<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 26, 1998
FILE NO. 333-56445
FILE NO. 811-08805
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. 2
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT ACT OF 1940
AMENDMENT NO. 2
WORLDWIDE INDEX FUNDS
(Exact Name of Registrant as Specified in Charter)
C/O 790 EAST COLORADO BOULEVARD, 9TH FLOOR
PASADENA, CALIFORNIA 91101
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, ZIP CODE)
Registrant's Telephone Number, including Area Code (626) 793-8078
F. BRIAN CERINI
LMI INVESTMENT ADVISORS LLC
790 EAST COLORADO BOULEVARD, 9TH FLOOR
PASADENA, CALIFORNIA 91101
(Name and Address of Agent for Service)
Copies to:
W. JOHN McGUIRE, ESQUIRE
Morgan, Lewis & Bockius LLP
1800 M STREET, N.W.
WASHINGTON, D.C. 20036
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/X/ Approximate date of Proposed Public Offering:
As soon as practicable after the
effective date of this Registration Statement
- --------------------------------------------------------------------------------
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.
<PAGE> 2
[WORLDWIDE INDEX FUNDS LOGO]
WORLDWIDE INDEX FUNDS(SM)
AUSTRALIA INDEX FUND
FRANCE INDEX FUND
GERMANY INDEX FUND
HONG KONG INDEX FUND
ITALY INDEX FUND
JAPAN INDEX FUND
NETHERLANDS INDEX FUND
SPAIN INDEX FUND
SWEDEN INDEX FUND
SWITZERLAND INDEX FUND UNITED KINGDOM INDEX FUND
EUROPE INDEX FUND
INTERNATIONAL INDEX FUND
Worldwide Index Funds
P.O. Box 9698
Providence, RI 02940
626-793-8078
Toll-Free: 1-877-463-9363
Worldwide Index Funds (the "Trust") is a no-load mutual fund complex with
thirteen separate investment portfolios (the "Funds"), all of which are
described in this Prospectus. The Funds sell shares directly, and through
broker-dealers and registered investment advisers, to retail investors and
institutions. This Prospectus offers R Class shares to retail investors and I
Class shares to institutional investors.
This Prospectus contains important information about the Funds. Please read it
before investing and keep it on file for future reference.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE
TRUST'S SHARES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
_________, 1998
PROSPECTUS
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
INVESTMENT SUMMARY: INVESTMENTS, STRATEGIES AND RISKS..........................3
FEES AND EXPENSES OF THE FUNDS.................................................5
COUNTRY INDEX FUNDS............................................................7
FUNDS OF INDEX FUNDS...........................................................8
ADDITIONAL RISK CONSIDERATIONS.................................................9
HOW TO INVEST IN THE FUNDS....................................................11
REDEMPTIONS...................................................................13
DIVIDENDS AND DISTRIBUTIONS...................................................14
TAX INFORMATION...............................................................14
MANAGEMENT OF THE FUNDS.......................................................15
ADDITIONAL FUND INFORMATION...........................................Back Cover
</TABLE>
2
<PAGE> 4
INVESTMENT SUMMARY: INVESTMENTS, STRATEGIES AND RISKS
INVESTMENT OBJECTIVES
- - The Australia, France, Germany, Hong Kong, Italy, Japan, Netherlands,
Spain, Sweden, Switzerland, and United Kingdom Index Funds (the "COUNTRY
INDEX FUNDS") seek long-term capital appreciation that reasonably
corresponds with local market equity returns. Each Fund seeks to track as
closely as possible the performance of a widely used index of local
market equity securities (the "LOCAL MARKET INDEX"(SM) or "LMI"(SM)) for
each respective country, and seeks to reduce or eliminate the impact of
currency fluctuation.
- - The Europe Index Fund and International Index Fund are "funds of funds"
(the "FUNDS OF INDEX FUNDS") which will invest in I Class shares of a
particular group of COUNTRY INDEX FUNDS. The FUNDS OF INDEX FUNDS seek
long-term capital appreciation that reasonably corresponds with local
market equity returns of the group of countries in which the underlying
COUNTRY INDEX FUNDS invest, and seek to reduce or eliminate the impact of
currency fluctuation. The Europe Index Fund will invest in the following
COUNTRY INDEX FUNDS: France, Germany, Italy, Netherlands, Spain, Sweden,
Switzerland, and United Kingdom (collectively, the "European COUNTRY
INDEX FUNDS"). The International Index Fund will invest in the eight
European COUNTRY INDEX FUNDS and the Australia, Hong Kong and Japan
COUNTRY INDEX FUNDS.
PRINCIPAL INVESTMENT STRATEGIES
- - The COUNTRY INDEX FUNDS intend to achieve their investment objective by
normally investing at least 95% of their total assets in a combination
of:
- some or all of the stocks included in each country's LMI;
- LMI futures and Related Securities;
- stock swap agreements;
- currency forward contracts and Related Securities;
- currency futures contracts and Related Securities; and/or
- cash and short-term debt instruments.
"Related Securities" may be options or other securities based upon an
underlying futures contract or forward contract.
Once a COUNTRY INDEX FUND has reached a sufficient asset level, it will
invest at least 65% of its total assets in the stocks included in its
respective LMI. Until that time, any assets not invested in those stocks
will be invested in some or all of the intruments listed above.
- - The Funds will generally invest in all the underlying securities within
each LMI and in the same proportion as the LMI. Nonetheless, the Funds
may not invest in all of the securities in, or in the same proportion as,
an LMI if the securities: (i) make up a small percentage of the total LMI
and LMI Investment Advisors LLC (the "Advisor") and/or State Street
Global Advisors (the "Sub-Advisor") believe that such securities will
have no material effect on a Fund's performance; or (ii) if investing in
the securities would be inconsistent with Federal tax diversification
requirements. A Fund may hold a representative sampling of its LMI using
"portfolio sampling" which considers each stock based on its
capitalization, industry and investment characteristics.
- - The COUNTRY INDEX FUNDS will hedge local currencies against the U.S.
Dollar in an attempt to significantly reduce or eliminate the impact of
currency fluctuation.
- - The FUNDS OF INDEX FUNDS will invest in I Class shares of underlying
COUNTRY INDEX FUNDS and will allocate their investments in proportion to
the relative equity market capitalization of the countries represented
(the "Allocation Method"). For example, in the case of the Europe Index
Fund, if the total capitalization of Spain's equity market were to equal
5% of the combined capitalization of the underlying countries in the
Fund, the Fund will seek to invest 5% of its assets in I Class shares of
the Spain Index Fund. The FUNDS OF INDEX FUNDS will reallocate their
investments on a continuous basis. The FUNDS OF INDEX FUNDS use country
3
<PAGE> 5
capitalization figures published by the Financial Times when calculating
allocation percentages under the Allocation Method.
- - The FUNDS OF INDEX FUNDS seek to reduce or eliminate the impact of
currency fluctuation by investing in the COUNTRY INDEX FUNDS which are
hedged against such risk.
GENERAL RISKS OF INVESTING IN THE FUNDS
The Funds are designed as long-term investments and not as trading vehicles. The
Funds do not represent a complete investment program and may not be suitable for
all investors. The Funds are designed for investors that may wish to add an
international component to a domestic portfolio to assist them in achieving
additional diversification and to participate in growth opportunities in
international markets. The following principal risk factors may affect each of
the Funds:
- - Because the Funds will invest in foreign markets, either directly or
indirectly, each of these Funds will be subject to the market, economic
and political risks prevalent in these foreign markets. Foreign
securities markets generally have less trading volume and less liquidity
than U.S. markets, and prices in some foreign markets can be extremely
volatile. In addition, the value of securities denominated in foreign
currencies, and of dividends from such securities, can change
significantly when foreign currencies strengthen or weaken relative to
the U.S. Dollar. The Funds will seek to hedge fully against this risk at
all times but cannot guarantee that such a strategy will be successful.
- - Investing in foreign companies may involve risks not typically associated
with investing in U.S. companies. In addition, the costs of foreign
investing, including withholding taxes, brokerage commissions and
custodial fees, generally are higher than for U.S. investments.
- - A Country Index Fund will invest primarily in the equity securities, and
instruments tied to those securities, in each Fund's respective LMI. Over
time, equity securities have generally shown superior gains, but they
have tended to be more volatile in the short-term.
- - The COUNTRY INDEX FUNDS, other than the Japan, Australia and United
Kingdom Index Funds, are "non-diversified" mutual funds. This means that
each non-diversified Fund may invest a significant portion of its assets
in securities issued by a few companies which may make the Fund
susceptible to the risks associated with those particular companies, or a
single economic, political or regulatory occurrence. In addition, as a
result of each Fund's policy to invest in the securities included in its
respective LMI, a Fund will necessarily "concentrate" its investments in
companies engaged in the same or similar industries if the underlying LMI
represents a concentration in those industries, making the Funds
susceptible to the risks and market fluctuations of that industry. (A
Fund will not "concentrate" its investments if doing so will cause the
Fund to lose its status as a regulated investment company ("RIC") under
the Internal Revenue Code.) These investment strategies may cause a
Fund's net asset value or share price to be more volatile than that of a
"diversified" mutual fund, such as the Japan, Australia, United Kingdom,
European and International Index Funds.
- - Because the Funds will invest in futures and other futures related
securities, the extent of a Fund's losses from these types of investments
may exceed the losses which could result if a Fund were holding the
underlying stocks represented by the LMI. (See "ADDITIONAL RISK
CONSIDERATIONS").
- - On January 1, 1999, the European Monetary Union (EMU) plans to implement
a new currency unit, the Euro, which is expected to reshape financial
markets, banking systems and monetary policies in Europe and other parts
of the world. Although it is not possible to predict the impact of the
Euro implementation plan on the Funds, the transition to the Euro may
change the economic environment and behavior of investors, particularly
in European markets.
- - BECAUSE INVESTING IN THESE FUNDS INVOLVES CERTAIN RISKS, YOU COULD LOSE
MONEY.
4
<PAGE> 6
FEES AND EXPENSES OF THE FUNDS
This table describes the highest fees and expenses that you could currently be
charged if you buy and hold shares of the Funds. The Funds will impose a
purchase fee of 0.50% as a percentage of net asset value payable to the
respective Fund on any purchase into a Fund. THESE PURCHASE FEES ARE NOT SALES
CHARGES, BUT ARE RETAINED BY THE RESPECTIVE FUND FOR THE BENEFIT OF ALL
SHAREHOLDERS. Purchase fees are intended to cover brokerage fees, other costs
associated with purchasing or selling portfolio securities and other
transaction-related expenses. All purchase fees paid to a FUND OF INDEX FUNDS
will be passed on to its underlying COUNTRY INDEX FUNDS. The Annual Fund
Operating Expenses in the table below reflect the application of purchase fees,
but do not reflect voluntary fee waivers and/or expense reimbursements from the
Advisor.
<TABLE>
<CAPTION>
R CLASS I CLASS
------------- -------------
SHAREHOLDER FEES
- ----------------
COUNTRY FUNDS COUNTRY FUNDS
INDEX OF INDEX INDEX OF INDEX
FUNDS FUNDS FUNDS FUNDS
<S> <C> <C> <C> <C>
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON NONE NONE NONE NONE
PURCHASE (AS A PERCENTAGE OF OFFERING PRICE)
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON NONE NONE NONE NONE
REINVESTED DIVIDENDS (AS A PERCENTAGE OF NET
ASSET VALUE)
PURCHASE FEE+ .50% .50% .50% .50%
<CAPTION>
ANNUAL FUND OPERATING R CLASS I CLASS
EXPENSES++ (EXPENSES THAT ARE DEDUCTED ------------- -------------
FROM FUND ASSETS)
COUNTRY FUNDS COUNTRY FUNDS
INDEX OF INDEX INDEX OF INDEX
FUNDS FUNDS FUNDS FUNDS
<S> <C> <C> <C> <C>
MANAGEMENT FEES .50% 0.0% .50% 0.0%
OTHER EXPENSES* .75% 1.30% .50% 1.05%
UNDERLYING FUND EXPENSES NONE 1.00% NONE 1.00%
MISCELLANEOUS .75% .30% .50% .05%
- ---------------------------------------------------------------------------------------------------------------
TOTAL ANNUAL FUND
OPERATING EXPENSES 1.25% 1.30% 1.00% 1.05%
</TABLE>
+ The purchase fee is deducted from all purchases, but not from reinvested
dividends or capital gains distributions.
++ THE ADVISOR COMMITS, BY WAIVING ITS FEES AND REIMBURSING EXPENSES AS
NECESSARY, TO LIMIT EACH COUNTRY INDEX FUND'S TOTAL EXPENSE RATIO AND
EACH FUNDS OF INDEX FUNDS' TOTAL EXPENSE RATIO, INCLUDING THE UNDERLYING
FUND EXPENSES, TO NO GREATER THAN 0.99% FOR R CLASS SHARES AND 0.74% FOR
I CLASS SHARES OVER A CALENDAR YEAR UNTIL DECEMBER 31, 2001. FEE WAIVERS
AND/OR EXPENSE REIMBURSEMENTS ARE VOLUNTARY. THE ADVISOR RESERVES THE
RIGHT TO TERMINATE ANY WAIVER AND/OR REIMBURSEMENT AT ANY TIME AFTER
DECEMBER 31, 2001, WITHOUT NOTICE.
* Other Expenses are based on estimated amounts for the current fiscal
year. For R CLASS shares only, 0.25% of Other Expenses is a shareholder
servicing fee.
5
<PAGE> 7
EXAMPLE
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This example is intended to help you compare the cost of investing in each Fund
with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in each Fund for the time periods
indicated, that your investment has a 5% return each year and that each Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower and based on these assumptions you would pay the following expenses if you
redeem all of your shares at the end of the time periods indicated:
<TABLE>
<CAPTION>
R CLASS I CLASS
------------- -------------
1 YEAR 3 YEARS 1 YEAR 3 YEARS
<S> <C> <C> <C> <C>
COUNTRY INDEX FUNDS $177 $389 $151 $311
FUNDS OF INDEX FUNDS ** $182 $397 $157 $317
</TABLE>
** Note that the FUNDS OF INDEX FUNDS will be subject to expenses greater
than those incurred by a COUNTRY INDEX FUND. The FUNDS OF INDEX FUNDS not
only bear the expenses associated with their operations and management,
but will also bear a pro-rata share of the expenses of the underlying
COUNTRY INDEX FUNDS.
6
<PAGE> 8
COUNTRY INDEX FUNDS
THE COUNTRY INDEX FUNDS AND CORRESPONDING LMIS
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------
COUNTRY INDEX FUND LOCAL MARKET INDEX ("LMI")(SM)
- -----------------------------------------------------------------------------------------
AUSTRALIA INDEX FUND All Ordinaries Index ("AOI")
- -----------------------------------------------------------------------------------------
FRANCE INDEX FUND CAC-40 ("CAC")
- -----------------------------------------------------------------------------------------
GERMANY INDEX FUND Deutsche Aktienindex ("DAX")
- -----------------------------------------------------------------------------------------
HONG KONG INDEX FUND Hang Seng ("HSI")
- -----------------------------------------------------------------------------------------
ITALY INDEX FUND MIB-30 ("MIB")
- -----------------------------------------------------------------------------------------
JAPAN INDEX FUND Nikkei-225 ("NKI")
- -----------------------------------------------------------------------------------------
NETHERLANDS INDEX FUND Amsterdam Exchanges Index ("AEX")
- -----------------------------------------------------------------------------------------
SPAIN INDEX FUND IBEX-35 ("IBEX")
- -----------------------------------------------------------------------------------------
SWEDEN INDEX FUND Stockholm Options Market Index ("OMX")
- -----------------------------------------------------------------------------------------
SWITZERLAND INDEX FUND Swiss Market Index ("SMI")
- -----------------------------------------------------------------------------------------
UNITED KINGDOM INDEX FUND FTSE-100 ("UKX")
- -----------------------------------------------------------------------------------------
</TABLE>
COUNTRY INDEX FUND LMI DESCRIPTIONS
The AUSTRALIA INDEX FUND seeks to track the All Ordinaries Index ("AOI") which
is a capitalization-weighted index of 310 common stocks listed on the Australian
Stock Exchange. As of June 30, 1998, the three stocks representing the highest
approximate percentage of capitalization in the index are National Australia
Bank, Ltd. (7.35%), Broken Hill Proprietary Company, Ltd. (6.43%), and News
Corporation, Ltd. (5.64%).
The FRANCE INDEX FUND seeks to track the CAC-40 ("CAC") which is a narrow-based,
capitalization-weighted index of 40 companies listed on the Paris Stock Exchange
(the Bourse). The index serves as a basis for futures and options traded on
France's financial futures and options market (the MATIF and MONEP). As of June
30, 1998, the three stocks representing the highest approximate percentage of
capitalization in the index are France Telecom (9.87%), AXA-UAP (6.96%), and
L'Oreal (5.90%).
The GERMANY INDEX FUND seeks to track the Deutsche Aktienindex ("DAX") which is
a total rate of return index of 30 selected German blue-chip stocks traded on
the Frankfurt Stock Exchange. As of June 30, 1998, the three stocks representing
the highest approximate percentage of capitalization in the index are Allianz,
AG (10.54%), SAP, AG (8.58%), and Daimler-Benz (7.24%).
The HONG KONG INDEX FUND seeks to track the Hang Seng ("HSI") which is a
capitalization-weighted index of 33 companies that represent approximately 70%
of the total market capitalization of the Stock Exchange of Hong Kong. As of
June 30, 1998, the three stocks representing the highest approximate percentage
of capitalization in the index are HSBC Holdings, PLC (30.07%), Hong Kong
Telecommunications (10.38%), and Hutchison Whampoa (8.86%).
The ITALY INDEX FUND seeks to track the MIB-30 ("MIB") which is a
capitalization-weighted index of the 30 top companies listed on the Milan Stock
Exchange. As of June 30, 1998, the three stocks representing the highest
approximate percentage of capitalization in the index are ENI, Spa (13.90%),
Telecom Italia (11.70%), and Telecom Italia Mobile, Spa (12.32%).
7
<PAGE> 9
The JAPAN INDEX FUND seeks to track the Nikkei-225 ("NKI") which is a
price-weighted index of the 225 top-rated Japanese companies listed in the First
Section of the Tokyo Stock Exchange. As of June 30, 1998, the three stocks
representing the highest approximate percentage of capitalization in the index
are Sony Corporation (8.05%), Honda Motor Co. (3.27%), and Fuji Photo Film
(3.23%).
The NETHERLANDS INDEX FUND seeks to track the Amsterdam Exchanges Index ("AEX")
which is a weighted index of the 25 leading Dutch stocks traded on the Amsterdam
Stock Exchange. The index is rebalanced every February by setting the company
with the greatest capitalization in the basket of stocks to 10% and calculating
the weights of the remaining stocks accordingly. As of June 30, 1998, the three
stocks representing the highest approximate percentage of capitalization in the
index are AEGON (12.98%), ING Groep NV (11.32%), and Unilever NV (10.76%).
The SPAIN INDEX FUND seeks to track the IBEX-35 ("IBEX") which is a
capitalization-weighted index of the 35 most liquid Spanish stocks traded on the
Continuous Markets. As of June 30, 1998, the three stocks representing the
highest approximate percentage of capitalization in the index are Telefonica de
Espana (21.36%), Banco de Santander (12.93%), and Endesa SA (9.60%).
The SWEDEN INDEX FUND seeks to track the Stockholm Options Market Index ("OMX")
which is a capitalization-weighted index of 30 stocks that have the largest
volume of trading on the Stockholm Stock Exchange. As of June 30, 1998, the
three stocks representing the highest approximate percentage of capitalization
in the index are Ericsson, LM (25.59%), Astra, AB (11.69%), and Hennes & Mauritz
(5.76%).
The SWITZERLAND INDEX FUND seeks to track the Swiss Market Index ("SMI") which
is a capitalization-weighted index of 21 of the largest and most liquid stocks
traded on the Electronic Bourse System. As of April 7, 1998, the three stocks
representing the highest approximate percentage of capitalization in the index
are Novartis (17.03%), Union Bank Switzerland (16.44%), and Nestle, SA (15.68%).
The UNITED KINGDOM INDEX FUND seeks to track the FTSE-100 ("UKX") which is a
capitalization-weighted index of the 100 most highly capitalized companies
traded on the London Stock Exchange. As of June 30, 1998, the three stocks
representing the highest approximate percentage of capitalization in the index
are Glaxo Wellcome (6.12%), British Telecom (5.05%), and British Petroleum
(4.61%).
For specific information on each country, see "THE FUNDS AND COUNTRY SPECIFIC
ECONOMIC CONSIDERATIONS" in the Statement of Additional Information ("SAI").
THE COUNTRY INDEX FUNDS ARE NOT SPONSORED, ENDORSED, SOLD, OR PROMOTED BY THEIR
RESPECTIVE LMIs.
FUNDS OF INDEX FUNDS
FUNDS OF INDEX FUNDS AND UNDERLYING COUNTRY INDEX FUNDS
<TABLE>
- --------------------------------------------------------------------------------------------------
FUND OF INDEX FUNDS UNDERLYING COUNTRY INDEX FUNDS (AND
APPROXIMATE ALLOCATION PERCENTAGE AS OF
JUNE 30, 1998)
- --------------------------------------------------------------------------------------------------
<S> <C>
</TABLE>
8
<PAGE> 10
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------
EUROPE INDEX FUND France Index Fund (13.2%)
Germany Index Fund (15.4%)
Italy Index Fund (6.7%)
Netherlands Index Fund (8.7%)
Spain Index Fund (4.7%)
Sweden Index Fund (4.9%)
Switzerland Index Fund (10.8%)
United Kingdom Index Fund (35.5%)
- --------------------------------------------------------------------------------------------------
INTERNATIONAL INDEX FUND Australia Index Fund (2.5%)
France Index Fund (9.5%)
Germany Index Fund (11.0%)
Hong Kong Index Fund (2.2%)
Italy Index Fund (4.8%)
Japan Index Fund (23.8%)
Netherlands Index Fund (6.2%)
Spain Index Fund (3.4%)
Sweden Index Fund (3.5%)
Switzerland Index Fund (7.8%)
United Kingdom Index Fund (25.4%)
- --------------------------------------------------------------------------------------------------
</TABLE>
ADDITIONAL RISK CONSIDERATIONS
NON-DIVERSIFICATION - The COUNTRY INDEX FUNDS, other than the Japan, Australia
and United Kingdom Index Funds, are classified as "non-diversified" for purposes
of the 1940 Act, which means each of those Funds is not limited by the 1940 Act
with regard to the portion of its assets that may be invested in the securities
of a single issuer. However, each Fund, regardless of whether classified as
non-diversified, intends to maintain the required level of diversification and
otherwise conduct its operations so as to qualify as a regulated investment
company ("RIC") for purposes of the Internal Revenue Code, in order to relieve
the Trust of any liability for Federal income tax to the extent that its
earnings are distributed to shareholders. Compliance with the diversification
requirements of the Internal Revenue Code may limit the investment flexibility
of certain Funds and could, as a result, decrease the likelihood that such Funds
will meet their investment objectives. In addition, as a result of each Fund's
policy to invest in the securities included in its respective LMI, a Fund will
necessarily "concentrate" its investments in companies engaged in the same or
similar industries if the underlying LMI represents a concentration in those
industries, unless such "concentration" would affect a Fund's qualification as a
RIC.
The stocks of a small number of issuers, or of issuers in a small number of
industries, may dominate the LMIs of certain Funds and, consequently, the
investment portfolios of such Funds. This may adversely affect the performance
of such Funds or subject such Funds to greater price volatility than that
experienced by diversified investment companies. The Funds may be more
susceptible to any single economic, political or regulatory occurrence than the
portfolio securities of an investment company that is more broadly invested than
the Funds in the equity securities of the relevant market.
CORRELATION ACCURACY - A perfect correlation of 100% is achieved if the net
asset value of a Fund increases or decreases in exact proportion to changes in
its respective LMI. Over time, the accuracy of the correlation between a Fund's
performance in tracking its respective LMI and the actual performance of that
LMI (without regard to currency hedging costs or income), is expected to be
greater than 95%, although there can be no assurances that such correlation will
be achieved. While the Funds expect to track their respective LMIs, factors such
as Fund expenses, imperfect correlation between the Funds' investments and those
of their LMIs, rounding of share prices, changes to the LMI, regulatory
policies, and the requirements of the Internal Revenue Code may affect their
ability to achieve more accurate correlation.
9
<PAGE> 11
Because an LMI is just a composite of the prices of the securities it
represents, rather than an actual portfolio of those securities, an LMI will
have no expenses. As a result, a Fund, which will have expenses such as taxes,
custody, management fees and other operational costs, and brokerage, may not
achieve its investment objective of accurately correlating to an LMI because of
these additional costs it must bear. In addition, because the Funds will attempt
to fully hedge currency risks at all times, a Fund's performance may not be the
same as the performance of its respective LMI.
FUTURES CONTRACTS/OPTIONS/SWAPS - The Funds may use options, futures contracts,
options on futures contracts, forward contracts, options on forward contracts,
and swaps because these instruments provide the Funds with higher liquidity,
lower brokerage costs, and the ability to track the performance of the
securities in an LMI without purchasing the underlying securities. Using these
instruments and investing in indexed securities involves special risks,
including: (1) imperfect or no correlation between the price of options, futures
contracts and forward contracts and the movements in the price of the underlying
securities or LMIs; (2) possible lack of a liquid secondary market for any
particular instrument at a particular time; (3) the fact that the skills needed
to use these strategies are different from those needed to select portfolio
securities; (4) losses due to unanticipated market price movements; (5) loss of
premiums paid by a Fund on options it purchases; and (6) the possible inability
of a Fund to purchase or sell a portfolio security at a time when it would
otherwise be favorable for it to do so, or the possible need for a Fund to sell
a portfolio security at a disadvantageous time, due to the need for the Fund to
maintain "cover" or to segregate assets in connection with such transactions and
the possible inability of a Fund to close out or liquidate its position.
These instruments may increase the volatility of a Fund and may typically
involve a small investment of cash relative to the magnitude of the risk
assumed. In addition, these instruments could result in a loss if the
counterparty to the transaction does not perform as promised or if there is not
a liquid secondary market to close out a position that a Fund has entered into.
The ordinary spreads between prices in the cash and futures markets, due to the
differences in the nature of those markets, are subject to distortion. Investors
should also be aware that while index futures and options contracts closely
correlate with the applicable LMIs over long periods, shorter-term deviation,
such as on a daily basis, does occur with these instruments. As a result, a
Fund's short-term performance will reflect such deviation from its relevant LMI.
The Funds may only invest in futures in countries that have futures markets
recognized by the Commodities Futures Trading Commission (the "CFTC"). Because
the futures markets of Switzerland and the Netherlands are not recognized by the
CFTC, the Switzerland and Netherlands Index Funds are unable to invest in
futures contracts in their respective countries. As an alternate, these Funds
will invest in options and swaps to a greater degree than the other Funds, which
is intended to have similar economic results as investing in a futures contract.
FOREIGN SECURITIES - Investing in foreign companies may involve risks not
typically associated with investing in U.S. companies. The value of securities
denominated in foreign currencies, and of dividends from such securities, can
change significantly when foreign currencies strengthen or weaken relative to
the U.S. Dollar. Foreign securities markets generally have less trading volume
and less liquidity than U.S. markets, and prices in some foreign markets can be
extremely volatile. Many foreign countries lack uniform accounting and
disclosure standards comparable to those that apply to U.S. companies, and it
may be more difficult to obtain reliable information regarding a foreign
issuer's financial condition and operations. In addition, the costs of foreign
investing, including withholding taxes, brokerage commissions and custodial
fees, generally are higher than for U.S. investments.
CURRENCY HEDGING - The COUNTRY INDEX FUNDS will use forward contracts on the
foreign currency within each respective country in which that Fund is investing
("Country Currency"), options on forward contracts and Related Securities,
futures contracts on Country Currency, options on such futures contracts, and
options on Country Currency to attempt to eliminate the effect that fluctuations
in the U.S. Dollar/Country Currency exchange rate may have on the Fund's net
asset value per share. The funds will seek to hedge fully against such
fluctuations at all times but cannot guarantee that a strategy will be
successful.
10
<PAGE> 12
YEAR 2000 - The Funds depend on the smooth functioning of computer systems in
almost every aspect of their business. Like other mutual funds, businesses and
individuals around the world, the Funds could be adversely affected if the
computer systems used by its service providers do not properly process dates on
and after January 1, 2000 and distinguish between the year 2000 and the year
1900. The Funds have asked their service providers whether they expect to have
their computer systems adjusted for the year 2000 transition, and received
assurances from each that they are devoting significant resources to prevent
material adverse consequences to the Funds. The Funds and their respective
shareholders may experience losses if these assurances prove to be incorrect or
as a result of year 2000 computer difficulties experienced by issuers of
portfolio securities or third parties, such as custodians, banks, broker-dealers
or others with which the Funds do business. Furthermore, many foreign countries
are not as prepared as the U.S. for the year 2000 transition. Consequently,
computer difficulties in foreign markets and with foreign institutions as a
result of the year 2000 may add to the possibility of losses to the Funds and
their respective shareholders.
HOW TO INVEST IN THE FUNDS
CLASSES
The Funds offer two classes of shares: R Class shares and I Class shares. R
Class shares are primarily intended for retail investors, require a minimum
initial investment of $5,000 for any Fund ($2,000 for individual retirement
accounts ("IRAs") and Roth IRAs) and are subject to a shareholder service fee of
0.25% of the net asset value of the respective shares. I Class shares are
primarily intended for institutional investors, require a minimum initial
investment of $100,000, in the aggregate, and are not subject to a shareholder
service fee.
ABOUT NET ASSET VALUE
The net asset value for one Fund share is the value of that share's portion of
all of the assets of that class of shares of the Fund. In making this
calculation, the Fund generally values securities at market price. If market
prices are unavailable or become unreliable because of events occurring during
or after the close of trading in any of the relevant foreign markets, fair value
prices may be determined by the Advisor, in good faith, using methods approved
by the Board of Trustees. Occasionally events that affect the values of foreign
securities and foreign exchange rates may occur between the times at which they
are determined and the close of the New York Stock Exchange (the "NYSE") and
will, therefore, not be reflected in the computation of a Fund's net asset
value. If events materially affecting the values of these foreign securities
occur during this period, the securities will be valued in accordance with
procedures established by the Trustees. As such, values ascribed to certain
securities maintained by a fund may not be the quoted or published prices of
those securities on their primary markets or exchanges.
PRICING OF PORTFOLIO SHARES
The price of R Class and I Class shares of each Fund is the net asset value next
determined for the respective class. The Fund determines net asset value as of
the close of regular trading on the NYSE (normally 4:00 p.m. Eastern Time) on
each day that the NYSE is open for business (the "Pricing Time"). Because the
Funds have portfolio securities that are listed on foreign exchanges which may
trade on weekends or other days when the Funds do not price their shares, the
net asset value of the Funds' shares may change on days when shareholders will
not be able to purchase or redeem the Funds' shares.
PURCHASE OF SHARES
You may purchase R Class and I Class shares of each Fund directly from the
Fund, from First Data Distributors, Inc. (the "Distributor") or through certain
third parties, such as brokers or other agents ("Financial Intermediaries").
The minimum initial investment is $5,000 for R Class shares of any Fund ($2,000
for IRAs and Roth IRAs), and $100,000, in the aggregate, for I Class shares.
The minimum amount for an additional investment is $250 for R Class shares, and
$1000 for I Class shares, for each account that you have. If the value of your
account falls below the minimum initial investment amount for R Class shares or
I Class shares as a result of share redemptions, and remains below that minimum
for 60 consecutive days, you may be subject to involuntary conversion from I
Class shares to R Class shares or involuntary redemption. The Fund will notify
you that your account is below the required minimum before taking further
action. The Advisor may waive the minimum initial investment requirement and
involuntary conversion or redemption for certain investors, including
individuals purchasing through a Financial Intermediary. Investors effecting a
transaction through a Financial Intermediary may be charged a fee by that
11
<PAGE> 13
Financial Intermediary. The minimum initial investment for R Class and I Class
shares will be waived for 401(k) plans and 403(b) plans, and other qualified
employee benefit plans as the Trust shall determine.
Shares of the Funds are sold at an offering price which is equal to the net
asset value of the shares plus a purchase fee. This fee represents management's
estimate of the costs reasonably anticipated to be associated with a Fund's
purchase or sale of portfolio securities and related operational costs. Fees are
paid directly to that Fund and are used to defray these costs.
- - Each Fund charges a purchase fee for the purchase of R Class and I Class
shares equal to 0.50% of that Fund's shares net asset value.
You may arrange to purchase R Class and I Class shares directly from the Trust
by calling toll-free, 1-877-463-9363, or by returning a completed Account
Application with payment for your purchase. The price you pay will be the net
asset value calculated at the next Pricing Time, plus a purchase fee, following
receipt of your purchase order in good form.
To purchase shares through a Financial Intermediary, you should contact your
Financial Intermediary for details about how to purchase shares. Generally, the
price of shares purchased through a Financial Intermediary is the price
calculated at the next Pricing Time, plus a purchase fee, after the Fund
receives your order from your Financial Intermediary in good form. Certain
Financial Intermediaries may have made arrangements with the Fund so that you
may purchase shares at the price calculated at the next Pricing Time after your
Financial Intermediary receives your purchase order. Your Financial Intermediary
may charge an additional service or transaction fee.
- - Because of the risks associated with common stock investments, the Funds
are intended to be long-term investment vehicles and are not designed to
provide investors with a means of speculating on short-term market
movements. Consequently, the Funds reserve the right to reject any
specific purchase request. The Funds also reserve the right to suspend
the offering of shares for a period of time.
BY MAIL. Initial investments, as well as subsequent investments, in the
Worldwide Index Funds made by mail must be received in good form by the Trust,
on any Business Day, at or prior to 4:00 p.m., Eastern Time (1:00 p.m. Pacific
Time), in order to be processed for that Business Day's net asset value. Fill
out an Account Application and make a check payable to "Worldwide Index Funds."
Mail the check, along with the completed application to:
Worldwide Index Funds
P.O. Box 9698
Providence, RI 02940
"Good form" means that all information, signatures, documents and payments
accompany the completed application. Federal law requires you to provide a
certified tax identification number when you open an account. The Trust
reserves the right to reject or delay the processing of your Account
Application if it is not received in good form.
IN ADDITION TO CHARGES DESCRIBED ELSEWHERE IN THIS PROSPECTUS, THE TRUST ALSO
MAY CHARGE $25.00 FOR CHECKS RETURNED FOR INSUFFICIENT OR UNCOLLECTIBLE FUNDS.
BY BANK WIRE TRANSFER. Please call the Trust toll-free at 1-877-463-9363 for
specific instructions. For initial investments you will be asked to fill out an
Account Application and fax the completed application in good form, along with
a request for a shareholder account number, to the Trust. For both initial and
subsequent investments, you must request that your bank wire transfer the
purchase amount using the following instructions:
Boston Safe Deposit and Trust Company
ABA 0110-0123-4
Worldwide Index Global Account
#17-749-0
12
<PAGE> 14
[Your name]
Reference Shareholder Account No.: [Your Shareholder Account Number]
Boston, MA
After instructing your bank to transfer money by wire (your bank may charge a
fee for such services) for both initial and subsequent purchases, you must call
the Trust toll-free at 1-877-463-9363 and inform the Trust as to the amount that
you have transferred and the name of the bank sending the transfer in order to
obtain same-day pricing or credit. For initial purchases, you must also supply
the time the wire was sent and the Fed Wire reference number. If the purchase is
canceled because your wire transfer is not received, you may be liable for any
loss that the Trust incurs.
Wire transfers for both initial investments and subsequent investments in the
Funds must be received in good form at the Trust, on any Business Day by 4:00
p.m., Eastern Time in order to be processed at that Business Day's net asset
value. An initial Account Application that is faxed to the Trust does not
constitute a purchase order until such application has been processed and
correct payment by check or wire transfer has been received by the Trust.
Financial Intermediaries may have earlier cut-off times for purchases. For more
information about how to purchase through an intermediary, you should contact
that intermediary directly.
REDEMPTIONS
REDEMPTION OF SHARES
You may redeem Fund shares directly from the Funds, through the Distributor or
through a Financial Intermediary as described above under Purchase of Shares.
The redemption price will be the net asset value per share calculated at the
next Pricing Time, which may be more or less than the purchase price of your
shares. The Funds will ordinarily distribute redemption proceeds in cash within
one business day of your redemption request. However, if you purchased shares by
check, a Fund will not distribute redemption proceeds until it has collected
your purchase payment, which may take up to ten business days from the purchase
date.
- - You may redeem shares from one Fund and purchase shares from any other
Fund in the Worldwide Index Funds. On these transactions, you will be
charged a purchase fee equal to 0.50% of the net asset value of the
shares purchased.
PROCEDURES FOR REDEMPTIONS
Written requests for redemptions should be sent to Worldwide Index Funds, P.O.
Box 9698, Providence, RI 02940, and should be signed by the record owner or
owners. With proper prior authorization, telephone and electronic redemption and
transfer requests are also permitted. Telephone redemption requests may be made
by calling 1-877-463-9363 (toll-free) by 3:30 p.m., Eastern Time (12:30 p.m.,
Pacific Time), on any Business Day. The Trust reserves the right to suspend the
right of redemption in accordance with the SAI.
If you own shares that are registered in your Financial Intermediary's name, and
you want to transfer the registration to another intermediary or want the shares
registered in your name, then you should contact your Financial Intermediary for
instructions to make this change.
TRANSACTIONS OVER THE TELEPHONE. Telephone redemption transactions are
convenient, but are not risk-free. To ensure that your telephone transactions
are safe, secure, and as risk-free as possible, the Trust has instituted
certain safeguards and procedures for determining the identity of callers and
authenticity of instructions, including recording telephone inquiries. As a
result, neither the Trust nor its transfer agent will be responsible for any
loss, liability, cost, or expense for following telephone or wire instructions
they reasonably believe to be genuine. If you or your Financial Intermediary
make redemption requests by telephone, you will generally bear the risk of any
loss. If you are unable to reach the Trust by telephone, you may want to try to
reach the Trust by other means.
