders of the Trust, or of any particular series
of the Trust, unless otherwise prescribed by statute, rule or regulation,
may be called for any purpose or purposes by the Chairman of the Board, any
Vice Chairman, or the President of the particular series of the Trust in
question at any time and shall be called by the Chairman of the Board, any
Vice Chairman, or the President of the particular series of the Trust in
question at the request of a majority of the Board of Trustees, or at the
request in writing of one or more shareholders who collectively hold at
least ten percent (10%) of the shares of a particular series of the Trust
issued and outstanding and entitled to vote. Such request shall state the
purpose or purposes of the meeting. Business transacted at all special
meetings shall be confined to the objects stated in the notice of such
meeting.
4. Written notice of every meeting of the shareholders, stating the time,
place and purpose or purposes for which the meeting is called, shall be
given by the Secretary to each shareholder entitled to vote thereat and to
any shareholder entitled by law to such notice. Such notice shall be given
to each shareholder by mailing the same, postage prepaid, to the address of
the shareholder as it appears on the books of the Trust not less than ten
(10) days nor more than forty-five (45) days before the time fixed for such
meeting.
5. The holders of a majority of the shares issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall be
requisite and shall constitute a quorum at all meetings of the shareholders
for the transaction of business, except as otherwise provided by statute.
If such quorum shall not be present or represented at any meeting of the
shareholders, the shareholders entitled to vote thereat, present in person
or represented by proxy, shall have power to adjourn the meeting from time
to time (provided no adjournment shall be for more than three (3) months)
without notice other than announcement at the meeting, until a quorum shall
be present or represented. At such adjourned meeting at which a quorum
shall the present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified.
6. When a quorum is present at any meeting, the vote of the holders of a
majority of the shares having the right to vote thereat, present in person
or represented by proxy, shall determine any question brought before such
meeting, unless the question is one upon which, by express provision of the
applicable statutes, rules and regulations, Declaration of Trust or these
Bylaws, a different vote is required, in which case such express provision
shall control.
7. At any meeting of the shareholders, every shareholder having the right to
vote shall be entitled to vote in person or by proxy appointed by an
instrument in writing subscribed by such shareholder and bearing a date not
more than eleven (11) months prior to said meeting, which instrument shall
be filed with the secretary of the meeting before being voted. Each
shareholder shall have one vote or fraction thereof for each share or
fraction thereof held.
8. The Board of Trustees may fix a record date, not more than ninety (90) nor
less than ten (10) days prior to the date for which a meeting is called, as
of which the shareholders entitled to vote at such meeting or any
adjournment thereof, shall be determined, notwithstanding any transfer or
the issue of any share occurring after such record date.
ARTICLE V
TRUSTEES
1. The number of trustees which shall constitute the entire Board of Trustees
of the Trust shall be such number as shall be fixed from time to time by a
vote adopted by a majority of the then Trustees. Any trustee may be removed
by a two-thirds (2/3) majority of all trustees, at a regular or special
meeting called for that purpose, for cause by them deemed sufficient.
Subject to death, resignation or removal, each trustee shall hold office
indefinitely and until his successor is elected and qualified. Trustees
need not be shareholders of the Trust.
2. If the office of any trustee or trustees becomes vacant for any reason, a
majority of the remaining trustees, though less than a quorum, may choose a
successor or successors, who shall hold office for the unexpired term in
respect to which such vacancy occurred or until the next election of
trustees, provided that, immediately after filling any such vacancy, at
least two-thirds (2/3) of the trustees then holding office shall have been
elected to such office by the shareholders of the Trust entitled to vote;
otherwise such vacancy shall be filled by vote of the shareholders at a
special meeting called for such purpose.
3. The property and business of the Trust shall be managed by its Board of
Trustees which may exercise all powers of the Trust and do all lawful acts
and things as are not by applicable statute, rule or regulation, the
Declaration of Trust or these Bylaws prohibited, or directed or required to
be exercised or done by the shareholders.
4. The Board of Trustees may hold their meetings and keep the books of the
Trust at the office of the Trust in the City of Rocky Mount, State of North
Carolina, or at such other places as they may from time to time determine,
and telephone meetings may be held except that the Board of Trustees may
not hold telephone meetings to approve or renew an investment advisory
agreement or any rule 12b-1 plan or any agreements relating to such plan.
The original or duplicate stock ledger shall be kept at the office of the
Trust in the City of Rocky Mount, State of North Carolina or at the office
of any transfer agent which may be employed by the Trust.
5. The first meeting of the newly elected Board of Trustees shall be held at
the place of, and immediately following the meeting of the shareholders at
which such Board of Trustees was elected, either within or without the
State of North Carolina; provided the trustees may hold their meeting at
such other place and time as they may determine. No notice of such meeting
shall be necessary to the newly elected trustees in order to legally
constitute the meeting, provided a quorum shall be present. Regular
meetings of the Board of Trustees shall be held without notice at such time
and place, either within or without the State of North Carolina as shall
from time to time be determined by the board.
6. Special meetings of the Board of Trustees may be held at any time when
called by the Chairman,
7. any Vice-Chairman, any President, the Secretary or any two(2) trustees (or
if there shall be fewer than three (3) trustees, by any trustee). Not less
than twenty-four (24) hours' notice of any special meeting shall be given
by the Secretary or other officer calling such meeting to each trustee
either in person, by telephone, by mail or by telegram. Such notice may be
waived by any trustee either in person or in writing or by telegram. Such
special meetings shall be held at such time and place, within or without
the State of North Carolina, as the notice thereof or waiver shall specify.
Unless otherwise specified in the notice thereof, any and all business may
be transacted at any meeting of the Board of Trustees.
8. At all meetings of the Board of Trustees, a majority of the trustees shall
be necessary and sufficient to constitute a quorum for the transaction of
business, and the act of the majority of trustees present at any meeting at
which there is a quorum shall be the act of the Board of Trustees, except
as may be otherwise specifically provided by an applicable statute, rule,
or regulation, by the Declaration of Trust or by these Bylaws. If a quorum
shall not be present at any meeting of the Board of Trustees, the trustees
present thereat may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present.
ARTICLE VI
COMMITTEES
The Board of Trustees may elect from their own number, by resolution or
resolutions passed by a majority of the board, an executive committee to consist
of two (2) or more trustees, which shall have the power to conduct the current
and ordinary business of the Trust while the Board of Trustees is not in
session. The Board of Trustees may also in the same manner elect from their own
number from time to time other committees, the number composing such committees
and the powers conferred thereon to be determined from the resolution creating
the same.
ARTICLE VII
NOTICES
1. Whenever, under the provisions of an applicable statute, rule, or
regulation, the Declaration of Trust or these Bylaws, notice is required to
be given to any shareholder or trustee, it shall not be construed to mean
personal notice unless the context otherwise provides such notice may be
given in writing, by mail, by depositing the same in a post office or
letter box, in a postage prepaid envelope, addressed to such shareholder or
trustee at such address as appears on the books of the Trust, and such
notice shall be deemed to be given at the time when the same shall be thus
mailed.
2. Whenever any notice is required to be given under the provisions of an
applicable statute, rule or regulation, the Declaration of Trust or by
these Bylaws, a waiver thereof in writing signed by the person or persons
entitled to said notice, whether before or after the time stated therein,
shall be equivalent thereto.
ARTICLE VIII
OFFICERS
1. The Board of Trustees shall elect officers of the Trust for such term in
office, which may be indefinite, as determined by the board. The Board of
Trustees shall elect one of its own members as Chairman of the Board and
shall elect a Secretary and Treasurer of the Trust and a President for each
series of the Trust. The Treasurer shall be the Chief Accounting Officer of
the Trust. The Board of Trustees may also elect or appoint or authorize the
Chairman, the Vice Chairman, if any, or any President to appoint such other
officers, including a Vice Chairman, Vice Presidents and one or more
Assistant Secretaries and Assistant Treasurers, as the Board of Trustees
deems advisable. The same person may hold two or more offices. The Chairman
of the Trust and any Vice-Chairman shall be a trustee. All other officers
may be, but need not be, trustees.
2. The Board of Trustees may appoint such other officers, agents and
representatives of the Trust as shall be deemed necessary, with such powers
for such term and to perform such acts and duties on behalf of the Trust as
the Board of Trustees may see fit to the extent authorized or permitted by
statute, rule, or regulation, the Declaration of Trust and these Bylaws.
3. The Chairman of the Board shall preside at all meetings of the shareholders
and Board of Trustees. In addition, the Chairman shall be the chief
executive officer of the Trust and shall have general charge and
supervision of the business, property, and affairs of the Trust and such
other powers and duties as the Board of Trustees may from time to time
prescribe.
4. If the trustees shall elect one or more Vice Chairmen, the Vice Chairman or
if there shall be more than one, such Vice Chairmen in the order of their
seniority or as designated by the Board of Trustees, in the absence of the
Chairman, shall preside at meetings of the shareholders and Board of
Trustees and shall exercise such other powers and duties as the Chairman
shall determine.
5. The President of each series of the Trust shall be the chief executive
officer of the Trust for matters pertaining to that particular series and
shall have general charge and supervision of the business, property and
affairs of the series and such other powers and duties as the Board of
Trustees shall from time to time prescribe.
6. The Vice Presidents of each series of the Trust, in the order of their
seniority or as designated by the Board of Trustees, shall in the absence
or disability of the President perform the duties and exercise the powers
of the President and shall perform such other duties as the Board of
Trustees or the President of such series may from time to time prescribe.
7. The Secretary shall record all votes and proceedings of meetings of the
shareholders and of the Board of Trustees in the Trust records. The
Secretary shall give, or cause to be given, notice of all meetings of the
shareholders and meetings of the Board of Trustees when notice thereof is
required. The Secretary shall have custody of the seal of the Trust and may
affix the same to any instrument requiring the seal and attest to the same
with his or her signature. The Secretary shall perform such other duties as
the Board of Trustees may from time to time prescribe.
8. The Assistant Secretaries, in order of their seniority or as directed by
the Board of Trustees, shall in the absence or disability of the Secretary
perform the duties and exercise the powers of the Secretary and shall
perform such other duties as the Board of Trustees may prescribe.
9. The Treasurer shall deliver all Trusts and securities of the Trust which
may come into the Treasurer's hands to such bank or trust company as the
Board of Trustees may designate as Custodian. The Treasurer shall keep such
records of the financial transactions of the Trust as the Board of Trustees
shall prescribe. The Treasurer shall perform such other duties as the Board
of Trustees may from time to time prescribe.
10. The Assistant Treasurers, in order of their seniority or as directed by the
Board of Trustees, shall in the absence or disability of the Treasurer
perform the duties and exercise the powers of the Treasurer and shall
perform such other duties as the Board of Trustees may prescribe.
11. The officers of the Trust shall hold office until their successors are
chosen and qualified. Any officer elected or appointed by the Board of
Trustees may be removed at any time with or without cause by the
affirmative vote of a majority of the entire Board of Trustees. If the
office of any officer shall become vacant for any reason, the Board of
Trustees shall fill the vacancy.
ARTICLE IX
INVESTMENT AND OTHER RESTRICTIONS
The investment limitations for each particular series of the Trust are set forth
in each of the Trust's current Prospectuses or Statements of Additional
Information for the particular series as approved by the Trustees.
ARTICLE X
CUSTODIAN
1. The Trust shall employ a Custodian pursuant to a written contract that
shall contain in substance the following provisions:
a) The Trust will cause all securities and Trusts owned by the Trust to be
delivered or paid to the Custodian.
b) The Custodian will receive any monies due to the Trust and deposit the
same in an account in its own banking department or in such other
banking institution, if any, as the Board of Trustees may direct.
c) The Custodian shall release and deliver securities owned by the Trust
in the following cases only:
(1) Upon the sale of such securities for the account of the company and
the receipt of payment therefor;
(2) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable, provided
that in any such case the cash proceeds thereof shall be delivered
to the Custodian;
(3) To the issuer thereof or its agent for transfer into the name of
the Trust or the Custodian, or a nominee of either, or in
exchange for a different number of certificates representing the
same number of shares or aggregate face amount, provided that in
any such case the new securities replacing such securities are
delivered to the Custodian and approval of the Trust is received;
(4) To any broker selling the same for examination in accord with the
"street delivery" custom;
(5) For exchange or conversion pursuant to any plan of merger,
consolidation, reorganization, recapitalization or readjustment of
the securities of the issuer of such securities, or pursuant to
provisions for conversion contained in such securities, provided
that in any such case the new securities and cash, if any, are
delivered to the Custodian;
(6) In the case of warrants, rights or similar options, the surrender
thereof shall be only for the exercise of such warrants, rights or
other options on behalf of the Trust upon interim receipts or
temporary securities for definitive securities;
(7) For any other proper purpose approved by the Trust.
d) The Custodian shall pay out monies of the Trust only upon the purchase
of securities for the account of the Trust and the delivery in due
course of such securities to the Custodian, or in connection with the
conversion, exchange or surrender of securities owned by the Trust as
set forth herein, or for the repurchase of shares issued by the Trust,
or for the making of any disbursements authorized by the Board of
Trustees for expenses or liabilities incurred by the Trust pursuant to
all applicable statutes, rules and regulations.
e) The Custodian shall make deliveries of securities and payments of cash
only upon proper written instructions signed by such officer or
officers or other agent or agents of the Trust, including the
investment advisor, as may be authorized to sign such instructions by
resolution of the Board of Trustees. The Trustees may, from time to
time, authorize different persons to sign proper instructions for
different purposes.
2. The contract between the Trust and the Custodian may contain any other
provisions not inconsistent with all applicable statutes, rules, and
regulations, the Declaration of Trust or with these Bylaws which the Board
of Trustees may approve.