13
<PAGE> 15
DIVIDENDS AND DISTRIBUTIONS
Each Fund distributes its income at least annually. If you own Fund shares on a
Fund's record date, you will be entitled to receive the dividend. The Funds make
distributions of capital gains at least annually. The Trust, however, may
declare a special capital gain distribution if the Trustees believe that such a
distribution would be in the best interest of the shareholders of a Fund.
You will receive dividends and distributions in the form of additional Fund
shares unless you have elected to receive payment in cash. If you have not
already elected to receive cash payments on your application, you must notify
the Trust in writing prior to the date of distribution. Your election will
become effective for dividends paid after the Trust receives your written
notice. To cancel your election, simply send written notice to the Trust.
Dividends and distributions from a Fund are taxable to you whether they are
reinvested in additional shares of the Fund or are received in cash. You will
receive an account statement at least quarterly.
TAX INFORMATION
The following is a summary of some important tax issues that affect the Funds
and their Shareholders. The summary is based on current tax laws, which may be
changed by legislative, judicial or administrative action. This prospectus does
not present a detailed explanation of the tax treatment of the Funds or of the
tax consequences of an investment in the Funds.
YOU SHOULD CONSULT YOUR TAX ADVISOR REGARDING SPECIFIC QUESTIONS AS TO FEDERAL,
STATE AND LOCAL INCOME TAXES.
TAX STATUS OF DISTRIBUTIONS
Each Fund will distribute substantially all of its income. The income dividends
you receive from the Funds may be taxed as ordinary income and capital gains
(which may be taxable at different rates depending on the length of time the
Fund holds its assets), whether you receive the dividends in cash or in
additional shares. Distributions paid in January but declared by a Fund in
October, November or December of the previous year, may be taxable to you in the
previous year.
TAX STATUS OF SHARE TRANSACTIONS
EACH SALE OR REDEMPTION OF FUND SHARES IS A TAXABLE EVENT TO YOU. YOU SHOULD
CONSIDER THE TAX CONSEQUENCES OF ANY REDEMPTION BEFORE MAKING SUCH A REQUEST.
FOREIGN TAX CONSIDERATIONS
The COUNTRY INDEX FUNDS may elect to "pass through" to shareholders of those
Funds the foreign income taxes paid by the Funds. If this election is made
because it was deemed to be in the best interest of shareholders, shareholders
would be required to include in their gross income their proportional share of
the foreign taxes paid by their respective Fund. Shareholders will, however, be
able to treat this income as either (but not both) an itemized deduction against
gross income or a foreign tax credit against U.S. income taxes. The Fund will
report to shareholders about the status of such "pass through" taxes on an
annual basis.
If the COUNTRY INDEX FUNDS elect to "pass through" foreign taxes to
shareholders, the tax credit would not pass through to FUNDS OF INDEX FUNDS
shareholders. Because the FUNDS OF INDEX FUNDS hold shares of the COUNTRY INDEX
FUNDS which are U.S. business entities, and do not hold shares of foreign
securities, the FUNDS OF INDEX FUNDS cannot pass through the tax credit to
shareholders. The FUNDS OF INDEX FUNDS may, however, claim a deduction for any
foreign taxes paid by the underlying COUNTRY INDEX FUNDS.
STATE TAX CONSIDERATIONS
Distributions by the Funds may be subject to state and local taxation. You
should verify your tax liability with your tax advisor.
14
<PAGE> 16
MANAGEMENT OF THE FUNDS
THE INVESTMENT ADVISOR
LMI Investment Advisors LLC (the "Advisor"), a Delaware limited liability
company with offices at 790 E. Colorado Boulevard, 9th Floor, Pasadena
California 91101, serves as the investment adviser for each Fund. The Advisor is
controlled by F. Brian Cerini, who formed the Advisor in 1998. Prior to that
time, Mr. Cerini was President of Sierra Capital Management Corporation. The
Advisor is responsible for formulating and continuing to assess investment
policies and recommending changes to the Board of Trustees where appropriate;
supervising compliance by State Street Global Advisors (the "Sub-Advisor") with
the Funds' investment objectives, policies and limits, as well as with laws and
regulations applicable to the Funds; evaluating the performance of the
Sub-Advisor in light of selected benchmarks and the needs of the Funds; and
reporting to the Board of Trustees and shareholders on the foregoing. The
Advisor is a newly organized and registered investment adviser with no previous
business experience. For its services, the Advisor will receive from each Fund
the following management fee:
<TABLE>
<CAPTION>
COUNTRY INDEX FUNDS FUNDS OF INDEX FUNDS
------------------- --------------------
<S> <C> <C>
MANAGEMENT FEE: .50% .0%
</TABLE>
THE INVESTMENT SUB-ADVISOR
State Street Global Advisors (the "Sub-Advisor"), the investment advisory
division of State Street Bank and Trust Company, is a Massachusetts trust
company with offices at 225 Franklin Street, Boston, Massachusetts 02110 and
serves as the investment sub-advisor for each Fund. The Sub-Advisor is
responsible for continuously managing the particular Fund's investment program
in accordance with the Fund's investment objectives. The Sub-Advisor has been in
the investment management business for 20 years. As of March 31, 1998, the
Sub-Advisor managed assets of approximately $471 billion, including $85 billion
of assets in internationally indexed investments.
The Sub-Advisor makes investment decisions for the assets of the Funds and the
Advisor continuously reviews, supervises, and administers each Fund's
investment program. The Trustees of the Trust supervise the Advisor and
establish policies that the Advisor and Sub-Advisor must follow in their
day-to-day management activities. The Advisor bears all of its own costs
associated with providing these advisory services, the fee paid to the
Sub-Advisor and the expenses of the Trustees who are affiliated with the
Advisor. The Advisor may make payments from its own resources to broker-dealers
and other financial institutions in connection with the sale of Fund shares.
For its services, the Sub-Advisor will receive from the Advisor the following
sub-advisory fee:
<TABLE>
<CAPTION>
COUNTRY INDEX FUNDS FUNDS OF INDEX FUNDS
------------------- --------------------
<S> <C> <C>
SUB-ADVISORY FEE: .15% .0%
</TABLE>
15
<PAGE> 17
ADDITIONAL FUND INFORMATION
Additional information about the WORLDWIDE INDEX FUNDS is included in a
Statement of Additional Information dated _______, 1998 (the "SAI"). The SAI is
incorporated by reference into this Prospectus and, therefore, is legally a part
of this Prospectus.
You may obtain a copy of the SAI, or of the annual or semi-annual reports,
without charge by calling toll-free 1-877-463-9363, or by writing to WORLDWIDE
INDEX FUNDS at P.O. Box 9698, Providence, RI 02940. The SAI has been filed with
the Securities and Exchange Commission (the "SEC"). The SEC maintains a Web site
("http://www.sec.gov") that contains the SAI, other material incorporated by
reference, and other information regarding registrants that file electronically
with the SEC. You may also review and copy documents at the SEC Public Reference
Room in Washington, DC (for information call 1-800-SEC-0330). You may request
documents by mail from the SEC, upon payment of a duplicating fee, by writing
to: Securities and Exchange Commission, Public Reference Section, Washington, DC
20549-6009. To aid you in obtaining this information, the Fund's Investment
Company Act registration number is 811-08805.
- --------------------------------------------------------------------------------
[WORLDWIDE INDEX FUNDS LOGO]
<PAGE> 18
STATEMENT OF ADDITIONAL INFORMATION
WORLDWIDE INDEX FUNDS(SM)
P.O. Box 9698
Providence, RI 02940
Toll Free: 1-877-463-9363
The Worldwide Index Funds (the "Trust") is a no-load mutual fund with thirteen
separate investment portfolios (individually a "Fund" and collectively, the
"Funds"). This Statement of Additional Information ("SAI") relates to all
thirteen Funds: Australia Index Fund, France Index Fund, Germany Index Fund,
Hong Kong Index Fund, Italy Index Fund, Japan Index Fund, Netherlands Index
Fund, Spain Index Fund, Sweden Index Fund, Switzerland Index Fund, and United
Kingdom Index Fund (collectively the "Country Index Funds"); and Europe Index
Fund and International Index Fund (collectively the "Funds of Index Funds").
This SAI is not a prospectus but should be read in conjunction with, and is
incorporated by reference into, the Prospectus for the Worldwide Index Funds,
dated ________, 1998. Copies of the Prospectus are available, without charge,
upon request to the Trust at P.O. Box 9698, Providence, RI 02940 or by calling
toll-free, 1-877-463-9363.
The date of this SAI is ________, 1998.
<PAGE> 19
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE FUNDS AND COUNTRY SPECIFIC ECONOMIC CONSIDERATIONS.................... 3
ADDITIONAL RISK CONSIDERATIONS ...........................................18
INVESTMENT POLICIES AND OBJECTIVES .......................................19
INVESTMENT TECHNIQUES ....................................................21
INVESTMENT RESTRICTIONS ..................................................27
PORTFOLIO TRANSACTIONS AND BROKERAGE .....................................28
ORGANIZATION OF THE TRUST AND THE FUNDS ..................................31
MANAGEMENT OF THE TRUST ..................................................31
DETERMINATION OF NET ASSET VALUE .........................................35
PERFORMANCE INFORMATION ..................................................36
CALCULATION OF RETURN QUOTATIONS .........................................36
INFORMATION ON COMPUTATION OF YIELD ......................................37
PURCHASE AND REDEMPTION OF SHARES ........................................38
DIVIDENDS, DISTRIBUTIONS, AND TAXES ......................................39
SERVICE PROVIDERS ........................................................43
EXPERTS ..................................................................43
</TABLE>
2
<PAGE> 20
THE FUNDS AND COUNTRY SPECIFIC ECONOMIC CONSIDERATIONS
THE COUNTRY INDEX FUNDS
The AUSTRALIA INDEX FUND seeks long-term capital appreciation in line with local
market equity returns. The Fund seeks to track as closely as possible the
performance of the Australia All Ordinaries Index (the "AOI"). The Fund will
normally invest at least 95% of its total assets in a combination of: (i) some
or all of the stocks included in the AOI; (ii) AOI futures and Related
Securities; (iii) currency forward contracts and/or currency futures contracts
and Related Securities; and/or (iv) short-term debt instruments. The Fund seeks
to reduce or eliminate the impact of currency fluctuation through hedging local
currency against the U.S. Dollar.
The AOI is a capitalization-weighted index of common stocks listed on the
Australian Stock Exchange. As of June 30, 1998, the top five stocks represented
in the AOI and their approximate proportional percentages are The National
Australia Bank, Ltd. (7.35%), The Broken Hill Proprietary Company, Ltd. (6.43%),
The News Corporation, Ltd. (5.64%), Westpac Banking Corporation (4.37%), and
Telstra Corp. (4.31%).
Trading shares has taken place in Australia since 1828, but did not become
significant until the latter half of the nineteenth century when there was
strong demand for equity capital to support the growth of mining activities. A
stock market was first formed in Melbourne in 1865. In 1885, the Melbourne
market became the stock exchange of Melbourne, in which form it has remained
until recently. Other stock exchanges were also established in Sydney (1871),
Brisbane (1884), Adelaide (1887), Hobart (1891) and Perth (1891). In 1937, the
six capital city stock exchanges established the Australian Associated Stock
Exchanges (AASE) to represent them at a national level. In 1987, the regional
exchanges merged to create a single entity -- The Australian Stock Exchange
(ASX). Trading is done via a computer link-up called "SEATS." SEATS enables all
exchanges to quote uniform prices. All the exchanges are members of the ASX and
are subject to the Securities Industry Act, which regulates the major aspects of
stock exchange operations. Although there are stock exchanges in all six states,
the Melbourne and Sydney Stock Exchanges are the major centers, covering 90% of
all trades.
Economic activity in Australia grew moderately in late 1997 and early 1998.
Asia's economic problems have yet to leave their mark fully on the Australian
economy. Consumer spending was strong, due to the current low interest rate
environment and rising consumer confidence. Inflation remained in check, and
interest-rate sensitive sectors, such as housing continued to benefit from
favorable monetary policy developments. Despite the new right-of-center liberal
national coalition elected to power in March of 1996, unemployment remains at
8.1% as of May, 1998 and growth remains below the 4% pace needed to cut the
jobless rate. The GDP forecasts for 1998 and 1999 are 2.8% and 3.2%,
respectively. Full-time employment is up sharply. Resource companies that export
commodities such as coal, natural gas, and minerals have suffered due to the
weakened Australian dollar, which hit a 3 1/2-year low against the U.S. dollar
in October of 1997.
Australian reporting, accounting and auditing standards differ substantially
from U.S. standards. In general Australian corporations do not provide all of
the disclosure required by U.S. law and accounting practice, and such disclosure
may be less timely and less frequent than that required of U.S. corporations. As
of June 30, 1998, the total market capitalization of the Australian equity
markets was approximately US $287.4 billion.
The FRANCE INDEX FUND seeks long-term capital appreciation in line with local
market equity returns. The Fund seeks to track as closely as possible the
performance of France's CAC-40 Index (the "CAC"). The Fund will normally invest
at least 95% of its total assets in a combination of: (i) some or all of the
stocks included in the CAC; (ii) CAC futures and Related Securities; (iii)
currency forward contracts and/or currency futures contracts and Related
Securities; and/or (iv) short-term debt instruments. The Fund seeks to reduce or
eliminate the impact of currency fluctuation through hedging local currency
against the U.S. Dollar.
3
<PAGE> 21
The CAC is a narrow-based, capitalization-weighted index of 40 companies listed
on the Paris Stock Exchange (the Bourse). The index serves as a basis for
futures and options traded on France's financial futures and options market (the
MATIF and MONEP). As of June 30, 1998, the top five stocks represented in the
CAC and their approximate proportional percentages are France Telecom (9.87%),
AXA-UAP (6.96%), L'Oreal (5.90%), Elf Aquitaine (5.55%), and Alcatel Alsthom
(5.38%).
Trading of securities in France is subject to the monopoly of the Societe de
Bourse, which replaced the individual agents de change in 1991 in order to
increase the cohesion of the French equity market. All purchases or sales of
equity securities in listed companies on any one of the French exchanges must be
executed through the Societe de Bourse. There are three different markets on
which French securities may be listed: (1) the official list (La Cote
Officielle), comprised of equity securities of large French and foreign
companies and most bond issues; (2) the second market (Le Second Marche),
designed for the trading of equity securities of smaller companies; and (3) the
"Hors-Cote" Market. Securities may only be traded on the official list and the
second market after they have been admitted for the listing by the Conseil des
Bourses de Valeurs (the "CBV"). By contrast, the Hors-Cote Market has no
prerequisites to listing, and shares of otherwise unlisted companies may be
freely traded there once they have been introduced on the market by the Societe
de Bourse. Although the Hors-Cote Market is frequently referred to as an
over-the-counter market, this term is inaccurate in that, like the official list
and the second market, it is supervised by Societes des Bourses Francaises and
regulated by the CBV.
Although there are seven stock exchanges in France (located in Paris, Bordeaux,
Lille, Lyon, Marseille, Nancy and Nantes), the Paris Stock Exchange handles more
than 95% of transactions in the country. All bonds and shares, whether listed or
unlisted, must be traded on one of the seven exchanges. Trading in most of the
Paris exchange-listed stocks takes place through the computer order-driven
trading system CAC, launched in 1988. French market capitalization constitutes
approximately 30% of the French Gross Domestic Product. Securities are
denominated in the official unit of currency, the French Franc. Unless otherwise
provided by a double tax treaty, dividends on French shares are subject to a
withholding tax of 25%.
Although French reporting, accounting and auditing standards are considered
rather rigorous by European standards, they differ from U.S. standards in
certain material respects. In general, French corporations are not required to
provide all of the disclosure required by U.S. law and accounting practice, and
such disclosure may be less timely and less frequent than that required of U.S.
corporations. As of June 30, 1998, the total market capitalization of the French
equity markets was approximately US $882.6 billion.
France is a leading industrial country. Its large service sectors, accounting
for approximately two-thirds of GDP, includes tourism, transportation and
computer consultancy. The once dominant iron and steel and textile industries
have given way to the fast growing aerospace, chemicals and pharmaceuticals,
plastics and telecommunications industries. The automobile industry, the most
important industry in the early eighties, has been largely overtaken by capital
goods industries. The capital goods industries account for one-fifth of the
country's exports and supply as many jobs as the agricultural sector.
High unemployment rates and a soaring budget deficit are some of the main
economic concerns that have plagued France for the past decade. Since 1993, the
government has been trying to solve these problems through a mix of higher
taxes, which reached a record level in 1995, and a reduction of non-wage costs.
In 1996, the largest attempt to cut the budget deficit was implemented, leading
to a disparity of interest rate differentials vis-a-vis Germany.
The government's 1996 implementation of an unpopular far-reaching reform of the
social security system, which aimed to curb health care spending through tighter
control from the Parliament and supervisory bodies, resulted in a protracted
strike. In 1997, the unexpected Socialist victory in the early general election
raised fresh doubts
4
<PAGE> 22
about the French authorities' commitment to cut the budget deficit in line with
the European Monetary Union ("EMU") requirements. However, the new government
finally decided to implement a temporary 10% corporate tax increase, the second
one since 1995, and cut spending, which should allow France to qualify for the
EMU. The government also envisions reducing current employees' weekly working
time and hiring 350,000 youths in the public sector to cut unemployment rates.
The French GDP grew by 2.5% in 1997, while inflation was 1.2%, the lowest level
seen since the 1950's. The government deficit was 3% of GDP in 1997.
Unemployment, while still high, dropped from 12.5% in April, 1997 to 11.9% in
April, 1998. As employment numbers improved, consumer spending increased, which
led to a significant rise in import consumption. However, foreign demand for
French cars stimulated car exports to record levels. Consumer spending is
expected to continue this trend, acting as the main catalyst for the French
recovery. Additionally, corporate investment has increased dramatically. GDP
growth forecasts for 1998 and 1999 are 2.9% and 2.8%, respectively. Due to
record low inflation together with significant excess capacity, no change is
anticipated in current monetary policy.
The future economic challenges facing the French government include reducing the
budget deficit to a level acceptable to the EMU requirements, downsizing and
restructuring the public sector and improving the business environment,
particularly by increasing labor market flexibility.
The GERMANY INDEX FUND seeks long-term capital appreciation in line with local
market equity returns. The Fund seeks to track as closely as possible the
performance of Germany's Deutsche Aktienindex (the "DAX"). The Fund will
normally invest at least 95% of its total assets in a combination of: (i) some
or all of the stocks included in the DAX; (ii) DAX futures and Related
Securities; (iii) currency forward contracts and/or currency futures contracts
and Related Securities; and/or (iv) short-term debt instruments. The Fund seeks
to reduce or eliminate the impact of currency fluctuation through hedging local
currency against the U.S. Dollar.
The DAX is a total rate of return index of 30 selected German blue-chip stocks
traded on the Frankfurt Stock Exchange. As of June 30, 1998, the top five stocks
represented in the DAX and their approximate proportional percentages are
Allianz, AG (10.54%), SAP, AG (8.58%), Daimler-Benz (7.24%), Deutsche Bank
(5.47%), and Muenchener Rue (5.21%).
The history of Frankfurt as a financial center can be traced back to the early
Middle Ages. Frankfurt had the right to issue coins as early as 1180; the first
exchange office was opened in 1402. Germany has been without a central stock
exchange, the position formerly held by the Berlin exchange, since 1945. Today
there are eight independent stock exchanges, of which Dusseldorf and Frankfurt
account for over three-quarters of the total volume. Frankfurt is the main
exchange in Germany. Exchange securities are denominated in German Marks, the
official currency of Germany. Equities may be traded in Germany in one of three
markets: (i) the official market, comprised of trading in shares which have been
formally admitted to official listing by the admissions committee of the
relevant stock exchange, based on disclosure in the listing application; (ii)
the "semi-official" unlisted market, comprised of trading in shares not in the
official listing; and (iii) the unofficial, over-the-counter market, which is
governed by the provisions of the Civil Code and the Merchant Code and not by
the provisions of any stock exchange. There is no stamp duty in Germany, but a
nonresident capital gains tax may apply in certain circumstances.
German reporting, accounting and auditing standards differ substantially from
U.S. standards. In general, German corporations do not provide all of the
disclosure required by U.S. law and accounting practice, and such disclosure may
be less timely and less frequent than that required of U.S. corporations. As of
June 30, 1998, the total market capitalization of the Germany equity markets was
approximately US $1,068.4 billion.
5
<PAGE> 23
Germany, the third largest economy in the world, has faced substantial economic
challenges resulting from the reunification of East and West Germany. The former
East Germany, which had been insulated from any real competition, was under
invested in housing and infrastructure and was not geared to handle full
economic and political union with West Germany. In addition, the cost of
reunification, which West Germany intended to finance with increased taxes,
proved to be much greater than anticipated due to the high cost of social
security transfers, extensive environmental damage and a worse than expected
economic condition. As a result, the public sector deficit rose from 0% to 7.5%
in 1993 and the Bundesbank (central bank) sharply raised interest rates, causing
the economy to recess.
Germany began to recover from recession in 1994, but the rise in interest rates
and the appreciation of the German Mark restricted market advances. The
depreciation of the German Mark and other monetary policies implemented by the
Bundesbank through 1997 have created very favorable monetary conditions to which
the economy is responding. The German economy continued to show signs of
strength in 1997 despite continued labor problems. Unemployment rose to a new
record high in January 1998, at 12.8%, dropping to 11.2% in May. There was
continued unrest among the trade unions, with protest marches taking place
throughout the country.
Rising capacity utilization rates, together with a significant decline in unit
labor costs over the past two years, should produce an increase in employment in
1998 - the first in six years. Domestic demand, both capital and consumer, is
expected to replace exports as the driving force in Germany's economic recovery.
Capital spending has already surged in early 1998 in response to the high rate
of capacity utilization and rising profits. Consumers have been driving a
miniature consumption boom, accelerating purchases of consumer durables. The
Bundesbank clearly signaled that it would take a proactive role in monetary
policy, announcing an M3 money supply target range of 3% to 6% for 1998. M3
money supply includes the money consumers use for ordinary purchases of goods
and services (M1), time deposits, money market funds, overnight repurchase
agreements (M2) and time deposits of more than $100,000 and repurchase
agreements with terms longer than one day. GDP growth forecasts for 1998 and
1999 are 2.6% and 2.8%, respectively. Germany's fiscal health and prosperity
over the next few years will largely depend on the continued growth of
capitalism in eastern Germany.
The HONG KONG INDEX FUND seeks long-term capital appreciation in line with local
market equity returns. The Fund seeks to track as closely as possible the
performance of Hong Kong's Hang Seng Index (the "HSI"). The Fund will normally
invest at least 95% of its total assets in a combination of: (i) some or all of
the stocks included in the HSI; (ii) HSI futures and Related Securities; (iii)
currency forward contracts and/or currency futures contracts and Related
Securities; and/or (iv) short-term debt instruments. The Fund seeks to reduce or
eliminate the impact of currency fluctuation through hedging local currency
against the U.S. Dollar.
The HSI is a capitalization-weighted index of 33 companies that represent
approximately 70% of the total market capitalization of the Stock Exchange of
Hong Kong. As of June 30, 1998, the top five stocks represented in the HSI and
their approximate proportional percentages are HSBC Holdings, PLC (30.07%), Hong
Kong Telecommunications (10.38%), Hutchison Whampoa (8.86%), China Telecom
(8.29%), and Cheung Kong (4.9%).
Trading in equity securities in Hong Kong began in 1891 with the formation of
the Association of Stockbrokers, which was changed in 1914 to the Hong Kong
Stock Exchange. In 1921, a second stock exchange, The Hong Kong Stockbrokers'
Association, was established. In 1947, these two exchanges were merged under the
name The Hong Kong Stock Exchange Limited. Three additional exchanges, the Far
East Exchange Limited (1969), The Kam Ngan Stock Exchange Limited (1971) and The
Kowloon Stock Exchange (1972) also commenced trading activities. These four
exchanges were unified in 1986 to form The Stock Exchange of Hong Kong Limited
(the "SEHK"). Trading on the SEHK is conducted in the post trading method,
matching buyers and sellers through public outcry. Securities are denominated in
the official unit of currency, the Hong Kong Dollar. Foreign
6
<PAGE> 24
investment in Hong Kong is generally unrestricted. All investors are subject to
a small stamp duty and a stock exchange levy, but capital gains are tax-exempt.
Hong Kong has significantly upgraded the required presentation of financial
information in the past decade. Nevertheless, reporting, accounting and auditing
practices remain significantly less rigorous than U.S. standards. In general,
Hong Kong corporations are not required to provide all of the disclosure
required by U.S. law and accounting practice, and such disclosure may be less
timely and less frequent than that required of U.S. corporations. As of June 30,
1997, the total market capitalization of the Hong Kong equity markets was
approximately US $238.1 billion.
The transfer of sovereignty from Britain to China, which has created a sense of
uncertainty in Hong Kong's economy, has largely been a smooth transition. Under
the principal of "one country, two systems," Hong Kong is now a special
administrative region (SAR) of the People's Republic of China and is empowered
with a high degree of autonomy. It has retained its administrative, legislative
and judicial systems. The SAR government has full control over its monetary and
fiscal policies and it maintains its own customs and immigration control,
separate from the mainland. Except for issues relating to national security and
foreign policy, the SAR is largely run as an independent territory.
The first chief executive of the SAR, Mr. C.H. Tung, a former shipping tycoon,
has vowed to make a difference in the lives of the people of Hong Kong, by
focusing his attention on the areas of housing, education and infrastructure. In
the past, the chronic shortage of housing has been a strong influence on the
property market. Hong Kong property prices today are among the highest in the
world. The Tung administration announced a major housing package in October
1997, detailing its plan to double the supply of apartments in the territory.
Worth noting is that there is heavy exposure to the property market in Hong
Kong's banking sector as well as the stock market as a whole.
The integration of Hong Kong's economy with that of the mainland continues
apace. While the integration process in the 1980's was driven by the relocation
of Hong Kong's labor-intensive manufacturing sector to Southern China, the
integration theme for the 1990's is that of Hong Kong becoming a service center
for China's fast growing economy. A large number of mainland companies have
established offices in Hong Kong as a window for interaction with the global
economy. The Hong Kong financial sector is increasing its role in the
intermediation of foreign funds for investment in China. Close to half of the
FDI into China goes through Hong Kong. Furthermore, Hong Kong is increasingly
playing a role in intermediating China's savings for investment in China. Hong
Kong is well on its way to become a bona fide financial center for China.
The Hong Kong dollar, which is pegged to the U.S. dollar, has come under recent
selling pressure as have most Asian currencies. Both the Hong Kong government
and the Central Bank of China have significant U.S. dollar reserves, which are
expected to be used to defend the peg. There can be no assurance that a
substantial devaluation will not occur. Hong Kong's property, bond, equity and
currency markets have all recently experienced downside pressure, partly as a
result of devaluation fears.
While it is impossible to pinpoint the economic effects of the transfer of
sovereignty from Britain to China, the transition appeared to have little impact
on the economy. During 1997, Hong Kong's economy felt the effects of the Asian
economic problems. Tourism is suffering from weakened currencies in Southeast
Asia, Korea, and Japan, which historically have accounted for 35% of Hong Kong's
tourism revenue. Decreased tourism has also negatively affected Hong Kong's
retail and hospitality industries. In November 1997, manufacturers saw a 9%
decline in orders from the prior month, with the plastics, electronics and
electrical industries being the hardest hit. At the same time, the printing and
publishing industries recorded an increase in orders of 14%. Climbing
unemployment indicated a slowing economy, edging up to 2.5% in late 1997 and
inflation was also somewhat high
7
<PAGE> 25
at 5.8%. The government raised interest rates in late 1997 to defend the Hong
Kong dollar's peg to the US dollar, as Hong Kong became a target of currency
speculation. While GDP in 1997 grew by 5.5%, the highest growth since 1993, it
fell sharply to -2.8% in the first quarter of 1998.
The ITALY INDEX FUND seeks long-term capital appreciation in line with local
market equity returns. The Fund seeks to track as closely as possible the
performance of Italy's MIB-30 Index (the "MIB"). The Fund will normally invest
at least 95% of its total assets in a combination of: (i) some or all of the
stocks included in the MIB; (ii) MIB futures and Related Securities; (iii)
currency forward contracts and/or currency futures contracts and Related
Securities; and/or (iv) short-term debt instruments. The Fund seeks to reduce or
eliminate the impact of currency fluctuation through hedging local currency
against the U.S. Dollar.
The MIB is a capitalization-weighted index of the 30 top companies listed on the
Milan Stock Exchange. As of June 30, 1998, the top five stocks represented in
the MIB and their approximate proportional percentages are ENI, SPA (13.90%),
Telecom Italia (11.70%), Telecom Italia Mobile, SPA (12.32%), Generali
Assicurazioni (10.38%), and Fiat, SPA (4.10%).
The first formal exchange was created in Italy in 1808 with the establishment of
the Milan Stock Exchange. Since then, nine other exchanges have been founded.
Milan is the most important exchange, accounting for 90% of total equity volume
and about 80% of turnover in fixed income securities. After the Milan Stock
Exchange the other exchanges, in order of importance, are: Rome, Turin, Genoa,
Bologna, Florence, Naples, Palermo, Trieste and Venice. By law the only persons
allowed to trade in the official posts of the stock exchange are the
stockbrokers, who must act as brokers and not trade for their own account. Banks
and intermediaries are allowed to enter the trading post as observers. In 1991,
the Parliament passed legislation creating Societa di Intermediazone Mobiliare
(SIMs). SIMs were created to regulate brokerage activities in the securities
market and are allowed to trade on their own and for customers' accounts. In
1986, the Centro Elaboraizione Dati (C.E.D. Borsa), a subsidiary of the Milan
Stock Exchange, developed a supporting service called Borsamat. The Borsamat
records all trading floor orders, links all Italian exchanges, checks
transaction details and issues confirmations. Italy has the world's largest
government securities market after the United States and Japan. At the end of
1993, issues of treasury bills, notes and bonds outstanding totaled US $1,133
billion.
Italian reporting, accounting and auditing practices are regulated by Italy's
National Control Commission. These practices bear some similarities to United
States standards, but differ significantly in many important respects. In
general, Italian corporations do not provide all of the disclosure required by
U.S. law and accounting practice, and such disclosure may be less timely, less
frequent and less consistent than that required of U.S. corporations. As of June
30, 1998, the total market capitalization of the Italian equity markets was
approximately US $454.4 billion.
Italy is a net importer of agricultural products and also imports most of its
energy products. Aside from tourism and design, Italy's service sector is not
very competitive. Through networks of small and medium-sized companies Italy's
strengths lie in its manufacturing sector, particularly in machine tools and
consumer goods. In the early 1990s, industry began to struggle to compete as a
result of wage increases and an exchange rate policy designed to limit the
effect of government borrowing on the inflation rate. In September 1992, the
lira collapsed and was forced to leave the Exchange Rate Mechanism (ERM). The
lira recovered in 1996 and returned to the ERM by the end of that year.
The Bank of Italy, operating autonomously, has historically followed a tough
monetary policy in an effort to prevent government borrowing from causing
inflation. Beginning in 1991, the government implemented a fiscal policy that
reduced government borrowing through tax measures and spending cuts. Since then,
successive governments have delivered to parliament ambitious budget laws that
included revenue raising measures and cuts to the pension system, health
service, local government and defense. Despite the slow pace of reform to avoid
8
<PAGE> 26
social unrest, impressive improvements have been made to realize 1997's
3%-of-GDP deficit target as required by the Maastricht Treaty.
In 1992, Italy also began a privatization program by transferring major state
holdings to joint stock companies as an intermediate step to total or, at least
partial, floatation on the stock exchange. Although the privatization program
was somewhat curbed in 1994, it resumed in 1995 and is still proceeding.
As Italy makes its case to join the EMU, real growth in 1997 was 1.5%, with a
strong fourth quarter rate of 2.8%. GDP growth forecasts for 1998 and 1999 are
2.1% and 2.8%, respectively. The budget deficit represented 2.7% of GDP. General
government debt declined in 1997, due to significant privatization revenues and
unexpected tax revenues. Short-run growth in the consumer price index ("CPI")
has continued at an annual rate of approximately 2% for the last five months of
1997, with year on year inflation increasing to 1.6% in December. Industrial
production figures showed growth at the end of 1997, with the year on year
growth rate at 8.1%, up from 4.9% in November. Unemployment remained relatively
constant from June 1997 to June 1998 at around 12%. Due to its growth rate being
the slowest in the European Union, Italy's fiscal policy is expected to be less
restrictive, with the Bank of Italy cutting interest rates and stimulating
economic growth. The Italian lira is strong, stimulated by investor demand for
high-yielding Italian bonds. Rising confidence and real wages are expected to
boost consumer demand, with increased capital spending not far behind.
The JAPAN INDEX FUND seeks long-term capital appreciation in line with local
market equity returns. The Fund seeks to track as closely as possible the
performance of Japan's Nikkei-225 Index (the "NKI"). The Fund will normally
invest at least 95% of its total assets in a combination of: (i) some or all of
the stocks included in the NKI; (ii) NKI futures and Related Securities; (iii)
currency forward contracts and/or currency futures contracts and Related
Securities; and/or (iv) short-term debt instruments. The Fund seeks to reduce or
eliminate the impact of currency fluctuation through hedging local currency
against the U.S. Dollar.
The NKI is a price-weighted index of the 225 top-rated Japanese companies listed
in the First Section of the Tokyo Stock Exchange. As of June 30, 1998, the top
five stocks represented in the NKI and their approximate proportional
percentages are Sony Corporation (8.05%), Honda Motor Co. (3.27%), Fuji Photo
Film (3.23%), Takeda Chemical (2.27%), and Toyota Motor (2.17%).
The Japanese stock market has a history of over 100 years beginning with the
establishment of the Tokyo Stock Exchange Company Ltd. in 1878. Stock exchanges
are located in eight cities in Japan (Tokyo, Osaka, Nagoya, Kyoto, Hiroshima,
Fukuoka, Niigata and Sapporo). There is also an over-the-counter market. There
are three distinct sections on the main Japanese stock exchanges. The First
Section trades in over 1,100 of the largest and most active stocks, which
account for over 95% of total market capitalization. The Second Section consists
of over 400 issues with lower turnover than the First Section, which are newly
quoted on the exchange or which are not listed and would otherwise be traded
over-the-counter. The Third Section consists of foreign stocks which are traded
over-the-counter. The main activity of the regular exchange members is the
buying and selling of securities on the floor of an exchange, both for their
customers and for their own account. Japan is second only to the United States
in aggregate stock market capitalization. Securities are denominated in the
official unit of currency, the Japanese Yen. Takeover activity is negligible in
Tokyo, and although foreign investors play a significant role, the trend of the
market is set by the domestic investor. The withholding tax is 20% on dividends.
There also is a transaction tax on share trades and a small stamp duty.
Although some Japanese reporting, accounting and auditing practices are based
substantially on U.S. principles, they are not identical to U.S. standards in
some important respects, particularly with regard to unconsolidated subsidiaries
and related structures. In general, Japanese corporations are not required to
provide all of the disclosure required by U.S. law and accounting practice, and
such disclosure may be less timely and less frequent
9
<PAGE> 27
than that required of U.S. corporations. As of June 30, 1998, the total market
capitalization of the Japanese equity markets was approximately US $2,166.2
billion.
Japan's economy, the second-largest in the world, has grown substantially over
the last three decades. However in 1995, the Japanese economy expanded by just
0.9% and its budget showed a deficit of 5.9% of GDP. The boom in Japan's equity
and property markets during the expansion of the late 1980's supported high
rates of investment and consumer spending on durable goods, but both of these
components of demand have now retreated sharply following the decline in asset
prices. Profits have fallen sharply, unemployment has reached a historical high
and consumer confidence is low. The banking sector continues to suffer from
nonperforming loans. Numerous cuts of the discount-rate since its 6% peak in
1991, a succession of fiscal stimulus packages, support plans for the debt-
burdened financial system and spending for reconstruction following the Kobe
earthquake may help to contain the recessionary forces, but substantial
uncertainties remain.
In addition to a cyclical downturn, Japan is suffering through structural
adjustments. Like the Europeans, the Japanese have seen a deterioration of their
competitiveness due to high wages, a strong currency and structural rigidities.
Finally, Japan is reforming its political process and deregulating its economy.
This has resulted in turmoil, uncertainty and a crisis of confidence.
While the Japanese governmental system itself seems stable, the dynamics of the
country's politics have been unpredictable in recent years. The economic crisis
of 1990-92 brought the downfall of the conservative Liberal Democratic Party,
which had ruled since 1955. Since then, the country has seen a series of
unstable multi-party coalitions and several prime ministers come and go, because
of politics as well as personal scandals. While there appears to be no reason to
anticipate civic unrest, it is impossible to know when the political instability
will end and what trade and fiscal policies might be pursued by the government
that emerges.
Japan's heavy dependence on international trade has been adversely affected by
trade tariffs and other protectionist measures, as well as the economic
condition of its trading partners. Japan subsidizes its agricultural industry
since only 19% of its land is suitable for cultivation. It is only 50%
self-sufficient in food production. Accordingly, it is highly dependent on large
imports of wheat, sorghum and soybeans. In addition, industry, its most
important economic sector, depends on imported raw materials and fuels,
including iron ore, copper, oil and many forest products. Japan's high volume of
exports, such as automobiles, machine tools and semiconductors, has caused trade
tensions, particularly with the United States. Some trade agreements have been
implemented to reduce these tensions. The relaxing of official and de facto
barriers to imports, or hardships created by any pressures brought by trading
partners, could adversely affect Japan's economy. A substantial rise in world
oil or commodity prices could also have a negative affect. Additionally, the
strength of the yen itself may prove an impediment to strong continued exports
and economic recovery, because it makes Japanese goods sold in other countries
more expensive and reduces the value of foreign earnings repatriated to Japan.
Since the Japanese economy is so dependent on exports, any fall off in exports
may be seen as a sign of economic weakness, which may adversely affect the
market.
The Japanese economy found no relief in 1997 from the economic struggles it has
experienced for the last seven years. The benchmark Nikkei Stock Average sank
4.2% on November 7, falling below the 16,000-point level for the first time in
more than two years, and it finished the year at a low not seen since 1985. The
decline wiped out unrealized stock gains in the portfolios of seven of Japan's
top 20 banks, fueling a pessimistic outlook on the financial crisis. By the end
of 1997, three major financial institutions had collapsed amidst overwhelming
debt: Sanyo Securities, Hokkaido Takushoku Bank, and Yamaichi Securities.
Yamaichi left behind $23 billion in debt, Japan's largest bankruptcy ever.
Bankruptcies are no longer newsworthy as banks tighten credit and enforce
tougher regulatory requirements. Consumers, anticipating a recession and reeling
from increases in taxes and medical fees, have cut spending considerably. Retail
sales in November of 1997 dropped 4.7% from a year earlier,
10
<PAGE> 28
the largest drop since 1955. Industrial production has also dropped. GDP
forecasts for 1998 and 1999 are -1.4% and 0.05%, respectively. While Asia needs
an economic leader to anchor any future recovery, Japan has been unable to take
on that role, actually cutting new investment in Thailand, Malaysia, Indonesia
and the Philippines by 29% over the summer of 1997. The economic trials of
Japan's neighbors continue to raise concerns over profit levels for the big
Japanese exporters.
The NETHERLANDS INDEX FUND seeks long-term capital appreciation in line with
local market equity returns. The Fund seeks to track as closely as possible the
performance of the Netherlands' Amsterdam Exchanges Index (the "AEX"). The Fund
will normally invest at least 95% of its total assets in a combination of: (i)
some or all of the stocks included in the AEX; (ii) AEX futures and Related
Securities; (iii) currency forward contracts and/or currency futures contracts
and Related Securities; and/or (iv) short-term debt instruments. The Fund seeks
to reduce or eliminate the impact of currency fluctuation through hedging local
currency against the U.S. Dollar.
The AEX is a weighted index of the 25 leading Dutch stocks traded on the
Amsterdam Stock Exchange. The index is rebalanced every February by setting the
company with the greatest capitalization in the basket of stocks to 10% and
calculating the weights of the remaining stocks accordingly. As of June 30,
1998, the top five stocks represented in the AEX and their approximate
proportional percentages are Aegon, NV (12.98%), ING Groep, NV (11.32%),
Unilever, NV (10.76%), Konolif (9.02%), and ABN Amro Holdings (8.49%).
Trading securities on the AEX Stock Exchange (AEX) (formerly the Amsterdam Stock
Exchange) started at the beginning of the seventeenth century. The United East
India Company was the first company in the world financed by an issue of shares,
and such issue was effected through the exchange. The Netherlands claims the
honor of having the oldest established stock exchange in existence. In 1611 a
stock market began trading in the coffee houses along the Dam Square. A more
formal establishment, the Amsterdam Stock Exchange Association, began trading
industrial stocks in 1876 and until World War II, Amsterdam ranked after New
York and London as the third most important stock market in the world. After the
war, the AEX Stock Exchange only gradually began to resume its activities, as
members felt threatened by what they saw as an impending socialist order which
would leave little of the stock market intact. Since the end of the war, the
Dutch market has remained relatively neglected, as local companies have found it
more favorable to use bank financing to meet their capital requirements. Trading
in shares on the AEX may take place on the official market or on the parallel
market, which is available to medium-sized and smaller companies that cannot yet
meet the requirements demanded for the official market.
Dutch reporting, accounting and auditing standards differ substantially from
U.S. standards. In general, Dutch corporations do not provide all of the
disclosure required by U.S. law and accounting practice, and such disclosure may
be less timely and less frequent than that required of U.S. corporations. As of
June 30, 1998, the total market capitalization of the Dutch equity markets was
approximately US $579.1 billion.
The Netherlands boasts one of the highest levels of GDP per capita in the world.
While industry is its most important sector, the Netherlands also benefits from
agricultural and natural gas resources. Foreign trade is vital to the
Netherlands, accounting for approximately 50% of GDP. The recovery of exports by
the end of the 1980s was fueled by government policies on wage moderation,
although such policies resulted in an increased unemployment rate.
Additionally, the reunification of Germany resulted in a surge in demand for
exports.
Public spending has exceeded 50% of GDP, including transfer payments. The
public-sector deficit is a political and economic problem and has received
heightened government attention. While the deficit has been reduced recently,
further reduction remains a key government objective. The Netherlands has
efficiently increased the flexibility of its labor market and cut indirect wage
costs. As a consequence, the Netherlands should outperform the European average
in terms of economic performance over the years to come.
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<PAGE> 29
Continuing the growth trend of the last seven years, the Dutch economy grew at a
rate of 3.25% in 1997, with forecasted GDP growth in 1998 and 1999 at 3.6% and
3.4%, respectively. The Netherlands' bid for membership in the EMU is very
likely to be successful, since its economy is admired by its European
counterparts due to its high growth, deficit reduction and low unemployment. The
Netherlands' only significant weakness is its high debt ratio, which was over
60% in 1997, but has been trending down since 1995. The Netherlands' economic
stability is due to the key role of agricultural produce in the export mix,
particularly to Germany. Exports make up almost 55% of the Dutch GDP. However,
1997 saw a sharp increase in demand for imports and a decrease in the export
trade balance due in part to higher domestic consumption and investment
spending. Inflation was about 2.2% for 1997, 0.75% higher than the EU average.
With output growth projected to remain strong, there is upward pressure on
inflation. Moderate wage growth has resulted from cooperation between the
government, trade unions, and employers. Unlike many other European countries,
the Dutch labor market is remarkably flexible, using a deregulated labor market
similar to that of the U.S. while still retaining a European-style social safety
net. Unemployment as of June 1998 was 4.2%, down from 5.8% a year earlier.
Current interest rates are low, but as interest rates in Germany are expected to
climb, forecasts show a modest tightening of monetary policy in the Netherlands
as well.
The SPAIN INDEX FUND seeks long-term capital appreciation in line with local
market equity returns. The Fund seeks to track as closely as possible the
performance of Spain's IBEX-35 (the "IBEX"). The Fund will normally invest at
least 95% of its total assets in a combination of: (i) some or all of the stocks
included in the IBEX; (ii) IBEX futures and Related Securities; (iii) currency
forward contracts and/or currency futures contracts and Related Securities;
and/or (iv) short-term debt instruments. The Fund seeks to reduce or eliminate
the impact of currency fluctuation through hedging local currency against the
U.S. Dollar.
The IBEX is a capitalization-weighted index of the 35 most liquid Spanish stocks
traded on the Continuous Markets. As of June 30, 1998, the top five stocks
represented in the IBEX and their approximate proportional percentages are
Telefonica de Espana (21.36%), Banco Santander (12.93%), Endesa, SA (9.60%),
Repsol, SA (6.87%), and Banco Central Hispanico (5.75%).
The trading of shares in Spain dates back to 1831 when the Madrid Stock Exchange
was founded. Since that time, other exchanges have been established in
Barcelona, Bilbao and Valencia, although the latter remains purely a local
market. Madrid is by far the most active and the most international market
exchange, accounting for nearly 50% of total market capitalization of both bonds
and stocks. The next largest exchange is Barcelona, founded in 1915. Membership
at each stock exchange in Spain is restricted to stockbrokers nominated by the
Ministry of Finance. In order to practice their profession, a broker must belong
to the Association of Brokers. In November 1986, the Madrid Stock Exchange
opened the new second market, or unlisted securities market, as part of an
effort to expand the range of Spanish companies whose shares are publicly
quoted. The second market provides small and medium-sized companies with access
to the trading market of the Madrid Stock Exchange.
Spanish reporting, accounting and auditing standards differ substantially from
U.S. standards. In general, Spanish corporations do not provide all of the
disclosure required by U.S. law and accounting practice, and such disclosure may
be less timely and less frequent than that required of U.S. corporations. As of
June 30, 1998, the total market capitalization of the Spanish equity markets was
approximately US $297.1 billion.
Spain's entry into the European Community in 1986 was followed by a period of
rapid economic growth. Economic growth did not continue; however, and the
government's restrictive monetary policy and the overvalued peseta contributed
to a downturn in investment along with a rise in unemployment in the early
1990s. Currently, the government faces the challenges of addressing the domestic
concerns of controlling inflation, reducing the deficit and effecting labor
reform against the competing interests of maintaining a monetary policy suitable
for Spain's participation in the EMU.
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<PAGE> 30
In June 1989, Spain joined the Exchange Rate Mechanism of the European Monetary
System with the goal of maintaining a stable currency. The resulting huge inflow
of foreign capital caused the Spanish economy to lose some of its
competitiveness. Despite the devaluation of the peseta and the easing of
monetary policy in 1993, Spain slipped into its worst recession in 30 years.
Economic growth has recovered since then, averaging 2.4% from 1994-96. The
center-right government elected in 1996 has displayed a strong ability to
control public spending through structural reforms.
In June of 1994, Spain experienced a general strike by the trade unions. The
strike, while unsuccessful, led to reforms in the labor market to ease the rigid
regulations that govern permanent job contracts. Spain's unemployment is
currently the highest in the European Union, however, 1997's strong economic
growth and new reforms to improve the flexibility of the labor market have
decreased the rate of unemployment from 24.6% in 1994 to 18.9% as of April 1998.
Like many of its European neighbors trying to improve themselves for the EMU,
Spain enjoyed a healthy growth rate of 3.4% in 1997, up from 2.3% in 1996. GDP
forecasts for 1998 and 1999 is 3.8% for both years. This strong showing is
attributable to the private consumption component of the economy, with Spain
being the first European country to achieve a demand-driven recovery. The
combination of 3% employment growth, rising real disposable income, and lower
interest rates were all factors in the increase in consumption. Low interest
rates drove a spending boom on durable goods, and mortgage payments have
decreased, giving homeowners more disposable income. On a quarter-by-quarter
basis, however, consumption is decelerating, raising expectations that inflation
will continue to be low. Unemployment is still the highest in Europe at 20%, yet
consumer confidence is at its highest in years. The deficit has been reduced to
2.6% of GDP, down from 6.6% in 1995, due to economic growth and increased
employment. Strong imports drove a negative net trade balance in the fourth
quarter, although exports are still quite strong. Spain's greatest challenge
will be to increase the flexibility of its labor markets.
The SWEDEN INDEX FUND seeks long-term capital appreciation in line with local
market equity returns. The Fund seeks to track as closely as possible the
performance of Sweden's Stockholm Options Market Index (the "OMX"). The Fund
will normally invest at least 95% of its total assets in a combination of: (i)
some or all of the stocks included in the OMX; (ii) OMX futures and Related
Securities; (iii) currency forward contracts and/or currency futures contracts
and Related Securities; and/or (iv) short-term debt instruments. The Fund seeks
to reduce or eliminate the impact of currency fluctuation through hedging local
currency against the U.S. Dollar.
The OMX is a capitalization-weighted index of 30 stocks that have the largest
volume of trading on the Stockholm Stock Exchange. As of June 30, 1998, the top
five stocks represented in the OMX and their approximate proportional
percentages are Ericsson, LM (25.59%), Astra, AB (11.69%), Hennes & Mauritz
(5.76%), Foreningssparban (4.83%), and SV Handelsbanken (4.60%).
Organized trading of securities in Sweden can be traced back to 1776. Although
the Stockholm Stock Exchange was founded in 1864, the real formation of a stock
exchange in an international sense took place in 1901. The statutes of the stock
exchange were modified in 1906 and, from the beginning of 1907, commercial banks
were admitted as members. During the 1970's the Stockholm market was
characterized by limited turnover and dull trading conditions. In 1980 the
market started to climb and for several years Stockholm was one of the best
performing stock markets in both price and volume growth. This regeneration of a
market for risk capital was reflected in the large number of companies
introduced in the early 1980's. The Stockholm Stock Exchange is structured on a
membership basis, with the Bank Inspection Board being the supervising
authority. The board consists of 11 directors and one chief executive. The
directors of the board are elected by the Swedish government, and the
Association of the Swedish Chamber of Commerce, the Federation of Swedish
Industries and the member companies of the Stock Exchange. There are three
different markets for trading shares in Sweden. The dominant
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market is the A1 list, for the largest and most heavily traded companies. The
second distinct market is the Over-the-Counter Market, which is more loosely
regulated than the official market and caters to small and medium sized
companies. The other market is the unofficial parallel market which deals in
unlisted shares, both on and off the exchange floor. The shares most frequently
traded on this market are those which have been delisted from the other markets
and those which are only occasionally available for trading. There are also two
independent markets for options -- the Swedish Options Market (SOM) and the
Swedish Options and Futures Exchange (SOFE). They offer calls, puts and forwards
on Swedish stocks and stock market index.
Swedish reporting, accounting and auditing standards differ substantially from
U.S. standards. In general, Swedish corporations do not provide all of the
disclosure required by U.S. law and accounting practice, and such disclosure may
be less timely and less frequent than that required of U.S. corporations. As of
June 30, 1998, the total market capitalization of the Swedish equity markets was
approximately US $311.6 billion.
Sweden has a highly developed and successful industrial sector. The chief
industries, most of which are privately owned, include textiles, furniture,
electronics, dairy, metals, ship building, clothing, engineering, chemicals,
food processing, fishing, paper, oil and gas, automobiles and shipping.
Productivity, as measured by GDP per capita, is well above the European average,
although two-thirds of GDP passes through the public sector.
Successive governments have traditionally afforded Swedes generous benefits for
unemployment, sick leave, child care, elderly care and general public welfare,
along with state medical care. This extensive social welfare system has proved
unsustainable in recent years and has resulted in large government deficits.
Furthermore, a wide tax wedge, caused by the generous social benefits, is a key
impediment to job creation and is the reason for the high unemployment rate.
Almost half of the personal disposable income received by Swedes resulted from
transfer payments, a system for redistributing income.
Sweden suffered a severe recession in the early 1990s causing GDP to fall 5%
between 1990 and 1993. The economic recovery gathered pace in 1994 and is now in
its fourth year. Nonetheless, the recession led to a drop in the standard of
living and has left Sweden with a large gap in its public finances. The budget
deficit peaked in 1993 at 12.3% of GDP.
Sweden, which joined the European Community on January 1, 1995, received strong
pressure to bring its public finances under control. A fiscal consolidation
plan, entailing a tightening of policy over a period of four years, was approved
by Parliament in 1995. Sweden is in the midst of a cyclical upturn, with a 1997
GDP growth rate of 2.3%, and forecasts for 1998 and 1999 at 2.8% and 3.0%,
respectively. The 1997 growth was split evenly between domestic demand and net
exports. The deficit, at 1.9% of GDP in 1997, is expected to revert to a balance
in 1998. As the economy continues to improve, Sweden has seen an improvement in
its unemployment rate, which is currently at 6.9% as of June 1998, down form
8.8% a year earlier. Inflation was 1.9% for 1997, leading to expectations of
tighter monetary policy by the Riksbank in 1998. Long yields are expected to
absorb most of the prospective tightening of monetary policy. Overall, Sweden's
fiscal situation continues to improve, with the deficit ratio equivalent to 1.6%
of GDP in 1997, contrasted to a 1994 ratio of 10.3%. The resulting improvement
in investor and business confidence has boosted Sweden's economic prospects and,
despite the continuing fiscal consolidation, such economic prospects are some of
the best in Europe for the remainder of the decade.
The SWITZERLAND INDEX FUND seeks long-term capital appreciation in line with
local market equity returns. The Fund seeks to track as closely as possible the
performance of Switzerland's Swiss Market Index (the "SMI"). The Fund will
normally invest at least 95% of its total assets in a combination of: (i) some
or all of the stocks included in the SMI; (ii) SMI futures and Related
Securities; (iii) currency forward contracts and/or currency futures contracts
and Related Securities; and/or (iv) short-term debt instruments. The Fund seeks
to reduce or eliminate the impact of currency fluctuation through hedging local
currency against the U.S. Dollar.
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The SMI is a capitalization-weighted index of the largest and most liquid stocks
traded on the Electronic Bourse System. As of June 30, 1998, the top five stocks
represented in the UKX and their approximate proportional percentages are
Novartis (17.03%), Union Bank of Switzerland (16.44%), Nestle, SA (15.68%),
Roche Holdings (Genussh) (13.28%), and Credit Suisse Group (11.56%).
There are three principal stock exchanges in Switzerland, the largest of which
is Zurich, followed by Geneva and Basel. The Geneva exchange is the oldest and
was formally organized in 1850. The Basel and the Zurich exchanges were founded
in 1876 and 1877, respectively. The Geneva Exchange is a corporation under
public law and in Zurich and Basel the exchanges are institutions under public
law. There are three different market segments for the trading of equities in
Switzerland. The first is the official market, the second is the semi-official
market, and the third is the unofficial market. On the official market, trading
takes place among members of the exchange on the official trading floors.
Trading in the semi-official market also takes place on the floors of the
exchanges, but this market has traditionally been reserved for smaller companies
not yet officially accepted on the exchange. Unofficial market trading is
conducted by members and non-members alike. Typical trading on this market
involves shares with small turnover. Both listed and unlisted securities can,
however, be traded on this market.
Swiss reporting, accounting and auditing standards differ substantially from
U.S. standards. In general, Swiss corporations do not provide all of the
disclosure required by U.S. law and accounting practice, and such disclosure may
be less timely and less frequent than that required of U.S. corporations. As of
June 30, 1998, the total market capitalization of the Swiss equity markets was
approximately US $673.6 billion.
Due to its lack of raw materials, Switzerland has based its economic growth on
its highly skilled labor market and technological manufacturing expertise.
Switzerland's strengths lie in chemicals and pharmaceuticals, watches, precision
instruments (machinery equipments), engineering, food, financial services and
tourism. Additionally, its small domestic market's reliance on exports accounted
for 36% of the GDP in 1994.
Historically, Switzerland has experienced low unemployment levels due to its
heavy dependence on foreign labor to supplement its labor force. However, from
1990 through the first half of 1997, the unemployment rate rose substantially,
peaking at 5.7% in mid 1997, resulting from seven years of recession and
stagnation. As of June 1998, unemployment dropped to 3.6%. The falling Swiss
franc helped Switzerland post the first real GDP growth since 1990, at 0.5% for
1997. The growth was driven by a strong demand for exports, which jumped 8.2%
since the second quarter of the prior year period. This increased demand was due
to similar economic recoveries in the rest of Europe, which consumes 62% of
Switzerland's exports. Net exports made a small positive contribution to growth.
Strong export sectors are chemicals, pharmaceuticals, and watchmakers. Although
Asia accounts for 13% of its exports, Switzerland has not experienced much
fallout from the Asian crisis to date. In contrast, domestic demand remains weak
with a growth rate of 0.25%, and consumer confidence is continuing at low
levels. Consumption growth was also slow at 1% for 1997. Capital investment
declined in 1997, falling by 2.75%. Inflationary pressures remain low, with
annual consumer price inflation in January 1998 at 0.1%, the lowest rate since
1986. The inflation rate for 1997 as a whole was 0.5%. The Organization of
Economic Cooperation and Development, estimates that the output gap (i.e. the
difference between peak capacity and actual output) in Switzerland was almost 5%
of GDP in 1997, reflecting significant capacity in Switzerland at present.
Forecasted GDP growth rates for 1998 and 1999 are 1.9% and 2.0%, respectively.
Nominal short-term interest rates have fallen to 1.25%. Once growth is
established, the Swiss National Bank is expected to return to a neutral monetary
policy. The biggest worry for the future is the success of monetary union in
Europe. If the EMU does not go smoothly, a panic flight to the Swiss franc could
result in significant appreciation, causing the economy to lapse into a
recession.
The UNITED KINGDOM INDEX FUND seeks long-term capital appreciation in line with
local market equity returns. The Fund seeks to track as closely as possible the
performance of United Kingdom's ("UK") FTSE 100 Index
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(the "UKX"). The Fund will normally invest at least 95% of its total assets in a
combination of: (i) some or all of the stocks included in the UKX; (ii) UKX
futures and Related Securities; (iii) currency forward contracts and/or currency
futures contracts and Related Securities; and/or (iv) short-term debt
instruments. The Fund seeks to reduce or eliminate the impact of currency
fluctuation through hedging local currency against the U.S. Dollar.
The UKX is a capitalization-weighted index of the 100 most highly capitalized
companies traded on the London Stock Exchange. As of June 30, 1998, the top five
stocks represented in the UKX and their approximate proportional percentages are
Glaxo Wellcome (6.12%), British Telecom (5.05%), British Petroleum (4.61%),
Lloyds TSB Group (4.48%), and Shell Trans & Trading (3.78%).
The UK is Europe's largest equity market in terms of aggregate market
capitalization. Trading is fully computerized under the Stock Exchange Automated
Quotation System. There are 14 stock exchanges in the UK and Ireland which
comprise the Associated Stock Exchange. The most important exchange and the one
that has the major share of the business is the London Stock Exchange. The
London Stock Exchange has the largest volume of trading in international
equities in the world.
Although UK reporting, accounting and auditing standards are among the most
stringent outside the United States, such standards are not identical to U.S.
standards in important respects. Some UK corporations are not required to
provide all of the disclosure required by U.S. law and accounting practice, and
such disclosure may, in certain cases, be less timely and less frequent than
that required of U.S. corporations. As of June 30, 1998, the total market
capitalization of the UK equity markets was approximately US $2,183.6 billion.
The 1997 general election resulted in a landslide victory for the Labor Party,
which had been out of office since May 1979. In its first few months, the Labor
Party administration showed signs of pursuing policies which are very similar to
the market-oriented policies of the outgoing government. It has granted
operational independence to the Bank of England, a step which the Conservative
government had been reluctant to take.
The new government is more open to EMU than the outgoing administration, but
early participation nonetheless remains unlikely. The Labor leadership is in
favor of the EMU in principal, but has stated that any eventual practical
decision to join must be preceded by a greater economic convergence than that
specified by the Maastricht Treaty and a formal referendum.
The UK economy has grown since 1993, and has continued to grow strongly during
early 1997. Measured unemployment has fallen sharply, toward levels more typical
of the United States than of Continental Europe, and corporate profitability has
been approaching levels not seen since the 1960s. With a GDP growth rate of 3.5%
for 1997, Britain sustained a fifth straight year of growth. GDP growth
forecasts for 1998 and 1999 are 2.2% and 1.3%, respectively. Britain's economy
has sparked some fears of inflation, however, given the tightness of the labor
market. The unemployment rate in 1997 was at 5.5% and rose to 6.3% as of May
1998. Accordingly, the Bank of England raised interest rates in five
quarter-point moves between May and November 1997. The specter of inflation
continued into early 1998, creating public debate over the necessity of further
rate hikes. The consensus is that the economy is now slowing. Industrial
production slowed in both November and December of 1997. Consumer spending was
less robust than in 1996 and rising interest rates have increased mortgage
payments as most mortgage-holders pay variable rates. The strength of sterling,
which is about 25% higher than in mid-1996, is expected to lead to a surge of
imports, which, along with the Asian crisis, is expected to have a dampening
effect on British exports. Fiscal policy remained unchanged in early 1998, due
to these slowdowns, and manufacturing output continued to fall in early 1998,
putting off any imminent interest rate hikes. Consumer confidence could
stimulate the economy since the aggregate household balance sheet is strong.
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THE FUNDS OF INDEX FUNDS
The EUROPE INDEX FUND is a "fund of funds" which invests in shares of the
France, Germany, Italy, Netherlands, Spain, Sweden, Switzerland, and United
Kingdom Country Index Funds (collectively, the "European Country Index Funds").
The Europe Index Fund seeks long-term capital appreciation in line with local
market equity returns of those European countries in which the underlying
Country Index Funds invest. The Europe Index Fund invests in its underlying
Country Index Funds in proportion to the relative equity market capitalization
of the countries represented by the underlying Country Index Funds. The Europe
Index Fund seeks to reduce or eliminate the impact of currency fluctuation by
investing in the Country Index Funds which are hedged against such risk.
In 1986, the member states of the European Community (the "Member States")
signed the "Single European Act," an agreement to establish a free market. The
development of a unified common European market has promoted the free flow of
goods and services; however, since September 1992, Europe's monetary policy has
been affected by fluctuating currencies. Additionally, 1993's tight monetary
policies and high inflation caused Europe's economies to ebb into recession.
The Maastricht Treaty creating the EMU, is intended to provide its members with
a stable monetary framework. The prospect of EMU has triggered a sharp
convergence of interest rates across Europe, with risk premium over the German
interest rates levels having decreased. Adding to the favorable monetary
conditions, the monetary easing experienced by core countries has triggered a
strong depreciation of their currencies. Consequently, European activity has
accelerated again in 1997.
The prospect of the EMU has reduced the roles of exchange rate depreciation,
fiscal profligacy and political control over central banks on the business
cycle. As a result, the European cycle is becoming less volatile. We believe
that future core European business cycles will resemble those in the US, where
swings in activity are determined mainly by exogenous shocks to the system,
policy mistakes and inventory corrections.
The EMU is set to take place in 1999 with Austria, Belgium, Finland, France,
Germany, Italy, Ireland, Luxembourg, Spain, Portugal, and the Netherlands. The
costs associated with a delay and possible abandonment appear to be too great to
allow the political leaders to walk away from their commitment. The EMU should
be a net plus for European investment spending and for economic growth. In
addition, a less volatile business cycle should be beneficial for future
business planning. This should be a net plus for shareholder value and for the
markets in general. The community's future challenge will be to allow more
countries into the EMU while maintaining its stability. See "ADDITIONAL RISK
CONSIDERATIONS" below.
The INTERNATIONAL INDEX FUND a "fund of funds" which invests in shares of the
eight European Country Index Funds and the Australia, Hong Kong and Japan
Country Index Funds. The International Index Fund seeks long-term capital
appreciation in line with local market equity returns of those countries in
which the underlying Country Index Funds invest. The International Index Fund
invests in its underlying Country Index Funds in proportion to the relative
equity market capitalization of the countries represented by the underlying
Country Index Funds. The International Index Fund seeks to reduce or eliminate
the impact of currency fluctuation by investing in the Country Index Funds which
are hedged against such risk. The Fund will be subject to the country-specific
economic considerations and risks associated which each of the underlying
Country Index Funds in its portfolio.
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<PAGE> 35
ADDITIONAL RISK CONSIDERATIONS
THE EURO
On January 1, 1999, the European Monetary Union (EMU) plans to implement a new
currency unit, the Euro, which is expected to reshape financial markets, banking
systems and monetary policies in Europe and other parts of the world. The
countries initially expected to convert or tie their currencies to the Euro
include Austria, Belgium, France, Germany, Luxembourg, the Netherlands, Ireland,
Finland, Italy, Portugal and Spain. Implementation of this plan will mean that
financial transactions and market information, including share quotations and
company accounts, in participating countries will be denominated in Euros.
Approximately 46% of the stock exchange capitalization of the total European
market may be reflected in Euros, and participating governments will issue their
bonds in Euros. Monetary policy for participating countries will be uniformly
managed by a new central bank, the European Central Bank (ECB).
Although it is not possible to predict the impact of the Euro implementation
plan on the Funds, the transition to the Euro may change the economic
environment and behavior of investors, particularly in European markets. For
example, investors may begin to view those countries participating in the EMU as
a single entity, and LMI Investment Advisors LLP (the "Advisor") may need to
adapt its investment strategy accordingly. The process of implementing the Euro
also may adversely affect financial markets world-wide and may result in changes
in the relative strength and value of the U.S. dollar or other major currencies,
as well as possible adverse tax consequences. The transition from current
currencies to the Euro, may be considered a taxable event. The transition to the
Euro is likely to have a significant impact on fiscal and monetary policy in the
participating countries and may produce unpredictable effects on trade and
commerce generally. These resulting uncertainties could create increased
volatility in financial markets world-wide.
YEAR 2000
The Funds depend on the smooth functioning of computer systems in almost every
aspect of their business. Like other mutual funds, businesses and individuals
around the world, the Funds could be adversely affected if the computer systems
used by its service providers do not properly process dates on and after January
1, 2000 and distinguish between the year 2000 and the year 1900. The Funds have
asked their service providers whether they expect to have their computer systems
adjusted for the year 2000 transition, and received assurances from each that
they are devoting significant resources to prevent material adverse consequences
to the Funds. The Funds and their respective shareholders may experience losses
if these assurances prove to be incorrect or as a result of year 2000 computer
difficulties experienced by issuers of portfolio securities or third parties,
such as custodians, banks, broker-dealers or others with which the Funds do
business. Furthermore, many foreign countries are not as prepared as the U.S.
for the year 2000 transition. As a result, computer difficulties in foreign
markets and with foreign institutions as a result of the year 2000 may add to
the possibility of losses to the Funds and their respective shareholders.
GLOBAL CUSTODIANS
In making investment decisions for each Fund, the Advisor evaluates the risks
associated with investing Fund assets in a particular country, including risks
stemming from a country's financial infrastructure and settlement practices; the
likelihood of expropriation, nationalization or confiscation of invested assets;
prevailing or developing custodial practices in the country; the country's laws
and regulations regarding the safekeeping, maintenance and recovery of invested
assets, the likelihood of government-imposed exchange control restrictions which
could impair the liquidity of Fund assets maintained with custodians in that
country, as well as risks from
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<PAGE> 36
political acts of foreign governments ("country risks"). Of course, the Advisor
cannot assure that a Fund will not suffer losses resulting from investing in
foreign countries.
Holding Fund assets in foreign countries through specific foreign custodians
presents additional risks, including but not limited to the risks that a
particular foreign custodian or depository will not exercise proper care with
respect to Fund assets or will not have the financial strength or adequate
practices and procedures to properly safeguard Fund assets.
INVESTMENT POLICIES AND OBJECTIVES
GENERAL
Each Fund's investment objective and permitted investments are described in the
Funds' Prospectus. The following information supplements, and should be read in
conjunction with, the Prospectus.
INVESTMENT POLICIES
The Funds are not managed by traditional methods of "active" investment
management which depend on fundamental financial and market analysis and on
relative valuation investment judgments. Instead, each Fund uses a "passive" or
indexed investment approach and attempts to track as closely as possible the
investment performance of its LOCAL MARKET INDEX ("LMI")(SM1) by normally
investing at least 95% of its total assets primarily in either some or all
stocks of the LMI in general proportion to the LMI or a statistical sampling of
common stocks designed to track the LMI, LMI futures and Related Securities,
stock swap agreements, currency forward contracts and currency futures contracts
and Related Securities, and/or cash and short-term debt instruments. Each Fund
has a policy of remaining as fully invested as practical in a pool of the
foregoing investment instruments.
Once a Country Index Fund has reached a sufficient asset level ("Asset Level"),
it will invest at least 65% of its total assets in the stocks included in its
respective LMI. Achieving the optimum mix of a combination of securities,
futures and other investment vehicles to best track a Funds respective LMI,
depends on such factors as the number of securities represented in an LMI and
costs, such as transaction and custody expenses. Therefore, projecting precise
Asset Levels for each Fund is difficult. Nevertheless, the Advisor believes
that each Fund will invest at least 65% of its assets in underlying stocks once
that Fund achieves the following Asset Levels:
Australia Index Fund ($50 Million), France Index Fund ($35 Million), Germany
Index Fund ($30 Million), Hong Kong Index Fund ($45 Million), Italy Index Fund
($30 Million), Japan Index Fund ($50 Million), Netherlands Index Fund ($40
Million), Spain Index Fund ($45 Million), Sweden Index Fund ($45 Million),
Switzerland Index Fund ($30 Million), and United Kingdom Index Fund ($40
Million).
Except for the investment flexibility necessary to comply with the requirements
of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"),
and other regulatory requirements and to manage future corporate actions and LMI
changes currently pertaining to the LMIs of Italy and Hong Kong, each Fund will
normally invest at least 95% of its total assets in some or all of these
investment instruments. A Fund may not invest in all of the underlying
securities within each LMI if the Advisor and/or State Street Global Advisors
(the "Sub-Advisor") determine that some securities make up a small percentage of
the total LMI and such securities will have no material effect on a Fund's
performance.
A Fund may invest its remaining assets in Short-Term Debt Instruments (defined
below), in stocks that are in the relevant Country market but are not in the LMI
and/or in combinations of LMI futures contracts, LMI options, LMI swaps, cash,
local currency and forward currency exchange contracts and Related Securities.
"Short-Term Debt Instruments" are short-term high quality debt securities that
include obligations of the U.S. Government and its agencies and
instrumentalities, commercial paper (rated Prime-I by Moody's Investors
Services, Inc. or A-1 by Standard & Poor's Ratings Group), bank certificates of
deposit, bankers acceptances, repurchase agreements collateralized by the
foregoing securities, participations of interest in these securities and shares
of money market funds.
A Fund may not use long futures contracts to leverage the portfolio at the time
of investment in the futures contracts. Rather, long futures positions will be
used to hedge a Fund's Short-Term Debt Instruments and cash reserves. A Fund
will not invest in Short-Term Debt Instruments, futures contracts, options, swap
agreements or
- --------
(1) The singular "LMI" should be read as "LMIs" in the context of the Funds
of Index Funds.
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<PAGE> 37
cash reserves as part of a defensive strategy to defend against possible adverse
stock market trends. A Fund may enter into forward currency exchange contracts
to facilitate settlements in local markets, and in connection with LMI futures
positions and to protect against currency exposure with regard to shareholder
distributions.
Each Fund will necessarily "concentrate" its investments in companies engaged in
the same or similar industries if the underlying LMI represents a concentration
in those industries, making the Funds susceptible to the risks and market
fluctuations of that industry. (A Fund will not "concentrate" its investments if
doing so will cause the Fund to lose its status as a regulated investment
company ("RIC") under the Internal Revenue Code.) In particular, a Fund will
maintain 25% or more of its net asset value in securities of issuers in each
industry in which its LMI has a concentration of 25% or more. Changes in LMI
industry concentrations will be made passively, as such changes are made only
based upon changes in the constituent common stocks of the LMI.
A Fund in many cases may not hold all issues that comprise its LMI because of
the costs involved for the Fund and because of relative illiquidity of certain
common stocks in its LMI. As an alternative to holding all securities that are
included in its LMI, the Fund may hold a representative sampling, based upon an
analytical technique known as "portfolio sampling." Portfolio sampling considers
each stock for inclusion into a Fund's portfolio based primarily upon its
capitalization, industry and fundamental investment characteristics. The Fund's
portfolio manager will attempt to construct a portfolio such that in aggregate
the Fund's capitalization, industry and fundamental investment characteristics
perform similarly to its LMI. The Fund's composition will be rebalanced on a
continuous basis to conform to changes in its LMI. Such rebalancing will involve
transaction costs to the Fund. Finally, each Fund reserves the right to invest
in all securities in its LMI, and a Fund with a LMI comprised of relatively few
common stocks may regularly do so.
In addition to common stock LMI futures contracts, a Fund may invest in options
on such futures contracts and stock index options and may enter into stock index
swaps to obtain its investment objective of full investment in its LMI. If LMI
futures contracts are not available or not as favorable an investment as stock
index swaps, then stock index swaps may be used by a Fund as a replacement to
the extent that LMI futures contracts may be invested into by the Fund. The
Advisor may not use these instruments to leverage the net assets of the Fund.
A Fund may lend securities from its portfolio to brokers, dealers and other
financial institutions. Since the government securities or other assets that are
pledged as collateral to the Fund in connection with these securities loans
generate income, securities lending earns income that may partially offset
expenses and improve the Fund's ability to more closely track the price and
yield performance of its LMI. These securities loans may not exceed 33a% of a
Fund's total assets. Loan documentation will provide that the Fund will receive
collateral at least equal to 100% of the current market value of the loaned
securities, as marked-to-market each day that the Fund determines its net asset
value.
Since each Fund seeks to passively invest in common stocks that primarily
comprise its LMI, a Fund's annual turnover rate for common stocks is expected to
be under fifty percent which is generally a lower turnover rate than that of
many actively managed international equity mutual funds. With regard to LMI
futures contracts and LMI swap agreements both of which seek to closely track a
LMI, such contracts and agreements mature in a relatively short term (usually
under one year). The Funds are managed without specific regard to the tax
effects of investment decisions, but rather seek to closely track the investment
returns of their respective LMIs.
INVESTMENT OBJECTIVE
COUNTRY INDEX FUNDS. Each Country Index Fund seek long-term capital appreciation
in line with local market equity returns. Each Fund seeks to track as closely as
possible the performance of its respective LMI. The Country Index Funds seek to
reduce or eliminate the impact of currency fluctuation through hedging local
currencies against the
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<PAGE> 38
U.S. Dollar. The above stated investment objective of each Country Index Fund is
a fundamental policy and cannot be changed without the approval of the holders
of a majority of the respective Country Index Fund's voting securities.
Although the Country Index Funds seek to track the investment return of their
designated LMI, there can be no assurance that this investment objective can be
achieved. Benchmark indexes are unmanaged and as such bear no management,
transaction, distribution, administration or other expenses or taxes; each
Country Index Fund bears these expenses. Additionally, there may be limits on
investment flexibility, particularly with regard to holding certain minimum
levels of cash to meet normal Fund redemptions and with regard to using
portfolio sampling techniques by which a Fund would not purchase all of the
securities in its LMI. Also, certain Country Index Funds may be subject to
foreign tax withholding at rates different than those assumed in its benchmark
LMI. Finally, all Country Index Funds seek to fully hedge currency risk at all
times, thereby further impeding the Funds from closely tracking the returns of
their respective LMIs.