3. Such contract shall be terminable by either party upon written notice to
the other; provided, however, that upon termination of the contract or
inability of the Custodian to continue to serve, the Custodian shall
deliver and pay over to such successor Custodian all securities and monies
held by it for the account of the Trust. In the event that the Custodian
terminates its contract with the Trust: (a) the Board of Trustees shall
promptly appoint a successor Custodian; (b) in the event that the Trust
cannot find a successor Custodian having the required qualifications and
willing to serve, the Board of Trustees shall promptly call a special
meeting of the shareholders to determine whether the Trust shall function
without a Custodian or shall be liquidated; (c) in the event that such vote
of shareholders shall be held the Custodian shall deliver and pay over all
property of the Trust held by it as directed by, and in accordance with,
the vote of a majority of the outstanding shares of the Trust.
ARTICLE XI
INVESTMENT ADVISOR
The Board of Trustees, with the approval of the shareholders, as
provided by applicable statutes, rules and regulations, and consistent with the
Declaration of Trust, may enter into a contract or contracts with one or more
persons, firms or corporations to act as Investment Advisor or Investment
Advisors for each particular series of the Trust and to perform such duties and
render such services as shall be deemed necessary. Any such contract shall
provide that it may be terminated at any time by the Trust without penalty and
upon not more than sixty (60) days' written notice, and shall be automatically
terminated in the event of its assignment. Any such contract shall continue in
effect only if approved in accordance with the provisions of all applicable
statutes, rules, and regulations, the Declaration of Trust and these Bylaws.
ARTICLE XII
DISTRIBUTOR
The Board of Trustees, as consistent with all applicable statutes,
rules, and regulations, and the Declaration of Trust, may enter into a contract
or contracts with any one or more persons, firms or corporations to act as
Distributor or Distributors for the Trust, or any particular series of the
Trust, and to perform such other duties and render such other services as shall
be deemed necessary. Any such contract shall provide that it shall be
automatically terminated in the event of its assignment by such person, firm or
corporation, and that, if it shall continue in effect for a period of more than
two (2) years from the date of its execution, it shall be specifically approved
at least annually by vote of the outstanding voting securities of the Trust or
the particular series of the Trust in question or by the Board of Trustees in
accordance with all applicable statutes, rules and regulations. Such contract
may be exclusive, and may be, with the same person, firm or corporation that is
a party to an investment advisor's contract with the Trust. Such contract may
also contain any other provisions not inconsistent with all applicable statutes,
rules and regulations, the Declaration of Trust and these Bylaws.
ARTICLE XIII
TRANSACTIONS OF TRUSTEES, OFFICERS AND OTHERS
1. No trustee or officer of the Trust, nor the Investment Advisor(s), nor any
member, officer, director, or shareholder of such Investment Advisor(s)
shall take a long or short position in the securities issued by any series
of the Trust, except that any trustee or officer of this Trust, or member,
officer, director or shareholder of the Investment Advisor(s) may purchase
from the Trust at any time, shares issued by any series of the Trust: (a)
at the price available to the public at the moment of such purchase; or (b)
to the extent that such person is a shareholder, at the price available to
shareholders generally at the moment of such purchase; or (c) at a price
determined as set forth in the Trust's current Prospectus for a particular
series of the Trust. In any event, such purchase shall not be in
contravention of any applicable federal or state statute, rule or
regulation.
2. The Trust shall not lend any of its assets to the Distributor(s) or
Investment Advisor(s) or to any officer, director or trustee of the
Distributor(s) or the Investment Advisor(s) or the Trust and shall not
permit any officer or trustee, or any officer or director of the
Distributor(s) or the Investment Advisor(s), to deal for or on behalf of
the Trust with himself as principal or agent, or with any partnership,
association or corporation in which he has a financial interest. The
foregoing provisions shall not prevent: (a) officers and trustees of the
Trust from buying, holding or selling shares in any series of the Trust, or
from being partners, officers or directors of or otherwise financially
interested in the Distributor(s) or the Investment Advisor(s); (b)
employment of legal counsel, registrar, transfer agent, dividend disbursing
agent or custodian who is, or has a partner, shareholder, officer or
director who is, an officer or trustee of the Trust, if only customary fees
are charged for services to the Trust; or (c) purchases or sales of
securities or other property if such transaction is permitted by or is
exempted under any applicable statute, rule or regulation.
3. Any officer, trustee or agent of the Trust may acquire, own and dispose of
shares of any series of the Trust to the same extent as if he or she were
not such officer, trustee or agent. The Board of Trustees may issue,
purchase and sell or cause to be issued, purchased and sold shares of any
series of the Trust and from any person, or to and from any firm or company
of which such person is an officer, director, trustee or shareholder
subject only to all applicable statutes, rules, and regulations, any
limitations contained in the Declaration of Trust and the limitations and
restrictions in these Bylaws.
ARTICLE XIV
INDEMNIFICATION
1. The Trust shall indemnify each trustee and officer to the full extent
permitted by applicable federal, state and local statutes, rules and
regulations and the Declaration of Trust, as amended from time to time.
2. With respect to a proceeding against a trustee or officer brought by or on
behalf of the Trust to obtain a judgment or decree in its favor, the Trust
shall provide the officer or trustee with the same indemnification, after
the same determination, as it is required to provide with respect to a
proceeding not brought by or on behalf of the Trust.
3. The Board of Trustees, in its discretion, may authorized or provide the
above-described indemnification to an employee or agent.
4. Any indemnification provided by this Article:
a) Continues as to a trustee, officer, employee or agent who has ceased to
be such, and inures to the benefit of his heirs and personal
representative; and
b) Does not exclude any other rights to which a person is or may be
entitled by any applicable statute, rule, regulation, agreement, vote
of shareholders or disinterested trustees, or otherwise, as to:
(1) Actions in his official capacity; and
(2) Actions in any other capacity while holding such office.
5. The indemnification provided by this Article shall be provided with respect
to an action, suit or proceeding arising from an act or omission or alleged
act or omission, whether occurring before or after the adoption of this
Article.
6. Nothing in this Article protects, or purports to protect, or may be
interpreted or construed to protect, any trustee or officer against any
liability to the Trust or its shareholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
ARTICLE XV
AUDITOR
The independent auditor of the particular series of the Trust shall be
selected annually in accordance with all applicable statutes, rules and
regulations.
ARTICLE XVI
AMENDMENTS
The Board of Trustees may make, amend, alter or repeal these Bylaws, at
any meeting duly held; provided, that the provisions concerning investment and
other restrictions contained in Article IX of these Bylaws shall only be
amended, altered or repealed by the vote of a majority of the outstanding voting
securities of the particular series of the Trust involved, as defined in the
Investment Company Act of 1940, or as otherwise provided by any applicable
statute, rule or regulations.
ARTICLE XVII
MISCELLANEOUS
1. When used in these Bylaws, the term "applicable statutes, rules and
regulations" shall mean any and all federal and state statutes, rules and
regulations that are applicable to, govern or otherwise regulate the
conduct of the Trust's business as a regulated, diversified, open-end
investment company of the management type. Such statutes, rules and
regulations shall include, but are not limited to: The Investment Company
Act of 1940, the Investment Advisors Act of 1940, the Securities Act of
1933, the Securities Exchange Act of 1934, all as amended to date and as
may be hereafter amended, and all rules and regulations promulgated by the
Securities and Exchange Commission thereunder; Subchapter M of the Internal
Revenue Code, and all rules and regulations promulgated by the Internal
Revenue Service thereunder; the Annotated Code of Massachusetts, and all
rules and regulations promulgated by any commission, organization, or
division of such, which has been authorized by the State of Massachusetts
to formulate or to enforce same; and any and all other statutes, rules or
regulations enacted or promulgated by any state, commission or division
that shall or may be deemed to govern or regulate the conduct of the Trust.
2. Each Article, section or portion of these Bylaws shall be deemed severable,
and the invalidity of any such Article, section or portion shall not affect
the validity of the remainder of these Bylaws.
EXHIBIT 5
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, entered into as of the date the registration statement of the
SCM Strategic Growth Fund of the Shanklin Investment Trust becomes effective
with the Securities and Exchange Commission, by and between SHANKLIN INVESTMENT
TRUST (the "Trust"), a Massachusetts Business Trust, and SHANKLIN CAPITAL
MANAGEMENT, Inc., a Tennessee corporation (the "Advisor"), registered as an
investment advisor under the Investment Advisors Act of 1940, as amended (the
"Advisors Act").
WHEREAS, the Trust is registered as a diversified, open-end management
investment company of the series type under the Investment Company Act of 1940,
as amended (the "1940 Act"); and
WHEREAS, the Trust desires to retain the Advisor to furnish investment advisory
and administrative services to SCM STRATEGIC GROWTH FUND series of the Trust,
and the Advisor is willing to so furnish such services;
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints the Advisor to act as Investment
Advisor to SCM STRATEGIC GROWTH FUND (the "Fund") series of the Trust
for the period and on the terms set forth in this Agreement. The
Advisor accepts such appointment and agrees to furnish the services
herein set forth, for the compensation herein provided.
2. Delivery of Documents. The Trust has furnished the Investment Advisor
with copies properly certified or authenticated of each of the
following:
(a) The Trust's Declaration of Trust, as filed with the State of
Massachusetts (such Declaration, as presently in effect and as
it shall from time to time be amended, is herein called the
"Declaration");
(b) The Trust's By-Laws (such By-Laws, as presently in effect and as
they shall from time to time be amended, are herein called the
"By-Laws");
(c) Resolutions of the Trust's Board of Trustees and the resolution
approved by a majority of the outstanding shares of the Fund
authorizing the appointment of the Advisor and approving this
Agreement;
(d) The Trust's Registration Statement on Form N-1A under the 1940
Act and under the Securities Act of 1933 as amended, (the "1933
Act"), relating to shares of beneficial interest of the Fund
(herein called the "Shares") as filed with the Securities and
Exchange Commission ("SEC") and all amendments thereto;
(e) The Fund's Prospectus (such Prospectus, as presently in effect
and all amendments and supplements thereto are herein called the
"Prospectus").
The Trust will furnish the Advisor from time to time with copies,
properly certified or authenticated, of all amendments of or
supplements to the foregoing at the same time as such documents are
required to be filed with the SEC.
3. Management. Subject to the supervision of the Trust's Board of
Trustees, the Advisor will provide a continuous investment program for
the Fund, including investment research and management with respect to
all securities, investments, cash and cash equivalents in the Fund. The
Advisor will determine from time to time what securities and other
investments will be purchased, retained or sold by the Fund. The
Advisor will provide the services under this Agreement in accordance
with the Fund's investment objectives, policies and restrictions as
stated in its Prospectus. The Advisor further agrees that it:
(a) Will conform its activities to all applicable Rules and
Regulations of the Securities and Exchange Commission and will,
in addition, conduct its activities under this Agreement in
accordance with regulations of any other Federal and State
agencies which may now or in the future have jurisdiction over
its activities under this Agreement;
(b) Will place orders pursuant to its investment determinations for
the Fund either directly with the issuer or with any broker or
dealer. In placing orders with brokers or dealers, the Advisor
will attempt to obtain the best net price and the most favorable
execution of its orders. Consistent with this obligation, when
the Advisor believes two or more brokers or dealers are
comparable in price and execution, the Advisor may prefer: (i)
brokers and dealers who provide the Fund with research advice
and other services, or who recommend or sell Trust shares, and
(ii) brokers who are affiliated with the Fund or its Advisor;
provided, however, that in no instance will portfolio securities
be purchased from or sold to the Advisor or any affiliated
person of the Advisor in principal transactions;
(c) Will provide certain executive personnel for the Fund as may be
mutually agreed upon from time to time with the Board of
Trustees, the salaries and expenses of such personnel to be
borne by the Advisor unless otherwise mutually agreed upon; and
(d) Will provide, at its own cost, all office space, facilities and
equipment necessary for the conduct of its advisory activities
on behalf of the Fund.
4. Services Not Exclusive. The advisory services furnished by the Advisor
hereunder are not to be deemed exclusive, and the Advisor shall be free
to furnish similar services to others so long as its services under
this Agreement are not impaired thereby; provided, however, that
without the written consent of the Trustees, the Advisor will not serve
as investment advisor to any other investment company having a similar
investment objective to that of the Fund.
5. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Advisor hereby agrees that all records which it
maintains for the benefit of the Fund are the property of the Fund and
further agrees to surrender promptly to the Fund any of such records
upon the Fund's request. The Advisor further agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act the records
required to be maintained by it pursuant to Rule 31a-1 under the 1940
Act that are not maintained by others on behalf of the Fund.
6. Expenses. During the term of this Agreement, the Advisor will pay all
expenses incurred by it in connection with its investment advisory
services pertaining to the Fund. In the event that there is no
distribution plan under Rule 12b-1 of the 1940 Act in effect for the
Fund, the Advisor will pay, out of the Advisor's resources generated
from sources other than fees received from the Fund, the entire cost of
the promotion and sale of Trust shares.
Notwithstanding the foregoing, the Fund shall pay the expenses and
costs of the following:
(a) Taxes, interest charges and extraordinary expenses;
(b) Brokerage fees and commissions with regard to portfolio
transactions of the Fund;
(c) Fees and expenses of the custodian of the Fund's portfolio
securities;
(d) Fees and expenses of the Fund's administrator, transfer and
dividend disbursing agent and the Fund's fund accounting agent
or, if the Fund performs any such services without an agent, the
costs of the same;
(e) Auditing and legal expenses;
(f) Cost of maintenance of the Fund's existence as a legal entity;
(g) Compensation of trustees who are not interested persons of the
Advisor as law defines that term;
(h) Costs of Trust meetings;
(i) Federal and State registration or qualification fees and
expenses;
(j) Costs of setting in type, printing and mailing Prospectuses,
reports and notices to existing shareholders;
(k) The investment advisory fee payable to the Advisor, as provided
in paragraph 7 herein; and
(l) Plan of Distribution expenses, but only in accordance with the
Plan of Distribution as approved by the shareholders of the Fund.
7. Compensation. The Trust will pay the Advisor and the Advisor will
accept as full compensation an investment advisory fee, based upon the
daily average net assets of each Fund, computed at the end of each
month and payable within five (5) business days thereafter, based upon
the schedule attached hereto as Exhibit A.
8.(a) Limitation of Liability. The Advisor shall not be liable for any error
of judgment, mistake of law or for any other loss whatsoever suffered
by the Fund in connection with the performance of this Agreement,
except a loss resulting from 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 the
Advisor in the performance of its duties or from reckless disregard by
it of its obligations and duties under this Agreement.
8.(b) Indemnification of Advisor. Subject to the limitations set forth in
this Subsection 8(b), the Fund shall indemnify, defend and hold
harmless (from the assets of the Trust or Trusts to which the conduct
in question relates) the Advisor against all loss, damage and
liability, including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and expenses,
including reasonable accountants' and counsel fees, incurred by the
Advisor in connection with the defense or disposition of any action,
suit or other proceeding, whether civil or criminal, before any court
or administrative or legislative body, related to or resulting from
this Agreement or the performance of services hereunder, except with
respect to any matter as to which it has been determined that the loss,
damage or liability is a direct result of (i) a breach of fiduciary
duty with respect to the receipt of compensation for services; or (ii)
willful misfeasance, bad faith or gross negligence on the part of the
Advisor in the performance of its duties or from reckless disregard by
it of its duties under this Agreement (either and both of the conduct
described in clauses (i) and (ii) above being referred to hereinafter
as "Disabling Conduct"). A determination that the Advisor is entitled
to indemnification may be made by (i) a final decision on the merits by
a court or other body before whom the proceeding was brought that the
Advisor was not liable by reason of Disabling Conduct, (ii) dismissal
of a court action or an administrative proceeding against the Advisor
for insufficiency of evidence of Disabling Conduct, or (iii) a
reasonable determination, based upon a review of the facts, that the
Advisor was not liable by reason of Disabling Conduct by, (a) vote of a
majority of a quorum of Trustees who are neither "interested persons"
of the Fund as the quoted phrase is defined in Section 2(a)(19) of the
1940 Act nor parties to the action, suit or other proceeding on the
same or similar grounds that is then or has been pending or threatened
(such quorum of such Trustees being referred to hereinafter as the
"Independent Trustees"), or (b) an independent legal counsel in a
written opinion. Expenses, including accountants' and counsel fees so
incurred by the Advisor (but excluding amounts paid in satisfaction of
judgments, in compromise or as fines or penalties), may be paid from
time to time by the Fund or Trust to which the conduct in question
related in advance of the final disposition of any such action, suit or
proceeding; provided, that the Advisor shall have undertaken to repay
the amounts so paid if it is ultimately determined that indemnification
of such expenses is not authorized under this Subsection 8(b) and if
(i) the Advisor shall have provided security for such undertaking, (ii)
the Fund shall be insured against losses arising by reason of any
lawful advances, or (iii) a majority of the Independent Trustees, or an
independent legal counsel in a written opinion, shall have determined,
based on a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the Advisor
ultimately will be entitled to indemnification hereunder.
As to any matter disposed of by a compromise payment by the Advisor
referred to in this Subsection 8(b), pursuant to a consent decree or
otherwise, no such indemnification either for said payment or for any
other expenses shall be provided unless such indemnification shall be
approved (i) by a majority of the Independent Trustees or (ii) by an
independent legal counsel in a written opinion. Approval by the
Independent Trustees pursuant to clause (i) shall not prevent the
recovery from the Advisor of any amount paid to the Advisor in
accordance with either of such clauses as indemnification of the
Advisor is subsequently adjudicated by a court of competent
jurisdiction not to have acted in good faith in the reasonable belief
that the Advisor's action was in or not opposed to the best interest of
the Fund or to have been liable to the Fund or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in its conduct under the Agreement.
The right of indemnification provided by this Subsection 8(b) shall not
be exclusive of or affect any of the rights to which the Advisor may be
entitled. Nothing contained in this Subsection 8(b) shall affect any
rights to indemnification to which Trustees, officers or other
personnel of the Fund, and other persons may be entitled by contract or
otherwise under law, nor the power of the Fund to purchase and maintain
liability insurance on behalf of any such person.
The Board of Trustees of the Trust shall take all such action as may be
necessary and appropriate to authorize the Fund hereunder to pay the
indemnification required by this Subsection 8(b) including, without
limitation, to the extent needed, to determine whether the Advisor is
entitled to indemnification hereunder and the reasonable amount of any
indemnity due it hereunder, or employ independent legal counsel for
that purpose.
8.(c) The provisions contained in Section 8 shall survive the expiration or
other termination of this Agreement, shall be deemed to include and
protect the Advisor and its directors, officers, employees and agents
and shall inure to the benefit of its/their respective successors,
assigns and personal representatives.
9. Duration and Termination. This Agreement shall become effective upon
the date the registration statement of the Trust containing the Fund's
Prospectus is declared effective by the Securities and Exchange
Commission and, unless sooner terminated as provided herein, shall
continue in effect for two years. Thereafter, this Agreement shall be
renewable for successive periods of one year each, provided such
continuance is specifically approved annually:
(a) By the vote of a majority of those members of the Board of
Trustees who are not parties to this Agreement or interested
persons of any such party (as that term is defined in the 1940
Act), cast in person at a meeting called for the purpose of
voting on such approval; and
(b) By vote of either the Board of Trustees or a majority (as that
term is defined in the 1940 Act) of the outstanding voting
securities of the Fund.
Notwithstanding the foregoing, this Agreement may be terminated by the
Fund or by the Advisor at any time on sixty (60) days' written notice,
without the payment of any penalty, provided that termination by the
Fund must be authorized either by vote of the Board of Trustees or by
vote of a majority of the outstanding voting securities of the Fund.
This Agreement will automatically terminate in the event of its
assignment (as that term is defined in the 1940 Act).
10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by a written
instrument signed by the party against which enforcement of the change,
waiver, discharge or termination is sought. No material amendment of
this Agreement shall be effective until approved by vote of the holders
of a majority of the Fund's outstanding voting securities (as defined
in the 1940 Act).
11. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. If
any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby. This Agreement shall be
binding and shall inure to the benefit of the parties hereto and their
respective successors.
12. Applicable Law. This Agreement shall be construed in accordance with,
and governed by, the laws of the State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
ATTEST: SHANKLIN INVESTMENT TRUST
By:_________________________ By:_________________________
Title:______________________ Title:______________________
ATTEST: SHANKLIN CAPITAL MANAGEMENT, INC.
By:_________________________ By:_________________________
Title:______________________ Title:______________________
<PAGE>
EXHIBIT A
INVESTMENT ADVISOR'S COMPENSATION SCHEDULE
For the services delineated in the INVESTMENT ADVISORY AGREEMENT, the Investment
Advisor shall be compensated monthly, as of the last day of each month, within
five business days of the month end, a fee based upon the daily average net
assets of the Fund according to the following schedule.
Annual
Net Assets Fee
On all Assets 0.85%
EXHIBIT 6
DISTRIBUTION AGREEMENT
AGREEMENT made effective as of the date the registration statement of the SCM
Strategic Growth Fund of the Shanklin Investment Trust becomes effective with
the Securities and Exchange Commission, by and between SHANKLIN INVESTMENT
TRUST, an unincorporated business trust organized under the laws of The
Commonwealth of Massachusetts (the "Trust"), and CAPITAL INVESTMENT GROUP, INC.,
a North Carolina corporation ("Distributor").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end management investment
company and is so registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue an unlimited number of shares of
beneficial interest (the "Shares"), in separate series representing the
interests in separate funds of securities and other assets; and
WHEREAS, the Trust offers a series of such Shares representing interests in the
SCM STRATEGIC GROWTH FUND (the "Fund") of the Trust, and has registered the
Shares under the Securities Act of 1933, as amended (the "1933 Act"), pursuant
to a registration statement on Form N-1A (the "Registration Statement"),
including a prospectus (the "Prospectus") and a statement of additional
information (the "Statement of Additional Information"); and
WHEREAS, Distributor has agreed to act as distributor of the Shares of the Fund
for the period of this Agreement;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1) Appointment of Distributor.
a) The Trust hereby appoints Distributor its exclusive agent for the
distribution of the Shares of the Fund in jurisdictions wherein such
Shares may be legally offered for sale; provided, however, that the
Trust in its absolute discretion may issue Shares of the Fund in
connection with (i) the payment or reinvestment of dividends or
distributions; (ii) any merger or consolidation of the Trust or of the
Fund with any other investment company or trust or any personal holding
company, or the acquisition of the assets of any such entity or another
fund of the Trust; or (iii) any offer of exchange permitted by Section
11 of the 1940 Act.
b) Distributor hereby accepts such appointment as exclusive agent for the
distribution of the Shares of the Fund and agrees that it will sell the
Shares as agent for the Trust at prices determined as hereinafter
provided and on the terms hereinafter set forth, all according to
applicable federal and state laws and regulations and to the Agreement
and Declaration of Trust of the Trust.
c) Distributor may sell Shares of the Fund to or through qualified
securities dealers or others. Distributor will require each dealer or
other such party to conform to the provisions hereof, the Registration
Statement and the Prospectus and Statement of Additional Information,
and applicable law; and neither Distributor nor any such dealers or
others shall withhold the placing of purchase orders for Shares so as
to make a profit thereby.
d) Distributor shall order Shares of the Fund from the Trust only to the
extent that it shall have received purchase orders therefor.
Distributor will not make, or authorize any dealers or others to make:
(i) any short sales of Shares; or (ii) any sales of Shares to any
Trustee or officer of the Trust or to any officer or director of
Distributor or of any corporation or association furnishing investment
advisory, managerial or supervisory services to the Trust, or to any
such corporation or association, unless such sales are made in
accordance with the then current Prospectus and Statement of Additional
Information.
e) Distributor is not authorized by the Trust to give any information or
make any representations regarding the Shares of the Fund, except such
information or representations as are contained in the Registration
Statement or in the current Prospectus or Statement of Additional
Information of the Fund, or in advertisements and sales literature
prepared by or on behalf of the Trust for Distributor's use.
f) Notwithstanding any provision hereof, the Trust may terminate, suspend
or withdraw the offering of Shares of the Fund whenever, in its sole
discretion, it deems such action to be desirable.
2) Offering Price of Shares. All Fund Shares sold under this Agreement shall
be sold at the public offering price per Share in effect at the time of the
sale, as described in the then current Prospectus of the Fund. The excess,
if any, of the public offering price over the net asset value of the Shares
sold by Distributor as agent shall be retained by Distributor as a
commission for its services hereunder. Out of such commission Distributor
may allow commissions or concessions to dealers and may allow them to
others in its discretion in such amounts as Distributor shall determine
from time to time. Except as may be otherwise determined by Distributor
from time to time, such commissions or concessions shall be uniform to all
dealers. At no time shall the Trust receive less than the full net asset
value of the Shares, determined in the manner set forth in the then current
Prospectus and Statement of Additional Information. Distributor shall also
be entitled to such commissions and other fees and payments as may be
authorized by the Trust from time to time under a Distribution Plan.
3) Furnishing of Information. The Trust shall furnish to Distributor copies of
any information, financial statements and other documents that Distributor
may reasonably request for use in connection with the sale of Shares of the
Fund under this Agreement. The Trust shall also make available a sufficient
number of copies of the Fund's current Prospectus and Statement of
Additional Information for use by the Distributor.
4) Expenses.
a) The Trust will pay or cause to be paid the following expenses: (i)
preparation, printing and distribution to shareholders of the
Prospectus and Statement of Additional Information; (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 certain
states; (v) qualification of the Trust as a dealer or broker under
state law as well as qualification of the Trust as an entity authorized
to do business in certain states; (vi) maintaining facilities for the
issue and transfer of Shares; (vii) supplying information, prices and
other data to be furnished by the Trust under this Agreement; and
(viii) certain taxes applicable to the sale or delivery of the Shares
or certificates therefor.
b) Except to the extent such expenses are borne by the Advisor or by the
Trust pursuant to a Distribution Plan, Distributor will pay or cause to
be paid the following expenses: (i) payments to sales representatives
of the Distributor and to securities dealers and others in respect of
the sale of Shares of the Fund; (ii) payment of compensation to and
expenses of employees of the Distributor and any of its affiliates to
the extent they engage in or support distribution of Fund Shares or
render shareholder support services not otherwise provided by the
Trust's transfer agent, administrator, or custodian, including, but not
limited to, answering routine inquiries regarding the Fund, processing
shareholder transactions, and providing such other shareholder services
as the Trust may reasonably request; (iii) formulation and
implementation of marketing and promotional activities, including, but
not limited to, direct mail promotions and television, radio,
newspaper, magazine and other mass media advertising; (iv) preparation,
printing and distribution of sales literature and of Prospectuses and
Statements of Additional Information and reports of the Trust for
recipients other than existing shareholders of the Fund; and (v)
obtaining such information, analyses and reports with respect to
marketing and promotional activities as the Trust may, from time to
time.
c) Distributor, in connection with any Distribution Plan that may be
authorized by the Trust from time to time, shall prepare and deliver
reports to the Trustees of the Trust on a regular basis, at least
quarterly, showing the expenditures with respect to the Fund pursuant
to the Distribution Plan and the purposes therefor, as well as any
supplemental reports as the Trustees of the Trust, from time to time,
may reasonably request.
5) Repurchase of Shares. Distributor as agent and for the account of the Trust
may repurchase Shares of the Fund offered for resale to it and redeem such
Shares at their net asset value.
6) Indemnification by the Trust. In absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties hereunder
on the part of Distributor, the Trust agrees to indemnify Distributor and
its officers and partners against any and all claims, demands, liabilities
and expenses that Distributor may incur under the 1933 Act, or common law
or otherwise, arising out of or based upon any alleged untrue statement of
a material fact contained in the Registration Statement or any Prospectus
or Statement of Additional Information of the Fund, or in any
advertisements or sales literature prepared by or on behalf of the Trust
for Distributor's use, or any omission to state a material fact therein,
the omission of which makes any statement contained therein misleading,
unless such statement or omission was made in reliance upon and in
conformity with information furnished to the Trust in connection therewith
by or on behalf of Distributor. Nothing herein contained shall require the
Trust to take any action contrary to any provision of its Agreement and
Declaration of Trust or any applicable statute or regulation.