FUNDS OF INDEX FUNDS. The Europe Index Fund and International Index Fund are
"funds of funds" (the "Funds of Index Funds") which will invest in I Class
shares of a particular group of Country Index Funds. The Funds of Index Funds
seek long-term capital appreciation in line with local market equity returns of
the group of countries in which the underlying Country Index Funds invest. The
Europe Index Fund will invest in the following Country Index Funds: France,
Germany, Italy, Netherlands, Spain, Sweden, Switzerland, and United Kingdom
(collectively, the "European Country Index Funds"). The International Index Fund
will invest in the eight European Country Index Funds and the Australia, Hong
Kong and Japan Country Index Funds. Each Fund of Index Funds invests in its
underlying Country Index Funds in proportion to the relative equity market
capitalization of the countries represented by the underlying Country Index
Funds. The Funds of Index Funds seek to reduce or eliminate the impact of
currency fluctuation by investing in the Country Index Funds which are hedged
against such risk. The above stated investment objective of each Fund of Index
Funds is a fundamental policy and cannot be changed without the approval of the
holders of a majority of the respective Fund of Index Fund's voting securities.
INVESTMENT TECHNIQUES
Unless specified to the contrary, each Fund may engage in the investment
techniques and make the types of investments described and discussed in this
section.
BORROWING
The Funds may borrow money, including borrowing for investment purposes.
Borrowing for investment is known as leveraging. Leveraging investments by
purchasing securities with borrowed money is a speculative technique which
increases investment risk, but also increases investment opportunity. Since
substantially all of a Fund's assets may fluctuate in value, whereas the
interest obligations on borrowing may be fixed, the net asset value per share of
the Fund will increase more when the Fund's portfolio assets increase in value
and decrease more when the Fund's portfolio assets decrease in value than would
otherwise be the case. Moreover, interest costs on borrowing may fluctuate with
changing market rates of interest and may partially offset or exceed the returns
on the borrowed funds. Under adverse conditions, the Funds might have to sell
portfolio securities to meet interest or principal payments at a time investment
considerations would not favor such sales. The Funds intend to use leverage
during periods when the Advisor believes that the respective Fund's investment
objective would be furthered.
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Each Fund may borrow money to facilitate management of the Fund's portfolio by
enabling the Fund to meet redemption requests when the liquidation of portfolio
instruments would be inconvenient or disadvantageous. Such borrowing is not for
investment purposes and will be repaid by the borrowing Fund promptly.
As required by the 1940 Act, a Fund must maintain continuous asset coverage
(total assets, including assets acquired with borrowed funds, less liabilities
exclusive of borrowing) of 300% of all amounts borrowed. If, at any time, the
value of a Fund's assets should fail to meet this 300% coverage test, the Fund,
within three days (not including Sundays and holidays), will reduce the amount
of the Fund's borrowing to the extent necessary to meet this 300% coverage.
Maintenance of this percentage limitation may result in the sale of portfolio
securities at a time when investment considerations otherwise indicate that it
would be disadvantageous to do so.
In addition to the foregoing, the Funds are authorized to borrow money from
banks as a temporary measure for extraordinary or emergency purposes in amounts
not in excess of 5% of the value of a Fund's total assets. This borrowing is not
subject to the foregoing 300% asset coverage requirement The Funds are
authorized to pledge portfolio securities as the Advisor deems appropriate in
connection with any borrowing.
FOREIGN ISSUERS
The Funds will invest in issuers located outside the United States. This may be
achieved by purchasing American Depositary Receipts ("ADRs"), European
Depositary Receipts ("EDRs") and/or Global Depositary Receipts ("GDRs")
(collectively, "Depositary Receipts"). Depositary Receipts are typically issued
by a financial institution ("depository") and evidence ownership interests in a
security or a pool of securities ("underlying securities") that have been
deposited with the depository. In ADRs, the depository is typically a U.S.
financial institution and the underlying securities are issued by a foreign
issuer. In other Depositary Receipts, the depository may be a foreign or a U.S.
entity, and the underlying securities may have a foreign or a U.S. issuer.
Depositary Receipts will not necessarily be denominated in the same currency as
their underlying securities. Depositary Receipts may be issued pursuant to
sponsored or unsponsored programs. In sponsored programs, an issuer has made
arrangements to have its securities traded in the form of Depositary Receipts.
In unsponsored programs, the issuer may not be directly involved in the creation
of the program. Although regulatory requirements with respect to sponsored and
unsponsored programs are generally similar, in some cases it may be easier to
obtain financial information from an issuer that has participated in the
creation of a sponsored program. Accordingly, there may be less information
available regarding issuers of securities underlying unsponsored programs and
there may not be a correlation between such information and the market value of
the Depositary Receipts. For purposes of a Fund's investment policies,
investments in Depositary Receipts will be deemed to be investments in the
underlying securities. Thus, a Depositary Receipt representing ownership of
common stock will be treated as common stock. When Depositary Receipts which are
purchased with and sold for U.S. dollars, this protects the Funds from the
foreign settlement risks described below. Note, however, that Depositary
Receipts are also subject to the risks inherent in investing in foreign
securities generally, other than foreign settlement risks, and that purchasing
and selling Depositary Receipts with U.S. Dollars may not protect the Funds from
these types of risks.
Investing in foreign companies may involve risks not typically associated with
investing in United States companies. The value of securities denominated in
foreign currencies, and of dividends from such securities, can change
significantly when foreign currencies strengthen or weaken relative to the U.S.
dollar. Foreign securities markets generally have less trading volume and less
liquidity than United States markets, and prices in some foreign markets can be
very volatile. Many foreign countries lack uniform accounting and disclosure
standards comparable to those that apply to United States companies, and it may
be more difficult to obtain reliable information regarding a foreign issuer's
financial condition and operations. In addition, the costs of foreign investing,
including withholding taxes, brokerage commissions, and custodial fees,
generally are higher than for United States investments.
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Investing in companies located abroad carries political and economic risks
distinct from those associated with investing in the United States. Foreign
investment may be affected by actions of foreign governments adverse to the
interests of United States investors, including the possibility of expropriation
or nationalization of assets, confiscatory taxation, restrictions on United
States investment, or on the ability to repatriate assets or to convert currency
into U.S. dollars. There may be a greater possibility of default by foreign
governments or foreign-government sponsored enterprises. Investments in foreign
countries also involve a risk of local political, economic, or social
instability, military action or unrest, or adverse diplomatic developments.
NON-U.S. EQUITY PORTFOLIOS
An investment in the Funds involves risks similar to those of investing in a
broadly-based portfolio of equity securities traded on exchanges in the
respective countries covered by the individual Funds. These risks include market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in stock prices. Investing in
securities issued by companies domiciled in countries other than the domicile of
the investor and denominated in currencies other than an investor's local
currency entails certain considerations and risks not typically encountered by
the investor making investments in its home country and in that country's
currency. These considerations include favorable or unfavorable changes in
interest rates, currency exchange rates, exchange control regulations and the
costs that may be incurred in connection with conversions between various
currencies. Investing in a Fund whose portfolio contains non-U.S. issuers
involves certain risks and considerations not typically associated with
investing in the securities of U.S. issuers. These risks include generally less
liquid and less efficient securities markets; generally greater price
volatility; less publicly available information about issuers; the imposition of
withholding or other taxes; restrictions on the expatriation of funds or other
assets of a Fund; higher transaction and custody costs; delays attendant in
settlement procedures; difficulties in enforcing contractual obligations; lesser
liquidity and significantly smaller market capitalization of most non-U.S.
securities markets; lesser levels of regulation of the securities markets; more
substantial government involvement in the economy; higher rates of inflation;
greater social, economic, and political uncertainty; and the risk of
nationalization or expropriation of assets and risk of war.
CURRENCY TRANSACTIONS
Foreign exchange transactions involve a significant degree of risk and the
markets in which foreign exchange transactions are effected are highly volatile,
highly specialized and highly technical. Significant changes, including changes
in liquidity and prices, can occur in such markets within very short periods of
time, often within minutes. Foreign exchange trading risks include, but are not
limited to, exchange rate risk, maturity gaps, interest rate risk and potential
interference by foreign governments through regulation of local exchange
markets, foreign investment, or particular transactions in foreign currency. If
the Advisor utilizes foreign exchange transactions at an inappropriate time or
judges market conditions, trends or correlations incorrectly, foreign exchange
transactions may not serve their intended purpose of improving the correlation
of a Fund's return with the performance of the corresponding LMI and may lower
the Fund's return. A Fund could experience losses if the values of its currency
forwards, options and futures positions were poorly correlated with its other
investments or if it could not close out its positions because of an illiquid
market. In addition, each Fund will incur transaction costs, including trading
commissions, in connection with certain of its foreign currency transactions.
ILLIQUID SECURITIES
The Funds may purchase illiquid securities, including securities that are not
readily marketable and securities that are not registered ("restricted
securities") under the Securities Act of 1933, as amended (the "1933 Act"), but
which can be offered and sold to "qualified institutional buyers" under Rule
144A under the 1933 Act. A Fund will not invest more than 15% of the Fund's net
assets in illiquid securities. The term "illiquid securities" for this
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purpose means securities that cannot be disposed of within seven days in the
ordinary course of business at approximately the amount at which the Fund has
valued the securities. Under the current guidelines of the staff of the
Securities and Exchange Commission (the "Commission"), illiquid securities also
are considered to include, among other securities, purchased over-the-counter
options, certain cover for over-the-counter options, repurchase agreements with
maturities in excess of seven days, and certain securities whose disposition is
restricted under the Federal securities laws. The Fund may not be able to sell
illiquid securities when the Advisor considers it desirable to do so or may have
to sell such securities at a price that is lower than the price that could be
obtained if the securities were more liquid. In addition, the sale of illiquid
securities also may require more time and may result in higher dealer discounts
and other selling expenses than does the sale of securities that are not
illiquid. Illiquid securities also may be more difficult to value due to the
unavailability of reliable market quotations for such securities, and investment
in illiquid securities may have an adverse impact on net asset value.
Institutional markets for restricted securities have developed as a result of
Rule 144A, which provides a "safe harbor" from 1933 Act registration
requirements for qualifying sales to institutional investors. When Rule 144A
securities present an attractive investment opportunity and otherwise meet
selection criteria, a Fund may make such investments. Whether or not such
securities are "illiquid" depends on the market that exists for the particular
security. The Commission staff has taken the position that the liquidity of Rule
144A restricted securities is a question of fact for a board of trustees to
determine, such determination to be based on a consideration of the
readily-available trading markets and the review of any contractual
restrictions. The staff also has acknowledged that, while a board of trustees
retains ultimate responsibility, the trustees may delegate this function to an
investment adviser. The trustees of the Trust (the "Trustees") have delegated to
the Advisor the responsibility for determining the liquidity of Rule 144A
restricted securities which may be invested in by a Fund. It is not possible to
predict with assurance exactly how the market for Rule 144A restricted
securities or any other security will develop. A security that may have enjoyed
a fair degree of marketability when purchased may subsequently become illiquid.
Accordingly, a security that was deemed to be liquid at the time of acquisition
may subsequently become illiquid. In such event, appropriate remedies will be
considered to minimize the effect on a Fund's liquidity.
LENDING OF PORTFOLIO SECURITIES
Subject to the investment restrictions set forth below, each of the Funds may
lend portfolio securities to brokers, dealers, and financial institutions,
provided that cash equal to at least 100% of the market value of the securities
loaned is deposited by the borrower with the Fund and is maintained each
business day in a segregated account pursuant to applicable regulations. While
such securities are on loan, the borrower will pay the lending Fund any income
accruing thereon, and the Fund may invest the cash collateral in portfolio
securities, thereby earning additional income. A Fund will not lend its
portfolio securities if such loans are not permitted by the laws or regulations
of any state in which the Fund's shares are qualified for sale, and the Funds
will not lend more than 33a% of the value of the Fund's total assets. Loans
would be subject to termination by the lending Fund on four business days'
notice, or by the borrower on one day's notice. Borrowed securities must be
returned when the loan is terminated. Any gain or loss in the market price of
the borrowed securities which occurs during the term of the loan inures to the
lending Fund and that Fund's shareholders. A lending Fund may pay reasonable
finders, borrowers, administrative, and custodial fees in connection with a
loan.
OPTIONS TRANSACTIONS
Options on Securities. The Funds may buy call options and write (sell) put
options on securities, and may buy put options and write call options on
securities for the purpose of realizing the Fund's investment objective. By
writing a call option on securities, a Fund becomes obligated during the term of
the option to sell the securities underlying the option at the exercise price if
the option is exercised. By writing a put option, a Fund becomes
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obligated during the term of the option to purchase the securities underlying
the option at the exercise price if the option is exercised.
During the term of the option, the writer may be assigned an exercise notice by
the broker-dealer through whom the option was sold. The exercise notice would
require the writer to deliver (in the case of a call) or take delivery of (in
the case of a put) the underlying security against payment of the exercise
price. This obligation terminates upon expiration of the option, or at such
earlier time that the writer effects a closing purchase transaction by
purchasing an option covering the same underlying security and having the same
exercise price and expiration date as the one previously sold. Once an option
has been exercised, the writer may not execute a closing purchase transaction.
To secure the obligation to deliver the underlying security in the case of a
call option, the writer of a call option is required to deposit in escrow the
underlying security or other assets in accordance with the rules of the Option
Clearing Corporation (the "OCC"), an institution created to interpose itself
between buyers and sellers of options. The OCC assumes the other side of every
purchase and sale transaction on an exchange and, by doing so, gives its
guarantee to the transaction.
Options on Security Indexes. The Funds may purchase call options and write put
options, and may purchase put options and write call options, on stock indexes
listed on international securities exchanges or traded in the over-the-counter
market as an investment vehicle for the purpose of realizing a Fund's investment
objective.
Options on indexes are settled in cash, not in delivery of securities. The
exercising holder of an index option receives, instead of a security, cash equal
to the difference between the closing price of the securities index and the
exercise price of the option. When a Fund writes a covered option on an index,
the Fund will be required to deposit and maintain with a custodian, cash or
liquid securities equal in value to the aggregate exercise price of a put or
call option pursuant to the requirements and the rules of the applicable
exchange. If, at the close of business on any day, the market value of the
deposited securities falls below the contract price, the Fund will deposit with
the custodian cash or liquid securities equal in value to the deficiency.
Options on Futures Contracts. Under Commodities Futures Trading Commission
("CFTC") Regulations, a Fund may engage in futures transactions, either for
"bona fide hedging" purposes, as this term is defined in the CFTC Regulations,
or for non-hedging purposes to the extent that the aggregate initial margins and
option premiums required to establish such non-hedging positions do not exceed
5% of the liquidation value of the Fund's portfolio. In the case of an option on
futures contracts that is "in-the-money" at the time of purchase (i.e., the
amount by which the exercise price of the put option exceeds the current market
value of the underlying security, or the amount by which the current market
value of the underlying security exceeds the exercise price of the call option),
the in-the-money amount may be excluded in calculating this 5% limitation.
When a Fund purchases or sells a stock index futures contract, or sells an
option thereon, the Fund "covers" its position. To cover its position, a Fund
may maintain with its custodian bank (and marked-to-market on a daily basis), a
segregated account consisting of cash or liquid securities that, when added to
any amounts deposited with a futures commission merchant as margin, are equal to
the market value of the futures contract or otherwise "cover" its position. If
the Fund continues to engage in the described securities trading practices and
properly segregates assets, the segregated account will function as a practical
limit on the amount of leverage which the Fund may undertake and on the
potential increase in the speculative character of the Fund's outstanding
portfolio securities. Additionally, such segregated accounts will generally
assure the availability of adequate funds to meet the obligations of the Fund
arising from such investment activities.
A Fund may cover its long position in a futures contract by purchasing a put
option on the same futures contract with a strike price (i.e., an exercise
price) as high or higher than the price of the futures contract. In the
alternative, if the strike price of the put is less than the price of the
futures contract, the Fund will maintain in a segregated
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account cash or liquid securities equal in value to the difference between the
strike price of the put and the price of the futures contract. A Fund may also
cover its long position in a futures contract by taking a short position in the
instruments underlying the futures contract, or by taking positions in
instruments with prices which are expected to move relatively consistently with
the futures contract. A Fund may cover its short position in a futures contract
by taking a long position in the instruments underlying the futures contracts,
or by taking positions in instruments with prices which are expected to move
relatively consistently with the futures contract.
A Fund may cover its sale of a call option on a futures contract by taking a
long position in the underlying futures contract at a price less than or equal
to the strike price of the call option. In the alternative, if the long position
in the underling futures contracts is established at a price greater than the
strike price of the written (sold) call, the Fund will maintain in a segregated
account cash or liquid securities equal in value to the difference between the
strike price of the call and the price of the futures contract. A Fund may also
cover its sale of a call option by taking positions in instruments with prices
which are expected to move relatively consistently with the call option. A Fund
may cover its sale of a put option on a futures contract by taking a short
position in the underlying futures contract at a price greater than or equal to
the strike price of the put option, or, if the short position in the underlying
futures contract is established at a price less than the strike price of the
written put, the Fund will maintain in a segregated account cash or liquid
securities equal in value to the difference between the strike price of the put
and the price of the futures contract. A Fund may also cover its sale of a put
option by taking positions in instruments with prices which are expected to move
relatively consistently with the put option.
REPURCHASE AGREEMENTS
The Funds may enter into repurchase agreements with financial institutions. The
Funds each follow certain procedures designed to minimize the risks inherent in
such agreements. These procedures include effecting repurchase transactions only
with large, well-capitalized and well-established financial institutions whose
condition will be continually monitored by the Advisor. In addition, the value
of the collateral underlying the repurchase agreement will always be at least
equal to the repurchase price, including any accrued interest earned on the
repurchase agreement. In the event of a default or bankruptcy by a selling
financial institution, a Fund will seek to liquidate such collateral. However,
the exercising of a Fund's right to liquidate such collateral could involve
certain costs or delays and, to the extent that proceeds from any sale upon a
default of the obligation to repurchase were less than the repurchase price, the
Fund could suffer a loss. It is the current policy of the Funds not to invest in
repurchase agreements that do not mature within seven days if any such
investment, together with any other illiquid assets held by the Fund, amounts to
more than 15% of the Fund's total assets. The investments of a Fund in
repurchase agreements, at times, may be substantial when, in the view of the
Advisor, liquidity or other considerations so warrant.
U.S. GOVERNMENT SECURITIES
Although the Funds have no present intention of doing so, each Fund may at
certain times invest in U.S. Treasury securities, which are backed by the full
faith and credit of the U.S. Treasury and which differ only in their interest
rates, maturities, and times of issuance. U.S. Treasury bills have initial
maturities of one year or less; U.S. Treasury notes have initial maturities of
one to ten years; and U.S. Treasury bonds generally have initial maturities of
greater than ten years. Certain U.S. Government Securities are issued or
guaranteed by agencies or instrumentalities of the U.S. Government including,
but not limited to, obligations of U.S. Government agencies or instrumentalities
such as Fannie Mae, the Government National Mortgage Association, the Small
Business Administration, the Federal Farm Credit Administration, the Federal
Home Loan Banks, Banks for Cooperatives (including the Central Bank for
Cooperatives), the Federal Land Banks, the Federal Intermediate Credit Banks,
the Tennessee Valley Authority, the Export-Import Bank of the United States, the
Commodity Credit Corporation,
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the Federal Financing Bank, the Student Loan Marketing Association, and the
National Credit Union Administration.
Some obligations issued or guaranteed by U.S. Government agencies and
instrumentalities, including, for example, Government National Mortgage
Association pass-through certificates, are supported by the full faith and
credit of the U.S. Treasury. Other obligations issued by or guaranteed by
Federal agencies, such as those securities issued by Fannie Mae, are supported
by the discretionary authority of the U.S. Government to purchase certain
obligations of the Federal agency, while other obligations issued by or
guaranteed by Federal agencies, such as those of the Federal Home Loan Banks,
are supported by the right of the issuer to borrow from the U.S. Treasury. While
the U.S. Government provides financial support to such U.S. Government-sponsored
Federal agencies, no assurance can be given that the U.S. Government will always
do so, since the U.S. Government is not so obligated by law. U.S. Treasury notes
and bonds typically pay coupon interest semi-annually and repay the principal at
maturity. A Fund will invest in such U.S. Government Securities only when the
Advisor is satisfied that the credit risk with respect to the issuer is minimal.
INVESTMENT RESTRICTIONS
FUNDAMENTAL POLICIES
The following investment limitations are fundamental policies of the Funds which
cannot be changed with respect to a Fund without the consent of the holders of a
majority of that Fund's outstanding shares. The term "majority of the
outstanding shares" means the vote of (i) 67% or more of a Fund's shares present
at a meeting, if more than 50% of the outstanding shares of that Fund are
present or represented by proxy, or (ii) more than 50% of that Fund's
outstanding shares, whichever is less.
A Fund may not:
1. Borrow money in an amount exceeding 33 1/3% of the value of its total
assets, provided that, for purposes of this limitation, investment
strategies which either obligate the Fund to purchase securities or
require that Fund to segregate assets are not considered to be borrowing.
Asset coverage of a least 300% is required for all borrowing, except
where the Fund has borrowed money for temporary purposes in amounts not
exceeding 5% of its total assets. The Fund will not purchase securities
while its borrowing exceed 5% of its total assets.
2. Make loans if, as a result, more than 33 1/3% of its total assets would
be lent to other parties, except that the Fund may (i) purchase or hold
debt instruments in accordance with its investment objective and
policies; (ii) enter into repurchase agreements; and (iii) lend its
securities.
3. Purchase or sell real estate, physical commodities, or commodities
contracts, except that the Fund may purchase (i) marketable securities
issued by companies which own or invest in real estate (including real
estate investment trusts), commodities, or commodities contracts; and
(ii) commodities contracts relating to financial instruments, such as
financial futures contracts and options on such contracts.
4. Issue senior securities (as defined in the 1940 Act) except as permitted
by rule, regulation or order of the SEC.
5. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter in selling a portfolio security.
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6. Invest in interests in oil, gas, or other mineral exploration or
development programs and oil, gas or mineral leases.
NON-FUNDAMENTAL POLICIES
The following investment limitations are non-fundamental policies of the Funds
and may be changed with respect to any Fund by the Board of Trustees.
A Fund may not:
1. Pledge, mortgage or hypothecate assets except to secure borrowing
permitted by the Fund's fundamental limitation on borrowing.
2. Invest in companies for the purpose of exercising control.
3. Invest its assets in securities of any investment company, except as
permitted by the 1940 Act or any rule, regulation or order of the SEC.
4. Purchase or hold illiquid securities, i.e., securities that cannot be
disposed of for their approximate carrying value in seven days or less
(which term includes repurchase agreements and time deposits maturing in
more than seven days) if, in the aggregate, more than 15% of its net
assets would be invested in illiquid securities.
Except for Non-Fundamental Policy number 4, above (which is based on net
assets), the foregoing percentages are based on total assets. Except for
Fundamental Policy number 1 and Non-Fundamental Policy number 4, above, the
foregoing percentages will apply at the time of the purchase of a security and
shall not be considered violated unless an excess or deficiency occurs or exists
immediately after and as a result of a purchase of such security.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to the general supervision by the Trustees, the Advisor is responsible
for decisions to buy and sell securities for each of the Funds, the selection of
brokers and dealers to effect the transactions, and the negotiation of brokerage
commissions, if any. The Advisor expects that the Funds may execute brokerage or
other agency transactions through registered broker-dealers for a commission, in
conformity with the 1940 Act, the Securities Exchange Act of 1934, and the rules
and regulations thereunder.
The Advisor may serve as an investment manager to a number of clients, including
other investment companies. It is the practice of the Advisor to cause purchase
and sale transactions to be allocated among the Funds and others whose assets
the Advisor manages in such manner as the Advisor deems equitable. The main
factors considered by the Advisor in making such allocations among the Funds and
other client accounts of the Advisor are the respective investment objectives,
the relative size of portfolio holdings of the same or comparable securities,
the availability of cash for investment, the size of investment commitments
generally held, and the opinions of the person or persons responsible, if any,
for managing the portfolios of the Funds and the other client accounts.
The policy of each Fund regarding purchases and sales of securities is that
primary consideration will be given to obtaining the most favorable prices and
efficient executions of transactions. Consistent with this policy, when
securities transactions are effected on a stock exchange, each Fund's policy is
to pay commissions which are considered fair and reasonable without necessarily
determining that the lowest possible commissions are paid in all circumstances.
Each Fund believes that a requirement to always seek the lowest possible
commissions could
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impede effective portfolio management and preclude the Fund and the Advisor from
obtaining high quality brokerage and research services. In seeking to determine
the reasonableness of brokerage commissions paid in any transaction, the Advisor
relies upon its experience and knowledge regarding commissions generally charged
by various brokers and on its judgment in evaluating the brokerage and research
services received from the broker effecting the transaction. Such determinations
are necessarily subjective and imprecise, as in most cases an exact dollar value
for those services is not ascertainable.
Purchases and sales of U.S. Government securities, if any, are normally
transacted through issuers, underwriters or major dealers in U.S. Government
Securities acting as principals. Such transactions are made on a net basis and
do not involve payment of brokerage commissions. The cost of securities
purchased from an underwriter usually includes a commission paid by the issuer
to the underwriters. Transactions with dealers normally reflect the spread
between bid and asked prices.
In seeking to implement the Funds' policies, the Advisor effects transactions
with those brokers and dealers who the Advisor believes provide the most
favorable prices and are capable of providing efficient executions. If the
Advisor believes such prices and executions are obtainable from more than one
broker or dealer, the Advisor may give consideration to placing portfolio
transactions with those brokers and dealers who also furnish research and other
services to the Funds or the Advisor. Such services may include, but are not
limited to, any one or more of the following: information as to the availability
of securities for purchase or sale; statistical or factual information or
opinions pertaining to investments; wire services; and appraisals or evaluations
of portfolio securities. If the broker-dealer providing these additional
services is acting as a principal for its own account, no commissions would be
payable. If the broker-dealer is not a principal, a higher commission may be
justified at the determination of the Advisor, for the additional services.
The information and services received by the Advisor from brokers and dealers
may be of benefit to the Advisor in the management of accounts of some of the
Advisor's other clients and may not in all cases benefit the Funds directly.
While the receipt of such information and services is useful in varying degrees
and would generally reduce the amount of research or services otherwise
performed by the Advisor and thereby reduce the Advisor's expenses, this
information and these services are of indeterminable value and the management
fee paid to the Advisor is not reduced by any amount that may be attributable to
the value of such information and services.
Consistent with each Fund's investment objectives, the Advisor has the
discretion to select sub-advisers that will determine which securities and the
total amount of securities which are to be bought or sold for each Fund's
account. Each sub-adviser's decision to buy and sell securities is subject to
the overall review of each Fund's Advisor and Trustees. The Advisor selects
sub-advisers whose primary objective in placing orders for the purchase or sale
of securities for a Fund is to obtain the most favorable net results taking into
account such factors as price, commission, size of order, difficulty of
execution and skill required of the broker. The Advisor has ultimate
responsibility for the investment performance of each Fund due to its
responsibility to oversee and direct each sub-adviser and to recommend their
hiring, termination and replacement.
A sub-adviser generally has the authority to select brokers to effect
transactions on a Fund's behalf. When a sub-adviser places orders for the
purchase or sale of portfolio securities for a Fund's account, it uses
reasonable efforts to seek the best combination of price and execution in
selecting brokers. Each sub-adviser selects brokers on the basis of best price
(including commissions) and execution capability. In selecting a broker to
execute a transaction for a Fund, a sub-adviser may consider a variety of
factors, including the following: the broker's capital depth; the broker's
market access; the broker's transaction confirmation and account statement
practices; its knowledge of negotiated commission rates and spreads currently
available; the nature of the security or instrument being traded; the size and
type of the transaction; the nature and character of the markets for the
security or instrument to be purchased or sold; the desired timing of the
transaction; the execution, clearance and settlement capabilities
29
<PAGE> 47
of the broker selected and others considered; the reputation and perceived
soundness of the broker selected and others considered; the sub-adviser's
knowledge of any actual or apparent operational problems of a broker; and the
reasonableness of the commission or its equivalent for the specific transaction.
While each sub-adviser generally seeks competitive commission rates and dealer
spreads, it will not necessarily pay the lowest commission or commission
equivalent. Transactions may involve specialized services on the part of the
broker and thereby justify higher commissions or their equivalent than would be
the case with other transactions requiring more routine services.
A Fund may limit a sub-adviser's discretionary authority in any or all of the
situations described above. In particular, a Fund may reserve the right to
direct a sub-adviser to purchase, sell, or transfer securities held for the
Fund's account or to use a particular broker or dealer to execute transactions
for its account. When a Fund directs the use of a particular broker or dealer,
the sub-adviser may not be in a position to freely negotiate commission rates or
spreads, or to select brokers or dealers on the basis of best price and
execution. In addition, transactions for a Fund who directs brokerage may not be
batched for execution with transactions in the same securities for other
clients. As a result, directed brokerage transactions may result in higher
commissions, greater spreads, or less favorable net prices than would be the
case if a sub-adviser were authorized to choose the brokers or dealers through
which to execute transactions for the Fund's account.
Consistent with obtaining best execution for clients, a sub-adviser may direct
brokerage transactions for Fund portfolios to brokers who provide research and
execution services to it and, indirectly, to its clients. These services are of
the type described in Section 28(e) of the Securities Exchange Act of 1934 and
are designed to augment the sub-adviser's own internal research and investment
strategy capabilities. Sub-advisers may not use each particular research
service, however, to service each of its clients. As a result, a client may pay
brokerage commissions that are used, in part, to purchase research services that
are not used to benefit that specific client. Brokers selected by a sub-adviser
may be paid commissions for effecting transactions for its clients that exceed
the amounts other brokers would have charged for effecting these transactions if
a sub-adviser determines in good faith that such amounts are reasonable in
relation to the value of the brokerage and/or research services provided by
those brokers, viewed either in terms of a particular transaction or the
sub-adviser's overall duty to its discretionary client accounts.
Certain items obtained with soft dollars might not be used exclusively for
either brokerage or research services. The cost of such "mixed-use" products or
services will be fairly allocated between soft dollars (paid by clients) and
hard dollars (paid by the sub-adviser), according to the proposed use. For
example, the cost of a computer that is used for both research services and
administrative purposes will be allocated between hard and soft dollars
according to the percentage of time it is used for each purpose. Although such
an allocation will not always be a precise calculation, the sub-adviser will
make a good faith effort to reasonably allocate such services.
ORGANIZATION OF THE TRUST AND THE FUNDS
The Funds are separate series' of an open-end, management investment company
which was organized on June 9, 1998 as a Trust under the laws of the
Commonwealth of Massachusetts, of a type commonly known as a Massachusetts
business trust.
MANAGEMENT OF THE TRUST
The Trustees of the Trust are responsible for the general supervision of the
Trust's business. The day-to-day operations of the Trust are the
responsibilities of the Trust's officers. The names, addresses and ages of the
Trustees and the officers of the Trust and the officers of the Advisor, together
with information as to their principal
30
<PAGE> 48
business occupations during the past five years, are set forth below. Fees and
expenses for non-interested Trustees will be paid by the Trust.
TRUSTEES
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION(S) DURING
NAME, ADDRESS, AND AGE POSITION(S) HELD WITH FUND PAST 5 YEARS
<S> <C> <C>
F. Brian Cerini,* 47 Chairman of the Board, Trustee, President, LMI Capital Management LLC, LMI
790 E. Colorado Boulevard President and CEO Investment Advisors LLC, and LMI Capital
9th Floor Administration LLC, 1998 to present; President of
Pasadena, CA 91101. Sierra Capital Management Corporation, 1988 to
1997; President, Sierra Administration, 1988 to
1997; Chairman of the Board, Sierra Advisors, 1988
to 1997; President, Sierra Investment Services, 1992
to 1998; Chairman of the Board, Trustee and President,
Sierra Group of Funds, 1988-1997.
Kunduck Moon, 45 Trustee Managing Director, ING (U.S.) Capital Corp., 1995
135 East 57th Street to present; Country Head, Duetsche Bank, Mexico,
New York, NY 10022 1994 to 1995; Director, Duetsche Bank, NY, 1992
to 1994.
Lawrence J. Sheehan, 66 Trustee Of Counsel, O'Melveny & Meyers, 1995 to present;
1999 Avenue of the Stars Partner, O'Melveny & Meyers, 1969 to 1994;
Suite 700 Director, FPA Capital, Inc., FPA New Income Fund,
Los Angeles, CA 90067 Inc., FPA Perennial Fund, Inc., Source Capital,
Inc. (NYSE), and TCW Convertible Securities Fund,
Inc. (NYSE).
Christopher Robert LaBonge, 49 Trustee President, Grey Direct West, 1994 to present;
700 N. Brand #800 Executive V.P., FCB Direct, 1979 to 1994.
Glendale, CA 91203
</TABLE>
31
<PAGE> 49
<TABLE>
<S> <C> <C>
Alfred E. Osborne, Jr., Ph.D. Trustee Professor, The Anderson School and Director, The
110 Westwood Plaza Harold Price Center for Entrepreneurial Studies
Suite C305 at UCLA, 1972 to present; Director, Times Mirror
Los Angeles, CA 90095 Company, 1980 to present; Director, United States
Filter Corporation, 1991 to present; Director,
Nordstrom, Inc., 1987 to present; Director,
Greyhound Lines, Inc., 1994 to present;
Independent general partner, Technology Funding
Partners V, 1990 to present; former Governor,
National Association of Securities Dealers,
Inc., 1994 to 1996; former Director, NASD
Regulation, September 1996 to December 1996;
Trustee, WM Group of Funds, 1998 to present;
Trustee, Sierra Group of Funds, 1996-1998.
Keith B. Pipes, 42 Treasurer, CFO and Secretary Managing Director, LMI Capital Management LLC,
790 E. Colorado Boulevard LMI Investment Advisors LLC, and LMI Capital
9th Floor Administration LLC, 1998 to present; Senior V.P.,
Pasadena, CA 91101 CFO and Secretary, Sierra Capital Management
Corporation, 1988 to 1998; CFO, Secretary
and Treasurer, Sierra Administration, 1988
to 1998; Executive V.P. and Secretary,
Sierra Advisors, 1988 to 1998; Senior
V.P., CFO and Secretary, Sierra Investment
Services, 1992 to 1998.
Whit Wannamaker, 40 Vice President Managing Director, LMI Capital Management LLC,
790 E. Colorado Boulevard LMI Investment Advisors LLC, and LMI Capital
9th Floor Administration LLC, 1998 to present; Senior V.P.,
Pasadena, CA 91101 Sierra Investment Services Corp., 1994-1998;
Senior V.P., Kemper Financial Services, 1985-1994
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------------
* This trustee is deemed to be an "interested person" of the Trust under the
1940 Act.
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<PAGE> 50
COSTS AND EXPENSES
Each Fund bears all expenses of its operations other than those assumed by the
Advisor or LMI Capital Administration LLP (the "Administrator"). Fund expenses
include: the management fee; the servicing fee (including administrative,
transfer agent, and shareholder servicing fees); custodian and accounting fees
and expenses; legal and auditing fees; securities valuation expenses; fidelity
bonds and other insurance premiums; expenses of preparing and printing
prospectuses, confirmations, proxy statements, and shareholder reports and
notices; registration fees and expenses; proxy and annual meeting expenses, if
any; all Federal, state, and local taxes (including, without limitation, stamp,
excise, income, and franchise taxes); organizational costs; non-interested
Trustees' fees and expenses; the costs and expenses of redeeming shares of the
Fund; fees and expenses paid to any securities pricing organization; dues and
expenses associated with membership in any mutual fund organization; and costs
for incoming telephone WATTS lines. In addition, each of the Funds pays an equal
portion of the Trustees' fees and expenses for attendance at Trustee meetings
for the Trustees of the Trust who are not affiliated with or interested persons
of the Advisor. Such fees consist of an annual retainer in the amount of $2,500,
paid in quarterly installments, $1,500 per Board Meeting attended and $1,000 per
Committee Meeting attended ($500 additional per meeting for the Chairman of the
Committee) plus out-of-pocket expenses incurred as a Trustee.
The estimated annual compensation paid by the Trust to each of its Trustees is
set forth in the table below:
COMPENSATION TABLE
<TABLE>
<CAPTION>
Name of Person, Aggregate Pension or Estimated Accrual Total
Position Compensation Retirement Benefits Upon Compensation
From Fund Benefits Accrued Retirement From Fund and
as Part of Fund Complex
Fund Expenses Paid to Trustees
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
F. Brian Cerini,* Trustee, -0- -0- -0- -0-
President and CEO
Kunduck Moon, Trustee -0- -0- -0- -0-
Lawrence J. Sheehan, Trustee -0- -0- -0- -0-
Christopher Robert LaBonge, -0- -0- -0- -0-
Trustee
Alfred E. Osborne, Jr., Ph.D., -0- -0- -0- -0-
Trustee
</TABLE>
- ------------------------------
(1)The information provided in this table is based on estimated future payments
which will be made in the upcoming fiscal year. Each Trustee will waive his fees
for the fiscal year ending July 31, 1999, with the exception of out-of-pocket
expenses.
* Mr. Cerini is an "interested person" of the Trust.
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<PAGE> 51
As of the date of this Statement of Additional Information, the Trustees and the
officers of the Trust, as a group, owned, of record and beneficially, less than
1% of the outstanding shares of each Fund.
SHAREHOLDER AND TRUSTEE LIABILITY
The Trust's Declaration of Trust disclaims liability of the shareholders of the
Trust or the Trustees of the Trust for acts or obligations of the Trust which
are binding only on the assets and property of the Trust. The Declaration of
Trust provides for indemnification out of Trust property for all loss and
expense of any Trust shareholder held personally liable for the obligations of
the Trust. The risk of a Trust shareholder incurring financial loss on account
of shareholder liability is limited to circumstances in which the Trust itself
would not be able to meet the Trust's obligations. Accordingly, this risk should
be considered remote.
DETERMINATION OF NET ASSET VALUE
GENERAL
The net asset value of a Fund serves as the basis for the purchase and
redemption price of that Fund's shares. The net asset value per share of a Fund
is calculated by dividing the market value of the Fund's securities plus the
values of its other assets, less all liabilities, by the number of outstanding
shares of the Fund.