7) Indemnification by Distributor. Distributor agrees to indemnify the Trust
and its officers and Trustees against any and all claims, demands,
liabilities and expenses which the Trust may incur under the 1933 Act, or
common law or otherwise, arising out of or based upon (i) any alleged
untrue statement of a material fact contained in the Registration Statement
or any Prospectus or Statement of Additional Information of the Fund, or in
any advertisements or sales literature prepared by or on behalf of the
Trust for Distributor's use, or any omission to state a material fact
therein, the omission of which makes any statement contained therein
misleading, if such statement or omission was made in reliance upon and in
conformity with information furnished to the Trust in connection therewith
by or on behalf of Distributor; or (ii) any act or deed of Distributor or
its sales representatives, or securities dealers and others authorized to
sell Fund Shares hereunder, or their sales representatives, that has not
been authorized by the Trust in any Prospectus or Statement of Additional
Information of the Fund or by this Agreement.
8) Term and Termination.
a) This Agreement shall become effective on the date the registration
statement of the Trust containing the Fund's Prospectus is declared
effective by the Securities and Exchange Commission and, unless sooner
terminated as provided herein, shall continue in effect for two years.
Unless terminated as herein provided, this Agreement shall continue in
full force and effect for successive periods of one year thereafter,
but only so long as each such continuance is approved (i) by either the
Trustees of the Trust or by vote of a majority of the outstanding
voting securities (as defined in the 1940 Act) of the Fund and, in
either event, (ii) by vote of a majority of the Trustees of the Trust
who are not parties to this Agreement or interested persons (as defined
in the 1940 Act) of any such party and who have no direct or indirect
financial interest in this Agreement or in the operation of the
Distribution Plan or in any agreement related thereto ("Independent
Trustees"), cast at a meeting called for the purpose of voting on such
approval.
b) This Agreement may be terminated at any time without the payment of any
penalty by vote of the Trustees of the Trust or a majority of the
Independent Trustees or by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Fund or by Distributor,
on sixty days' written notice to the other party.
c) This Agreement shall automatically terminate in the event of its
assignment (as defined in the 1940 Act).
9) Limitation of Liability. The obligations of the Trust hereunder shall not
be binding upon any of the Trustees, officers or shareholders of the Trust
personally, but shall bind only the assets and property of the Trust. The
term "Shanklin Investment Trust" means and refers to the Trustees from time
to time serving under the Agreement and Declaration of Trust of the Trust,
a copy of which is on file with the Secretary of the Commonwealth of
Massachusetts. The execution and delivery of this Agreement has been
authorized by the Trustees, and this Agreement has been signed on behalf of
the Trust by an authorized officer of the Trust, acting as such and not
individually, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by
any of them individually or to impose any liability on any of them
personally, but shall bind only the assets and property of the Trust as
provided in the Agreement and Declaration of Trust.
IN WITNESS THEREOF, the parties hereto have caused this Agreement to be executed
as of the date first written above.
SHANKLIN INVESTMENT TRUST
Attest:
By:___________________________
SCM STRATEGIC GROWTH FUND
Attest:
By:___________________________
CAPITAL INVESTMENT GROUP, INC.
Attest:
By:___________________________
EXHIBIT 8
CUSTODY AGREEMENT
(Mutual Funds)
THIS AGREEMENT is made as of __________________, 199__, by and between SHANKLIN
INVESTMENT TRUST (the "Trust"), a Massachusetts business trust, with respect to
its existing series as of the date of this Agreement, and such other series as
shall be designated from time to time by the Trust (the "Fund" or "Funds"), and
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking association (the
"Custodian").
The Trust desires that its securities and funds shall be hereafter held and
administered by the Custodian pursuant to the terms of this Agreement, and,
pursuant to a separate agreement, The Nottingham Company, Inc., a North Carolina
corporation ("Nottingham"), has agreed to perform the duties of Accounting
Services Agent and Administrator for the Fund, and NC Shareholder Services, LLC,
a North Carolina limited liability company ("NCSS"), has agreed to perform the
duties of Transfer Agent and Dividend Disbursing Agent for the Fund.
In consideration of the mutual agreements herein, the Trust and the Custodian
agree as follows:
1. DEFINITIONS.
As used herein, the following words and phrases shall have the meanings
shown in this Section 1:
"Securities" includes stocks, shares, bonds, debentures, bills, notes,
mortgages, certificates of deposit, bank time deposits, bankers'
acceptances, commercial paper, scrip, warrants, participation
certificates, evidences of indebtedness, or other obligations and any
certificates, receipts, warrants or other instruments representing
rights to receive, purchase, or subscribe for the same, or evidencing
or representing any other rights or interests therein, or in any
property or assets.
"Oral Instructions" shall mean an authorization, instruction, approval,
item or set of data, or information of any kind transmitted to the
Custodian in person or by telephone, telegram, telecopy or other
mechanical or documentary means lacking original signature, by an
officer or employee of the Trust or an employee of Nottingham in its
capacity as Accounting Services Agent and Administrator, or employee of
NCSS in its capacity as Transfer Agent and Dividend Disbursing Agent,
who has been authorized by a resolution of the Board of Trustees of the
Trust or the Board of Directors of Nottingham or NCSS, as the case may
be, to give Written Instructions on behalf of the Trust.
"Written Instructions" shall mean an authorization, instruction,
approval, item or set of data, or information of any kind transmitted
to the Custodian containing original signatures or a copy of such
document transmitted by telecopy including transmission of such
signature, reasonably believed by the Custodian to be the signature of
an officer or employee of the Trust or an employee of Nottingham in its
capacity as Accounting Services Agent and Administrator, or an employee
of NCSS in its capacity as Transfer Agent and Dividend Disbursing
Agent, who has been authorized by a resolution of the Board of Trustees
of the Trust or Board of Directors of Nottingham or NCSS, as the case
may be, to give Written Instructions on behalf of the Trust.
"Securities Depository" shall mean a system for the central handling of
securities where 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 securities.
"Officers' Certificate" shall mean a direction, instruction or
certification in writing signed in the name of the Trust by the
President, Secretary or Assistant Secretary, or the Treasurer or
Assistant Treasurer of the Trust, or any other persons duly authorized
to sign by the Board of Trustees or the Executive Committee of the
Trust.
"Book-Entry Securities" shall mean securities issued by the Treasury of
the United States of America and federal agencies of the United States
of America which are maintained in the book-entry system as provided in
Subpart O of Treasury Circular No. 300, 31 CFR 306, Subpart B of 31 CFR
Part 350, and the book-entry regulations of federal agencies
substantially in the form of Subpart O, and the term Book-Entry Account
shall mean an account maintained by a Federal Reserve Bank in
accordance with the aforesaid Circular and regulations.
2. DOCUMENTS TO BE FILED BY TRUST.
The Trust shall from time to time file with the Custodian a certified
copy of each resolution of its Board of Trustees authorizing execution
of Written Instructions and the number of signatories required,
together with certified signatures of the officers and other
signatories authorized to sign, which shall constitute conclusive
evidence of the authority of the officers and other signatories
designated therein to act, and shall be considered in full force and
effect and the Custodian shall be fully protected in acting in reliance
thereon until it receives a new certified copy of a resolution adding
or deleting a person or persons with authority to give Written
Instructions. If the certifying officer is authorized to sign Written
Instructions, the certification shall also be signed by a second
officer of the Trust. The Trust also agrees that the Custodian may rely
on Written Instructions received from Nottingham and/or NCSS, as agent
for the Trust, if those Written Instructions are given by persons
having authority pursuant to resolutions of the Board of Trustees of
the Trust.
The Trust shall from time to time file with the Custodian a certified
copy of each resolution of the Board of Trustees authorizing the
transmittal of Oral Instructions and specifying the person or persons
authorized to give Oral Instructions in accordance with this Agreement.
The Trust agrees that the Custodian may rely on Oral Instructions
received from Nottingham and/or NCSS, as agent for the Trust, if those
instructions are given by persons reasonably believed by the Custodian
to have such authority. Any resolution so filed with the Custodian
shall be considered in full force and effect and the Custodian shall be
fully protected in acting in reliance thereon until it actually
receives a new certified copy of a resolution adding or deleting a
person or persons with authority to give Oral Instructions. If the
certifying officer is authorized to give Oral Instructions, the
certification shall also be signed by a second officer of the Trust.
3. RECEIPT AND DISBURSEMENT OF FUNDS.
(a) The Custodian shall open and maintain a separate account or
accounts in the name of each Fund of the Trust, subject only
to draft or order by the Custodian acting pursuant to the
terms of this Agreement. The Custodian shall hold in
safekeeping in such account or accounts, subject to the
provisions hereof, all funds received by it from or for the
account of the Trust. The Trust will deliver or cause to be
delivered to the Custodian all funds owned by the Trust,
including cash received for the issuance of its shares during
the period of this Agreement. The Custodian shall make
payments of funds to, or for the account of, the Trust from
such funds only:
(i)for the purchase of securities for the portfolio of the
Trust upon the delivery of such securities to the Custodian
(or to any bank, banking firm or trust company doing
business in the United States and designated by the
Custodian as its sub-custodian or agent for this purpose or
any foreign bank qualified under Rule 17f-5 of the
Investment Company Actof 1940 and acting as sub-custodian),
registered (if registerable) in the name of the Trust or of
the nominee of the Custodian referred to in Section 8 or in
proper form for transfer, or, in the case of repurchase
agreements entered into between the Trust and the Custodian
or other bank or broker dealer (A) against delivery of the
securities either in certificate form or through an entity
crediting the Custodian's account at the Federal Reserve
Bank with such securities or (B) upon delivery of the
receipt evidencing purchase by the Trust of securities
owned by the Custodian along with written evidence of the
agreement by the Custodian bank to repurchase such
securities from the Trust;
(ii) for the payment of interest, dividends, taxes, management
or supervisory fees, or operating expenses (including,
without limitation, Board of Trustees' fees and expenses,
and fees for legal, accounting and auditing services)
and for redemption or repurchase of shares of the Trust;
(iii) for payments in connection with the conversion, exchange
or surrender of securities owned or subscribed to by the
Trust held by or to be delivered to the Custodian;
(iv) for the payment to any bank of interest on all or any
portion of the principal of any loan made by such bank to
the Trust;
(v) for the payment to any person, firm or corporation who
has borrowed the Trust's portfolio securities the amount
deposited with the Custodian as collateral for such
borrowing upon the delivery of such securities to the
Custodian, registered (if registerable) in the name of the
Trust or of the nominee of the Custodian referred to in
Section 8 or in proper form for transfer; or
(vi) for other proper purposes of the Trust.
Before making any such payment the Custodian shall receive
(and may rely upon) Written Instructions or Oral Instructions
directing such payment and stating that it is for a purpose
permitted under the terms of this subsection (a). In respect
of item (vi), the Custodian will take such action only upon
receipt of an Officers' Certificate and a certified copy of a
resolution of the Board of Trustees or the Executive Committee
of the Trust signed by an officer of the Trust and certified
by the Secretary or an Assistant Secretary, specifying the
amount of such payment, setting forth the purpose for which
such payment is to be made. In respect of item (v), the
Custodian shall make payment to the borrower of securities
loaned by the Trust of part of the collateral deposited with
the Custodian upon receipt of Written Instructions from the
Trust or Nottingham stating that the market value of the
securities loaned has declined and specifying the amount to be
paid by the Custodian without receipt or return of any of the
securities loaned by the Trust. In respect of item (i), in the
case of repurchase agreements entered into with a bank which
is a member of the Federal Reserve System, the Custodian may
transfer funds to the account of such bank, which may be
itself, prior to receipt of written evidence that the
securities subject to such repurchase agreement have been
transferred by book-entry to the Custodian's non-proprietary
account at the Federal Reserve Bank, or in the case of
repurchase agreements entered into with the Custodian, of the
safekeeping receipt and repurchase agreement, provided that
such securities have in fact been so transferred by
book-entry, or in the case of repurchase agreements entered
into with the Custodian, the safekeeping receipt is received
prior to the close of business on the same day.
(b) Notwithstanding anything herein to the contrary, the Custodian
may at any time or times with the written approval of the
Board of Trustees, appoint (and may at any time remove without
the written approval of the Trust) any other bank or trust
company as its sub-custodian or agent to carry out such of the
provisions of Subsection (a) of this Section 3 as instructions
from the Trust may from time to time request; provided,
however, that the appointment of such sub-custodian or agent
shall not relieve the Custodian of any of its responsibilities
hereunder; and provided, further, that the Custodian shall not
enter into any arrangement with any subcustodian unless such
sub-custodian meets the requirements of Section 26 of the
Investment Company Act of 1940 and Rule 17f-5 thereunder, if
applicable.
(c) The Custodian is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money
received by the Custodian for the accounts of the Trust.
4. RECEIPT OF SECURITIES.
(a) The Custodian shall hold in safekeeping in a separate account,
and physically segregated at all times from those of any other
persons, firms, corporations or trusts or any other series of
the Trust, pursuant to the provisions hereof, all securities
received by it from or for the account of each series of the
Trust, and the Trust will deliver or cause to be delivered to
the Custodian all securities owned by the Trust. All such
securities are to be held or disposed of by the Custodian
under, and subject at all times to the instructions pursuant
to, the terms of this Agreement. The Custodian shall have no
power or authority to assign, hypothecate, pledge, lend or
otherwise dispose of any such securities and investments,
except pursuant to instructions and only for the account of
the Trust as set forth in Section 5 of this Agreement.
(b) Notwithstanding anything herein to the contrary, the Custodian
may at any time or times with the written approval of the
Board of Trustees, appoint (and may at any time without the
written approval of such Board of Trustees remove) any other
bank or trust company as its sub-custodian or agent to carry
out such of the provisions of Subsection (a) of this Section 4
and of Section 5 of this Agreement, as instructions may from
time to time request, provided, however, that the appointment
of such sub-custodian or agent shall not relieve the Custodian
of any of its responsibilities hereunder, and provided,
further, that the Custodian shall not enter into arrangement
with any sub-custodian unless such sub-custodian meets the
requirements of Section 26 of the Investment Company Act of
1940 or Rule 17f-5 thereunder, if applicable.