FOREIGN SECURITIES
The value of a foreign security is determined as of the close of trading on the
foreign exchange on which it is traded or as of the close of trading on the New
York Stock Exchange (the "NYSE"), if that is earlier. The value is then
converted into its U.S. dollar equivalent at the foreign exchange rate in effect
at noon, New York time, on the day the value of the foreign security is
determined. If no sale is reported at that time, the foreign security is valued
within the range of the most recent quoted bid and ask prices. Occasionally
events that affect the values of foreign securities and foreign exchange rates
may occur between the times at which they are determined and the close of the
exchange and will, therefore, not be reflected in the computation of a Fund's
net asset value. If events materially affecting the values of these foreign
securities occur during this period, the securities will be valued in accordance
with procedures established by the Trustees.
TIMING DIFFERENCES
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of business
of the NYSE on each day that the NYSE is open. Trading in European or Far
Eastern securities generally, or in a particular country or countries, may not
take place on every NYSE business day. Furthermore, trading takes place in
various foreign markets on days that are not business days for the NYSE and on
which a Fund's net asset value is not calculated. Thus, the calculation of a
Fund's net asset value does not take place contemporaneously with the
determination of the prices of many of the portfolio securities used in the
calculation and, if events materially affecting the values of these foreign
securities occur, the securities will be valued at fair value as determined by
management and approved in good faith by the Trustees.
OPTIONS AND FUTURES
For purposes of determining net asset value per share of a Fund, options and
futures contracts are valued at the closing prices of the exchanges on which
they trade. The value of a futures contract equals the unrealized gain or loss
on the contract that is determined by marking the contract to the current
settlement price for a like contract acquired on the day on which the futures
contract is being valued. The value of options on futures contracts is
34
<PAGE> 52
determined based upon the current settlement price for a like option acquired on
the day on which the option is being valued. Lacking any sales that day or if
the last sale price is outside the bid and ask prices, options are valued within
the range of the current closing bid and ask prices if the valuation is believed
to fairly reflect the contract's market value. A settlement price may not be
used for the foregoing purposes if the market makes a limited move with respect
to a particular commodity.
ILLIQUID SECURITIES
Illiquid securities, securities for which reliable quotations or pricing
services are not readily available, and all other assets will be valued at their
respective fair value as determined in good faith by, or under procedures
established by, the Trustees, which procedures may include the delegation of
certain responsibilities regarding valuation to the Advisor or the officers of
the Trust. The officers of the Trust report, as necessary, to the Trustees
regarding portfolio valuation determinations. The Trustees, from time to time,
will review these methods of valuation and will recommend changes which may be
necessary to assure that the investments of the Funds are valued at fair value.
PERFORMANCE INFORMATION
From time to time, each of the Funds may include a Fund's total return in
advertisements or reports to shareholders or prospective shareholders.
Quotations of average annual total return for a Fund will be expressed in terms
of the average annual compounded rate of return on a hypothetical investment in
the Fund over a period of at least one, five, and ten years, up to the life of
the Fund (the ending date of the period will be stated). Total return of a Fund
is calculated from two factors: the amount of dividends earned by each Fund
share and by the increase or decrease in value of the Fund's share price. See
"Calculation of Return Quotations," below.
Performance information for each of the Funds contained in reports to
shareholders or prospective shareholders, advertisements, and other promotional
literature may be compared to the record of various unmanaged indexes. Such
indexes include, but are not limited to, ones provided by Dow Jones & Company,
Standard & Poor's Corporation, Lipper Analytical Services, Inc., Lehman
Brothers, National Association of Securities Dealers Automated Quotations, The
Frank Russell Company, Value Line Investment Survey, the American Stock
Exchange, the Philadelphia Stock Exchange, the Financial Times Stock Exchange,
Morgan Stanley Capital International, Wilshire Associates, the All Ordinaries
Index, CAC-40, Deutsche Aktienindex, Hang Seng, MIB-30, Nikkei-225, Amsterdam
Exchanges Index, IBEX-35, Stockholm Options Market Index, Swiss Market Index,
and FTSE-100, all of which are unmanaged market indicators. Such comparisons can
be a useful measure of the qualify of a Fund's investment performance.
Such unmanaged indexes may assume the reinvestment of dividends, but generally
do not reflect deductions for operating costs and expenses. In addition, a
Fund's total return may be compared to the performance of broad groups of
comparable mutual funds with similar investment goals, as such performance is
tracked and published by such independent organizations as Lipper Analytical
Services, Inc. ("Lipper") and CDA Investment Technologies, Inc., among others.
When Lipper's tracking results are used, a Fund will be compared to Lipper's
appropriate fund category, that is, by fund objective and portfolio holdings.
Rankings may be listed among one or more of the asset-size classes as determined
by Lipper. Since the assets in all mutual funds are always changing, a Fund may
be ranked within one Lipper asset-size class at one time and in another Lipper
asset-size class at some other time. Footnotes in advertisements and other
marketing literature will include the time period and Lipper asset-size class,
as applicable, for the ranking in question. Performance figures are based on
historical results and are not intended to indicate future performance.
35
<PAGE> 53
Additional investment information sources may include: The Financial Times,
Bloomberg, DRI/McGraw-Hill, the World Bank, the International Monetary Fund,
International Federation of Stock Exchanges, MSCI, Morgan Stanley, PFPC, Inc.,
U.S. government agencies, foreign government agencies, Salomon Brothers, JP
Morgan, The Economist, Morningstar, Ibbottson, Russell, Wall Street Journal, New
York Times, Los Angeles Times, Time, Newsweek, Business Week, Forbes, Fortune,
foreign country stock exchanges, Reuters, Wilshire, Merrill Lynch, Citibank,
Chase Manhattan Bank, Deutsche Bank, Barclays Bank, ING, Bankers Trust, Robert
Fleming, Jardine Fleming, the United Nations, Worldscope, State Street Global
Advisors and State Street Bank.
CALCULATION OF RETURN QUOTATIONS
For purposes of quoting and comparing the performance of a Fund to that of other
mutual funds and to other relevant market indexes in advertisements or in
reports to shareholders, performance for the Fund may be stated in terms of
total return (the purchase fee is included in the total return calculation).
Under the rules of the SEC ("SEC Rules"), a Fund's advertising performance must
include total return quotes calculated according to the following formula:
n
P(1+T) = ERV
Where: P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years (1, 5 or 10); and
ERV = ending redeemable value of a hypothetical $1,000 payment, made
at the beginning of the 1, 5 or 10 year periods, at the end of
the 1, 5, or 10 year periods (or fractional portion thereof).
Under the foregoing formula, the time periods used in advertising will be based
on rolling calendar quarters, updated to the last day of the most recent quarter
prior to submission of the advertising for publication, and will cover 1, 5, and
10 year periods or a shorter period dating from the effectiveness of the
Registration Statement of the Trust. In calculating the ending redeemable value,
all dividends and distributions by a Fund are assumed to have been reinvested at
net asset value as described in the Prospectuses on the reinvestment dates
during the period. Total return, or "T" in the formula above, is computed by
finding the average annual compounded rates of return over the 1, 5, and 10 year
periods (or fractional portion thereof) that would equate the initial amount
invested to the ending redeemable value.
From time to time, each Fund also may include in such advertising a total return
figure that is not calculated according to the formula set forth above in order
to compare more accurately the performance of the Fund with other measures of
investment return. For example, in comparing the total return of a Fund with
data published by Lipper Analytical Services, Inc., each respective Fund
calculates its aggregate total return or the specified periods of time by
assuming the investment of $10,000 in Fund shares and assuming the investment of
each dividend or other distribution at net asset value on the reinvestment date.
Percentage increases are determined by subtracting the initial value of the
investment from the ending value and by dividing the remainder by the beginning
value. Such alternative total return information will be given no greater
prominence in such advertising than the information prescribed under SEC Rules.
36
<PAGE> 54
INFORMATION ON COMPUTATION OF YIELD
In addition to the total return quotations discussed above, a Fund may advertise
its yield based on a thirty-day (or one month) period ended on the date of the
most recent balance sheet included in the Trust's Registration Statement,
computed by dividing the net investment income per share of a Fund earned during
the period by the maximum offering price per Fund share on the last day of the
period, according to the following formula:
6
YIELD = 2[(a - b + 1) - 1]
-----
cd
Where: a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements);
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends; and
d = the maximum offering price per share on the last day of the
period.
Under this formula, interest earned on debt obligations for purposes of "a"
above, is calculated by (i) computing the yield to maturity of each obligation
held by a Fund based on the market value of the obligation at the close of
business on the last day of each month, or, with respect to obligations
purchased during the month, the purchase price (plus actual accrued interest),
(ii) dividing that figure by 360 and multiplying the quotient by the market
value of the obligation (including actual accrued interest as referred to above)
to determine the interest income on the obligation that is in the Fund's
portfolio (assuming a month of thirty days), and (iii) computing the total of
the interest earned on all debt obligations and all dividends accrued on all
equity securities during the thirty-day or one month period. In computing
dividends accrued, dividend income is recognized by accruing 1/360 of the stated
dividend rate of a security each day that the security is in the Fund's
portfolio. Undeclared earned income, computed in accordance with generally
accepted accounting principles, may be subtracted from the maximum offering
price calculation required pursuant to "d" above.
A Fund from time to time may also advertise its yield based on a thirty-day
period ending on a date other than the most recent balance sheet included in the
Trust's Registration Statement, computed in accordance with the yield formula
described above, as adjusted to conform with the differing period for which the
yield computation is based.
Any quotation of performance stated in terms of yield (whether based on a
thirty-day or one month period) will be given no greater prominence than the
information prescribed under SEC Rules. In addition, all advertisements
containing performance data of any kind will include a legend disclosing that
such performance data represents past performance and that the investment return
and principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than the original cost of such
shares.
PURCHASE AND REDEMPTION OF SHARES
MINIMUM INVESTMENT REQUIREMENTS
Shareholders will be informed of any increase in the minimum investment
requirements by a new prospectus or a prospectus supplement, in which the new
minimum is disclosed. The Trust may redeem an account whose balance (due to
redemptions) has fallen below the minimum investment amount applicable at the
time of the
37
<PAGE> 55
shareholder's most recent purchase of Fund shares (unless the shareholder brings
his or her account value up to the currently applicable minimum investment).
TAX CONSEQUENCES
Note that in the case of tax-qualified retirement plans, a redemption from such
a plan may have adverse tax consequences. A shareholder contemplating such a
redemption should consult his or her own tax advisor. Other shareholders should
consider the tax consequences of any redemption.
SUSPENSION OF THE RIGHT OF REDEMPTION
The Funds may suspend the right of redemption or the date of payment: (i) for
any period during which the NYSE, the Federal Reserve Bank of New York, the
NASDAQ, the Chicago Mercantile Exchange ("CME"), the CBOT, or any other
exchange, as appropriate, is closed (other than customary weekend or holiday
closings), or trading on the NYSE, the NASDAQ, the CME, the CBOT, or any other
exchange, as appropriate, is restricted; (ii) for any period during which an
emergency exists so that sales of a Fund's investments or the determination of
its net asset value is not reasonably practicable; or (iii) for such other
periods as the SEC may permit for the protection of a Fund's investors.
HOLIDAYS
The NYSE, the Federal Reserve Bank of New York, the NASDAQ, the CME, the CBOT,
and other U.S. exchanges are closed on weekends and on the following holidays:
(i) New Year's Day, Martin Luther King Jr.'s Birthday, Presidents' Day, Good
Friday, Memorial Day, July Fourth, Labor Day, Columbus Day, Thanksgiving Day,
and Christmas Day; and (ii) the preceding Friday if any of these holidays falls
on a Saturday, or the subsequent Monday if any of these holidays falls on a
Sunday. Although the Trust expects the same holiday schedules to be observed in
the future, each of the aforementioned exchanges may modify its holiday schedule
at any time.
DIVIDENDS, DISTRIBUTIONS, AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income and any distributions of net realized
capital gains from each of the Funds will be distributed as described in the
Prospectuses under "Dividends and Distributions." All such distributions of a
Fund normally automatically will be reinvested without charge in additional
shares of the same Fund.
FOREIGN SECURITIES
Dividend income and other distributions are recorded on the ex-dividend date,
except for certain dividends from foreign securities which are recorded as soon
as the Trust is informed after the ex-dividend date.
REGULATED INVESTMENT COMPANY STATUS
As a regulated investment company (a "RIC") under Subchapter M of the U.S.
Internal Revenue Code of 1986, as amended (the "Code"), a Fund would not be
subject to Federal income taxes on the net investment income and capital gains
that the Fund distributes to the Fund's shareholders. The distribution of net
investment income and capital gains will be taxable to Fund shareholders
regardless of whether the shareholder elects to receive these distributions in
cash or in additional shares. Distributions reported to Fund shareholders as
capital gains from
38
<PAGE> 56
property held for more than 1 year, shall be taxable as such, regardless of how
long the shareholder has owned the shares. Fund shareholders will be notified
annually by the Fund as to the Federal tax status of all distributions made by
the Fund. Distributions may be subject to state and local taxes. To qualify as a
RIC, the Code requires that at the end of each quarter of the taxable year, (i)
at least 50% of the market value of the Fund's total assets be invested in cash,
U.S. Government Securities, the securities of other regulated investment
companies, and other securities, with such securities of any one issuer limited
for the purposes of this calculation to an amount not greater than 5% of the
value of Fund's total assets and 10% of the outstanding voting securities of any
one issuer, and (ii) not more than 25% of the value of the Fund's total assets
be invested in the securities of any one issuer (other than U.S. Government
Securities or the securities of other regulated investment companies), or of two
or more issuers which the Fund controls and which are determined to be engaged
in the same or similar trades or businesses, or related trades or businesses.
Each of the Funds will seek to qualify for treatment as a RIC under the Code.
Provided that a Fund (i) is a RIC and (ii) distributes at least 90% of the
Fund's net investment income (including, for this purpose, net realized
short-term capital gains), the Fund itself will not be subject to Federal income
taxes to the extent the Fund's net investment income and the Fund's net realized
long and short-term capital gains, if any, are distributed to the Fund's
shareholders. To avoid an excise tax on its undistributed income, each Fund
generally must distribute annually at least 98% of its income, including its net
long-term capital gains as calculated on a calendar year basis as defined by the
Code. One of several requirements for RIC qualification is that the Fund must
receive at least 90% of the Fund's gross income each year from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of securities or foreign currencies, or other income derived
with respect to the Fund's investments in stock, securities, and foreign
currencies (the "90% Test").
In the event of a failure by a Fund to qualify as a RIC, the Fund would be
subject to Federal income taxes on its taxable income and the Fund's
distributions, to the extent that such distributions are derived from the Fund's
current or accumulated earnings and profits, would constitute dividends that
would be taxable to the shareholders of the Fund as ordinary income and would be
eligible for the dividends received deduction for corporate shareholders. This
treatment would also apply to any portion of the distributions that might have
been treated in the shareholder's hands as long-term capital gains, as discussed
below, had the Fund qualified as a RIC.
If a Fund were to fail to qualify as a RIC for one or more taxable years, the
Fund could then qualify (or requalify) as a RIC for a subsequent taxable year
only if the Fund had distributed to the Fund's shareholders a taxable dividend
equal to the full amount of any earnings or profits (less the interest charge
mentioned below, if applicable) attributable to such period. In addition,
pursuant to the Code and an interpretative notice issued by the IRS, if the Fund
should fail to qualify as a RIC and should thereafter seek to qualify as a RIC,
the Fund may be subject to tax on the excess (if any) of the fair market of the
Fund's assets over the Fund's basis in such assets, as of the day immediately
before the first taxable year for which the Fund seeks to qualify as a RIC. A
similar rule may apply if the Fund initially qualifies as a RIC, then fails to
qualify for more than 1 taxable year, and subsequently requalifies as a RIC.
If a Fund determines that the Fund will not qualify as a RIC under Subchapter M
of the Code, the Fund will establish procedures to reflect the anticipated tax
liability in the Fund's net asset value.
TRANSACTIONS BY THE FUNDS
If a call option written by a Fund expires, the amount of the premium received
by the Fund for the option will be treated as a gain from the sale or exchange
of a capital asset held for not more than 1 year, i.e., short-term capital gain.
Similarly, if such an option is closed by a Fund, any gain or loss realized by
the Fund as a result of the
39
<PAGE> 57
closing transaction will be treated as a gain or loss from the sale or exchange
of capital assets held for not more than a year. If the holder of a call option
exercises the holder's right under the option, any gain or loss realized by the
Fund upon the sale of the underlying security or underlying futures contract
pursuant to such exercise will be short-term or long-term capital gain or loss
to the Fund depending on the Fund's holding period for the underlying security
or underlying futures contract. The amount paid to the Fund for the option will
be added to the amount of the proceeds received by the Fund.
With respect to call options purchased by a Fund, the Fund will realize
short-term or long-term capital gain or loss if such option is sold and will
realize short-term or long-term capital loss if the option is allowed to expire
depending on the Fund's holding period for the call option. If such a call
option is exercised, the amount paid by the Fund for the option will be added to
the basis of the stock or futures contract so acquired.
Each of the Funds also may utilize options on foreign stock indexes. Certain
options on broad-based stock indexes are classified as "nonequity options" under
the Code. Gains and losses resulting from the expiration, exercise, or closing
of "non-equity options" will be treated as short-term capital gain or loss to
the extent of 40% of such gain or loss, and long-term capital gain or loss to
the extent of 60% of such gain or loss.
The trading strategies of each of the Funds involving options on stock indexes
may constitute "straddle" transactions. "Straddles" may affect the taxation of
such instruments and may cause the postponement of recognition of losses
incurred in certain closing transactions. Each of the Funds will also have
available to the Fund a number of elections under the Code concerning the
treatment of option transactions for tax purposes. Each such Fund will utilize
the tax treatment that, in the Fund's judgment, will be most favorable to a
majority of investors in the Fund. Taxation of these transactions will vary
according to the elections made by the Fund. These tax considerations may have
an impact on investment decisions made by the Fund.
A Fund's transactions in certain options, futures and forwards under some
circumstances, could preclude the Fund's qualifying for the special tax
treatment available to investment companies meeting the requirements of
Subchapter M of the Code. However, it is the intention of each Fund's portfolio
management to limit gains from such investments to less than 10% of the gross
income of the Fund during any fiscal year in order to maintain this
qualification.
BACK-UP WITHHOLDING
Each Fund is required to withhold and remit to the U.S. Treasury 31% of (i)
reportable taxable dividends and distributions; and (ii) the proceeds of any
redemptions of Fund shares with respect to any shareholder who is not exempt
from withholding and who fails to furnish the Trust with a correct taxpayer
identification number, who fails to report fully dividend or interest income, or
who fails to certify to the Trust that the shareholder has provided a correct
taxpayer identification number and that the shareholder is not subject to
withholding. (An individual's taxpayer identification number is the individual's
social security number.) The 31% "back-up withholding tax" is not an additional
tax and may be credited against a taxpayer's regular Federal income tax
liability.
FOREIGN TAX CONSIDERATIONS
The Country Index Funds may elect to "pass through" to shareholders of those
Funds the foreign income taxes paid by the Funds. If this election is made
because it was deemed to be in the best interest of shareholders, shareholders
would be required to include in their gross income their proportional share of
the foreign taxes paid by their respective Fund. Shareholders will, however, be
able to treat this income as either (but not both) an itemized deduction against
gross income or a foreign tax credit against U.S. income taxes. The U.S.
shareholders
40
<PAGE> 58
of the Country Index Funds may claim a foreign tax credit or deduction by reason
of the Fund's election under Section 853 of the Code, provided that more than
50% of the value of the total assets of the Fund at the close of the taxable
year consists of stock or securities of foreign corporations. The foreign tax
credit or deduction available to shareholders is subject to certain limitations
imposed by the Code. Also, under Section 63 of the Code, no deduction for
foreign taxes may be claimed by shareholders who do not itemize deductions on
their federal income tax returns, although any such shareholder may claim a
credit for foreign taxes and in any event will be treated as having gross income
in respect of the shareholder's pro rata share of foreign taxes paid by the
Fund.
If the Country Index Funds elect to "pass through" foreign taxes to
shareholders, the tax credit would not pass through to Funds of Index Funds
shareholders. Because the Funds of Index Funds hold shares of the Country Index
Funds which are U.S. business entities, and do not hold shares of foreign
securities, the Funds of Index Funds cannot pass through the tax credit to
shareholders. The Funds of Index Funds may, however, claim a deduction for any
foreign taxes paid by the underlying Country Index Funds. The effective rate of
foreign taxes to which a Fund will be subject depends on the specific countries
in which each Fund's assets will be invested and the extent of the assets
invested in each such country and, therefore, cannot be determined in advance.
FOREIGN CURRENCY GAINS AND LOSSES
Under the Code, gains or losses attributable to fluctuations in exchange rates
which occur between the time a Fund accrues income or other receivables or
accrues expenses or other liabilities denominated in a foreign currency, and the
time a Fund actually collects such receivables or pays such liabilities,
generally are treated as ordinary income or ordinary loss. Similarly, on the
disposition of debt securities denominated in a foreign currency and on the
disposition of certain options, futures, forward and other contracts, gain or
loss attributable to fluctuations in the value of foreign currency between the
date of acquisition of the security or contract and the date of disposition also
are treated as ordinary gain or loss. These gains or losses, referred to under
the Code as "Section 988" gains or losses, may increase or decrease the amount
of a Fund's net investment income to be distributed to its shareholders. If
Section 988 losses exceed other investment company taxable income (which
includes, among other items, dividends, interest and the excess, if any, of net
short-term capital gains over net long-term capital losses) during the taxable
year, a Fund would not be able to make any ordinary dividend distributions, and
distributions made before the losses were realized would be recharacterized as a
return of capital to shareholders or, in some cases, as capital gain, rather
than as an ordinary dividend.
PASSIVE FOREIGN INVESTMENT COMPANIES
It is anticipated that the Funds may make investments in "passive foreign
investment companies" ("PFICs") within the meaning of section 1297 of the Code.
Under the general rules applicable to PFICs, a Fund would be required to
include in its gross income gains and "excess distributions" that may be
allocated to the Fund's current and prior years. This treatment could result in
tax and an interest charge being imposed on the Fund. This result might be
avoided if the Funds were able to elect to treat the PFIC as a "qualified
electing fund" ("QEF") in which case a Fund would include in its income, on a
current basis, its share of the PFIC's income, whether or not distributed. It
may not be possible for a Fund to make a QEF election with respect to PFICs in
which it is a shareholder. Under recent legislation, a Fund may be able to make
a mark-to-market election with respect to stock of a PFIC. Under such an
election, a Fund includes in income each year an amount equal to the excess of
any of the fair market value of the PFIC stock as of the close of the taxable
year over the Fund's basis in such stock. The Fund is allowed a deduction for
the excess, if any, of the adjusted basis of the PFIC stock over its fair market
value as of the close of the taxable year. However, deductions are allowable
under this rule only to the extent of any net mark-to-market gains with respect
to the stock included by the Fund for prior taxable years.
OTHER ISSUES
Each Fund may be subject to tax or taxes in certain states where the Fund does
business. Furthermore, in those states which have income tax laws, the tax
treatment of a Fund and of Fund shareholders with respect to distributions by
the Fund may differ from Federal tax treatment.
Shareholders are urged to consult their own tax advisors regarding the
application of the provisions of tax law described in this SAI in light of the
particular tax situations of the shareholders and regarding specific questions
as to Federal, state, local or foreign taxes.
All or a portion of losses incurred by a shareholder from a redemption of a
Fund's shares may be disallowed (deferred) for tax purposes if shares of the
Fund are purchased 30 days before to 30 days after the redemption date.
SERVICE PROVIDERS
INVESTMENT ADVISORS
LMI Investment Advisors (the "Advisor") serves as the investment adviser for
each Fund. State Street Global Advisors (the "Sub-Advisor") serves as the
investment sub-advisor for each Fund.
41
<PAGE> 59
ADMINISTRATOR AND TRANSFER AGENT
LMI Capital Administration (the "Administrator") provides shareholder service
other administrative services under and an Administration Agreement with the
Trust. The Administrator is under common control with the Advisor. The
Administrator is located at 790 East Colorado Boulevard Pasadena, California
91101. Pursuant to an Administration Agreement, the Administrator is responsible
for all administrative functions with respect to the Trust, although it
delegates certain of its responsibilities to First Data Investor Services Group,
Inc. ("Investor Services Group"), a subsidiary of First Data Corporation. The
Administrator is entitled to a monthly fee at an annual rate of 0.20% of each
Country Index Fund's average daily net assets and at an annual rate of 0.05% of
each Fund of Index Fund's average daily net assets. Investor Services Group
serves as sub-administrator under a Services Agreement with the Administrator
and the Trust and Transfer Agent under a Transfer Agency Agreement with the
Trust. Investor Services Group is located at 4400 Computer Drive, Westboro,
Massachusetts 01581. The Administrator and the Trust compensates Investor
Services Group for its services as sub-administrator and Transfer Agent.
DISTRIBUTOR
First Data Distributors, Inc. (the "Distributor") serves as Distributor for the
Funds. Under its Distribution Agreement with the Trust, the Distributor provides
for the sale and distribution of shares of the Funds.
CUSTODIAN
State Street Bank and Trust Company (the "Custodian") serves as Custodian for
the Trust on behalf of each of the Funds. Under its custodian contract with the
Trust (the "Contract"), the Custodian is authorized to employ one or more
sub-custodians located in the United States in accordance with an applicable
vote by the Trustees. In accordance with the Contract and a similar applicable
vote of the Trustees, the Custodian may also employ foreign banking institutions
and foreign securities depositories as sub-custodians for the Trust's foreign
securities.
EXPENSE LIMITS
Through December 31, 2001, the Advisor and the Administrator have agreed, by
waiving fees and reimbursing expenses, to limit each Fund's total annual expense
ratio to 0.99% for R Class shares and 0.74% for I Class shares ("Expense
Limits"). In subsequent years, a Fund may, subject to certain limitations,
reimburse the Advisor or the Administrator for fees and expenses waived or
reimbursed under the Expense Limits.
EXPERTS
PricewaterhouseCoopers LLP, 160 Federal Street, Boston, MA 02110, serve as
auditor and independent public accountant to the Trust and each of the Funds.
Morgan, Lewis & Bockius LLP, 1800 M Street, N.W., Washington, DC 20036, serve as
counsel to the Trust and each of the Funds.
42
<PAGE> 60
WORLDWIDE INDEX FUNDS (SM)
FRANCE INDEX FUND
STATEMENT OF ASSETS AND LIABILITIES
JULY 30, 1998
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Cash $ 100,000
NET ASSETS $ 100,000
-----------
NET ASSETS CONSIST OF:
Paid-in capital 100,000
-----------
NET ASSETS $ 100,000
-----------
NET ASSETS:
R Class Shares $ 50,000
I Class Shares 50,000
SHARES OUTSTANDING:
R Class Shares 5,000
I Class Shares 5,000
R Class Shares:
Net asset value, offering and redemption price per share $ 10.00
===========
I Class Shares:
Net asset value, offering and redemption price per share $ 10.00
===========
</TABLE>
SEE NOTES TO STATEMENT OF ASSETS AND LIABILITIES
<PAGE> 61
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
1. ORGANIZATION
Worldwide Index Funds (sm) ("the Trust"), is organized as a Massachusetts
Business Trust and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company whose shares are offered
in the following thirteen separate investment portfolios: Australia Index Fund,
France Index Fund, Germany Index Fund, Hong Kong Index Fund, Italy Index Fund,
Japan Index Fund, Netherlands Index Fund, Spain Index Fund, Sweden Index Fund,
Switzerland Index Fund, United Kingdom Index Fund, Europe Index Fund,
International Index Fund (individually, a "Portfolio", collectively the
"Portfolios"). The Portfolios offer R Class shares to retail investors and I
Class shares to institutional investors.
2. AGREEMENTS AND TRANSACTIONS WITH AFFILIATES
The Trust has entered into an investment advisory agreement with LMI Investment
Advisors LLC ("LMI"). LMI serves as investment advisor to the Portfolios of the
Trust. State Street Global Advisors ("State Street") serves as sub-advisor to
the Portfolios.
For its services, LMI is entitled to receive advisory fees, computed daily and
paid monthly, at the annual rates of 0.50% from each Portfolio.
LMI has agreed to bear all organizational expenses of the Trust.
For its services, State Street is entitled to receive sub-advisory fees,
computed daily and paid monthly, at the annual rates of 0.15% from each
Portfolio.
3. SHAREHOLDER SERVICING AND DISTRIBUTION PLANS
The Portfolios have adopted a Shareholder Servicing Plan pursuant to rule 12b-1
under the 1940 Act. Payments under the Shareholder Servicing Plan will be
calculated daily and paid monthly at a rate not exceeding 0.25% (on an
annualized basis) of the average net asset value of the R Class shares.
4. TRANSACTIONS WITH RELATED PARTIES
The Trust and LMI have one common member on their boards of directors.
<PAGE> 62
Report of Independent Accountants
August 7, 1998
To the Shareholder and Board
Of Trustees of Worldwide Index Funds
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of France Index Fund
(one of the portfolios constituting Worldwide Index Funds, hereafter referred to
as the "Trust") at July 30, 1998, in conformity with generally accepted
accounting principles. This financial statement is the responsibility of the
Trust's management; our responsibility is to express an opinion on this
financial statement based on our audit. We conducted our audit to this financial
statement in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statement is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statement, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 7, 1998
<PAGE> 63
PART C: OTHER INFORMATION
Item 23. Exhibits:
(a) Agreement and Declaration of Trust of Worldwide Index Funds is
incorporated by reference to Exhibit (a) of the Initial
Registration Statement, as filed on June 9, 1998.
(b) By-Laws are incorporated by reference to Exhibit (b) of the
Initial Registration Statement, as filed on June 9, 1998.
(c) Not Applicable
(d)(1) Investment Advisory Agreement between Registrant and LMI
Investment Advisors LLC is filed herewith
(d)(2) Sub-Advisory Agreement between LMI Investment Advisors LLC and
State Street Global Advisors is incorporated by reference to
Exhibit (d) (2) of Pre-Effective Amendment No. 1, as filed on
July 28, 1998.
(e) Distribution Agreement between the registrant and First Data
Distributors, Inc. is filed herewith
(f) Not Applicable
(g) Custodian Agreement between the Registrant and State Street
Bank and Trust Company is filed herewith
(h)(1) Services Agreement between the Registrant and First Data
Investor Services Group, Inc. is filed herewith
(h)(2) Transfer Agency and Services Agreement between the Registrant
and First Data Investor Services Group, Inc. is filed herewith
(h)(3) Form of Administration Agreement between the Registrant and LMI
Capital Administration LLC is filed herewith
(i) Legal Opinion of Morgan, Lewis and Bockius LLP is filed
herewith
(j) Consent of Independent Accountants is filed herewith
(k) Not Applicable
(l) Not Applicable
(m) Not Applicable
(n) Financial Data Schedules are filed herewith
(o) Registrant's Rule 18f-3 Plan is filed herewith
(p) Powers of Attorney for Christopher LaBonge, Kunduck Moon, Al
Osborne, Lawrence J. Sheehan, F. Brian Cerini, and Keith B.
Pipes are filed herewith
ii
<PAGE> 64
Item 24. Persons Controlled by or under Common Control with the Fund
Not applicable.
Item 25. Indemnification
Article VIII of the Declaration of Trust, filed as Exhibit 1(a) to the
Registration Statement, is incorporated by reference.
Item 26. Business and other Connections of the Investment Adviser:
ADVISER
LMI Investment Advisors LLC (the "Adviser") is the investment adviser for the
Trust. The principal address of the Adviser is 790 East Colorado Boulevard, 9th
Floor, Pasadena, California 91101. The Adviser is an investment adviser
registered under the Advisers Act.
The list required by this Item 28 of officers and directors of the Adviser,
together with information as to any other business profession, vocation or
employment of substantial nature engaged in by such officers and directors
during the past two years is incorporated by reference to Schedules A and D of
Form ADV filed by the Adviser to the Advisers Act (SEC File No. 801-55369).
Item 27. Principal Underwriters
(a) Furnish the name of each investment company (other than the Registrant)
for which each principal underwriter currently distributing the
securities of the Registrant also acts as a principal underwriter,
distributor or investment adviser.
First Data Distributors, Inc., a wholly-owned subsidiary of First Data
Corporation, acts as distributor for ABN AMRO Funds pursuant to a
distribution agreement dated February 26, 1998. First Data Distributors,
Inc. also acts as underwriter for BT Insurance Funds Trust, First Choice
Funds Trust, The Galaxy Fund, The Galaxy VIP Fund, Galaxy Fund II,
Panorama Trust, CT&T Funds, Wilshire Target Funds, Inc., Potomac Funds,
Undiscovered Managers Funds, LKCM Funds, IBJ Funds Trust and the ICM
Series Trust. The Distributor is registered with the Securities and
Exchange Commission as a broker-dealer and is a member of the National
Association of Securities Dealers. The Distributor is a wholly-owned
subsidiary of First Data Corporation and is located at 4400 Computer
Drive, Westborough, Massachusetts 01581.
iii
<PAGE> 65
(b) The information required by this Item 27 (b) with respect to each
director, officer, or partner of First Data Distributors, Inc. is
incorporated by reference to Schedule A of Form BD filed by First Data
Distributors, Inc. with the Securities and Exchange Commission pursuant
to the Securities Exchange Act of 1934 (File No. 8-45467.)
(c) Not Applicable
Item 28. Location of Accounts and Records
Books or other documents required to be maintained by Section 31(a) of the
Investment Company Act of 1940, and the rules promulgated thereunder, are
maintained as follows:
(a) With respect to Rules 31a-1(a); 31a-1(b)(1); (2)(a) and (b); (3);
(6); (8); (12); and 31a-1(d), the required books and records will be
maintained at the offices of Registrant's Custodian:
State Street Bank &Trust Company
Boston, MA 02110
(b)/(c) With respect to Rules 31a-1(a); 31a-1(b),(4); (2)(C) and (D);
(4); and 31a-1(f), the required books and records are maintained at the
offices of Registrant's Sub-Administrator:
First Data Investor Services Group, Inc.
4400 Computer Drive
Westboro, MA 01581
(c) With respect to Rules 31a-1(b)(5), (6), (9), (10) and (11) and
31a-1(f), the required books and records are maintained at the principal
offices of the Registrant's Adviser:
LMI Investment Advisors LLC
790 East Colorado Boulevard, 9th Floor
Pasadena, CA 91101
Item 29. Management Services
Not applicable
Item 30. Undertakings
"Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the
iv
<PAGE> 66
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection
with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed
in the Act and will be governed by the final adjudication of such issue."
v
<PAGE> 67
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Pre-Effective Amendment No. 2 to the Registration Statement (File No.
811-08805) to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Pasadena, State of California on this 24th day of
August, 1998.
Worldwide Index Funds
By: /s/ F. BRIAN CERINI
--------------------------------
F. Brian Cerini
President and Trustee
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 2 to the Registration Statement has been signed
below by the following persons in the capacity and on the date indicated.
<TABLE>
<CAPTION>
Signature
- ---------
<S> <C> <C>
* Trustee August 24, 1998
--------------------------------
Christopher LaBonge
* Trustee August 24, 1998
--------------------------------
Kunduck Moon
* Trustee August 24, 1998
--------------------------------
Al Osborne
* Trustee August 24, 1998
--------------------------------
Lawrence J. Sheehan
/s/ F. BRIAN CERINI President and Trustee August 24, 1998
--------------------------------
F. Brian Cerini
/s/ KEITH B. PIPES Chief Financial Officer August 24, 1998
--------------------------------
Keith B. Pipes
*By: /s/ F. BRIAN CERINI
-------------------------
F. Brian Cerini
Attorney in Fact
</TABLE>
vi
<PAGE> 68
EXHIBIT INDEX
<TABLE>
<CAPTION>
Name Exhibit Page
---- ------------
<S> <C>
Agreement and Declaration of Trust of the Worldwide Index Funds is EX-99. a
incorporated by reference to Exhibit (a) of the Initial Registration
Statement as filed on June 9, 1998
By-Laws are incorporated by reference to Exhibit (b) of the Initial EX-99. b
Registration Statement as filed on June 9, 1998.
Not Applicable EX-99. c
Investment Advisory Agreement between Registrant and LMI Investment EX-99. d 1
Advisors LLC is filed herewith
Sub-Advisory Agreement between LMI Investment Advisors LLC and State EX-99. d 2
Street Global Advisors is incorporated by reference to Exhibit (d) of
Pre-Effective Amendment No. 1, as filed on July 28, 1998
Distribution Agreement between the Registrant and First Data EX-99. e
Distributors, Inc. is filed herewith
Not Applicable EX-99. f
Custodian Agreement between the registrant and State Street Bank and EX-99. g
Trust Company is filed herewith
Services Agreement between the Registrant and First Data Investor EX-99. h (1)
Services Group, Inc. is filed herewith
Transfer Agency and Services Agreement between the Registrant and EX-99. h (2)
First Data Investor Services Group, Inc. is filed herewith
Form of Administration Agreement between the Registrant and LMI
Capital Administration LLC is filed herewith EX-99. h (3)
Legal Opinion of Morgan, Lewis and Bockius LLP is filed herewith EX-99. i
Consent of Independent Accountant is filed herewith EX-99. j
Not Applicable EX-99. k
Not Applicable EX-99. l
Not Applicable EX-99. m
Financial Data Schedules are filed herewith EX-99. Bn
Registrant's Rule 18f-3 Plan is filed herewith EX-99. o
Powers of Attorney for Christopher LaBonge, Kunduck Moon, Al Osborne, EX-99. p
Lawrence J. Sheehan, F. Brian Cerini, and Keith B. Pipes, are filed
herewith
</TABLE>
vii
<PAGE> 1
EXHIBIT (d)(1)
WORLDWIDE INDEX FUNDS
FORM OF
INVESTMENT MANAGEMENT AGREEMENT
INVESTMENT MANAGEMENT AGREEMENT (this "Agreement"), dated July 29,
1998, between Worldwide Index Funds, a Massachusetts business trust, (the
"Trust"), on behalf of each of its series which are listed on the signature
page of this Agreement (each referred to herein as a "Fund" and, collectively,
the "Funds") and LMI Investment Advisors LLC, a Delaware limited liability
company (the "Manager").
W I T N E S S E T H
WHEREAS, the Trust is an open-end series management investment
company, registered under the Investment Company Act of 1940 (the "1940 Act");
and
WHEREAS, the Trust, desires to retain the Manager to render investment
management services to each Fund, and the Manager is willing to render such
services;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto agree as follows:
1. Appointment. The Trust hereby appoints the Manager to act as
investment manager to each Fund for the period and on the terms set forth in
this Agreement. The Manager accepts such appointment and agrees to render the
services herein described, for the compensation herein provided.
2. Management. Subject to the supervision of the Board of Trustees of
the Trust, the Manager shall manage the investment operations of each Fund and
the composition of each Fund's portfolio, including the purchase, retention and
disposition of securities therefor, in accordance with the Fund's investment
objectives, policies and restrictions as stated in the Prospectus and Statement
of Additional Information (as such terms are hereinafter defined) and
resolutions of the Trust's Board of Trustees and subject to the following
understandings:
(a) The Manager shall provide supervision of each Fund's
investments, furnish a continuous investment program for each Fund's
portfolio and determine from time to time what securities will be
purchased, retained, or sold by each Fund, and what portion of the
assets will be invested or held as cash.
(b) The Manager, in the performance of its duties and
obligations under this Agreement, shall act in conformity with the
Trust's Declaration of Trust and the investment policies of the Funds
as determined by the Board of Trustees of the Trust.
(c) The Manager shall determine the securities to be
purchased or sold by each Fund and shall place orders for the purchase
and sale of portfolio securities pursuant to its determinations with
brokers or dealers selected by the Manager. In executing portfolio
transactions and selecting brokers or dealers, the Manager shall use
<PAGE> 2
its best efforts to seek on behalf of each Fund the best overall terms
available. In assessing the best overall terms available for any
transaction, the Manager may consider all factors it deems relevant,
including the breadth of the market in the security, the price of the
security, the size of the transaction, the timing of the transaction,
the reputation, financial condition, experience, and execution
capability of a broker or dealer, the amount of commission, and the
value of any brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934,
provided by a broker or dealer. The Manager is authorized to pay to a
broker or dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for a Fund which is
in excess of the amount of commission another broker or dealer would
have charged for effecting the transaction if the Manager determines
in good faith that such commission was reasonable in relation to the
value of the brokerage and research services provided by such broker
or dealer, viewed in terms of that particular transaction or in terms
of the overall responsibilities of the Manager to the Fund and/or
other accounts over which the Manager exercises investment discretion.
(d) On occasions when the Manager deems the purchase or
sale of a security to be in the best interest of a Fund as well as
other fiduciary accounts for which it has investment responsibility,
the Manager, to the extent permitted by applicable laws and
regulations, may aggregate the securities to be so sold or purchased
in order to obtain the best execution, most favorable net price or
lower brokerage commissions.
(e) Subject to the provisions of the Trust's Declaration
of Trust and the 1940 Act, the Manager, at its expense, may select and
contract with one or more investment advisers (the "Sub-adviser") for
each Fund to perform some or all of the services for which it is
responsible pursuant to this Section 2. The Manager shall be solely
responsible for the compensation of any Sub-adviser of a Fund for its
services to such Fund. The Manager may terminate the services of any
Sub-adviser at any time in its sole discretion, and shall at such time
assume the responsibilities of such Sub-adviser unless and until a
successor Sub-adviser is selected. To the extent that more than one
Sub-adviser is selected, the Manager shall, in its sole discretion,
determine the amount of the Fund's assets allocated to each such
Sub-adviser.
3. Services Not Exclusive. The investment management services rendered
by the Manager hereunder to the Funds are not to be deemed exclusive, and the
Manager shall have the right to render similar services to others, including,
without limitation, other investment companies.
4. Expenses. During the term of this Agreement, the Manager shall pay
all expenses incurred by it in connection with its activities under this
Agreement including the salaries and expenses of any of the officers or
employees of the Manager who act as officers, Trustees or employees of the
Trust but excluding the cost of securities purchased for the Funds and the
amount of any brokerage fees and commissions incurred in executing portfolio
transactions for the Funds, and shall provide the Funds with suitable office
space. Other expenses to be incurred in the operation of the Funds (other than
those borne by any third party), including
2
<PAGE> 3
without limitation, taxes, interest, brokerage fees and commissions, fees of
Trustees who are not officers, directors, or employees of the Manager, federal
registration fees and state Blue Sky qualification fees, administration fees,
bookkeeping, charges of custodians, transfer and dividend disbursing agents'
fees, certain insurance premiums, industry association fees, outside auditing
and legal expenses, costs of maintaining the Funds' or the Trust's existence,
costs of independent pricing services, costs attributable to investor services
(including, without limitation, telephone and personnel expenses), costs of
preparing, printing and distributing prospectuses to existing shareholders,
costs of stockholders' reports and meetings of shareholders and Trustees of the
Funds or the Trust, as applicable, and any extraordinary expenses will be borne
by the Fund.
5. Compensation. For the services provided pursuant to this Agreement,
the Trust shall pay to the Manager as full compensation therefor a monthly fee
computed on the average daily net assets at the annual rate for each Fund as
stated in Schedule A attached hereto. The Trust acknowledges that the Manager,
as agent for the Funds, will allocate a portion of the fee equal to the
sub-advisory fee payable to the sub-advisor, if any, under its sub-advisory
agreement to the sub-advisor for sub-advisory services. This payment would be
made from revenue which otherwise would be considered profit to the Manager for
its services.
6. Limitation of Liability. The Manager shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Trust in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on its part
in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
7. Delivery of Documents. The Trust has heretofore delivered to the
Manager true and complete copies of each of the following documents and shall
promptly deliver to it all future amendments and supplements thereto, if any:
(a) Declaration of Trust as presently in effect and as amended
from time to time;
(b) Bylaws of the Trust;
(c) Registration Statement under the Securities Act of 1933 and
under the 1940 Act of the Trust on Form N-1A, and all amendments
thereto, as filed with the Securities and Exchange Commission (the
"Registration Statement") relating to the Trust and the shares of the
Funds;
(d) Notification of Registration of the Trust under the 1940 Act
on Form N-8A;
(e) Prospectus of the Trust relating to shares of the Funds (such
prospectus as is presently in effect and/or as amended or supplemented
from time to time, the "Prospectus"); and
3
<PAGE> 4
(f) Statement of Additional Information of the Trust relating to
shares of the Funds (such statement as is presently in effect and/or
as amended or supplemented from time to time, the "Statement of
Additional Information").
8. Duration and Termination. This Agreement shall become effective as of
the date first above-written for an initial period of two years and shall
continue thereafter so long as such continuance is specifically approved at
least annually by (i) the vote of the Board of Trustees including a majority of
those members of the Trust's Board of Trustees who are not parties to this
Agreement or "interested persons" of any such party, cast in person at a
meeting called for that purpose, or (ii) by vote of a majority of the
outstanding voting securities of each Fund. Notwithstanding the foregoing, (i)
this Agreement may be terminated with respect to any Fund at any time, without
the payment of any penalty, by either the Trust (by vote of the Trust's Board
of Trustees or by vote of a majority of the outstanding voting securities of
the Fund) or the Manager, on sixty (60) days prior written notice to the other
and (ii) shall automatically terminate in the event of its assignment. As used
in this Agreement, the terms "majority of the outstanding voting securities,"
"interested persons" and "assignment" shall have the meanings assigned to such
terms in the 1940 Act.
9. Amendments. No provision of this Agreement may be amended, modified,
waived or supplemented except by a written instrument signed by the party
against which enforcement is sought. No amendment of this Agreement shall be
effective until approved in accordance with any applicable provisions of the
1940 Act.
10. Use of Name and Logo. The Trust agrees that it shall furnish to the
Manager, prior to any use or distribution thereof, copies of all prospectuses,
statements of additional information, proxy statements, reports to
stockholders, sales literature, advertisements, and other material prepared for
distribution to stockholders of the Trust or to the public, which in any way
refer to or describe the Manager or which include any trade names, trademarks
or logos of the Manager or of any affiliate of the Manager. The Trust further
agrees that it shall not use or distribute any such material if the Manager
reasonably objects in writing to such use or distribution within five (5)
business days after the date such material is furnished to the Manager.
The Manager and/or its affiliates own the name "LMI" and any other
names which may be listed from time to time on a Schedule B to be attached
hereto that they may develop for use in connection with the Trust, which names
may be used by the Trust only with the consent of the Manager and/or its
affiliates. The Manager, on behalf of itself and/or its affiliates, consents
to the use by the Trust of such names or any other names embodying such names,
but only on condition and so long as (i) this Agreement shall remain in full
force, (ii) the Fund and the Trust shall fully perform, fulfill and comply with
all provisions of this Agreement expressed herein to be performed, fulfilled or
complied with by it, and (iii) the Manager is the manager of each Fund of the
Trust. No such name shall be used by the Trust at any time or in any place or
for any purposes or under any conditions except as provided in this section.
The foregoing authorization by the Manager, on behalf of itself and/or its
affiliates, the Trust to use such names as part of a business or name is not
exclusive of the
4
<PAGE> 5
right of the Manager and/or its affiliates themselves to use, or to authorize
others to use, the same; each Fund and the Trust acknowledges and agrees that
as between the Manager and/or its affiliates and a Fund or the Trust, the
Manager and/or its affiliates have the exclusive right so to use, or authorize
others to use, such names, and the Trust agrees to take such action as may
reasonably be requested by the Manager, on behalf of itself and/or its
affiliates, to give full effect to the provisions of this section (including,
without limitation, consenting to such use of such names). Without limiting
the generality of the foregoing, the Trust agrees that, upon (i) any violation
of the provisions of this Agreement by the Trust or (ii) any termination of
this Agreement, by either party or otherwise, the Trust will, at the request of
the Manager, on behalf of itself and/or its affiliates, made within six months
after such violation or termination, use its best efforts to change the name of
the Trust so as to eliminate all reference, if any, to such names and will not
thereafter transact any business in a name containing such names in any form or
combination whatsoever, or designate itself as the same entity as or successor
to an entity of such names, or otherwise use such names or any other reference
to the Manager and/or its affiliates, except as may be required by law. Such
covenants on the part of the Trust shall be binding upon it, its Trustees,
officers, shareholders, creditors and all other persons claiming under or
through it.
The provisions of this section shall survive termination of this
Agreement.
11. Notices. Any notice or other communication required to be given
pursuant to this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, if to the Trust: 790 Colorado Boulevard, 9th
Floor, Pasadena, California 91101; or if to the Manager: 790 Colorado
Boulevard, 9th Floor, Pasadena, California 91101; or to either party at such
other address as such party shall designate to the other by a notice given in
accordance with the provisions of this section.
12. Miscellaneous.
(a) Except as otherwise expressly provided herein or
authorized by the Board of Trustees of the Trust from time to time,
the Manager for all purposes herein shall be deemed to be an
independent contractor and shall have no authority to act for or
represent the Trust in any way or otherwise be deemed an agent of the
Trust.
(b) The Trust shall furnish or otherwise make available
to the Manager such information relating to the business affairs of
the Trust as the Manager at any time or from time to time reasonably
requests in order to discharge its obligations hereunder.
(c) This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts and
shall inure to the benefit of the parties hereto and their respective
successors.
(d) If any provision of this Agreement shall be held or
made invalid or by any court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
5
<PAGE> 6
13. Declaration of Trust and Limitation of Liability. A copy of the
Trust's Declaration of Trust is on file with the Secretary of State of the
Commonwealth of Massachusetts, and notice is hereby given that this Agreement
is executed by an officer of the Trust on behalf of the Trustees of the Trust,
as trustees and not individually, on further behalf of the Funds, and that the
obligations of this Agreement with respect to a Fund shall be binding upon the
assets and properties of that Fund only and shall not be binding upon the
assets and properties of any other Fund or series of the Trust or upon any of
the Trustees, officers, employees, agents or shareholders of the Funds or the
Trust individually.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers designated below as of the date first
above-written.
WORLDWIDE INDEX FUNDS, on behalf of its series
AUSTRALIA INDEX FUND,
FRANCE INDEX FUND,
GERMANY INDEX FUND,
HONG KONG INDEX FUND,
ITALY INDEX FUND,
JAPAN INDEX FUND,
NETHERLANDS INDEX FUND,
SPAIN INDEX FUND,
SWEDEN INDEX FUND,
SWITZERLAND INDEX FUND,
UNITED KINGDOM INDEX FUND,
EUROPE INDEX FUND, and
INTERNATIONAL INDEX FUND.
By: /s/ F. Brian Cerini
------------------------------
Name: F. Brian Cerini
Title: President
Attest:
By: /s/ Keith Pipes
---------------
Name: Keith Pipes
Title:
LMI INVESTMENT ADVISERS LLC
By: /s/ F. Brian Cerini
-------------------
Name: F. Brian Cerini
Title: Member
Attest:
By: /s/ Keith Pipes
---------------
Name: Keith Pipes
Title:
7
<PAGE> 8
SCHEDULE A
WORLDWIDE INDEX FUNDS
INVESTMENT MANAGEMENT AGREEMENT
The fees to be charged to Worldwide Index Funds for services provided under
this Agreement (including any sub-advisory fees) are as follows:
<TABLE>
<S> <C>
AUSTRALIA INDEX FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . .50%
FRANCE INDEX FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50%
GERMANY INDEX FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50%
HONG KONG INDEX FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . .50%
ITALY INDEX FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50%
JAPAN INDEX FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50%
NETHERLANDS INDEX FUND . . . . . . . . . . . . . . . . . . . . . . . . . . .50%
SPAIN INDEX FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50%
SWEDEN INDEX FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50%
SWITZERLAND INDEX FUND . . . . . . . . . . . . . . . . . . . . . . . . . . .50%
UNITED KINGDOM INDEX FUND . . . . . . . . . . . . . . . . . . . . . . . . . .50%
EUROPE INDEX FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0%
INTERNATIONAL INDEX FUND . . . . . . . . . . . . . . . . . . . . . . . . . .0%
</TABLE>
The Manager agrees, by waiving its fees and reimbursing expenses as
necessary, to limit each Fund's total expense ratio to no greater than 0.99%
for R Class shares and 0.74% for I Class shares over a calendar year until
December 31, 2001 (Expense Limits). Any amount waived or reimbursed by the
Manager pursuant to the Expense Limits for a given calendar year shall be
reimbursed by each Fund to the Manager in a subsequent year, provided that (1)
no such reimbursements shall be made to the Manager after 3 years following the
year any amount is waived or reimbursed; and (2) such reimbursements shall only
be made to the extent that they do not result in any Fund's aggregate expenses
exceeding an expense limit of 0.99% for R Class shares and 0.74% for I Class
shares.
<PAGE> 1
EXHIBIT 99-E
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of this ____ day of _______, 1998 (the
"Agreement") by and between Worldwide Index Funds, a Massachusetts business
trust (the "Fund") and First Data Distributors, Inc. (the "Distributor"), a
Massachusetts corporation.
WHEREAS, the Fund is registered as a diversified, open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and is currently offering units of beneficial interest (such units
of all series are hereinafter called the "Shares"), representing interests in
investment portfolios of the Fund identified on Schedule A hereto (the
"Portfolios") which are registered with the Securities and Exchange Commission
(the "SEC") pursuant to the Fund's Registration Statement on Form N-1A (the
"Registration Statement"); and
WHEREAS, the Fund desires to retain the Distributor as distributor for
the Portfolios to provide for the sale and distribution of the Shares of the
Portfolios identified on Schedule A and for such additional classes or series as
the Fund may issue, and the Distributor is prepared to provide such services
commencing on the date first written above.
NOW THEREFORE, in consideration of the premises and mutual covenants set
forth herein and intending to be legally bound hereby the parties hereto agree
as follows:
1. SERVICE AS DISTRIBUTOR
1.1 The Distributor will act on behalf of the Fund for the distribution of
the Shares covered by the Registration Statement under the Securities Act
of 1933, as amended (the "1933 Act") and provide the distribution
services outlined in Schedule B to this Agreement. The Distributor will
have no liability for payment for the purchase of Shares sold pursuant to
this Agreement or with respect to redemptions or repurchases of Shares.
1.2 The net asset value of the Shares shall be determined in the manner
provided in the then current Prospectus and Statement of Additional
Information relating to the Shares, and when determined shall be
applicable to all transactions as provided in the Prospectus. The net
asset value of the Shares shall be calculated by the Fund or by another
entity on behalf of the Fund. The Distributor shall have no duty to
inquire into, or liability for, the accuracy of the net asset value per
Share as calculated.
1.3 The Distributor agrees to use efforts deemed appropriate by the
Distributor to solicit orders for the sale of the Shares and will
undertake such advertising and promotion as it believes reasonable in
connection with such solicitation. To the extent that the Distributor
receives fees under any plan adopted by the Fund pursuant to Rule 12b-1
under the 1940 Act, the Distributor agrees to furnish and/or enter into
arrangements with others for the furnishing of marketing or sales
services with respect to the Shares as may be required pursuant to such
plan. To the extent that the Distributor receives shareholder services
fees under any shareholder services plan adopted by the Fund, the
Distributor
<PAGE> 2
agrees to furnish and/or enter into arrangements with others for the
furnishing of, personal and/or account maintenance services with respect
to the relevant shareholders of the Fund as may be required pursuant to
such plan. It is contemplated that the Distributor will enter into sales
or servicing agreements with securities dealers, financial institutions
and other industry professionals, such as investment advisers,
accountants and estate planning firms. The Distributor will require each
dealer with whom the Distributor has a selling agreement to conform to
the applicable provisions of the Prospectus, with respect to the public
offering price of the Shares, and the Distributor shall not cause the
Fund to withhold the placing of purchase orders so as to make a profit
thereby.
1.4 The Fund understands that the Distributor is now, and may in the future
be, the distributor of the shares of several investment companies or
series (collectively, the "Investment Entities"), including Investment
Entities having investment objectives similar to those of the Fund. The
Fund further understands that investors and potential investors in the
Fund may invest in shares of such other Investment Entities. The Fund
agrees that the Distributor's duties to such Investment Entities shall
not be deemed in conflict with its duties to the Fund under this Section
1.4.
1.5 The Distributor shall not utilize any materials in connection with the
sale or offering of Shares except the Fund's Prospectus and Statement of
Additional Information and such other materials as the Fund shall provide
or approve. The Fund agrees to furnish the Distributor with sufficient
copies of any and all: agreements, plans, communications with the public
or other materials which the Fund intends to use in connection any sales
of Shares, in adequate time for the Distributor to file and clear such
materials with the proper authorities before they are put in use. The
Distributor and the Fund may agree that any such material does not need
to be filed subsequent to distribution. In addition, the Fund agrees not
to use any such materials until so filed and cleared for use, if
required, by appropriate authorities as well as by the Distributor.
1.6 All activities by the Distributor and its employees, as distributor of
the Shares, shall comply with all applicable laws, rules and regulations,
including, without limitation, all rules and regulations made or adopted
by the SEC or the National Association of Securities Dealers.
1.7 The Distributor will transmit any orders received by it for purchase or
redemption of the Shares to the transfer agent for the Fund.
1.8 Whenever in its judgment such action is warranted by unusual market,
economic or political conditions or abnormal circumstances of any kind,
the Fund may decline to accept any orders for, or make any sales of, the
Shares until such time as the Fund deems it advisable to accept such
orders and to make such sales, and the Fund advises the Distributor
promptly of such determination.
1.9 The Fund agrees to execute any and all documents and to furnish any and
all information and otherwise to take all actions that may be reasonably
necessary in connection with the
2
<PAGE> 3
qualification of the Shares for sale in such states as the Distributor
may designate. The Fund shall notify the Distributor in writing of the
states in which the Shares may be sold and shall notify the Distributor
in writing of any changes to the information contained in the previous
notification.
1.10 The Fund shall furnish from time to time, for use in connection with the
sale of the Shares, such information with respect to the Fund and the
Shares as the Distributor may reasonably request; and the Fund warrants
that the statements contained in any such information shall fairly show
or represent what they purport to show or represent. The Fund shall also
furnish the Distributor upon request with: (a) audited annual statements
and unaudited semi-annual statements of a Portfolio's books and accounts
prepared by the Fund, (b) quarterly earnings statements prepared by the
Fund, (c) a monthly itemized list of the securities in the Portfolios,
(d) monthly balance sheets as soon as practicable after the end of each
month, and (e) from time to time such additional information regarding
the financial condition of the Fund as the Distributor may reasonably
request.
1.11 The Fund represents to the Distributor that all Registration Statements
and Prospectuses filed by the Fund with the SEC under the 1933 Act with
respect to the Shares have been prepared in conformity with the
requirements of the 1933 Act and the rules and regulations of the SEC
thereunder. As used in this Agreement, the term "Registration Statement"
shall mean any Registration Statement and any Prospectus and any
Statement of Additional Information relating to the Fund filed with the
SEC and any amendments or supplements thereto at any time filed with the
SEC. Except as to information included in the Registration Statement in
reliance upon information provided to the Fund by the Distributor or any
affiliate of the Distributor expressly for use in the Registration
Statement, the Fund represents and warrants to the Distributor that any
Registration Statement, when such Registration Statement becomes
effective, will contain statements required to be stated therein in
conformity with the 1933 Act and the rules and regulations of the SEC;
that all statements of fact contained in any such Registration Statement
will be true and correct when such Registration Statement becomes
effective; and that no Registration Statement when such Registration
Statement becomes effective will include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading to a
purchaser of the Shares. The Fund may but shall not be obligated to
propose from time to time such amendment or amendments to any
Registration Statement and such supplement or supplements to any
Prospectus as, in the light of future developments, may, in the opinion
of the Fund's counsel, be necessary or advisable. The Fund shall promptly
notify the Distributor of any advice given to it by its counsel regarding
the necessity or advisability of amending or supplementing such
Registration Statement. If the Fund shall not propose such amendment or
amendments and/or supplement or supplements within fifteen days after
receipt by the Fund of a written request from the Distributor to do so,
the Distributor may, at its option, terminate this Agreement. The Fund
shall not file any amendment to any Registration Statement or supplement
to any Prospectus without giving the Distributor reasonable notice
thereof in advance; provided, however, that nothing contained in this
Agreement shall in any way limit the Fund's right to file at any
3
<PAGE> 4
time such amendments to any Registration Statements and/or supplements to
any Prospectus, of whatever character, as the Fund may deem advisable,
such right being in all respects absolute and unconditional. The Fund
authorizes the Distributor to use any Prospectus or Statement of
Additional Information in the form furnished from time to time in
connection with the sale of the Shares.
1.12 No Shares shall be offered by either the Distributor or the Fund under
any of the provisions of this Agreement and no orders for the purchase or
sale of Shares hereunder shall be accepted by the Fund if and so long as
effectiveness of the Registration Statement then in effect or any
necessary amendments thereto shall be suspended under any of the
provisions of the 1933 Act, or if and so long as a current Prospectus as
required by Section 5(b)(2) of the 1933 Act is not on file with the SEC;
provided, however, that nothing contained in this Section 1.12 shall in
any way restrict or have any application to or bearing upon the Fund's
obligation to redeem Shares tendered for redemption by any shareholder in
accordance with the provisions of the Fund's Registration Statement,
Articles of Incorporation, or bylaws.
1.13 The Fund agrees to advise the Distributor as soon as reasonably practical
by a notice in writing delivered to the Distributor:
(a) of any request by the SEC for amendments to the Registration
Statement, Prospectus or Statement of Additional Information then
in effect or for additional information;
(b) in the event of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement,
Prospectus or Statement of Additional Information then in effect
or the initiation by service of process on the Fund of any
proceeding for that purpose;
(c) of the happening of any event that makes untrue any statement of a
material fact made in the Registration Statement, Prospectus or
Statement of Additional Information then in effect or that
requires the making of a change in such Registration Statement,
Prospectus or Statement of Additional Information in order to make
the statements therein not misleading; and
(d) of all actions of the SEC with respect to any amendments to any
Registration Statement, Prospectus or Statement of Additional
Information which may from time to time be filed with the SEC.
For purposes of this section, informal requests by or acts of the Staff
of the SEC shall not be deemed actions of or requests by the SEC.
1.14 The Fund represents and warrants to the Distributor that the Fund is a
series of investment company registered under the 1940 Act and the Shares
sold by each Portfolio are, and will be, registered under the 1933 Act.
4
<PAGE> 5
2. COMPENSATION AND EXPENSES
2.1 The Fund will bear the following expenses:
(a) preparation, printing and distribution of sufficient copies of the
Prospectus and SAI for to shareholders;
(b) preparation, printing and distribution of reports and other
communications to shareholders;
(c) registration of the Shares under the federal and state securities
laws;
(d) maintaining facilities for the issue and transfer of Shares;
(e) supplying information, prices and other data to be furnished by
the Fund under this Agreement;
(f) any original issue taxes or other transfer taxes applicable to the
sale or delivery of the Shares or certificates therefor; and
(g) any filing fees associated with the submission of sales material
to the NASD or any state authority.
The Fund will pay all other expenses incident to the sale and
distribution of the Shares sold hereunder.
3. INDEMNIFICATION
3.1 The Fund agrees to indemnify and hold harmless the Distributor, its
officers, directors, and employees, and any person who controls the
Distributor within the meaning of Section 15 of the 1933 Act, free and
harmless (a) from and against any and all claims, costs, expenses
(including reasonable attorneys' fees) losses, damages, charges, payments
and liabilities of any sort or kind which the Distributor, its officers,
directors, employees or any such controlling person may incur under the
1933 Act, under any other statute, at common law or otherwise, arising
out of or based upon: (i) any untrue statement, or alleged untrue
statement, of a material fact contained in the Fund's Registration
Statement, Prospectus, Statement of Additional Information, or sales
literature (including amendments and supplements thereto), or (ii) any
omission, or alleged omission, to state a material fact required to be
stated in the Fund's Registration Statement, Prospectus, Statement of
Additional Information or sales literature (including amendments or
supplements thereto), necessary to make the statements therein not
misleading, provided, however, that insofar as losses, claims, damages,
liabilities or expenses arise out of or are based upon any such untrue
statement or omission or alleged untrue statement or omission made in
reliance on and in conformity with information furnished to the Fund
5
<PAGE> 6
by the Distributor or its affiliated persons for use in the Fund's
Registration Statement, Prospectus, or Statement of Additional
Information or sales literature (including amendments or supplements
thereto), such indemnification is not applicable; and (b) from and
against any and all such claims, demands, liabilities and expenses
(including such costs and counsel fees) which you, your officers and
directors, or such controlling person, may incur in connection with this
Agreement or the Distributor's performance hereunder (but excluding such
claims, demands, liabilities and expenses (including such costs and
counsel fees) arising out of or based upon any untrue statement, or
alleged untrue statement, of a material fact contained in any
registration statement or any Prospectus or arising out of or based upon
any omission, or alleged omission, to state a material fact required to
be stated in either any registration statement or any Prospectus or
necessary to make the statements in either thereof not misleading),
unless such claims, demands, liabilities and expenses (including such
costs and counsel fees) arise by reason of the Distributor's willful
misfeasance, bad faith or negligence in the performance of the
Distributor's duties hereunder. The Fund acknowledges and agrees that in
the event that the Distributor, at the request of the Fund, are required
to give indemnification comparable to that set forth in this Section 3.1
to any broker-dealer selling Shares of the Fund or servicing agent
servicing the shareholders of the Fund and such broker-dealer or
servicing agent shall make a claim for indemnification against the
Distributor, the Distributor shall make a similar claim for
indemnification against the Fund.
The Fund will indemnify the Distributor against and hold it harmless from
any and all claims, costs, expenses (including reasonable attorneys'
fees), losses, damages, charges, payments and liabilities of any sort or
kind which may be asserted against the Distributor for which the
Distributor may be held to be liable in connection with this Agreement or
the Distributor's performance hereunder (a "Claim"), unless such Claim
resulted from a negligent act or omission to act or bad faith by the
Distributor in the performance of its duties hereunder.
3.2 The Distributor agrees to indemnify and hold harmless the Fund, its
several officers and Board Members and each person, if any, who controls
a Portfolio within the meaning of Section 15 of the 1933 Act against any
and all claims, costs, expenses (including reasonable attorneys' fees),
losses, damages, charges, payments and liabilities of any sort or kind
which the Fund, its officers, Board Members or any such controlling
person may incur under the 1933 Act, under any other statute, at common
law or otherwise, but only to the extent that such liability or expense
incurred by the Fund, its officers or Board Members, or any controlling
person resulting from such claims or demands arose out of the acquisition
of any Shares by any person which may be based upon any untrue statement,
or alleged untrue statement, of a material fact contained in the Fund's
Registration Statement, Prospectus or Statement of Additional Information
(including amendments and supplements thereto), or any omission, or
alleged omission, to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, if such
statement or omission was made in reliance upon information furnished or
confirmed in writing to the Fund by the Distributor or its affiliated
persons (as defined in the 1940 Act). The Distributor also agrees to
indemnify and hold harmless
6
<PAGE> 7
the Fund and each such person in connection with any claim or in
connection with any action, suit or proceeding which arises out of or is
alleged to arise out of the Distributor's failure to exercise reasonable
care and diligence with respect to its services rendered in connection
with the purchase and sale of Shares. The foregoing rights of
indemnification shall be in addition to any other rights to which the
Fund or any such person shall be entitled to as a matter of law.
3.3 In any case in which one party hereto (the "Indemnifying Party") may be
asked to indemnify or hold the other party hereto (the "Indemnified
Party") harmless, the Indemnified Party will notify the Indemnifying
Party promptly after identifying any situation which it believes presents
or appears likely to present a claim for indemnification (an
"Indemnification Claim") against the Indemnifying Party, although the
failure to do so shall not prevent recovery by the Indemnified Party, and
shall keep the Indemnifying Party advised with respect to all
developments concerning such situation. The Indemnifying Party shall have
the option to defend the Indemnified Party against any Indemnification
Claim which may be the subject of this indemnification, and, in the event
that the Indemnifying Party so elects, such defense shall be conducted by
counsel chosen by the Indemnifying Party and satisfactory to the
Indemnified Party, and thereupon the Indemnifying Party shall take over
complete defense of the Indemnification Claim and the Indemnified Party
shall sustain no further legal or other expenses in respect of such
Indemnification Claim. In the event that the Indemnifying Party does not
elect to assume the defense of any such suit, or in case the Indemnified
Party reasonably does not approve of counsel chosen by the Indemnifying
Party, or in case there is a conflict of interest between the
Indemnifying Party or the Indemnified Party, the Indemnifying Party will
reimburse the Indemnified Party for the fees and expenses of any counsel
retained by the Indemnified Party.. The Fund agrees promptly to notify
the Distributor of the commencement of any litigation or proceedings
against the Fund or any of its officers or directors in connection with
the issue and sale of any Shares. The Indemnified Party will not confess
any Indemnification Claim or make any compromise in any case in which the
Indemnifying Party will be asked to provide indemnification, except with
the Indemnifying Party's prior written consent.
3.4 The obligations of the parties hereto under this Section 3 shall survive
the termination of this Agreement. The Fund's indemnification agreement
contained in this Section 3 and the Fund's representations and warranties
in this Agreement shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of the Distributor,
its officers, directors and employees, or any controlling person, and
shall survive the delivery of any Shares. This agreement of indemnity
will inure exclusively to the Distributor's benefit, to the benefit of
its several officers, directors and employees, and their respective
estates and to the benefit of the controlling persons and their
successors.
4. STANDARD OF CARE; LIMITATION OF LIABILITY
4.1 The Distributor shall not be liable to the Fund for any error of judgment
or mistake of law or for any loss suffered by the Fund in connection with
the performance of its obligations
7
<PAGE> 8
and duties under this Agreement, except a loss resulting from the
Distributor's willful misfeasance, bad faith or negligence in the
performance of such obligations and duties, or by reason of its reckless
disregard thereof.
4.2 Notwithstanding any provision in this Agreement to the contrary, the
Distributor's cumulative liability (to the Fund) for all losses, claims,
suits, controversies, breaches, or damages ("Liability Claims") for any
cause whatsoever and regardless of the form of action or legal theory,
shall not exceed $500,000. The Fund understands the limitation on the
Distributor's damages to be a reasonable allocation of risk and the Fund
expressly consents with respect to such allocation of risk.
4.3 Neither party may assert any cause of action against the other party
under this Agreement that accrued more than two (2) years prior to the
filing of the suit (or commencement of arbitration proceedings) alleging
such cause of action.
4.4 Each party shall have the duty to mitigate damages for which the other
party may become responsible.
4.5 NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT
SHALL THE DISTRIBUTOR, ITS AFFILIATES OR ANY OF ITS OR THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE UNDER ANY THEORY
OF TORT, CONTRACT, STRICT LIABILITY OF OTHER LEGAL OR EQUITABLE THEORY
FOR LOST PROFITS, EXEMPLARY, PUNITIVE, SPECIAL, INCIDENTAL, INDIRECT OR
CONSEQUENTIAL DAMAGES, EACH OF WHICH IS HEREBY EXCLUDED BY AGREEMENT OF
THE PARTIES REGARDLESS OF WHETHER SUCH DAMAGES WERE FORESEEABLE OR
WHETHER EITHER PARTY OR ANY ENTITY HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES.
5. EXCLUSION OF WARRANTIES
THIS IS A SERVICE AGREEMENT. EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, THE DISTRIBUTOR DISCLAIMS ALL OTHER REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, MADE TO THE COMPANY, A PORTFOLIO OR ANY
OTHER PERSON, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES REGARDING
QUALITY, SUITABILITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE
OR OTHERWISE (IRRESPECTIVE OF ANY COURSE OF DEALING, CUSTOM OR USAGE OF
TRADE) OF ANY SERVICES OR ANY GOODS PROVIDED INCIDENTAL TO SERVICES
PROVIDED UNDER THIS AGREEMENT. THE DISTRIBUTOR DISCLAIMS ANY WARRANTY OF
TITLE OR NON-INFRINGEMENT EXCEPT AS OTHERWISE SET FORTH IN THIS
AGREEMENT.
6. TERM
8
<PAGE> 9
6.1 This Agreement shall become effective on the date first written above
and, unless sooner terminated as provided herein, shall continue for an
initial two-year term and thereafter shall be renewed for successive
one-year terms, provided such continuance is specifically approved at
least annually by (i) the Fund's Board of Directors or (ii) by a vote of
a majority (as defined in the 1940 Act and Rule 18f-2 thereunder) of the
outstanding voting securities of the Fund, provided that in either event
the continuance is also approved by a majority of the Board Members who
are not parties to this Agreement and who are not interested persons (as
defined in the 1940 Act) of any party to this Agreement, by vote cast in
person at a meeting called for the purpose of voting on such approval.
This Agreement is terminable without penalty, on at least sixty days'
written notice, by the Fund's Board of Directors, by vote of a majority
(as defined in the 1940 Act and Rule 18f-2 thereunder) of the outstanding
voting securities of the Fund, or by the Distributor. This Agreement will
also terminate automatically in the event of its assignment (as defined
in the 1940 Act and the rules thereunder).
6.2 In the event a termination notice is given by the Fund, all expenses
associated with movement of records and materials and conversion thereof
will be borne by the Fund.
7. MODIFICATIONS AND WAIVERS
No change, termination, modification, or waiver of any term or condition
of the Agreement shall be valid unless in writing signed by each party.
No such writing shall be effective as against the Distributor unless said
writing is executed by a Senior Vice President, Executive Vice President
or President of the Distributor. A party's waiver of a breach of any term
or condition in the Agreement shall not be deemed a waiver of any
subsequent breach of the same or another term or condition.
8. NO PRESUMPTION AGAINST DRAFTER
The Distributor and the Fund have jointly participated in the negotiation
and drafting of this Agreement. The Agreement shall be construed as if
drafted jointly by the Fund and the Distributor, and no presumptions
arise favoring any party by virtue of the authorship of any provision of
this Agreement.
9. PUBLICITY
Neither the Distributor nor the Fund shall release or publish news
releases, public announcements, advertising or other publicity relating
to this Agreement or to the transactions contemplated by it without prior
review and written approval of the other party; provided, however, that
either party may make such disclosures as are required by legal,
accounting or regulatory requirements after making reasonable efforts in
the circumstances to consult in advance with the other party.
10. SEVERABILITY
9
<PAGE> 10
The parties intend every provision of this Agreement to be severable. If
a court of competent jurisdiction determines that any term or provision
is illegal or invalid for any reason, the illegality or invalidity shall
not affect the validity of the remainder of this Agreement. In such case,
the parties shall in good faith modify or substitute such provision
consistent with the original intent of the parties. Without limiting the
generality of this paragraph, if a court determines that any remedy
stated in this Agreement has failed of its essential purpose, then all
other provisions of this Agreement, including the limitations on
liability and exclusion of damages, shall remain fully effective.
11. FORCE MAJEURE
No party shall be liable for any default or delay in the performance of
its obligations under this Agreement if and to the extent such default or
delay is caused, directly or indirectly, by (i) fire, flood, elements of
nature or other acts of God; (ii) any outbreak or escalation of
hostilities, war, riots or civil disorders in any country, (iii) any act
or omission of the other party or any governmental authority; (iv) any
labor disputes (whether or not the employees' demands are reasonable or
within the party's power to satisfy); or (v) nonperformance by a third
party or any similar cause beyond the reasonable control of such party,
including without limitation, failures or fluctuations in
telecommunications or other equipment. In any such event, the
non-performing party shall be excused from any further performance and
observance of the obligations so affected only for so long as such
circumstances prevail and such party continues to use commercially
reasonable efforts to recommence performance or observance as soon as
practicable.
12. MISCELLANEOUS
12.1 Any notice or other instrument authorized or required by this Agreement
to be given in writing to the Fund or the Distributor shall be
sufficiently given if addressed to the party and received by it at its
office set forth below or at such other place as it may from time to time
designate in writing.
To the Fund:
Worldwide Index Funds
790 E. Colorado Boulevard
9th Floor
Pasadena, California 91101
Attention: F. Brian Cerini
To the Distributor:
First Data Distributors, Inc.