5. TRANSFER, EXCHANGE, REDELIVERY, ETC. OF SECURITIES.
The Custodian shall have sole power to release or deliver any
Securities of the Trust held by it pursuant to this Agreement. The
Custodian agrees to transfer, exchange or deliver Securities held by it
on behalf of the Trust hereunder only:
(a) for sales of such Securities for the account of the Trust upon
receipt by the Custodian of Payment therefor;
(b) when such securities mature or are called, redeemed or retired
or otherwise become payable;
(c) for examination by any broker selling any such securities in
accordance with "street delivery" custom;
(d) in exchange for or upon conversion into other Securities alone
or other securities and cash whether pursuant to any plan of
merger, consolidation, reorganization, recapitalization or
readjustment, or otherwise;
(e) upon conversion of such Securities pursuant to their terms
into other Securities;
(f) upon exercise of subscription, purchase or other similar
rights represented by such Securities;
(g) for the purpose of exchanging interim receipts for temporary
Securities for definitive securities;
(h) for the purpose of effecting a loan of the portfolio
Securities to any person, firm, corporation or trust upon the
receipt by the Custodian of cash or cash equivalent collateral
at least equal to the market value of the securities loaned;
(i) to any bank for the purpose of collateralizing the obligation
of the Trust to repay any moneys borrowed by the Trust from
such bank; provided, however, that the Custodian may at the
option of such lending bank keep such collateral in its
possession, subject to the rights of such bank given to it by
virtue of any promissory note or agreement executed and
delivered by the Trust to such bank; or
(j) for other proper purposes of the Trust.
As to any deliveries made by the Custodian pursuant to items (a), (b),
(c), (d), (e), (f), (g) and (h), Securities or funds receivable in
exchange therefor shall be deliverable to the Custodian. Before making
any such transfer, exchange or delivery, the Custodian shall receive
(and may rely upon) instructions requesting such transfer, exchange, or
delivery and stating that it is for a purpose permitted under the terms
(a), (b), (c), (d), (e), (f), (g), (h), or (i) of this Section 5, and,
in respect of item (j), upon receipt of instructions of a certified
copy of a resolution of the Board of Trustees of the Trust, signed by
an officer of the Trust and certified by its Secretary or an Assistant
Secretary, specifying the Securities to be delivered, setting forth the
purpose for which such delivery is to be made, declaring such purpose
to be a proper purpose of the Trust, and naming the person or persons
to whom delivery of such Securities shall be made. In respect of item
(h), the instructions shall state the market value of the Securities to
be loaned and the corresponding amount of collateral to be deposited
with the Custodian; thereafter, upon receipt of instructions stating
that the market value of the Securities loaned has increased and
specifying the amount of increase, the Custodian shall collect from the
borrower additional cash collateral in such amount.
6. FEDERAL RESERVE BOOK-ENTRY SYSTEM.
Notwithstanding any other provisions of this Agreement, it is expressly
understood and agreed that the Custodian is authorized in the
performance of its duties hereunder to deposit in the book-entry
deposit system operated by the Federal Reserve Bank (the "System"),
United States government, instrumentality and agency securities and any
other Securities deposited in the System and to use the facilities of
the System, as permitted by Rule 17f-4 under the Investment Company Act
of 1940, in accordance with the following terms and provisions:
(a) The Custodian may keep Securities of the Trust in the System
provided that such Securities are represented in an account
("Account") of the Custodian's in the System which shall not
include any assets of the Custodian other than assets held in
a fiduciary or custodian capacity.
(b) The records of the Custodian with respect to the participation
in the System through the Custodian shall identify by
Book-Entry Securities belonging to the Trust which are
included with other Securities deposited in the Account and
shall at all times during the regular business hours of the
Custodian be open for inspection by duly authorized officers,
employees or agents of the Trust and employees and agents of
the Securities and Exchange Commission.
(c) The Custodian shall pay for Securities purchased for the
account of the Trust upon:
(i) receipt of advice from the System that such Securities
have been transferred to the Account; and
(ii)the making of an entry on the records of the Custodian
to reflect such payment and transfer for the account of
the Trust. The Custodian shall transfer Securities sold
for the account of the Trust upon:
(1)receipt of advice from the System that payment for
such Securities has been transferred to the
Account; and
(2)the making of an entry on the records of the
Custodian to reflect such transfer and payment for
the account of the Trust. The Custodian shall
send the Trust a confirmation of any transfers to
or from the account of the Trust.
(d) The Custodian will provide the Trust with any report obtained
by the Custodian on the System's accounting system, internal
accounting control and procedures for safeguarding Securities
deposited in the System. The Custodian will provide the Trust
with reports by independent public accountants on the
accounting system, internal accounting control and procedures
for safeguarding Securities, including Securities deposited in
the System relating to the services provided by the Custodian
under this Agreement; such reports shall detail material
inadequacies disclosed by such examination, and, if there are
no such inadequacies, shall so state, and shall be of such
scope and in such detail as the Trust may reasonably require
and shall be of sufficient scope to provide reasonable
assurance that any material inadequacies would be disclosed.
7. USE OF CLEARING FACILITIES.
Notwithstanding any other provisions of the Agreement, the Custodian
may, in connection with transactions in portfolio Securities by the
Trust, use the facilities of the Depository Trust Company ("DTC"), and
the Participants Trust Company ("PTC"), as permitted by Rule 17f-4
under the Investment Company Act of 1940, if such facilities have been
approved by the Board of Trustees of the Trust in accordance with the
following:
(a) DTC and PTC may be used to receive and hold eligible
Securities owned by the Trust;
(b) payment for Securities purchased may be made through the
clearing medium employed by DTC and PTC for transactions of
participants acting through them;
(c) Securities of the Trust deposited in DTC and PTC will at all
times be segregated from any assets and cash controlled by the
Custodian in other than a fiduciary or custodian capacity but
may be commingled with other assets held in such capacities.
Subject to the provisions of the Agreement with regard to
instructions, the Custodian will pay out money only upon
receipt of Securities or notification thereof and will deliver
Securities only upon the receipt of money or notification
thereof;
(d) all books and records maintained by the Custodian which relate
to the participation in DTC and PTC shall identify by
Book-Entry Securities belonging to the Trust which are
deposited in DTC and PTC and shall at all times during the
Custodian's regular business hours be open to inspection by
the duly authorized officers, employees, agents and auditors,
and the Trust will be furnished with all the information in
respect of the services rendered to it as it may require;
(e) the Custodian will make available to the Trust copies of any
internal control reports concerning DTC and PTC delivered to
it by either internal or external auditors within ten days
after receipt of such a report by the Custodian; and
(f) confirmations of transactions using the facilities of DTC and
PTC shall be provided as set forth in Rule 17f-4 of the
Investment Company Act of 1940.
8. CUSTODIAN'S ACTS WITHOUT INSTRUCTIONS.
Unless and until the Custodian receives instructions to the contrary,
the Custodian shall on behalf of the Trust:
(a) Present for payment all coupons and other income items held by
it for the account of the Trust which call for payment upon
presentation and hold the funds received by it upon such
payment for the Trust;
(b) collect interest and cash dividends received, with notice to
the Trust, for the accounts of the Trust;
(c) hold for the accounts of the Trust hereunder all stock
dividends, rights and similar Securities issued with respect
to any securities held by it hereunder;
(d) execute as agent on behalf of the Trust all necessary
ownership certificates required by the Internal Revenue Code
or the Income Tax Regulations of the United States Treasury
Department or under the laws of any state now or hereafter in
effect, inserting the name of such certificates as the owner
of the Securities covered thereby, to the extent it may
lawfully do so;
(e) transmit promptly to the Trust all reports, notices and other
written information received by the Custodian from or
concerning issuers of the portfolio Securities; and
(f) collect from the borrower the Securities loaned and delivered
by the Custodian pursuant to item (h) of Section 5 hereof, any
interest or cash dividends paid on such Securities, and all
stock dividends, rights and similar Securities issued with
respect to any such loaned Securities.
With respect to Securities of foreign issuers, it is expected that the
Custodian will use its best efforts to effect collection of dividends,
interest and other income, and to notify the Trust of any call for
redemption, offer of exchange, right of subscription, reorganization,
or other proceedings affecting such Securities, or any default in
payments due thereon. It is understood, however, that the Custodian
shall be under no responsibility for any failure or delay in effecting
such collections or giving such notice with respect to Securities of
foreign issuers, regardless of whether or not the relevant information
is published in any financial service available to it unless (a) such
failure or delay is due to the Custodian's or any sub-custodians'
negligence or (b) any relevant sub-custodian has acted in accordance
with established industry practices. Collections of income in foreign
currency are, to the extent possible, to be converted into United
States dollars unless otherwise instructed in writing, and in effecting
such conversion the Custodian may use such methods or agencies as it
may see fit, including the facilities of its own foreign division at
customary rates. All risk and expenses incident to such collection and
conversion is for the accounts of the Trust and the Custodian shall
have no responsibility for fluctuations in exchange rates affecting any
such conversion.
9. REGISTRATION OF SECURITIES.
Except as otherwise directed by instructions, the Custodian shall
register all Securities, except such as are in bearer form, in the name
of a registered nominee of the Custodian, as defined in the Internal
Revenue Code and any Regulation of the Treasury Department issued
thereunder or in any provision of any subsequent Federal tax law
exempting such transaction from liability for stock transfer taxes, and
shall execute and deliver all such certificates in connection therewith
as may be required by such laws or Regulations or under the laws of any
State. The Custodian shall use its best efforts to the end that the
specific securities held by it hereunder shall be at all times
identifiable in its records.
The Trust, Nottingham, or NCSS shall from time to time furnish to the
Custodian appropriate instruments to enable the Custodian to hold or
deliver in proper form for transfer, or to register in the name of its
registered nominee, any securities which it may hold for the accounts
of the Trust and which may from time to time be registered in the name
of the Trust.
10. SEGREGATED ACCOUNT.
The Custodian shall upon receipt of written instructions from the
Trust, Nottingham, or NCSS establish and maintain a segregated account
or accounts for and on behalf of the Trust, into which account or
accounts may be transferred cash and/or Securities, including
Securities maintained in an account by the Custodian pursuant to
Section 4 hereof,
(i) in accordance with the provisions of any agreement
among the Trust, the Custodian and a broker-dealer
registered under the Securities and Exchange Act of
1934 and a member of the NASD (or any futures
commission merchant registered under the Commodity
Exchange Act), relating to compliance with the rules
of The Options Clearing Corporation and of any
registered national securities exchange (or the
commodity Futures Trading Commission or any
registered contract market), or of any similar
organization or organizations, regarding escrow or
other arrangements in connection with transactions
by the Trust;
(ii) for purposes of segregating cash or government
securities in connection with options purchased, sold
or written by the Trust or commodity futures
contracts or options thereon purchased or sold by the
Trust;
(iii) for the purposes of compliance by the Trust with the
procedures required by the Investment Company Act
Release No. 10666, or any subsequent release or
releases of the Securities and Exchange Commission
relating to the maintenance of segregated accounts by
registered investment companies; and
(iv) for other proper corporate purposes, but only, in the
case of clause (iv), upon receipt of, in addition to
an Officer's Certificate, a certified copy of a
resolution of the Board of Trustees signed by an
officer of the Trust and certified by the Secretary
or an Assistant Secretary, setting forth the purpose
or purposes of such segregated account and declaring
such purposes to be proper corporate purposes.
11. VOTING AND OTHER ACTIONS.
Neither the Custodian nor any nominee of the Custodian shall vote any
of the Securities held hereunder by or for the accounts of the Trust,
except in accordance with instructions. The Custodian shall execute and
deliver, or cause to be executed and delivered, to the appropriate
investment advisor of each series of the Trust, all notices, proxies
and proxy soliciting materials with relation to such Securities
(excluding any Securities loaned and delivered by the Custodian
pursuant to item (h) of Section 5 hereof), such proxies to be executed
by the registered holder of such Securities (if registered otherwise
than in the name of the Trust), but without indicating the manner in
which such proxies are to be voted. Such proxies shall be delivered by
regular mail to the appropriate investment advisor of each series of
the Trust.
12. TRANSFER TAX AND OTHER DISBURSEMENTS.
The Trust shall pay or reimburse the Custodian from time to time for
any transfer taxes payable upon transfers of securities made hereunder
and for all other necessary and proper disbursements and expenses made
or incurred by the Custodian in the performance of this Agreement. The
Custodian shall execute and deliver such certificates in connection
with Securities delivered to it or by it under this Agreement as may be
required under the provisions of the Internal Revenue Code and any
Regulations of the Treasury Department issued thereunder, or under the
laws of any State, to exempt from taxation any exemptible transfers
and/or deliveries of any such securities.
13. CONCERNING THE CUSTODIAN.
(a) The Custodian's compensation shall be paid by the Trust. The
Custodian shall not be liable for any action taken in good
faith upon receipt of instructions as herein defined or a
certified copy of any resolution of the Board of Trustees, and
may rely on the genuineness of any such document which it may
in good faith believe to have been validly executed.
(b) The Custodian shall not be liable for any loss or damage,
resulting from its action or omission to act or otherwise,
except for any such loss or damage arising out of its own
negligence or willful misconduct and except that the Custodian
shall be responsible for the acts of any sub-custodian, or
agent appointed hereunder and approved by the Board of
Trustees of the Trust. At any time, the Custodian may seek
advice from legal counsel for the Trust whose legal fees shall
be paid at the sole expense of the Trust, with respect to any
matter arising in connection with this Agreement, and it shall
not be liable for any action taken or not taken or suffered by
it in good faith in accordance with the opinion of counsel for
the Trust. The Trust and not the Custodian shall be
responsible for any fee or charges by counsel for the Trust in
connection with any such opinion rendered to the Custodian.
(c) Without limiting the generality of the foregoing, the
Custodian shall be under no duty or obligation to inquire
into, and shall not be liable for:
(i) The validity of the issue of any Securities purchased
by or for the Trust, the legality of the purchase
thereof, or the propriety of the amount paid
therefor;
(ii) The legality of the issue or sale of any Securities
by or for the Trust, or the propriety of the amount
for which the same are sold;
(iii) The legality of the issue or sale of any shares of
the Trust, or the sufficiency of the amount to be
received therefor;
(iv) The legality of the redemption of any shares of the
Trust, or the propriety of the amount to be paid
therefor;
(v) The legality of the declaration of any dividend or
distribution by the Trust, or the legality of the
issue of any Securities of the Trust in payment of
any dividend or distribution in shares;
(vi) The legality of the delivery of any Securities held
for the Trust for the purpose of collateralizing the
obligation of the Trust to repay any moneys borrowed
by the Trust; or
(vii) The legality of the delivery of any Securities held
for the Trust for the purpose of lending said
securities to any person, firm or corporation.
(d) The Custodian shall not be under any duty or obligation 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 by
the Custodian on behalf of the Trust, unless and until
(i) the Custodian shall be directed to take such action
by written instructions signed in the name of the
Trust on behalf of the Trust by one of its executive
officers; and
(ii) the Custodian shall be assured to its satisfaction of
reimbursement of its costs and expenses in connection
with any such action.
(e) The Custodian shall not be under any duty or obligation to
ascertain whether any securities at any time delivered to or
held by it for the account of the Trust, are such as may
properly be held by the Trust under the provisions of the
Trust's Declaration of Trust or By-Laws as amended from time
to time.
(f) The Trust agrees to indemnify and hold harmless the Custodian
and its nominees, sub-custodians, depositories and agent from
all taxes, charges, expenses, assessments, liabilities, and
losses (including counsel fees) incurred or assessed against
it or its nominees, sub-custodians, depositories and agents in
connection with the performance of this Agreement, except such
as may arise from its or its nominee's, sub-custodian's,
depositories' and agent's own negligent action, negligent
failure to act, breach of this agreement or willful
misconduct. The Custodian is authorized to charge any account
of the Trust for such items; provided, however, that, except
for overdrafts as to which the Custodian shall have the
immediate right of offset, prior to charging any such account
for such items, the Custodian shall first have forwarded an
invoice for such item to the Trust and 30 days shall have
elapsed from the date of such invoice to the Trust without
payment of the same having been received by the Custodian. In
the event of any advance of funds for any purpose made by the
Custodian resulting from orders or instructions of the Trust,
or in the event that the Custodian or its nominees,
sub-custodians, depositories and agents shall incur or be
assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this
Agreement, except such as may arise from its or its nominee's
own negligent action, negligent failure to act or willful
misconduct any property at any time held for the accounts of
the Trust shall be security therefor. Nothing in this
paragraph, however, shall be deemed to apply to transaction
and asset holding fees or out of pocket expenses of the
Custodian which are payable by Nottingham and/or NCSS, and as
to such fees and expenses the Custodian shall have no right of
offset or security under this paragraph.
(g) The Custodian agrees to indemnify and hold harmless the Trust
and Trust's Trustees and officers from all taxes, charges,
expenses, assessments, claims liabilities, and losses
(including counsel fees) incurred or assumed against any of
them as a result of any breach or violation of this Agreement
by the Custodian or any act or omission by the Custodian or
its Trustees, officers, employees and agents and resulting
from their negligence or willful misconduct.
(h) In the event that, pursuant to this Agreement, instructions
direct the Custodian to pay for securities on behalf of the
Trust, the Trust hereby grants to the Custodian a security
interest in such Securities, until the Custodian has been
reimbursed by the Trust in immediately available funds. The
instructions designating the Securities to be paid for shall
be considered the requisite description and designation of the
Securities pledged to the Custodian for purposes of the
requirements of the Uniform Commercial Code.
(i) The Custodian represents that it is qualified to act as such
under section 26(a) of the Investment Company Act of 1940.
14. REPORTS BY THE CUSTODIAN.
(a) The Custodian shall furnish the Trust and the appropriate
investment advisor of each series of the Trust, daily with a
statement summarizing all transactions and entries for the
accounts of the Trust. The Custodian shall furnish the Trust
at the end of every month with a list of the portfolio
Securities held by it as Custodian for the Trust, adjusted for
all commitments confirmed by instructions as of such time. The
books and records of the Custodian pertaining to its actions
under this Agreement shall be open to inspection and audit at
reasonable times by officers of the Trust, its independent
public accountants and officers of its investment advisers.
(b) The Custodian will maintain such books and records relating to
transactions effected by it as are required by the Investment
Company Act of 1940, as amended, and any rule or regulation
thereunder; or by any other applicable provision of the law to
be maintained by the Trust or its Custodian, with respect to
such transactions, and preserving or causing to be preserved,
any such books and records for such periods as may be required
by any such rule or regulation.
15. TERMINATION OR ASSIGNMENT.
This agreement may be terminated by the Trust, or by the Custodian, on
sixty (60) days' notice, given in writing and sent by registered mail
to the Custodian, or to the Trust, as the case may be, at the address
hereinafter set forth. Upon any termination of this Agreement, pending
appointment by the Trust of a successor to the Custodian or a vote of
the shareholders of the Trust to dissolve or to function without a
Custodian of its funds, the Custodian shall not deliver funds,
Securities or other property of the Trust to the Trust, but may deliver
them to a bank or trust company of its own selection having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report of not less than ten million dollars ($10,000,000) and
otherwise qualified to act as a custodian to a registered investment
company as a Custodian for the Trust to be held under terms similar to
those of this Agreement; provided, however, that the Custodian shall
not be required to make any such delivery or payment until full payment
shall have been made to the Custodian of all its contractual fees,
compensations, costs and expenses, except for fees and expenses all as
set forth in Section 13 of this Agreement.
16. MISCELLANEOUS.
(a) Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Custodian, shall
be sufficiently given if addressed to the Custodian and mailed
or delivered to it at its office at First Union National Bank
of North Carolina, 401 South Tryon Street, Charlotte, North
Carolina 28288, or at such other place as the Custodian may
from time to time designate in writing.
(b) Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Trust, shall be
sufficiently given if addressed to the Trust and mailed or
delivered to it at 105 N. Washington Street, Rocky Mount,
North Carolina 27802, or at-such other place as the Trust may
from time to time designate in writing.
(c) 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 authorized or
approved by a resolution of the Board of Trustees of the
Trust.
(d) 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 Trust without the written consent of the Custodian or
by the Custodian without the written consent of the Trust,
authorized or approved by a resolution of its Board of
Trustees.
(e) 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 but one instrument.
(f) This Agreement and the rights and obligations of the Trust and
the Custodian hereunder shall be construed and interpreted in
accordance with the laws of the State of North Carolina.
(g) The Declaration of Trust of the Trust has been filed with the
Secretary of State of the Commonwealth of Massachusetts. The
obligations of the Trust on behalf of the Funds are not
personally binding upon, nor shall resort be had to the
private property of any of the Trustees, shareholders,
officers, employees or agents of the Trust, but only the
Trust's property shall be bound.
<PAGE>
IN WITNESS WHEREOF, the Trust and the Custodian have caused this Agreement to be
signed and witnessed by duly authorized persons as of the date first written
above. Executed in several counterparts, each of which is an original.
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
Attest:_____________________
By:_______________________________
Title:____________________________
SHANKLIN INVESTMENT TRUST
Attest:_____________________
By:_______________________________
Title:____________________________
EXHIBIT 9A
FUND ACCOUNTING
AND COMPLIANCE ADMINISTRATION
AGREEMENT
THIS AGREEMENT, made and entered into as of the ____ day of ___________, 1998,
by and between SHANKLIN INVESTMENT TRUST, a Massachusetts business trust (the
"Trust"), and THE NOTTINGHAM COMPANY, INC., a North Carolina corporation (the
"Administrator").
WHEREAS, the Trust is an open-end management investment company of the series
type which is registered under the Investment Company Act of 1940 (the "1940
Act"); and
WHEREAS, the Administrator is in the business of providing administrative
services to investment companies.
NOW THEREFORE, the Trust and the Administrator do mutually promise and agree as
follows:
1. Employment. The Trust hereby employs Administrator and its subsidiary NC
Fund Services, LLC ("NCFS") to act as fund accountant and fund
administrator for each Fund of the Trust. Administrator, at its own
expense, shall render the services and assume the obligations herein set
forth subject to being compensated therefore as herein provided.
2. Delivery of Documents. The Trust has furnished the Administrator with
copies properly certified or authenticated of each of the following:
a) The Trust's Declaration of Trust, as filed with the State of
Massachusetts (such Declaration, as presently in effect and as it
shall from time to time be amended, is herein called the
"Declaration");
b) The Trust's By-Laws (such By-Laws, as presently in effect and as they
shall from time to time be amended, are herein called the "By-Laws");
c) Resolutions of the Trust's Board of Trustees authorizing the
appointment of the Administrator and approving this Agreement; and
d) The Trust's Registration Statement on Form N-1A under the 1940 Act and
under the Securities Act of 1933 as amended, (the "1933 Act"),
including all exhibits, relating to shares of beneficial interest of,
and containing the Prospectus of, each Fund of the Trust (herein
called the "Shares") as filed with the Securities and Exchange
Commission and all amendments thereto.
The Trust will furnish the Administrator with copies, properly certified or
authenticated, of all amendments of or supplements to the foregoing.
3. Duties of the Administrator. Subject to the policies and direction of the
Trust's Board of Trustees, the Administrator will provide a continuous
executive management program and day to day supervision for each of the
Trust's Funds. Services to be provided shall be in accordance with the
Trust's organizational and registration documents as listed in paragraph 2
hereof and with the Prospectus of each Fund of the Trust.
The Administrator further agrees that it:
a) Will conform with all applicable Rules and Regulations of the
Securities and Exchange Commission and will, in addition, conduct its
activities under this Agreement in accordance with regulations of any
other Federal and State agencies which may now or in the future have
jurisdiction over its activities;
b) Will maintain, except as may be required to be maintained by third
parties hired by the Trust under Rule 31a-3 of the 1940 Act, the
account books and records of the Trust and each Fund of the Trust as
required by Rule 31a-1 of the 1940 Act and will preserve such records
in accordance with Rule 31a-2 of the 1940 Act;
c) Will provide, at its expense the necessary non-executive personnel and
data processing equipment and software to perform the Portfolio
Accounting Services, Expense Accrual and Payment Services, Fund
Valuation and Financial Reporting Services, Tax Accounting Services,
Compliance Control Services Registration Services, SEC Filing
Services, and Minutes, Proxy Material Services shown on Exhibit A
hereof;
d) Will provide, at its expense, certain executive personnel for the
Trust as may be agreed upon from time to time with the Board of
Trustees; and
e) Will provide all office space and general office equipment necessary
for the activities of the Trust except as may be provided by third
parties pursuant to separate agreements with the Trust.
Notwithstanding anything contained in this Agreement to the contrary, the
Administrator (including its directors, officers, employees and agents) shall
not be required to perform any of the duties of, assume any of the obligations
or expenses of, or be liable for any of the acts or omissions of, any investment
advisor of a Fund of the Trust or other third party subject to separate
agreements with the Trust. The Administrator shall not be responsible hereunder
for the administration of the Code of Ethics of the Trust which shall be under
the responsibility of the investment advisors, except insofar as the Code of
Ethics applies to the personnel of the Administrator. It is the express intent
of the parties hereto that the Administrator shall not have control over or be
responsible for the placement, investment or reinvestment of the assets of any
Fund of the Trust. The Administrator may from time to time, subject to the
approval of the Trustees (other than with respect to NCFS), obtain at its own
expense the services of consultants or other third parties to perform part or
all of its duties hereunder, and such parties may be affiliates of the
Administrator.
4. Services Not Exclusive. The management and administrative services
furnished by the Administrator hereunder are not to be deemed exclusive,
and the Administrator shall be free to furnish similar services to others
so long as its services under this Agreement are not impaired thereby.
5. Books and Records. In compliance with the requirements of Rule 31a-3 under
the 1940 Act, the Administrator hereby agrees that all records which it
maintains for the Trust are the property of the Trust and further agrees to
surrender promptly to the Trust any of such records upon the Trust's
request.
6. Expenses. During the term of this Agreement, the Administrator will pay all
expenses incurred by it in connection with the performance of its
obligations under this Agreement.
Notwithstanding the foregoing, the Trust shall pay the expenses and costs of the
following:
a) Taxes;
b) Brokerage fees and commissions with regard to portfolio transaction of
the Funds;
c) Interest charges, fees and expenses of the custodian of the Funds'
portfolio securities;
d) Fees and expenses of the Trust's dividend disbursing and transfer
agent;
e) Fees and expenses of the Trust's fund accounting agent and
administrator, in accordance with paragraph 7 herein;
f) Costs, as may be allocable to and agreed upon in advance by the
Trustees and the Administrator, of all non-executive and clerical
personnel and all data processing equipment and software in connection
with the provision of fund accounting and recordkeeping services
functions as contemplated herein;
g) Auditing and legal expenses of the Trust;
h) Cost of maintenance of the Trust's existence as a legal entity;
i) Cost of special forms, stationery and telephone services (but not
telephone equipment)for the Trust;
j) Compensation of Independent Trustees who are not interested persons of
the Trust as that term is defined by law;
k) Costs of Trust meetings;
l) Federal and State registration fees and expenses;
m) Costs of setting in type, printing and mailing Prospectuses, reports
and notices to existing shareholders;
n) The Advisory fees payable to each Funds' Investment Advisor;
o) Direct out-of-pocket costs in connection with Trust activities, such
as the costs of long distance telephone and wire charges, postage and
the printing of special forms and stationery, copying charges,
financial publications used in connection with Trust activities, etc.,
and
p) Other actual out-of-pocket expenses of the Administrator as may be
agreed upon in writing from time to time by the Administrator and the
Trustees.