10
<PAGE> 11
4400 Computer Drive
Westboro, Massachusetts 01581
Attention: President
with a copy to the Distributors Chief Legal Officer
12.2 The laws of the Commonwealth of Massachusetts, excluding the laws on
conflicts of laws, and the applicable provisions of the 1940 Act shall
govern the interpretation, validity, and enforcement of this Agreement.
To the extent the provisions of Massachusetts law or the provisions
hereof conflict with the 1940 Act, the 1940 Act shall control. All
actions arising from or related to this Agreement shall be brought in the
state and federal courts sitting in the City of Boston, and the
Distributor and the Fund hereby submit themselves to the exclusive
jurisdiction of those courts
12.3 This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original and which collectively shall be
deemed to constitute only one instrument.
12.4 The captions of this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
12.5 This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and is not intended to
confer upon any other person any rights or remedies hereunder.
13. CONFIDENTIALITY
13.1 The parties agree that the Proprietary Information (defined below) and
the contents of this Agreement (collectively "Confidential Information")
are confidential information of the parties and their respective
licensers. The Fund and the Distributor shall exercise reasonable care to
safeguard the confidentiality of the Confidential Information of the
other. The Fund and the Distributor may each use the Confidential
Information only to exercise its rights or perform its duties under this
Agreement. The Fund and the Distributor shall not duplicate, sell or
disclose to others the Confidential Information of the other, in whole or
in part, without the prior written permission of the other party. The
Fund and the Distributor may, however, disclose Confidential Information
to its employees who have a need to know the Confidential Information to
perform work for the other, provided that each shall use reasonable
efforts to ensure that the Confidential Information is not duplicated or
disclosed by its employees in breach of this Agreement. The Fund and the
Distributor may also disclose the Confidential Information to independent
contractors, auditors and professional advisors, provided they first
agree in writing to be bound by the confidentiality obligations
substantially similar to this Section 13. Notwithstanding the previous
sentence, in no event shall either the Fund or the
11
<PAGE> 12
Distributor disclose the Confidential Information to any competitor of
the other without specific, prior written consent.
13.2 Proprietary Information means:
(a) any data or information that is completely sensitive material, and
not generally known to the public, including, but not limited to,
information about product plans, marketing strategies, finance,
operations, customer relationships, customer profiles, sales estimates,
business plans, and internal performance results relating to the past,
present or future business activities of the Fund or the Distributor,
their respective subsidiaries and affiliated companies and the customers,
clients and suppliers of any of them;
(b) any scientific or technical information, design, process,
procedure, formula, or improvement that is commercially valuable and
secret in the sense that its confidentiality affords the Fund or the
Distributor a competitive advantage over its competitors: and
(c) all confidential or proprietary concepts, documentation, reports,
data, specifications, computer software, source code, object code, flow
charts, databases, inventions, know-how, show-how and trade secrets,
whether or not patentable or copyrightable.
13.3 Confidential Information includes, without limitation, all documents,
inventions, substances, engineering and laboratory notebooks, drawings,
diagrams, specifications, bills of material, equipment, prototypes and
models, and any other tangible manifestation of the foregoing of either
party which now exist or come into the control or possession of the
other.
13.4 The Fund acknowledges that breach of the restrictions on use,
dissemination or disclosure of any Confidential Information would result
in immediate and irreparable harm, and money damages would be inadequate
to compensate the Distributor for that harm. The Distributor shall be
entitled to equitable relief, in addition to all other available
remedies, to redress any such breach.
13.5 The obligations of confidentiality and restriction on use herein shall
not apply to any Confidential Information that a party proves:
(a) Was in the public domain prior to the date of this Agreement or
subsequently came into the public domain through no fault of such party;
or
(b) Was lawfully received by the party from a third party free of any
obligation of confidence to such third party; or
(c) Was already in the possession of the party prior to receipt
thereof, directly or indirectly, from the other party; or
12
<PAGE> 13
(d) Is required to be disclosed in a judicial or administrative
proceeding after all reasonable legal remedies for maintaining such
information in confidence have been exhausted including, but not limited
to, giving the other party as much advance notice of the possibility of
such disclosure as practical so the other party may attempt to stop such
disclosure or obtain a protective order concerning such disclosure; or
(e) Is subsequently and independently developed by employees,
consultants or agents of the party without reference to the Confidential
Information disclosed under this Agreement.
14. ENTIRE AGREEMENT
This Agreement, including all Schedules hereto, constitutes the entire
agreement between the parties with respect to the subject matter hereof
and supersedes all prior and contemporaneous proposals, agreements,
contracts, representations, and understandings, whether written or oral,
between the parties with respect to the subject matter hereof.
15. BOARD MEMBER LIABILITY
The Fund and the Distributor agree that the obligations of the Fund under
the Agreement shall not be binding upon any of the Board Members,
shareholders, nominees, officers, employees or agents, whether past,
present or future, of the Fund individually, but are binding only upon
the assets and property of the Fund, as provided in the Articles of
Incorporation. The execution and delivery of this Agreement have been
authorized by the Board Members of the Fund, and signed by an authorized
officer of the Fund, acting as such, and neither such authorization by
such Board Members nor such execution and delivery by such officer shall
be deemed to have been made by any of them or any shareholder of the Fund
individually or to impose any liability on any of them or any shareholder
of the Fund personally, but shall bind only the assets and property of
the Fund as provided in the Articles of Incorporation.
13
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
WORLDWIDE INDEX FUNDS
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
FIRST DATA DISTRIBUTORS, INC.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
14
<PAGE> 15
SCHEDULE A
NAME OF PORTFOLIOS
Australia Index Fund
France Index Fund
Germany Index Fund
Hong Kong Index Fund
Italy Index Fund
Japan Index Fund
Netherlands Index Fund
Spain Index Fund
Sweden Index Fund
Switzerland Index Fund
United Kingdom Index Fund
Europe Index Fund
International Index Fund
S-1
<PAGE> 16
SCHEDULE B
DISTRIBUTION SERVICES
Services shall include:
1. Preparation and execution of sales or servicing agreements
monitoring accruals
monitoring expenses
making disbursements for expenses and fees
2. Quarterly 12b-1 Reports to the Board
3. Literature review, recommendations and submission to the NASD
S-2
<PAGE> 1
EXHIBIT 99.G
FORM OF CUSTODIAN CONTRACT
This Contract between WORLDWIDE INDEX FUNDS, a business trust
organized and existing under the laws of Massachusetts, having its principal
place of business at 790 East Colorado Blvd., 9th Floor, Pasadena, California
91101 hereinafter called the "Fund," and State Street Bank and Trust Company, a
Massachusetts trust company, having its principal place of business at 225
Franklin Street, Boston, Massachusetts 02110, hereinafter called the
"Custodian"
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Fund intends to initially offer shares in 13 series,
AUSTRALIA INDEX FUND, FRANCE INDEX FUND, GERMANY INDEX FUND, HONG KONG INDEX
FUND, ITALY INDEX FUND, JAPAN INDEX FUND, NETHERLANDS INDEX FUND, SPAIN INDEX
FUND, SWEDEN INDEX FUND, SWITZERLAND INDEX FUND, UNITED KINGDOM INDEX FUND,
EUROPE INDEX FUND, AND INTERNATIONAL INDEX FUND (such series together with all
other series subsequently established by the Fund and made subject to this
Contract in accordance with paragraph 18, being herein referred to as the
"Portfolio(s)").
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of the assets
of the Portfolios of the Fund, including securities which the Fund, on behalf
of the applicable Portfolio desires to be held in places within the United
States ("domestic securities") and securities it desires to be held outside the
United States ("foreign securities") pursuant to the provisions of the
Declaration of Trust. The Fund on behalf of the Portfolio(s) agrees to deliver
to the Custodian all securities and cash of the Portfolios, and all payments of
income, payments of principal or capital distributions received by it with
respect to all securities owned by the Portfolio(s) from time to time, and the
cash consideration received by it for such new or treasury shares of beneficial
interest of the Fund representing interests in the Portfolios, ("Shares") as
may be issued or sold from time to time. The Custodian shall not be responsible
for any property of a Portfolio held or received by the Portfolio and not
delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article
5), the Custodian shall on behalf of the applicable Portfolio(s) from time to
time employ one or more sub-custodians, located in the United States but only
in accordance with an applicable vote by the Board of Trustees of the Fund on
behalf of the applicable Portfolio(s), and provided that the Custodian shall
have no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may
<PAGE> 2
employ as sub-custodian for the Fund's foreign securities on behalf of the
applicable Portfolio(s) the foreign banking institutions and foreign securities
depositories designated in Schedule A hereto but only in accordance with the
provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the Fund Held By
the Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of each Portfolio all non-cash property, to be held by
it in the United States including all domestic securities owned by
such Portfolio, other than (a) securities which are maintained
pursuant to Section 2.10 in a clearing agency which acts as a
securities depository or in a book-entry system authorized by the U.S.
Department of the Treasury (each, a "U.S. Securities System") and (b)
commercial paper of an issuer for which State Street Bank and Trust
Company acts as issuing and paying agent ("Direct Paper") which is
deposited and/or maintained in the Direct Paper System of the
Custodian (the "Direct Paper System") pursuant to Section 2.11.
2.2 Delivery of Securities. The Custodian shall release and deliver
domestic securities owned by a Portfolio held by the Custodian or in a
U.S. Securities System account of the Custodian or in the Custodian's
Direct Paper book entry system account ("Direct Paper System Account")
only upon receipt of Proper Instructions from the Fund on behalf of
the applicable Portfolio, which may be continuing instructions when
deemed appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio
and receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Portfolio;
3) In the case of a sale effected through a U.S. Securities
System, in accordance with the provisions of Section 2.10
hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;
5) 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 or other
consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the
name of the Portfolio or into the name of any nominee or
nominees of the Custodian or into the name or nominee name of
any agent appointed pursuant to Section 2.9 or into the name
or nominee name of any sub-custodian appointed pursuant to
Article 1; or for exchange for a different number of bonds,
certificates or other evidence representing the same
2.
<PAGE> 3
aggregate face amount or number of units; provided that, in
any such case, the new securities are to be delivered to the
Custodian;
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street delivery"
custom; provided that in any such case, the Custodian shall
have no responsibility or liability for any loss arising from
the delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to
be delivered to the Custodian;
10) For delivery in connection with any loans of securities made
by the Portfolio, but only against receipt of adequate
collateral as agreed upon from time to time by the Custodian
and the Fund on behalf of the Portfolio, which may be in the
form of cash or obligations issued by the United States
government, its agencies or instrumentalities, except that in
connection with any loans for which collateral is to be
credited to the Custodian's account in the book-entry system
authorized by the U.S. Department of the Treasury, the
Custodian will not be held liable or responsible for the
delivery of securities owned by the Portfolio prior to the
receipt of such collateral;
11) For delivery as security in connection with any borrowings by
the Fund on behalf of the Portfolio requiring a pledge of
assets by the Fund on behalf of the Portfolio, but only
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities
exchange, or of any similar organization or organizations,
regarding escrow or other arrangements in connection with
transactions by the Portfolio of the Fund;
3.
<PAGE> 4
13) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian, and a Futures Commission Merchant registered under
the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any
Contract Market, or any similar organization or organizations,
regarding account deposits in connection with transactions by
the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Fund, for delivery to such Transfer
Agent or to the holders of shares in connection with
distributions in kind, as may be described from time to time
in the currently effective prospectus and statement of
additional information of the Fund, related to the Portfolio
("Prospectus"), in satisfaction of requests by holders of
Shares for repurchase or redemption; and
15) For any other proper corporate purpose, but only upon receipt
of Proper Instructions from the Fund on behalf of the
applicable Portfolio specifying the securities of the
Portfolio to be delivered, setting forth the purpose for which
such delivery is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person or persons to
whom delivery of such securities shall be made.
2.3 Registration of Securities. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the
Portfolio or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, unless the Fund has authorized
in writing the appointment of a nominee to be used in common with
other registered investment companies having the same investment
adviser as the Portfolio, or in the name or nominee name of any agent
appointed pursuant to Section 2.9 or in the name or nominee name of
any sub-custodian appointed pursuant to Article 1. All securities
accepted by the Custodian on behalf of the Portfolio under the terms
of this Contract shall be in "street name" or other good delivery
form. If, however, the Fund directs the Custodian to maintain
securities in "street name", the Custodian shall utilize its best
efforts only to timely collect income due the Fund on such securities
and to notify the Fund on a best efforts basis only of relevant
corporate actions including, without limitation, pendency of calls,
maturities, tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Portfolio
of the Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Contract, and shall hold in such account
or accounts, subject to the provisions hereof, all cash received by
it from or for the account of the Portfolio, other than cash
maintained by the Portfolio in a bank account established and used in
accordance with Rule 17f-3 under the Investment Company Act of 1940.
Funds held by the Custodian for a Portfolio may be deposited by it to
its credit as Custodian in the Banking Department of the Custodian or
in such other banks or trust companies as it may in its discretion
deem necessary or desirable; provided, however, that every such bank
or trust company shall be qualified to act as a custodian under the
4.
<PAGE> 5
Investment Company Act of 1940 and that each such bank or trust
company and the funds to be deposited with each such bank or trust
company shall on behalf of each applicable Portfolio be approved by
vote of a majority of the Board of Trustees of the Fund. Such funds
shall be deposited by the Custodian in its capacity as Custodian and
shall be withdrawable by the Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between the Fund
on behalf of each applicable Portfolio and the Custodian, the
Custodian shall, upon the receipt of Proper Instructions from the Fund
on behalf of a Portfolio, make federal funds available to such
Portfolio as of specified times agreed upon from time to time by the
Fund and the Custodian in the amount of checks received in payment for
Shares of such Portfolio which are deposited into the Portfolio's
account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other
payments with respect to registered domestic securities held hereunder
to which each Portfolio shall be entitled either by law or pursuant to
custom in the securities business, and shall collect on a timely basis
all income and other payments with respect to bearer domestic
securities if, on the date of payment by the issuer, such securities
are held by the Custodian or its agent and shall credit such income,
as collected, to such Portfolio's custodian account. Without limiting
the generality of the foregoing, the Custodian shall detach and
present for payment all coupons and other income items requiring
presentation as and when they become due and shall collect interest
when due on securities held hereunder. Income due each Portfolio on
securities loaned pursuant to the provisions of Section 2.2 (10) shall
be the responsibility of the Fund. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the Fund
with such information or data as may be necessary to assist the Fund
in arranging for the timely delivery to the Custodian of the income to
which the Portfolio is properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions from the
Fund on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian
shall pay out monies of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of
the Portfolio but only (a) against the delivery of such
securities or evidence of title to such options, futures
contracts or options on futures contracts to the Custodian (or
any bank, banking firm or trust company doing business in the
United States or abroad which is qualified under the
Investment Company Act of 1940, as amended, to act as a
custodian and has been designated by the Custodian as its
agent for this purpose) registered in the name of the
Portfolio or in the name of a nominee of the Custodian
referred to in Section 2.3 hereof or in proper form for
transfer; (b) in the case of a purchase effected through a
U.S. Securities System, in accordance with the conditions set
forth in Section 2.10 hereof; (c) in the case of a purchase
involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.11; (d) in the case of
repurchase agreements entered into between the Fund on behalf
of the Portfolio and
5.
<PAGE> 6
the Custodian, or another bank, or a broker-dealer which is a
member of NASD, (i) against delivery of the securities either
in certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank with such
securities or (ii) against delivery of the receipt evidencing
purchase by the Portfolio of securities owned by the Custodian
along with written evidence of the agreement by the Custodian
to repurchase such securities from the Portfolio; or (e) for
transfer to a time deposit account of the Fund in any bank,
whether domestic or foreign; such transfer may be effected
prior to receipt of a confirmation from a broker and/or the
applicable bank pursuant to Proper Instructions from the Fund
as defined in Article 5;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued by the
Portfolio as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments
for the account of the Portfolio: interest, taxes,
management, accounting, transfer agent and legal fees, and
operating expenses of the Fund whether or not such expenses
are to be in whole or part capitalized or treated as deferred
expenses;
5) For the payment of any dividends on Shares of the Portfolio
declared pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short; and
7) For any other proper corporate purpose, but only upon receipt
of Proper Instructions from the Fund on behalf of the
Portfolio specifying the amount of such payment, setting forth
the purpose for which such payment is to be made, declaring
such purpose to be a proper corporate purpose, and naming the
person or persons to whom such payment is to be made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of domestic securities for the
account of a Portfolio is made by the Custodian in advance of receipt
of the securities purchased in the absence of specific written
instructions from the Fund on behalf of such Portfolio to so pay in
advance, the Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received
by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified
6.
<PAGE> 7
under the Investment Company Act of 1940, as amended, to act as a
custodian, as its agent to carry out such of the provisions of this
Article 2 as the Custodian may from time to time direct; provided,
however, that the appointment of any agent shall not relieve the
Custodian of its responsibilities or liabilities hereunder.
2.10 Deposit of Fund Assets in U.S. Securities Systems. The Custodian may
deposit and/or maintain securities owned by a Portfolio in a clearing
agency registered with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system authorized by the
U.S. Department of the Treasury and certain federal agencies,
collectively referred to herein as "U.S. Securities System" in
accordance with applicable Federal Reserve Board and Securities and
Exchange Commission rules and regulations, if any, and subject to the
following provisions:
1) The Custodian may keep securities of the Portfolio in a U.S.
Securities System provided that such securities are
represented in an account ("Account") of the Custodian in the
U.S. Securities System which shall not include any assets of
the Custodian other than assets held as a fiduciary, custodian
or otherwise for customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a U.S. Securities System
shall identify by book-entry those securities belonging to the
Portfolio;
3) The Custodian shall pay for securities purchased for the
account of the Portfolio upon (i) receipt of advice from the
U.S. Securities 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 Portfolio. The Custodian
shall transfer securities sold for the account of the
Portfolio upon (i) receipt of advice from the U.S. Securities
System that payment for such securities has been transferred
to the Account, and (ii) the making of an entry on the records
of the Custodian to reflect such transfer and payment for the
account of the Portfolio. Copies of all advices from the U.S.
Securities System of transfers of securities for the account
of the Portfolio shall identify the Portfolio, be maintained
for the Portfolio by the Custodian and be provided to the Fund
at its request. Upon request, the Custodian shall furnish the
Fund on behalf of the Portfolio confirmation of each transfer
to or from the account of the Portfolio in the form of a
written advice or notice and shall furnish to the Fund on
behalf of the Portfolio copies of daily transaction sheets
reflecting each day's transactions in the U.S. Securities
System for the account of the Portfolio;
4) The Custodian shall provide the Fund for the Portfolio with
any report obtained by the Custodian on the U.S. Securities
System's accounting system, internal accounting control and
procedures for safeguarding securities deposited in the U.S.
Securities System; and
7.
<PAGE> 8
5) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Portfolio for any loss or damage to the Portfolio resulting
from use of the U.S. Securities System by reason of any
negligence, misfeasance or misconduct of the Custodian or any
of its agents or of any of its or their employees or from
failure of the Custodian or any such agent to enforce
effectively such rights as it may have against the U.S.
Securities System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with
respect to any claim against the U.S. Securities System or any
other person which the Custodian may have as a consequence of
any such loss or damage if and to the extent that the
Portfolio has not been made whole for any such loss or damage.
2.11 Fund Assets Held in the Custodian's Direct Paper System. The
Custodian may deposit and/or maintain securities owned by a Portfolio
in the Direct Paper System of the Custodian subject to the following
provisions:
1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper Instructions
from the Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the
Direct Paper System only if such securities are represented in
an account ("Account") of the Custodian in the Direct Paper
System which shall not include any assets of the Custodian
other than assets held as a fiduciary, custodian or otherwise
for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System
shall identify by book-entry those securities belonging to the
Portfolio;
4) The Custodian shall pay for securities purchased for the
account of the Portfolio upon the making of an entry on the
records of the Custodian to reflect such payment and transfer
of securities to the account of the Portfolio. The Custodian
shall transfer securities sold for the account of the
Portfolio upon the making of an entry on the records of the
Custodian to reflect such transfer and receipt of payment for
the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the account
of the Portfolio, in the form of a written advice or notice,
of Direct Paper on the next business day following such
transfer and shall furnish to the Fund on behalf of the
Portfolio copies of daily transaction sheets reflecting each
day's transaction in the U.S. Securities System for the
account of the Portfolio; and
8.
<PAGE> 9
6) The Custodian shall provide the Fund on behalf of the
Portfolio with any report on its system of internal accounting
control as the Fund may reasonably request from time to time.
2.12 Segregated Account. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on
behalf of each such Portfolio, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
an account by the Custodian pursuant to Section 2.10 hereof, (i) in
accordance with the provisions of any agreement among the Fund on
behalf of the Portfolio, the Custodian and a broker-dealer registered
under the Exchange Act and a member of the NASD (or any futures
commission merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract
market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Portfolio, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written by
the Portfolio or commodity futures contracts or options thereon
purchased or sold by the Portfolio, (iii) for the purposes of
compliance by the Portfolio with the procedures required by 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 Proper Instructions from the Fund on behalf of the
applicable Portfolio setting forth the purpose or purposes of such
segregated account and declaring such purposes to be a proper
corporate purpose.
2.13 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of each Portfolio held by
it and in connection with transfers of securities.
2.14 Proxies. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder
of such securities, if the securities are registered otherwise than in
the name of the Portfolio or a nominee of the Portfolio, all proxies,
without indication of the manner in which such proxies are to be
voted, and shall promptly deliver to the Fund on behalf of the
Portfolio such proxies, all proxy soliciting materials and all notices
relating to such securities.
2.15 Communications Relating to Portfolio Securities. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to
the Fund for each Portfolio all written information (including,
without limitation, pendency of calls and maturities of domestic
securities and expirations of rights in connection therewith and
notices of exercise of call and put options written by the Fund on
behalf of the Portfolio and the maturity of futures contracts
purchased or sold by the Portfolio) received by the Custodian from
issuers of the securities being held for the Fund on behalf of the
Portfolio. With respect to tender or exchange
9.
<PAGE> 10
offers, the Custodian shall transmit promptly to the Fund on behalf
of the Portfolio all written information received by the Custodian
from issuers of the securities whose tender or exchange is sought and
from the party (or his agents) making the tender or exchange offer.
If the Fund on behalf of the Portfolio desires to take action with
respect to any tender offer, exchange offer or any other similar
transaction, the Fund shall notify the Custodian at least three
business days prior to the date on which the Custodian is to take
such action.
3. Duties of the Custodian with Respect to Property of the Fund Held
Outside of the United States
3.1 Appointment of Foreign Sub-Custodians. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for the
Portfolio's securities and other assets maintained outside the United
States the foreign banking institutions and foreign securities
depositories designated on Schedule A hereto ("foreign
sub-custodians"). Upon receipt of "Proper Instructions", as defined
in Section 5 of this Contract, the Custodian and the Fund may agree to
amend Schedule A hereto from time to time to designate additional
foreign banking institutions and foreign securities depositories to
act as sub-custodian. Upon receipt of Proper Instructions, the Fund
may instruct the Custodian to cease the employment of any one or more
such sub-custodians for maintaining custody of the Portfolio's assets.
3.2 Assets to be Held. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to:
(a) "foreign securities", as defined in paragraph (c)(1) of Rule 17f-5
under the Investment Company Act of 1940, and (b) cash and cash
equivalents in such amounts as the Custodian or the Fund may determine
to be reasonably necessary to effect the Portfolio's foreign
securities transactions. The Custodian shall identify on its books as
belonging to the Fund, the foreign securities of the Fund held by each
foreign sub-custodian.
3.3 Foreign Securities Systems. Except as may otherwise be agreed upon in
writing by the Custodian and the Fund, assets of the Portfolios shall
be maintained in a clearing agency which acts as a securities
depository or in a book-entry system for the central handling of
securities located outside the United States (each a "Foreign
Securities System") only through arrangements implemented by the
foreign banking institutions serving as sub-custodians pursuant to the
terms hereof (Foreign Securities Systems and U.S. Securities Systems
are collectively referred to herein as the "Securities Systems").
Where possible, such arrangements shall include entry into agreements
containing the provisions set forth in Section 3.5 hereof.
3.4 Holding Securities. The Custodian may hold securities and other
non-cash property for all of its customers, including the Fund, with a
foreign sub-custodian in a single account that is identified as
belonging to the Custodian for the benefit of its customers, provided
however, that (i) the records of the Custodian with respect to
securities and other non-cash property of the Fund which are
maintained in such account shall identify by book-entry those
securities and other non-cash property belonging to the Fund and (ii)
the Custodian shall require that
10.
<PAGE> 11
securities and other non-cash property so held by the foreign
sub-custodian be held separately from any assets of the foreign
sub-custodian or of others.
3.5 Agreements with Foreign Banking Institutions. Each agreement with a
foreign banking institution shall provide that: (a) the assets of
each Portfolio will not be subject to any right, charge, security
interest, lien or claim of any kind in favor of the foreign banking
institution or its creditors or agent, except a claim of payment for
their safe custody or administration; (b) beneficial ownership for the
assets of each Portfolio will be freely transferable without the
payment of money or value other than for custody or administration;
(c) adequate records will be maintained identifying the assets as
belonging to each applicable Portfolio; (d) officers of or auditors
employed by, or other representatives of the Custodian, including to
the extent permitted under applicable law the independent public
accountants for the Fund, will be given access to the books and
records of the foreign banking institution relating to its actions
under its agreement with the Custodian; and (e) assets of the
Portfolios held by the foreign sub-custodian will be subject only to
the instructions of the Custodian or its agents.
3.6 Access of Independent Accountants of the Fund. Upon request of the
Fund, the Custodian will use its best efforts to arrange for the
independent accountants of the Fund to be afforded access to the books
and records of any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate to the
performance of such foreign banking institution under its agreement
with the Custodian.
3.7 Reports by Custodian. The Custodian will supply to the Fund from time
to time, as mutually agreed upon, statements in respect of the
securities and other assets of the Portfolio(s) held by foreign
sub-custodians, including but not limited to an identification of
entities having possession of the Portfolio(s) securities and other
assets and advices or notifications of any transfers of securities to
or from each custodial account maintained by a foreign banking
institution for the Custodian on behalf of each applicable Portfolio
indicating, as to securities acquired for a Portfolio, the identity of
the entity having physical possession of such securities.
3.8 Transactions in Foreign Custody Account. (a) Except as otherwise
provided in paragraph (b) of this Section 3.8, the provision of
Sections 2.2 and 2.7 of this Contract shall apply, mutatis mutandis to
the foreign securities of the Fund held outside the United States by
foreign sub-custodians.
(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of each
applicable Portfolio and delivery of securities maintained for the
account of each applicable Portfolio may be effected in accordance
with the customary established securities trading or securities
processing practices and procedures in the jurisdiction or market in
which the transaction occurs, including, without limitation,
delivering securities to the purchaser thereof or to a dealer therefor
(or an agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such
purchaser or dealer.
11.
<PAGE> 12
(c) Securities maintained in the custody of a foreign sub-custodian
may be maintained in the name of such entity's nominee to the same
extent as set forth in Section 2.3 of this Contract, and the Fund
agrees to hold any such nominee harmless from any liability as a
holder of record of such securities.
3.9 Liability of Foreign Sub-Custodians. Each agreement pursuant to which
the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable
care in the performance of its duties and to indemnify, and hold
harmless, the Custodian and the Fund from and against any loss,
damage, cost, expense, liability or claim arising out of or in
connection with the institution's performance of such obligations. At
the election of the Fund, it shall be entitled to be subrogated to the
rights of the Custodian with respect to any claims against a foreign
banking institution as a consequence of any such loss, damage, cost,
expense, liability or claim if and to the extent that the Fund has not
been made whole for any such loss, damage, cost, expense, liability or
claim.
3.10 Liability of Custodian. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody of a
foreign banking institution, a foreign securities depository or a
branch of a U.S. bank as contemplated by paragraph 3.13 hereof, the
Custodian shall not be liable for any loss, damage, cost, expense,
liability or claim resulting from nationalization, expropriation,
currency restrictions, or acts of war or terrorism or any loss where
the sub-custodian has otherwise exercised reasonable care.
3.11 Reimbursement for Advances. If the Fund requires the Custodian to
advance cash or securities for any purpose for the benefit of a
Portfolio including the purchase or sale of foreign exchange or of
contracts for foreign exchange, or in the event that the Custodian or
its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance
of this Contract, 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 account of the applicable
Portfolio shall be security therefor and should the Fund fail to repay
the Custodian promptly, the Custodian shall be entitled to utilize
available cash and to dispose of such Portfolio's assets to the extent
necessary to obtain reimbursement.
3.12 Monitoring Responsibilities. The Custodian shall furnish annually to
the Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection
with the initial approval of this Contract. In addition, the
Custodian will promptly inform the Fund in the event that the
Custodian learns of a material adverse change in the financial
condition of a foreign sub-custodian or any material loss of the
assets of the Fund.
12.
<PAGE> 13
3.13 Branches of U.S. Banks. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of
the Portfolios assets are maintained in a foreign branch of a banking
institution which is a "bank" as defined by Section 2(a)(5) of the
Investment Company Act of 1940 meeting the qualification set forth in
Section 26(a) of said Act. The appointment of any such branch as a
sub-custodian shall be governed by paragraph 1 of this Contract.
(b) Cash held for each Portfolio of the Fund in the United Kingdom
shall be maintained in an interest bearing account established for the
Fund with the Custodian's London branch, which account shall be
subject to the direction of the Custodian, State Street London Ltd. or
both.
3.14 Tax Law. The Custodian shall have no responsibility or liability for
any obligations now or hereafter imposed on the Fund or the Custodian
as custodian of the Fund by the tax law of the United States of
America or any state or political subdivision thereof. It shall be
the responsibility of the Fund to notify the Custodian of the
obligations imposed on the Fund or the Custodian as custodian of the
Fund by the tax law of jurisdictions other than those mentioned in the
above sentence, including responsibility for withholding and other
taxes, assessments or other governmental charges, certifications and
governmental reporting. The sole responsibility of the Custodian with
regard to such tax law shall be to use reasonable efforts to assist
the Fund with respect to any claim for exemption or refund under the
tax law of jurisdictions for which the Fund has provided such
information.
4. Payments for Sales or Repurchases or Redemptions of Shares of the Fund
The Custodian shall receive from the distributor for the Shares or
from the Transfer Agent of the Fund and deposit into the account of the
appropriate Portfolio such payments as are received for Shares of that
Portfolio issued or sold from time to time by the Fund. The Custodian will
provide timely notification to the Fund on behalf of each such Portfolio and
the Transfer Agent of any receipt by it of payments for Shares of such
Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable votes of the Board
of Trustees of the Fund pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the redemption or
repurchase of Shares of a Portfolio, the Custodian is authorized upon receipt
of instructions from the Transfer Agent to wire funds to or through a
commercial bank designated by the redeeming shareholders. In connection with
the redemption or repurchase of Shares of the Fund, the Custodian shall honor
checks drawn on the Custodian by a holder of Shares, which checks have been
furnished by the Fund to the holder of Shares, when presented to the Custodian
in accordance with such procedures and controls as are mutually agreed upon
from time to time between the Fund and the Custodian.
13.
<PAGE> 14
5. Proper Instructions
Proper Instructions as used throughout this Contract means a writing
signed or initialed by one or more person or persons as the Board of Trustees
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes
them to have been given by a person authorized to give such instructions with
respect to the transaction involved. The Fund shall cause all oral
instructions to be confirmed in writing. Proper Instructions may include
communications effected directly between electro-mechanical or electronic
devices provided that the instructions are consistent with any security
procedures agreed to by the Fund and the Custodian, including, but not limited
to, the security procedures selected by the Fund on the Funds Transfer
Addendum to this Contract. For purposes of this Section, Proper Instructions
shall include instructions received by the Custodian pursuant to any
three-party agreement which requires a segregated asset account in accordance
with Section 2.12.
6. Actions Permitted without Express Authority
The Custodian may in its discretion, without express authority from
the Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Contract, provided that all such payments
shall be accounted for to the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Fund on behalf of
the Portfolio, checks, drafts and other negotiable
instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property
of the Fund on behalf of the Portfolio except as otherwise
directed by the Board of Trustees of the Fund.
7. Evidence of Authority
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the
Fund. The Custodian may receive and accept a certified copy of a vote of the
Board of Trustees of the Fund as conclusive evidence (a) of the authority of
any person to act in accordance with such vote or (b) of any determination or
of any action by the Board of Trustees pursuant to the Declaration of Trust as
described in such vote, and such vote may be considered as in full force and
effect until receipt by the Custodian of written notice to the contrary.
14.
<PAGE> 15
8. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Trustees of the Fund to keep
the books of account of each Portfolio and/or compute the net asset value per
Share of the outstanding Shares of each Portfolio or, if directed in writing to
do so by the Fund on behalf of the Portfolio, shall itself keep such books of
account and/or compute such net asset value per Share. If so directed, the
Custodian shall also calculate daily the net income of the Portfolio as
described in the Fund's currently effective prospectus related to such
Portfolio and shall advise the Fund and the Transfer Agent daily of the total
amounts of such net income and, if instructed in writing by an officer of the
Fund to do so, shall advise the Transfer Agent periodically of the division of
such net income among its various components. The calculations of the net
asset value per Share and the daily income of each Portfolio shall be made at
the time or times described from time to time in the Fund's currently effective
prospectus related to such Portfolio.
9. Records
The Custodian shall with respect to each Portfolio create and maintain
all records relating to its activities and obligations under this Contract in
such manner as will meet the obligations of the Fund under the Investment
Company Act of 1940, with particular attention to Section 31 thereof and Rules
31a-1 and 31a-2 thereunder. All such records shall be the property of the Fund
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
Fund and employees and agents of the Securities and Exchange Commission. The
Custodian shall, at the Fund's request, supply the Fund with a tabulation of
securities owned by each Portfolio and held by the Custodian and shall, when
requested to do so by the Fund and for such compensation as shall be agreed
upon between the Fund and the Custodian, include certificate numbers in such
tabulations.
10. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the Fund on behalf
of each applicable Portfolio may from time to time request, to obtain from year
to year favorable opinions from the Fund's independent accountants with respect
to its activities hereunder in connection with the preparation of the Fund's
Form N-1A, and Form N-SAR or other annual reports to the Securities and
Exchange Commission and with respect to any other requirements of such
Commission.
11. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, on behalf of each of the
Portfolios at such times as the Fund may reasonably require, with reports by
independent public accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, futures contracts and
options on futures contracts, including securities deposited and/or maintained
in a Securities System, relating to the services provided by the Custodian
under this Contract; such reports, shall
15.
<PAGE> 16
be of sufficient scope and in sufficient detail, as may reasonably be required
by the Fund to provide reasonable assurance that any material inadequacies
would be disclosed by such examination, and, if there are no such inadequacies,
the reports shall so state.
12. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between
the Fund on behalf of each applicable Portfolio and the Custodian.
13. Responsibility of Custodian
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract,
but shall be kept indemnified by and shall be without liability to the Fund for
any action taken or omitted by it in good faith without negligence. It shall
be entitled to rely on and may act upon advice of counsel (who may be counsel
for the Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice.
Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a sub-custodian or agent,
the Custodian shall be without liability to the Fund for any loss, liability,
claim or expense resulting from or caused by; (i) events or circumstances
beyond the reasonable control of the Custodian or any sub-custodian or
Securities System or any agent or nominee of any of the foregoing, including,
without limitation, nationalization or expropriation, imposition of currency
controls or restrictions, the interruption, suspension or restriction of
trading on or the closure of any securities market, power or other mechanical
or technological failures or interruptions, computer viruses or communications
disruptions, acts of war or terrorism, riots, revolutions, work stoppages,
natural disasters or other similar events or acts; (ii) errors by the Fund or
the Investment Advisor in their instructions to the Custodian provided such
instructions have been in accordance with this Contract; (iii) the insolvency
of or acts or omissions by a Securities System; (iv) any delay or failure of
any broker, agent or intermediary, central bank or other commercially prevalent
payment or clearing system to deliver to the Custodian's sub-custodian or agent
securities purchased or in the remittance or payment made in connection with
securities sold; (v) any delay or failure of any company, corporation, or other
body in charge of registering or transferring securities in the name of the
Custodian, the Fund, the Custodian's sub-custodians, nominees or agents or any
consequential losses arising out of such delay or failure to transfer such
securities including non-receipt of bonus, dividends and rights and other
accretions or benefits; (vi) delays or inability to perform its duties due to
any disorder in market infrastructure with respect to any particular security
or Securities System; and (vii) any provision of any present or future law or
regulation or order of the United
16.
<PAGE> 17
States of America, or any state thereof, or any other country, or political
subdivision thereof or of any court of competent jurisdiction.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution to the same extent as set forth with respect to
sub-custodians generally in this Contract.
If the Fund on behalf of a Portfolio requires the Custodian to take
any action with respect to securities, which action involves the payment of
money or which action may, in the opinion of the Custodian, result in the
Custodian or its nominee assigned to the Fund or the Portfolio being liable for
the payment of money or incurring liability of some other form, the Fund on
behalf of the Portfolio, as a prerequisite to requiring the Custodian to take
such action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not
limited to securities settlements, foreign exchange contracts and assumed
settlement) or in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract, 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 account of the applicable
Portfolio shall be security therefor and should the Fund fail to repay the
Custodian promptly, the Custodian shall be entitled to utilize available cash
and to dispose of such Portfolio's assets to the extent necessary to obtain
reimbursement.
In no event shall the Custodian be liable for indirect, special or
consequential damages.
14. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; provided,
however that the Fund shall not amend or terminate this Contract in
contravention of any applicable federal or state regulations, or any provision
of the Declaration of Trust, and further provided, that the Fund on behalf of
one or more of the Portfolios may at any time by action of its Board of
Trustees (i) substitute another bank or trust company for the Custodian by
giving notice as described above to the Custodian, or (ii) immediately
terminate this Contract in the event of the appointment of a conservator or
receiver for the Custodian by the Comptroller of the Currency or upon the
happening of a like event at the direction of an appropriate regulatory agency
or court of competent jurisdiction.