7. Compensation. For the services provided and the expenses assumed by the
Administrator pursuant to this Agreement, the Trust will pay the
Administrator and the Administrator will accept as full compensation the
administrative fees and expenses as set forth on Exhibit C attached hereto.
Special projects, not included herein and requested in writing by the
Trustees, shall be completed by the Administrator and invoiced to the Trust
as mutually agreed upon.
8.(a)Limitation of Liability. The Administrator shall not be liable for any
loss, damage or liability related to or resulting from the placement,
investment or reinvestment of assets in any Fund of the Trust or the acts
or omissions of any Fund's investment advisor or any other third party
subject to separate agreements with the Trust. Further, the Administrator
shall not be liable for any error of judgment or mistake of law or for any
loss or damage suffered by the Trust in connection with the performance of
this Agreement or any agreement with a third party, except a loss resulting
directly from (i) a breach of fiduciary duty on the part of the
Administrator with respect to the receipt of compensation for services; or
(ii) willful misfeasance, bad faith or gross negligence on the part of the
Administrator in the performance of its duties or from reckless disregard
by it of its duties under this Agreement.
8.(b)Indemnification of Administrator. Subject to the limitations set forth in
this Subsection 8(b), the Trust shall indemnify, defend and hold harmless
(from the assets of the Fund or Funds to which the conduct in question
relates) the Administrator against all loss, damage and liability,
including but not limited to amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and expenses, including reasonable
accountants' and counsel fees, incurred by the Administrator in connection
with the defense or disposition of any action, suit or other proceeding,
whether civil or criminal, before any court or administrative or
legislative body, related to or resulting from this Agreement or the
performance of services hereunder, except with respect to any matter as to
which it has been determined that the loss, damage or liability is a direct
result of (i) a breach of fiduciary duty on the part of the Administrator
with respect to the receipt of compensation for services; or (ii) willful
misfeasance, bad faith or gross negligence on the part of the Administrator
in the performance of its duties or from reckless disregard by it of its
duties under this Agreement (either and both of the conduct described in
clauses (i) and (ii) above being referred to hereinafter as "Disabling
Conduct"). A determination that the Administrator is entitled to
indemnification may be made by (i) a final decision on the merits by a
court or other body before whom the proceeding was brought that the
Administrator was not liable by reason of Disabling Conduct, (ii) dismissal
of a court action or an administrative proceeding against the Administrator
for insufficiency of evidence of Disabling Conduct, or (iii) a reasonable
determination, based upon a review of the facts, that the Administrator was
not liable by reason of Disabling Conduct by, (a) vote of a majority of a
quorum of Trustees who are neither "interested persons" of the Trust as the
quoted phrase is defined in Section 2(a)(19) of the 1940 Act nor parties to
the action, suit or other proceeding on the same or similar grounds that is
then or has been pending or threatened (such quorum of such Trustees being
referred to hereinafter as the "Independent Trustees"), or (b) an
independent legal counsel in a written opinion. Expenses, including
accountants' and counsel fees so incurred by the Administrator (but
excluding amounts paid in satisfaction of judgments, in compromise or as
fines or penalties), shall be paid from time to time by the Fund or Funds
to which the conduct in question related in advance of the final
disposition of any such action, suit or proceeding; provided, that the
Administrator shall have undertaken to repay the amounts so said unless it
is ultimately determined that it is entitled to indemnification of such
expenses under this Subsection 8(b) and if (i) the Administrator shall have
provided security for such undertaking, (ii) the Trust shall be insured
against losses arising by reason of any lawful advances, or (iii) a
majority of the Independent Trustees, or an independent legal counsel in a
written opinion, shall have determined, based on a review of readily
available facts (as opposed to a full trial-type inquiry), that there is
reason to believe that the Administrator ultimately will be entitled to
indemnification hereunder.
As to any matter disposed of by a compromise payment by the Administrator
referred to in this Subsection 8(b), pursuant to a consent decree or
otherwise, no such indemnification either for said payment or for any other
expenses shall be provided unless such indemnification shall be approved
(i) by a majority of the Independent Trustees or (ii) by an independent
legal counsel in a written opinion. Approval by the Independent Trustees
pursuant to clause (i) shall not prevent the recovery from the
Administrator of any amount paid to the Administrator in accordance with
either of such clauses as indemnification of the Administrator is
subsequently adjudicated by a court of competent jurisdiction not to have
acted in good faith in the reasonable belief that the Administrator's
action was in or not opposed to the best interests of the Trust or to have
been liable to the Trust or its Shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in its conduct under the Agreement.
The right of indemnification provided by this Subsection 8(b) shall not be
exclusive of or affect any of the rights to which the Administrator may be
entitled. Nothing contained in this Subsection 8(b) shall affect any rights
to indemnification to which Trustees, officers or other personnel of the
Trust, and other persons may be entitled by contract or otherwise under
law, nor the power of the Trust to purchase and maintain liability
insurance on behalf of any such person.
The Board of Trustees of the Trust shall take all such action as may be
necessary and appropriate to authorize the Trust hereunder to pay the
indemnification required by this Subsection 8(b) including, without
limitation, to the extent needed, to determine whether the Administrator is
entitled to indemnification hereunder and the reasonable amount of any
indemnity due it hereunder, or employ independent legal counsel for that
purpose.
8.(c)The provisions contained in Section 8 shall survive the expiration or other
termination of this Agreement, shall be deemed to include and protect the
Administrator and its directors, officers, employees and agents and shall
inure to the benefit of its/their respective successors, assigns and
personal representatives.
9. Duration and Termination. This Agreement shall be continued, effective as
of the date first above written, and shall continue in force and effect for
a period of one year thereafter and shall be continued on its terms from
year to year thereafter unless sooner terminated as permitted herein. This
Agreement may be terminated at any time, without payment of any penalty, by
the Trust or the Administrator upon ninety days' written notice to the
other party.
10. Amendment. This Agreement may be amended by mutual written consent of the
parties. If, at any time during the existence of this Agreement, the Trust
deems it necessary or advisable in the best interests of the Trust that any
amendment of this Agreement be made in order to comply with the
recommendations or requirements of the Securities and Exchange Commission
or state regulatory agencies or other governmental authority, or to obtain
any advantage under state or federal laws, and shall notify the
Administrator of the form of Amendment which it deems necessary or
advisable and the reasons therefor, and if the Administrator declines to
assent to such amendment, the Trust may terminate this Agreement forthwith.
11. Notice. Any notice that is required to be given by the parties to each
other under the terms of this Agreement shall be in writing, addressed or
delivered, or mailed postpaid to the other party at the principal place of
business of such party.
12. Construction. This Agreement shall be governed and enforced in accordance
with the laws of the State of North Carolina. If any provision of this
Agreement, or portion thereof, shall be determined to be void or
unenforceable by any court of competent jurisdiction, then such
determination shall not affect any other provision of this Agreement, or
portion thereof, all of which other provisions and portions thereof shall
remain in full force and effect. If any provision of this Agreement, or
portion thereof, is capable of two interpretations, one of which would
render the provision, or portion thereof, void and the other of which would
render the provision, or portion thereof, valid, then the provision, or
portion thereof, shall have the meaning which renders it valid.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by their duly authorized officers effective as of the date indicated above.
SHANKLIN INVESTMENT TRUST
By:______________________(SEAL)
THE NOTTINGHAM COMPANY, INC.
By:______________________(SEAL)
<PAGE>
Exhibit A
FUND ACCOUNTING AND RECORDKEEPING SERVICES
Portfolio Accounting Services:
(1) Maintain portfolio records on a trade date basis using security trade
information communicated from the investment manager on a timely basis.
(2) For each valuation date, obtain prices from a pricing source approved by
the Board of Trustees and apply those prices to the portfolio positions.
For those securities where market quotations are not readily available, the
Board of Trustees shall approve, in good faith, the method for determining
the fair market value for such securities.
(3) Identify interest and dividend accrual balances as of each valuation date
and calculate gross earnings on investments for the accounting period.
(4) Determine gain/loss on security sales and identify them as to short or long
term status. Account for periodic distributions of gain to shareholders and
maintain undistributed gain or loss balances as of each valuation date.
Expense Accrual and Payment Services:
(5) For each valuation date, calculate the expense accrual amounts as directed
by the Trust as to methodology, rate, or dollar amount.
(6) Issue payments for Fund expenses upon receipt of funds from the Trust's
Custodian.
(7) Account for Fund expenditures and maintain expense accrual balances at the
level of accounting detail specified by the Fund.
(8) Support periodic expense accrual review, i.e., comparison of actual expense
activity versus accrual amounts.
(9) Provide expense accrual and payment reporting.
Fund Valuation and Financial Reporting Services:
(10) Account for Fund share purchases, sales, exchanges, transfers, dividend
reinvestments, and other Fund share activity, for each of the Funds, as
reported by the Trust on a timely basis.
(11) Determine net investment income (earnings) for each of the Funds as of each
valuation date. Account for periodic distributions of earnings to
shareholders and maintain undistributed net investment income balances as
of each valuation date.
(12) Maintain a general ledger for each of the Funds in the form defined by the
Trust and produce a set of financial statements as may be agreed upon from
time to time as of each valuation date.
(13) For each day the Funds are opened as defined in the prospectuses, determine
the net asset value of each of the Funds according to the accounting
policies and procedures set forth in the prospectuses.
(14) Calculate per share net asset value, per share net earnings, and other per
share amounts reflective of fund operation at such time as required by the
nature and characteristics of the Funds. Perform the calculations using the
number of shares outstanding reported by the Trust to be applicable at the
time of calculation.
(15) Communicate, at an agreed upon time, the per share price for each valuation
date to parties as agreed upon from time to time.
(16) Prepare monthly reports which document the adequacy of accounting detail to
support month-end ledger balances.
Tax Accounting Services:
(17) Maintain tax accounting records for each of the Funds' investment
portfolios so as to support tax reporting required for IRS defined
regulated investment companies.
(18) Maintain tax lot detail for the investment portfolio.
(19) Calculate taxable gain/loss on security sales using the tax cost basis
defined for each Fund.
(20) Report the taxable components of income and capital gains distributions to
the Trust to support tax reporting to the shareholders.
Compliance Control Services:
(21) Maintain accounting records to support compliance monitoring by the Trust.
(22) Support reporting to regulatory bodies and support financial statement
preparation by making the Fund accounting records available to the Trust,
the Securities and Exchange Commission, and the outside auditors.
(23) Maintain accounting records according to the Investment Company Act of 1940
and regulations provided thereunder.
Registration Services
(24) Prepare all reports and filings required to maintain the registration and
qualification of the Fund and its shares under federal and state securities
laws, including the annual amendment to its Registration Statement on From
N-1A containing an updated Prospectus and Statement of Additional
Information.
SEC Filing Services
(25) Prepare and make periodic SEC filings, including From N-SAR, annual and
semi-annual shareholder reports, other shareholder reports, and fidelity
bond amendments but not including preparation and filing of any sales
literature and preparation of President's letter contained in shareholder
reports.
Minutes, Proxy Material Services
(26) Maintenance of minutes and other records of meetings of the Board of
Trustees.
(27) Preparation of any proxy material and related shareholder meetings and
records.
<PAGE>
Exhibit C
ADMINISTRATOR'S COMPENSATION SCHEDULE
For the services delineated in the FUND ACCOUNTING AND COMPLIANCE ADMINISTRATION
AGREEMENT, the Administrator shall be compensated monthly, as of the last day of
each month, within five business days of the month end, a base fee plus a fee
based upon net assets according to the following schedule. The fee is calculated
based upon the average daily net assets of each Fund:
Base fee $2,000 per month
Class Fee: $ 750 per month for each additional Class
Asset based fee
Annual
Net Assets Fee
On the first $100 million 0.150%
On all assets over $100 million 0.125%
Securities pricing
$0.15 per equity per pricing day priced
$0.20 per U.S. Treasury
$0.40 per asset backed security per pricing day
$0.40 per corporate bond per pricing day
$2.00 per equity per month for corporate action
Blue Sky administration
$150 per registration per state per year
Minimum Aggregate Fee
Minimum aggregate fee of $3,000 per month for all fees paid to the
Administrator (excluding securities pricing and blue sky administration),
analyzed monthly.
EXHIBIT 9B
DIVIDEND DISBURSING
AND TRANSFER AGENT
AGREEMENT
THIS AGREEMENT, made and entered into as of the ___ day of ___________, 1998, by
and between SHANKLIN INVESTMENT TRUST, a Massachusetts business trust (the
"Trust"), and NC SHAREHOLDER SERVICES, LLC, a North Carolina limited liability
company (the "Transfer Agent").
WHEREAS, the Trust is an open-end management investment company of the series
type which is registered under the Investment Company Act of 1940 (the "1940
Act"); and
WHEREAS, the Transfer Agent is in the business of providing dividend disbursing,
transfer agent, and shareholder services to investment companies.
NOW THEREFORE, the Trust and the Transfer Agent do mutually promise and agree as
follows:
1. Employment. The Trust hereby employs Transfer Agent to act as dividend
disbursing and transfer agent for each Fund of the Trust. Transfer Agent,
at its own expense, shall render the services and assume the obligations
herein set forth subject to being compensated therefore as herein provided.
2. Delivery of Documents. The Trust has furnished the Transfer Agent with
copies properly certified or authenticated of each of the following:
a) The Trust's Declaration of Trust, as filed with the State of
Massachusetts (such Declaration, as presently in effect and as it
shall from time to time be amended, is herein called the
"Declaration");
b) The Trust's By-Laws (such By-Laws, as presently in effect and as they
shall from time to time be amended, are herein called the "By-Laws");
c) Resolutions of the Trust's Board of Trustees authorizing the
appointment of the Transfer Agent and approving this Agreement; and
d) The Trust's Registration Statement on Form N-1A under the 1940 Act and
under the Securities Act of 1933 as amended, (the "1933 Act"),
including all exhibits, relating to shares of beneficial interest of,
and containing the Prospectus of, each Fund of the Trust (herein
called the "Shares") as filed with the Securities and Exchange
Commission and all amendments thereto.
The Trust will furnish the Transfer Agent with copies, properly certified or
authenticated, of all amendments of or supplements to the foregoing.
3. Duties of the Transfer Agent. Subject to the policies and direction of the
Trust's Board of Trustees, the Transfer Agent will provide day to day
supervision for the dividend disbursing, transfer agent, and shareholder
servicing operations of each of the Trust's Funds. Services to be provided
shall be in accordance with the Trust's organizational and registration
documents as listed in paragraph 2 hereof and with the Prospectus of each
Fund of the Trust. The Transfer Agent further agrees that it:
a) Will conform with all applicable rules and regulations of the
Securities and Exchange Commission and will, in addition, conduct its
activities under this Agreement in accordance with regulations of any
other federal and state agency which may now or in the future have
jurisdiction over its activities.
b) Will provide, at its expense the non-executive personnel and data
processing equipment and software necessary to perform the Shareholder
Servicing functions shown on Exhibit A hereof; and
c) Will provide all office space and general office equipment necessary
for the dividend disbursing, transfer agent, and shareholder servicing
activities of the Trust except as may be provided by third parties
pursuant to separate agreements with the Trust.
Notwithstanding anything contained in this Agreement to the contrary, the
Transfer Agent (including its directors, officers, employees and agents)
shall not be required to perform any of the duties of, assume any of the
obligations or expenses of, or be liable for any of the acts or omissions
of, any investment advisor of a Fund of the Trust or other third party
subject to separate agreements with the Trust. The Transfer Agent shall not
be responsible hereunder for the administration of the Code of Ethics of
the Trust which shall be under the responsibility of the investment
advisors, except insofar as the Code of Ethics applies to the personnel of
the Transfer Agent. It is the express intent of the parties hereto that the
Transfer Agent shall not have control over or be responsible for the
placement (except as specifically directed by a Shareholder of the Trust),
investment or reinvestment of the assets of any Fund of the Trust. The
Transfer Agent may from time to time, subject to the approval of the
Trustees, obtain at its own expense the services of consultants or other
third parties to perform part or all of its duties hereunder, and such
parties may be affiliates of the Transfer Agent.
4. Services Not Exclusive. The management and administrative services
furnished by the Transfer Agent hereunder are not to be deemed exclusive,
and the Transfer Agent shall be free to furnish similar services to others
so long as its services under this Agreement are not impaired thereby.
5. Books and Records. In compliance with the requirements of Rule 31a-3 under
the 1940 Act, the Transfer Agent hereby agrees that all records which it
maintains for the Trust are the property of the Trust and further agrees to
surrender promptly to the Trust any of such records upon the Trust's
request.
6. Expenses. During the term of this Agreement, the Transfer Agent will pay
all expenses incurred by it in connection with the performance of its
obligations under this Agreement.
7. Compensation. For the services provided and the expenses assumed by the
Transfer Agent pursuant to this Agreement, the Trust will pay the Transfer
Agent and the Transfer Agent will accept as full compensation the fees and
expenses as set forth on Exhibit C attached hereto. Special projects, not
included herein and requested in writing by the Trustees, shall be
completed by the Transfer Agent and invoiced to the Trust as mutually
agreed upon.
8. Limitation of Liability. The Transfer Agent shall not be liable for any
loss, damage or liability related to or resulting from the placement
(except as specifically directed by a Shareholder of the Trust), investment
or reinvestment of assets in any Fund of the Trust or the acts or omissions
of any Fund's investment advisor or any other third party subject to
separate agreements with the Trust. Further, the Transfer Agent shall not
be liable for any error of judgment or mistake of law or for any loss or
damage suffered by the Trust in connection with the performance of this
Agreement or any agreement with a third party, except a loss resulting
directly from (i) a breach of fiduciary duty on the part of the Transfer
Agent with respect to the receipt of compensation for services; or (ii)
willful misfeasance, bad faith or gross negligence on the part of the
Transfer Agent in the performance of its duties or from reckless disregard
by it of its duties under this Agreement.
9. Indemnification of Transfer Agent. Subject to the limitations set forth in
this Subsection 9, the Trust shall indemnify, defend and hold harmless
(from the assets of the Fund or Funds to which the conduct in question
relates) the Transfer Agent against all loss, damage and liability,
including but not limited to amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and expenses, including reasonable
accountants' and counsel fees, incurred by the Transfer Agent in connection
with the defense or disposition of any action, suit or other proceeding,
whether civil or criminal, before any court or administrative or
legislative body, related to or resulting from this Agreement or the
performance of services hereunder, except with respect to any matter as to
which it has been determined that the loss, damage or liability is a direct
result of (i) a breach of fiduciary duty on the part of the Transfer Agent
with respect to the receipt of compensation for services; or (ii) willful
misfeasance, bad faith or gross negligence on the part of the Transfer
Agent in the performance of its duties or from reckless disregard by it of
its duties under this Agreement (either and both of the conduct described
in clauses (i) and (ii) above being referred to hereinafter as "Disabling
Conduct"). A determination that the Transfer Agent is entitled to
indemnification may be made by (i) a final decision on the merits by a
court or other body before whom the proceeding was brought that the
Transfer Agent was not liable by reason of Disabling Conduct, (ii)
dismissal of a court action or an administrative proceeding against the
Transfer Agent for insufficiency of evidence of Disabling Conduct, or (iii)
a reasonable determination, based upon a review of the facts, that the
Transfer Agent was not liable by reason of Disabling Conduct by, (a) vote
of a majority of a quorum of Trustees who are neither "interested persons"
of the Trust as the quoted phrase is defined in Section 2(a)(19) of the
1940 Act nor parties to the action, suit or other proceeding on the same or
similar grounds that is then or has been pending or threatened (such quorum
of such Trustees being referred to hereinafter as the "Independent
Trustees"), or (b) an independent legal counsel in a written opinion.
Expenses, including accountants' and counsel fees so incurred by the
Transfer Agent (but excluding amounts paid in satisfaction of judgments, in
compromise or as fines or penalties), shall be paid from time to time by
the Fund or Funds to which the conduct in question related in advance of
the final disposition of any such action, suit or proceeding; provided,
that the Transfer Agent shall have undertaken to repay the amounts so paid
unless it is ultimately determined that it is entitled to indemnification
of such expenses under this Subsection 8(b) and if (i) the Transfer Agent
shall have provided security for such undertaking, (ii) the Trust shall be
insured against losses arising by reason of any lawful advances, or (iii) a
majority of the Independent Trustees, or an independent legal counsel in a
written opinion, shall have determined, based on a review of readily
available facts (as opposed to a full trial-type inquiry), that there is
reason to believe that the Transfer Agent ultimately will be entitled to
indemnification hereunder.
As to any matter disposed of by a compromise payment by the Transfer Agent
referred to in this Subsection 9, pursuant to a consent decree or
otherwise, no such indemnification either for said payment or for any other
expenses shall be provided unless such indemnification shall be approved
(i) by a majority of the Independent Trustees or (ii) by an independent
legal counsel in a written opinion. Approval by the Independent Trustees
pursuant to clause (i) shall not prevent the recovery from the Transfer
Agent of any amount paid to the Transfer Agent in accordance with either of
such clauses as indemnification of the Transfer Agent is subsequently
adjudicated by a court of competent jurisdiction not to have acted in good
faith in the reasonable belief that the Transfer Agent's action was in or
not opposed to the best interests of the Trust or to have been liable to
the Trust or its Shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in its
conduct under the Agreement.
The right of indemnification provided by this Subsection 9 shall not be
exclusive of or affect any of the rights to which the Transfer Agent may be
entitled. Nothing contained in this Subsection 9 shall affect any rights
to indemnification to which Trustees, officers or other personnel of the
Trust, and other persons may be entitled by contract or otherwise under
law, nor the power of the Trust to purchase and maintain liability
insurance on behalf of any such person.
The Board of Trustees of the Trust shall take all such action as may be
necessary and appropriate to authorize the Trust hereunder to pay the
indemnification required by this Subsection 8(b) including, without
limitation, to the extent needed, to determine whether the Transfer Agent
is entitled to indemnification hereunder and the reasonable amount of any
indemnity due it hereunder, or employ independent legal counsel for that
purpose.
The provisions contained in Section 9 shall survive the expiration or
other termination of this Agreement, shall be deemed to include and protect
the Transfer Agent and its directors, officers, employees and agents and
shall inure to the benefit of its/their respective successors, assigns and
personal representatives.
10. Duration and Termination. This Agreement shall be continued effective as of
the date first above written, and shall continue in force and effect for a
period of one year thereafter and shall be continued on its terms from year
to year thereafter unless sooner terminated as permitted herein. This
Agreement may be terminated at any time, without payment of any penalty, by
the Trust or the Transfer Agent upon ninety days' written notice to the
other party.
11. Amendment. This Agreement may be amended by mutual written consent of the
parties. If, at any time during the existence of this Agreement, the Trust
deems it necessary or advisable in the best interests of the Trust that any
amendment of this Agreement be made in order to comply with the
recommendations or requirements of the Securities and Exchange Commission
or state regulatory agencies or other governmental authority, or to obtain
any advantage under state or federal laws, and shall notify the Transfer
Agent of the form of Amendment which it deems necessary or advisable and
the reasons therefor, and if the Transfer Agent declines to assent to such
amendment, the Trust may terminate this Agreement forthwith.
12. Notice. Any notice that is required to be given by the parties to each
other under the terms of this Agreement shall be in writing, addressed or
delivered, or mailed postpaid to the other party at the principal place of
business of such party.
13. Construction. This Agreement shall be governed and enforced in accordance
with the laws of the State of North Carolina. If any provision of this
Agreement, or portion thereof, shall be determined to be void or
unenforceable by any court of competent jurisdiction, then such
determination shall not affect any other provision of this Agreement, or
portion thereof, all of which other provisions and portions thereof shall
remain in full force and effect. If any provision of this Agreement, or
portion thereof, is capable of two interpretations, one of which would
render the provision, or portion thereof, void and the other of which would
render the provision, or portion thereof, valid, then the provision, or
portion thereof, shall have the meaning which renders it valid.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by their duly authorized officers effective as of the date indicated above.
SHANKLIN INVESTMENT TRUST
By:______________________(SEAL)
NC SHAREHOLDER SERVICES LLC
By:______________________(SEAL)
<PAGE>
SHAREHOLDER SERVICING FUNCTIONS
(1) Process new accounts.
(2) Process purchases, both initial and subsequent in accordance with
conditions set forth in the Fund's prospectus.
(3) Transfer shares of capital stock to an existing account or to a new
account upon receipt of required documentation in good order.
(4) Distribute dividends and/or capital gain distributions. This includes
disbursement as cash or reinvestment and to change the disbursement
option at the request of shareholders.
(5) Process exchanges between funds, (process and direct purchase/redemption
and initiate new account or process to existing account).
(6) Make miscellaneous changes to records, including, but not necessarily
limited to, address changes and changes in plans (such as systematic
withdrawal, dividend reinvestment, etc.).
(7) Prepare and mail a year-to-date confirmation and statement as each
transaction is recorded in a shareholder account as follows: original to
shareholder. Duplicate confirmations to be available on request within
current year.
(8) Handle telephone calls and correspondence in reply to shareholder
requests except those items otherwise set forth herein.
(9) Daily control and reconciliation of Fund shares.
(10) Prepare address labels or confirmations for four reports to shareholders
per year.
(11) Mail and tabulate proxies for one Meeting of Shareholders annually,
including preparation of certified shareholder list and daily report to
Fund management, if required.
(12) Prepare and mail annual Form 1099, Form W-2P and 5498 to shareholders to
whom dividends or distributions are paid, with a copy for the IRS.
(13) Provide readily obtainable data which may from time to time be requested
for audit purposes.
(14) Replace lost or destroyed checks.
(15) Continuously maintain all records for active and closed accounts
according to the Investment Company Act of 1940 and regulations provided
thereunder.
(16) Furnish shareholder data information for a current calendar year in
connection with IRA and Keogh Plans in a format suitable for mailing to
shareholders.
<PAGE>
TRANSFER AGENT'S COMPENSATION SCHEDULE
For the services delineated in the DIVIDEND DISBURSING AND TRANSFER AGENT
AGREEMENT, the Transfer Agent shall be compensated monthly, as of the last day
of each month, within five business days of the month end, a fee calculated
based upon 1/12 of the annual fee calculated using the then current number of
shareholders:
Shareholder servicing fee
$15.00 per shareholder per year; minimum fee of $750 per month
EXHIBIT 13
SUBSCRIPTION LETTER
Board of Trustees
Shanklin Investment Trust
105 North Washington Street
Rocky Mount, North Carolina 27802-0069
Gentlemen:
This letter will serve to advise you that Shanklin Capital Management, Inc.
("SCM") hereby subscribes for the purchase of the initial organizational shares
of the SCM Strategic Growth Fund (the "Fund") in the amount of $10.00 per share,
for an aggregate investment of $100,000, and agrees to advance all registration
and organization costs of the Fund to the Trust upon the Trust's demand. In
connection with its subscription for shares of the Fund, SCM acknowledges that
the shares have not been registered under federal or state securities laws an
that the transfer of such shares is restricted. SCM further represents that it
is acquiring such shares for investment purposes and without any intention to
redeem or dispose of such shares. Payment for such shares shall be made in cash
prior to the effective date of the Trust's Registration Statement with the SEC
with respect to the Fund. As initial subscriber for shares, SCM hereby approves
the actions of the Trust in the organization of the Fund, including the approval
of the Investment Advisory Agreement, Fund Accounting and Compliance
Administration Agreement, Dividend Disbursing and Transfer Agent Agreement, and
Distribution Agreement.
If the terms and conditions as stated herein are acceptable to the Board of
Trustees, please so signify by having an authorized officer or trustee sign a
copy of this letter.
Very truly yours,
Date: April 9, 1998 SHANKLIN CAPITAL MANAGEMENT, INC.
By:_________________________________
Title:______________________________
Accepted this 9th day of April, 1998.
SHANKLIN INVESTMENT TRUST
/s/ Julian G. Winters
By:________________________________
Treasurer
Title:_____________________________