Upon termination of the Contract, the Fund on behalf of each
applicable Portfolio shall pay to the Custodian such compensation as may be due
as of the date of such termination and shall likewise reimburse the Custodian
for its costs, expenses and disbursements.
17.
<PAGE> 18
15. Notices
Except as otherwise provided under this Contract, notices and other
writings shall be delivered or mailed postage prepaid to:
To the Fund: WORLDWIDE INDEX FUND
790 East Colorado Blvd.
9th Floor
Pasadena, California 91101
Attention:
Telephone:
Telecopy:
To the Custodian: STATE STREET BANK AND TRUST COMPANY
1776 Heritage Drive JAB2N
North Quincy, Massachusetts 02171
Attention: Molly Stone
Telephone: 617-985-5230
Telecopy:
or to such other address as the parties may hereafter specify in writing and
any notice or other writing when mailed shall be deemed to have been received
on the fifth business day after it was mailed.
Telephone and facsimile notices shall be sufficient if communicated to
the party entitled to receive such notice at the following numbers:
If to the Company:
Telephone: ( ) - Facsimile: ( ) -
If to the Custodian:
Telephone: (617) 985-5230 Facsimile: ( ) -
or to such other numbers as the parties may specify by written notice under
this Section and any facsimile notice shall be deemed to have been received on
the date of its transmission provided that if such day is not a business day or
it is received after normal business hours on the day of its transmission, it
shall be deemed to have been received at the opening of business on the first
business day next following the transmission thereof.
18.
<PAGE> 19
16. Successor Custodian
If a successor custodian for the Fund, of one or more of the
Portfolios shall be appointed by the Board of Trustees of the Fund, the
Custodian shall, upon termination, deliver to such successor custodian at the
office of the Custodian, duly endorsed and in the form for transfer, all
securities and other assets of each applicable Portfolio then held by it
hereunder and shall transfer to an account of the successor custodian all of
the securities and other assets of each such Portfolio held in a Securities
System.
If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote of the Board
of Trustees of the Fund, deliver at the office of the Custodian and transfer
such securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian
or certified copy of a vote of the Board of Trustees shall have been delivered
to the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or
trust company, which is a "bank" as defined in the Investment Company Act of
1940, doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian on behalf of each applicable Portfolio and all
instruments held by the Custodian relative thereto and all other property held
by it under this Contract on behalf of each applicable Portfolio and to
transfer to an account of such successor custodian all of the securities of
each such Portfolio held in any Securities System. Thereafter, such bank or
trust company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
17. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and
the Fund on behalf of each of the Portfolios, may from time to time agree on
such provisions interpretive of or in addition to the provisions of this
Contract as may in their joint opinion be consistent with the general tenor of
this Contract. Any such interpretive or additional provisions shall be in a
writing signed by both parties and shall be annexed hereto, provided that no
such interpretive or additional provisions shall contravene any applicable
federal or state regulations or any provision of the Declaration of Trust of
the Fund. No interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this Contract.
19.
<PAGE> 20
18. Additional Funds
In the event that the Fund establishes one or more series of Shares in
addition to AUSTRALIA INDEX FUND, FRANCE INDEX FUND, GERMANY INDEX FUND, HONG
KONG INDEX FUND, ITALY INDEX FUND, JAPAN INDEX FUND, NETHERLANDS INDEX FUND,
SPAIN INDEX FUND, SWEDEN INDEX FUND, SWITZERLAND INDEX FUND, UNITED KINGDOM
INDEX FUND, EUROPE INDEX FUND, AND INTERNATIONAL INDEX FUND with respect to
which it desires to have the Custodian render services as custodian under the
terms hereof, it shall so notify the Custodian in writing, and if the Custodian
agrees in writing to provide such services, such series of Shares shall become
a Portfolio hereunder.
19. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
20. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund on behalf of each of the Portfolios and the
Custodian relating to the custody of the Fund's assets.
21. Counterparts
This Contract may be executed in several counterparts, each of which
shall be deemed to be an original, and all such counterparts taken together
shall constitute but one and the same Contract.
22. Reproduction of Documents
This Contract and all schedules, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties
hereto all/each agree that any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding,
whether or not the original is in existence and whether or not such
reproduction was made by a party in the regular course of business, and that
any enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.
23. Data Access Services Addendum
The Fund and the Custodian agree to be bound by the terms of the Data
Access Services Addendum attached hereto.
20.
<PAGE> 21
24. Shareholder Communications Election
Securities and Exchange Commission Rule 14b-2 requires banks which
hold securities for the account of customers to respond to requests by issuers
of securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether it authorizes the
Custodian to provide the Fund's name, address, and share position to requesting
companies whose securities the Fund owns. If the Fund tells the Custodian
"no", the Custodian will not provide this information to requesting companies.
If the Fund tells the Custodian "yes" or does not check either "yes" or "no"
below, the Custodian is required by the rule to treat the Fund as consenting to
disclosure of this information for all securities owned by the Fund or any
funds or accounts established by the Fund. For the Fund's protection, the Rule
prohibits the requesting company from using the Fund's name and address for any
purpose other than corporate communications. Please indicate below whether the
Fund consents or objects by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's
name, address, and share positions.
NO [ ] The Custodian is not authorized to release the Fund's
name, address, and share positions.
21.
<PAGE> 22
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and
its seal to be hereunder affixed as of the _______ day of _________________,
1998.
ATTEST WORLDWIDE INDEX FUNDS
By:
- ---------------------- ------------------------------
Name:
Its:
ATTEST STATE STREET BANK AND TRUST COMPANY
By:
- ---------------------- ------------------------------
Name: Ronald E. Logue
Its: Executive Vice President
22.
<PAGE> 23
FUNDS TRANSFER ADDENDUM
[STATE STREET GRAPHIC]
OPERATING GUIDELINES
1. OBLIGATION OF THE SENDER: State Street is authorized to promptly debit
Client's (as named below) account(s) upon the receipt of a payment order in
compliance with the selected Security Procedure chosen for funds transfer and
in the amount of money that State Street has been instructed to transfer.
State Street shall execute payment orders in compliance with the Security
Procedure and with the Client's instructions on the execution date provided
that such payment order is received by the customary deadline for processing
such a request, unless the payment order specifies a later time. All payment
orders and communications received after this time will be deemed to have been
received on the next business day.
2. SECURITY PROCEDURE: The Client acknowledges that the Security
Procedure it has designated on the Selection Form was selected by the Client
from Security Procedures offered by State Street. The Client shall restrict
access to confidential information relating to the Security Procedure to
authorized persons as communicated in writing to State Street. The Client must
notify State Street immediately if it has reason to believe unauthorized
persons may have obtained access to such information or of any change in the
Client's authorized personnel. State Street shall verify the authenticity of
all instructions according to the Security Procedure.
3. ACCOUNT NUMBERS: State Street shall process all payment orders on the
basis of the account number contained in the payment order. In the event of a
discrepancy between any name indicated on the payment order and the account
number, the account number shall take precedence and govern.
4. REJECTION: State Street reserves the right to decline to process or
delay the processing of a payment order which (a) is in excess of the collected
balance in the account to be charged at the time of State Street's receipt of
such payment order; (b) if initiating such payment order would cause State
Street, in State Street's sole judgment, to exceed any volume, aggregate
dollar, network, time, credit or similar limits upon wire transfers which are
applicable to State Street; or (c) if State Street, in good faith, is unable to
satisfy itself that the transaction has been properly authorized.
5. CANCELLATION OR AMENDMENT: State Street shall use reasonable efforts
to act on all authorized requests to cancel or amend payment orders received in
compliance with the Security Procedure provided that such requests are received
in a timely manner affording State Street reasonable opportunity to act.
However, State Street assumes no liability if the request for amendment or
cancellation cannot be satisfied.
6. ERRORS: State Street shall assume no responsibility for failure to
detect any erroneous payment order provided that State Street complies with the
payment order instructions as received and State Street complies with the
Security Procedure. The Security Procedure is established for the purpose of
authenticating payment orders only and not for the detection of errors in
payment orders.
7. INTEREST AND LIABILITY LIMITS: State Street shall assume no
responsibility for lost interest with respect to the refundable amount of any
unauthorized payment order, unless State Street is notified of the unauthorized
payment order within thirty (30) days of notification by State Street of the
acceptance of such payment order. In no event shall State Street be liable for
special, indirect or consequential damages, even if advised of the possibility
of such damages and even for failure to execute a payment order.
8. AUTOMATED CLEARING HOUSE ("ACH") CREDIT ENTRIES/PROVISIONAL PAYMENTS:
When a Client initiates or receives ACH credit and debit entries pursuant to
these Guidelines and the rules of the National Automated Clearing House
Association and the New England Clearing House Association, State Street will
act as an Originating Depository Financial Institution and/or Receiving
Depository Institution, as the case may be, with respect to such entries.
Credits given by State Street with respect to an ACH credit entry are
provisional until State Street receives final settlement for such entry from
the Federal Reserve Bank. If State Street does not receive such final
settlement, the Client agrees that State Street shall receive a refund of the
amount credited to the Client in connection with such entry, and the party
making payment to the Client via such entry shall not be deemed to have paid
the amount of the entry.
9. CONFIRMATION STATEMENTS: Confirmation of State Street's execution of
payment orders shall ordinarily be provided within 24 hours notice which may be
delivered through State Street's proprietary information systems, such as, but
not limited to Horizon and GlobalQuest(R), or by facsimile or callback. The
Client must report any objections to the execution of a payment order within 30
days.
<PAGE> 24
FUNDS TRANSFER ADDENDUM
[STATE STREET GRAPHIC]
SELECTTION FORM
Please select one or more of the funds transfer security procedures indicated
below.
[ ]SWIFT
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a
cooperative society owned and operated by member financial institutions that
provides telecommunication services for its membership. Participation is
limited to securities brokers and dealers, clearing and depository
institutions, recognized exchanges for securities, and investment management
institutions. SWIFT provides a number of security features through encryption
and authentication to protect against unauthorized access, loss or wrong
delivery of messages, transmission errors, loss of confidentiality and
fraudulent changes to messages. SWIFT is considered to be one of the most
secure and efficient networks for the delivery of funds transfer instructions.
Selection of this security procedure would be most appropriate for existing
SWIFT members.
[ ]STANDING INSTRUCTIONS
Standing Instructions may be used where funds are transferred to a broker on
the Client's established list of brokers with which it engages in foreign
exchange transactions. Only the date, the currency and the currency amount are
variable. In order to establish this procedure, State Street will send to the
Client a list of the brokers that State Street has determined are used by the
Client. The Client will confirm the list in writing, and State Street will
verify the written confirmation by telephone. Standing Instructions will be
subject to a mutually agreed upon limit. If the payment order exceeds the
established limit, the Standing Instruction will be confirmed by telephone
prior to execution.
[ ]REMOTE BATCH TRANSMISSION
Wire transfer instructions are delivered via Computer-to-Computer (CPU-CPU)
data communications between the Client and State Street. Security procedures
include encryption and or the use of a test key by those individuals authorized
as Automated Batch Verifiers.
Clients selecting this option should have an existing facility for completing
CPU-CPU transmissions. This delivery mechanism is typically used for high-volume
business.
[ ]GLOBAL HORIZON INTERCHANGE(SM) FUNDS TRANSFER SERVICE
Global Horizon Interchange Funds Transfer Service (FTS) is a State Street
proprietary microcomputer-based wire initiation system. FTS enables Clients to
electronically transmit authenticated Fedwire, CHIPS or internal book transfer
instructions to State Street.
This delivery mechanism is most appropriate for Clients with a low-to-medium
number of transactions (5-75 per day), allowing Clients to enter, batch, and
review wire transfer instructions on their PC prior to release to State Street.
[ ]TELEPHONE CONFIRMATION (CALLBACK)
Telephone confirmation will be used to verify all non-repetitive funds transfer
instructions received via untested facsimile or phone. This procedure requires
Clients to designate individuals as authorized initiators and authorized
verifiers. State Street will verify that the instruction contains the
signature of an authorized person and prior to execution, will contact someone
other than the originator at the Client's location to authenticate the
instruction.
Selection of this alternative is appropriate for Clients who do not have the
capability to use other security procedures.
[ ]REPETITIVE WIRES
For situations where funds are transferred periodically (minimum of one
instruction per calendar quarter) from an existing authorized account to the
same payee (destination bank and account number) and only the date and currency
amount are variable, a repetitive wire may be implemented. Repetitive wires
will be subject to a mutually agreed upon limit. If the payment order exceeds
the established limit, the instruction will be confirmed by telephone prior to
execution. Telephone confirmation is used to establish this process.
Repetitive wire instructions must be reconfirmed annually.
This alternative is recommended whenever funds are frequently transferred
between the same two accounts.
[ ]TRANSFERS INITIATED BY FACSIMILE
The Client faxes wire transfer instructions directly to State Street Mutual
Fund Services. Standard security procedure requires the use of a random number
test key for all transfers. Every six months the Client receives test key logs
from State Street. The test key contains alpha-numeric characters, which the
Client puts on each document faxed to State Street. This procedure ensures all
wire instructions received via fax are authorized by the Client.
We provide this option for Clients who wish to batch wire instructions and
transmit these as a group to State Street Mutual Fund Services once or several
times a day.
[ ]AUTOMATED CLEARING HOUSE (ACH)
State Street receives an automated transmission or a magnetic tape from a
Client for the initiation of payment (credit) or collection (debit)
transactions through the ACH network. The transactions contained on each
transmission or tape must be authenticated by the Client. Clients using ACH
must select one or more of the following delivery options:
<PAGE> 25
FUNDS TRANSFER ADDENDUM
[STATE STREET GRAPHIC]
[ ]GLOBAL HORIZON INTERCHANGE AUTOMATED CLEARING HOUSE SERVICE
Transactions are created on a microcomputer, assembled into batches and
delivered to State Street via fully authenticated electronic transmissions in
standard NACHA formats.
[ ]Transmission from Client PC to State Street Mainframe with Telephone
Callback
[ ]Transmission from Client Mainframe to State Street Mainframe with Telephone
Callback
[ ]Transmission from DST Systems to State Street Mainframe with Encryption
[ ]Magnetic Tape Delivered to State Street with Telephone Callback
State Street is hereby instructed to accept funds transfer instructions only via
the delivery methods and security procedures indicated. The selected delivery
methods and security procedure(s) will be effective _________________ for
payment orders initiated by our organization.
KEY CONTACT INFORMATION
Whom shall we contact to implement your selection(s)?
<TABLE>
<CAPTION>
CLIENT OPERATIONS CONTACT ALTERNATE CONTACT
<S> <C>
- --------------------------------------------------- ------------------------------------------
Name Name
- --------------------------------------------------- ------------------------------------------
Address Address
- --------------------------------------------------- ------------------------------------------
City/State/Zip Code City/State/Zip Code
- --------------------------------------------------- ------------------------------------------
Telephone Number Telephone Number
- --------------------------------------------------- ------------------------------------------
Facsimile Number Facsimile Number
- ---------------------------------------------------
SWIFT Number
- ---------------------------------------------------
Telex Number
</TABLE>
<PAGE> 26
FUNDS TRANSFER ADDENDUM
[STATE STREET GRAPHIC]
TELEPHONE CONFIRMATION
CLIENT WORLDWIDE INDEX FUNDS
-------------------------------------------------------
INVESTMENT ADVISOR WATERMARK INVESTMENT ADVISORS, LTD.
-------------------------------------------
SUB-INVESTMENT ADVISOR STATE STREET GLOBAL ADVISORS
---------------------------------------
AUTHORIZED INITIATORS
Please Type or Print
Please provide a listing of your staff members who are currently authorized to
INITIATE wire transfer instructions to State Street:
<TABLE>
<CAPTION>
NAME TITLE (Specify whether position SPECIMEN SIGNATURE
is with Client , Investment
Advisor, or Sub-Investment Advisor)
<S> <C> <C>
- ------------------------- ------------------------------------- -------------------------
- ------------------------- ------------------------------------- -------------------------
- ------------------------- ------------------------------------- -------------------------
- ------------------------- ------------------------------------- -------------------------
- ------------------------- ------------------------------------- -------------------------
</TABLE>
AUTHORIZED VERIFIERS
Please Type or Print
Please provide a listing of your staff members who will be CALLED BACK to
verify the initiation of repetitive wires of $10 million or more and all non
repetitive wire instructions:
<TABLE>
<CAPTION>
NAME CALLBACK PHONE NUMBER DOLLAR LIMITATION (IF ANY)
<S> <C> <C>
- ------------------------- ------------------------------------- -------------------------
- ------------------------- ------------------------------------- -------------------------
- ------------------------- ------------------------------------- -------------------------
- ------------------------- ------------------------------------- -------------------------
- ------------------------- ------------------------------------- -------------------------
</TABLE>
<PAGE> 27
SCHEDULE A
17f-5 APPROVAL
The Board of Trustees of Worldwide Index Funds has approved certain
foreign banking institutions and foreign securities depositories within State
Street's Global Custody Network for use as subcustodians for the Fund's
securities, cash and cash equivalents held outside of the United States. Board
approval is as indicated by the Fund's Authorized Officer:
<TABLE>
<CAPTION>
FUND
OFFICER
INITIALS COUNTRY SUBCUSTODIAN CENTRAL DEPOSITORY
- -------- ------- ------------ ------------------
STATE STREET'S ENTIRE GLOBAL CUSTODY NETWORK LISTED BELOW
- ------
<S> <C> <C>
Argentina Citibank, N.A. Caja de Valores S.A.
- ------
Australia Westpac Banking Corporation Austraclear Limited
- ------
Reserve Bank Information and
Transfer System
Austria Erste Bank der Oesterreichischen Oesterreichische Kontrollbank AG
- ------ Sparkassen AG (Wertpapiersammelbank Division)
Bahrain British Bank of the Middle East None
- ------ (as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Bangladesh Standard Chartered Bank None
- ------
Belgium Generale de Banque Caisse Interprofessionnelle de Depot
- ------ et de Virement de Titres S.A.
Banque Nationale de Belgique
Bermuda The Bank of Bermuda Limited None
- ------
Bolivia Banco Boliviano Americano S.A. None
- ------
Botswana Barclays Bank of Botswana Limited None
- ------
</TABLE>
1
<PAGE> 28
<TABLE>
<CAPTION>
FUND
OFFICER
INITIALS COUNTRY SUBCUSTODIAN CENTRAL DEPOSITORY
- -------- ------- ------------ ------------------
<S> <C> <C> <C>
Brazil Citibank, N.A. Caixa de Liquidacao de Sao Paulo
- ------
Banco Central do Brasil,
Sistema Especial de Liquidacao de
Custodia
Bulgaria ING Bank N.V. Central Depository AD
======
Bulgarian National Bank
Canada Canada Trustco Mortgage Company The Canadian Depository
- ------ for Securities Limited
Chile Citibank, N.A. None
- ------
People's Republic The Hongkong and Shanghai Shanghai Securities Central Clearing and
- ------ of China Banking Corporation Limited, Registration Corporation
Shanghai and Shenzhen branches
Shenzhen Securities Central Clearing
Co., Ltd.
Colombia Cititrust Colombia S.A. None
- ------ Sociedad Fiduciaria
Croatia Privredna Banka Zagreb d.d. Ministry of Finance
======
National Bank of Croatia
Cyprus Barclays Bank Plc. None
- ------ Cyprus Offshore Banking Unit
Czech Republic Ceskoslovenska Obchodni Stredisko cennych papiru
====== Banka, A.S.
Czech National Bank
Denmark Den Danske Bank Vaerdipapircentralen (the Danish
- ------ Securities Center)
Ecuador Citibank, N.A. None
- ------
Egypt National Bank of Egypt Misr Company for Clearing, Settlement,
- ------ and Central Depository
Estonia Hansabank Eesti Vaartpaberite Keskdepositoorium
- ------
Finland Merita Bank Limited The Finnish Central Securities
- ------ Depository
</TABLE>
2
<PAGE> 29
<TABLE>
<CAPTION>
FUND
OFFICER
INITIALS COUNTRY SUBCUSTODIAN CENTRAL DEPOSITORY
- -------- ------- ------------ ------------------
<S> <C> <C> <C>
France Banque Paribas Societe Interprofessionnelle
- ------ pour la Compensation des
Valeurs Mobilieres (SICOVAM)
Germany Dresdner Bank AG Deutsche Borse Clearing AG
- ------
Ghana Barclays Bank of Ghana Limited None
- ------
Greece National Bank of Greece S.A. The Central Securities Depository
- ------ (Apothetirion Titlon AE)
The Bank of Greece,
System for Monitoring Transactions in
Securities in Book-Entry Form
Hong Kong Standard Chartered Bank The Central Clearing and
- ------ Settlement System
Central Money Markets Unit
Hungary Citibank Budapest Rt. The Central Depository and Clearing
- ------ House (Budapest) Ltd. (KELER)
Iceland Icebank Ltd. None
======
India Deutsche Bank AG The National Securities Depository
- ------ Limited
The Hongkong and Shanghai The National Securities Depository
- ------ Banking Corporation Limited Limited
Indonesia Standard Chartered Bank Bank Indonesia
- ------
Ireland Bank of Ireland Central Bank of Ireland
- ------ Securities Settlement Office
Israel Bank Hapoalim B.M. The Tel Aviv Stock Exchange
- ------ Clearing House Ltd.
Bank of Israel
Italy Banque Paribas Monte Titoli S.p.A.
- ------
Banca d'Italia
Ivory Coast Societe Generale de Banques None
- ------ en Cote d'Ivoire
</TABLE>
3
<PAGE> 30
<TABLE>
<CAPTION>
FUND
OFFICER
INITIALS COUNTRY SUBCUSTODIAN CENTRAL DEPOSITORY
- -------- ------- ------------ ------------------
<S> <C> <C> <C>
Jamaica Scotiabank Jamaica Trust The Jamaican Central Securities
====== and Merchant Bank Ltd. Depository
Japan The Daiwa Bank, Limited Japan Securities Depository
- ------ Center (JASDEC)
Bank of Japan Net System
The Fuji Bank, Limited Japan Securities Depository
- ------ Center (JASDEC)
Bank of Japan Net System
Jordan British Bank of the Middle East None
- ------ (as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Kenya Barclays Bank of Kenya Limited Central Bank of Kenya
- ------
Republic of Korea The Hongkong and Shanghai Korea Securities Depository Corporation
- ------ Banking Corporation Limited
Latvia JSC Hansabank-Latvija The Latvian Central Depository
======
Lebanon British Bank of the Middle East The Custodian and Clearing Center of
- ------ (as delegate of The Hongkong and Financial Instruments for Lebanon and
Shanghai Banking Corporation the Middle East (MIDCLEAR) S.A.L.
Limited)
The Central Bank of Lebanon
Lithuania Vilniaus Bankas AB The Central Securities Depository of
====== Lithuania
Malaysia Standard Chartered Bank The Malaysian Central Depository Sdn.
- ------ Malaysia Berhad Bhd.
Bank Negara Malaysia,
Scripless Securities Trading and
Safekeeping Systems
Mauritius The Hongkong and Shanghai The Central Depository & Settlement
====== Banking Corporation Limited Co. Ltd.
Mexico Citibank Mexico, S.A. S.D. INDEVAL, S.A. de C.V.
- ------ (Instituto para el Deposito de
Valores)
Morocco Banque Commerciale du Maroc Maroclear
- ------ (pending publication of enabling legislation
in the Moroccan government Gazette)
</TABLE>
4
<PAGE> 31
<TABLE>
<CAPTION>
FUND
OFFICER
INITIALS COUNTRY SUBCUSTODIAN CENTRAL DEPOSITORY
- -------- ------- ------------ ------------------
<S> <C> <C> <C>
The Netherlands MeesPierson N.V. Nederlands Centraal Instituut voor
- ------ Giraal Effectenverkeer B.V. (NECIGEF)
De Nederlandsche Bank N.V.
New Zealand ANZ Banking Group New Zealand Central Securities
- ------ (New Zealand) Limited Depository Limited
Norway Christiania Bank og Verdipapirsentralen (the Norwegian
- ------ Kreditkasse Registry of Securities)
Oman British Bank of the Middle East Muscat Securities Market
====== (as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Pakistan Deutsche Bank AG Central Depository Company of
- ------ Pakistan Limited
Peru Citibank, N.A. Caja de Valores y Liquidaciones S.A.
- ------ (CAVALI)
Philippines Standard Chartered Bank The Philippines Central Depository, Inc.
=====
The Registry of Scripless Securities
(ROSS) of the Bureau of the Treasury
Poland Citibank (Poland) S.A. The National Depository of Securities
- ------ (Krajowy Depozyt Papierow
Wartosciowych)
Central Treasury Bills Registrar
Bank Polska Kasa Opieki S.A. The National Depository of Securities
- ------ (Krajowy Depozyt Papierow
Wartosciowych)
Central Treasury Bills Registrar
Portugal Banco Comercial Portugues Central de Valores Mobiliarios (Central)
- ------
Romania ING Bank N.V. National Securities Clearing, Settlement
- ------ and Depository Company
Bucharest Stock Exchange Registry
Division
Russia Credit Suisse First Boston AO, Moscow None
======= (as delegate of Credit Suisse
First Boston, Zurich)
</TABLE>
6
<PAGE> 32
<TABLE>
<CAPTION>
FUND
OFFICER
INITIALS COUNTRY SUBCUSTODIAN CENTRAL DEPOSITORY
- -------- ------- ------------ ------------------
<S> <C> <C> <C>
Singapore The Development Bank The Central Depository (Pte)
- ------ of Singapore Limited Limited
Monetary Authority of Singapore
Slovak Republic Ceskoslovenska Obchodna Stredisko Cennych Papierov
- ------ Banka, A.S.
National Bank of Slovakia
Slovenia Banka Creditanstalt d.d. Klirinsko Depotna Druzba d.d.
========
South Africa Standard Bank of South Africa Limited The Central Depository Limited
- ------
Spain Banco Santander, S.A. Servicio de Compensacion y
- ------ Liquidacion de Valores, S.A.
Banco de Espana,
Central de Anotaciones en Cuenta
Sri Lanka The Hongkong and Shanghai Central Depository System
- ------ Banking Corporation Limited (Pvt) Limited
Swaziland Standard Bank Swaziland Limited None
======
Sweden Skandinaviska Enskilda Banken Vardepapperscentralen AB
- ------ (the Swedish Central Securities
Depository)
Switzerland UBS AG Schweizerische Effekten - Giro AG
- ------
INTERSETTLE
Taiwan - R.O.C. Central Trust of China The Taiwan Securities Central
- ------ OR Depository Co., Ltd.
- ------ --------------------------------
(Client Designated Subcustodian)
Thailand Standard Chartered Bank Thailand Securities Depository
- ------ Company Limited
Trinidad & Tobago Republic Bank Limited None
- ------
Tunisia Banque Internationale Societe Tunisienne Interprofessionelle de
- ------ Arabe de Tunisie Compensation et de Depot de
Valeurs Mobilieres
</TABLE>
7
<PAGE> 33
<TABLE>
<CAPTION>
FUND
OFFICER
INITIALS COUNTRY SUBCUSTODIAN CENTRAL DEPOSITORY
- -------- ------- ------------ ------------------
<S> <C> <C>
Turkey Citibank, N.A. Takas ve Saklama Bankasi A.S.
- ------ (TAKASBANK)
Central Bank of Turkey
Ottoman Bank Takas ve Saklama Bankasi A.S.
- ------ (TAKASBANK)
Central Bank of Turkey
United Kingdom State Street Bank and Trust Company, None
- ------ London branch
The Bank of England,
The Central Gilts Office and
The Central Moneymarkets Office
Uruguay Citibank, N.A. None
- ------
Venezuela Citibank, N.A. Central Bank of Venezuela
- ------
Zambia Barclays Bank of Zambia Limited Lusaka Central Depository Limited
- ------
Bank of Zambia
Zimbabwe Barclays Bank of Zimbabwe Limited None
- ------
</TABLE>
Euroclear (The Euroclear System)/State Street London Limited
- ------
Cedel, S.A. (Cedel Bank, societe anonyme)/State Street London
Limited
- ------
CERTIFIED BY:
- ----------------------------------------------- --------------------
FUND'S AUTHORIZED OFFICER DATE
8
<PAGE> 34
DATA ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT
Addendum to the Custodian Agreement between Worldwide Index Funds (the
"Customer") and State Street Bank and Trust Company ("State Street").
PREAMBLE
WHEREAS, State Street has been appointed as custodian of certain
assets of the Customer pursuant to a certain Custodian Agreement (the
"Custodian Agreement") dated as of _____________________;
WHEREAS, State Street has developed and utilizes proprietary
accounting and other systems, including State Street's proprietary
Multicurrency HORIZON(SM) Accounting System, in its role as custodian of the
Customer, and maintains certain Customer-related data ("Customer Data") in
databases under the control and ownership of State Street (the "Data Access
Services"); and
WHEREAS, State Street makes available to the Customer certain Data
Access Services solely for the benefit of the Customer and intends to provide
additional services, consistent with the terms and conditions of this Addendum;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, and for other good and valuable consideration, the
parties agree as follows:
1. SYSTEM AND DATA ACCESS SERVICES
a. System. Subject to the terms and conditions of this Addendum,
State Street hereby agrees to provide the Customer with access to State
Street's Multicurrency HORIZON(SM) Accounting System and the other information
systems (collectively, the "System") as described in Attachment A, on a remote
basis for the purpose of obtaining reports and information, solely on computer
hardware, system software and telecommunication links as listed in Attachment B
(the "Designated Configuration") of the Customer, or certain third parties
approved by State Street that serve as investment advisors or investment
managers of the Customer (the "Investment Advisor") or independent autditors
(the "Independent Auditors") of the Customer, and solely with respect to the
Customer or on any designated substitute or back-up equipment configuration
with State Street's written consent, such consent not to be unreasonably
withheld.
b. Data Access Services. State Street agrees to make available
to the Customer the Data Access Services subject to the terms and conditions of
this Addendum and data access operating standards and procedures as may be
issued by State Street from time to time. The ability of the Customer to
originate electronic instructions to State Street on behalf of the Customer in
order to (i) effect the transfer or movement of cash or securities held under
custody by State Street or (ii) transmit accounting or other information (such
transactions are referred to herein as "Client Originated Electronic Financial
Instructions"), and (iii) access data for the purpose of reporting and analysis
shall be deemed to be Data Access Services for purposes of this Addendum.
c. Additional Services. State Street may from time to time agree
to make available to the Customer additional Systems that are not described in
the attachments to this Addendum. In the absence of any other written
agreement concerning such additional systems, the term "System" shall include,
and this Addendum shall govern, the Customer's access to and use of any
additional System made available by State Street and/or accessed by the
Customer.
2. NO USE OF THIRD PARTY SYSTEMS-LEVEL SOFTWARE
State Street and the Customer acknowledge that in connection with the
Data Access Services provided under this Addendum, the Customer will have
access, through the Data Access Services, to Customer Data and to functions of
State Street's proprietary systems; provided, however, that in no event will
the Customer have direct access to any third party systems-level software that
retrieves data for, stores data from, or otherwise supports the System.
3. LIMITATION ON SCOPE OF USE
a. Designated Equipment; Designated Location. The System and the
Data Access Services shall be used and accessed solely on and through the
Designated Configuration at the offices of the Customer or the Investment
Advisor or the Investment Sub-Advisor or the Independent Auditor located in
Pasadena, California ("Designated Location").
b. Designated Configuration; Trained Personnel. State Street
shall be responsible for supplying, installing and maintaining the Designated
Configuration at the Designated Location. State Street and the Customer agree
that each will engage or retain the services of trained personnel to enable
both parties to perform their respective obligations under this Addendum.
State Street agrees to use commercially reasonable efforts to maintain the
System so that it remains serviceable, provided, however, that State Street
does not guarantee or assure uninterrupted remote access use of the System.
c. Scope of Use. The Customer will use the System and the Data
Access Services only for the processing of securities transactions, the keeping
of books of account for the Customer and accessing data for purposes of
reporting and analysis. The Customer shall not, and shall cause its employees
and agents not to (i) permit any third party to use the System or the Data
Access Services, (ii) sell, rent, license or otherwise use the System or the
Data Access Services in the operation of a service bureau or for any purpose
other than as expressly authorized under this Addendum, (iii) use the System or
the Data Access Services for any fund, trust or other investment vehicle
without the prior written consent of State Street, (iv) allow access to the
System or the Data Access Services through terminals or any other computer or
telecommunications facilities located outside the Designated Locations, (v)
allow or cause any information (other than portfolio holdings, valuations of
portfolio holdings, and other information reasonably necessary for the
management or distribution of the assets of the Customer) transmitted from
State Street's databases, including data from third party sources, available
through use of the System or the Data Access Services to be redistributed or
retransmitted to another computer, terminal or other device for other than use
for or on behalf of the Customer or (vi) modify the System in any way,
including without limitation, developing any software for or attaching
<PAGE> 35
any devices or computer programs to any equipment, system, software or database
which forms a part of or is resident on the Designated Configuration.
d. Other Locations. Except in the event of an emergency or of a
planned System shutdown, the Customer's access to services performed by the
System or to Data Access Services at the Designated Location may be transferred
to a different location only upon the prior written consent of State Street.
In the event of an emergency or System shutdown, the Customer may use any
back-up site included in the Designated Configuration or any other back-up site
agreed to by State Street, which agreement will not be unreasonably withheld.
The Customer may secure from State Street the right to access the System or the
Data Access Services through computer and telecommunications facilities or
devices complying with the Designated Configuration at additional locations
only upon the prior written consent of State Street and on terms to be mutually
agreed upon by the parties.
e. Title. Title and all ownership and proprietary rights to the
System, including any enhancements or modifications thereto, whether or not
made by State Street, are and shall remain with State Street.
f. No Modification. Without the prior written consent of State
Street, the Customer shall not modify, enhance or otherwise create derivative
works based upon the System, nor shall the Customer reverse engineer, decompile
or otherwise attempt to secure the source code for all or any part of the
System.
g. Security Procedures. The Customer shall comply with data
access operating standards and procedures and with user identification or other
password control requirements and other security procedures as may be issued
from time to time by State Street for use of the System on a remote basis and
to access the Data Access Services. The Customer shall have access only to the
Customer Data and authorized transactions agreed upon from time to time by
State Street and, upon notice from State Street, the Customer shall discontinue
remote use of the System and access to Data Access Services for any security
reasons cited by State Street; provided, that, in such event, State Street
shall, for a period not less than 180 days (or such other shorter period
specified by the Customer) after such discontinuance, assume responsibility to
provide accounting services under the terms of the Custodian Agreement.
h. Inspections. State Street shall have the right to inspect the
use of the System and the Data Access Services by the Customer and the
Investment Advisor to ensure compliance with this Addendum. The on-site
inspections shall be upon prior written notice to the Customer and the
Investment Advisor and at reasonably convenient times and frequencies so as not
to result in an unreasonable disruption of the Customer's or the Investment
Advisor's business.
4. PROPRIETARY INFORMATION
a. Proprietary Information. The Customer acknowledges and State
Street represents that the System and the databases, computer programs, screen
formats, report formats, interactive design techniques, documentation and other
information made available to the Customer by State Street as part of the Data
Access Services and through the use of the System constitute copyrighted, trade
secret, or other proprietary information of substantial value to State Street.
Any and all such information provided by State Street to the Customer shall be
deemed proprietary and confidential information of State Street (hereinafter
"Proprietary Information"). The Customer agrees that it will hold such
Proprietary Information in the strictest confidence and secure and protect it
in a manner consistent with its own procedures for the protection of its own
confidential information and to take appropriate action by instruction or
agreement with its employees who are permitted access to the Proprietary
Information to satisfy its obligations hereunder. The Customer further
acknowledges that State Street shall not be required to provide the Investment
Advisor or the Independent Auditor with access to the System unless it has
first received from the Investment Advisor and the Independent Auditor an
undertaking with respect to State Street's Proprietary Information in the form
of Attachment C and/or Attachment C-1 to this Addendum. The Customer shall use
all commercially reasonable efforts to assist State Street in identifying and
preventing any unauthorized use, copying or disclosure of the Proprietary
Information or any portions thereof or any of the logic, formats or designs
contained therein.
b. Cooperation. Without limitation of the foregoing, the
Customer shall advise State Street immediately in the event the Customer learns
or has reason to believe that any person to whom the Customer has given access
to the Proprietary Information, or any portion thereof, has violated or intends
to violate the terms of this Addendum, and the Customer will, at its expense,
co-operate with State Street in seeking injunctive or other equitable relief in
the name of the Customer or State Street against any such person.
c. Injunctive Relief. The Customer acknowledges that the
disclosure of any Proprietary Information, or of any information which at law
or equity ought to remain confidential, will immediately give rise to
continuing irreparable injury to State Street inadequately compensable in
damages at law. In addition, State Street shall be entitled to obtain
immediate injunctive relief against the breach or threatened breach of any of
the foregoing undertakings, in addition to any other legal remedies which may
be available.
d. Survival. The provisions of this Section 4 shall
survive the termination of this Addendum.
5. LIMITATION ON LIABILITY
a. Limitation on Amount and Time for Bringing Action. The
Customer agrees that any liability of State Street to the Customer or any third
party arising out of State Street's provision of Data Access Services or the
System under this Addendum shall be limited to the amount paid by the Customer
for the preceding 24 months for such services. In no event shall State Street
be liable to the Customer or any other party for any special, indirect,
punitive or consequential damages even if advised of the possibility of such
damages. No action, regardless of form, arising out of this Addendum may be
brought by the Customer more than two years after the Customer has knowledge
that the cause of action has arisen.
b. Limited Warranties. NO OTHER WARRANTIES, WHETHER EXPRESS OR
IMPLIED, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE MADE BY STATE STREET.
IN NO EVENT WILL STATE STREET BE LIABLE TO THE CUSTOMER OR ANY OTHER PARTY FOR
ANY CONSEQUENTIAL OR INCIDENTAL DAMAGES WHICH MAY ARISE FROM THE CUSTOMER'S
ACCESS TO THE SYSTEM OR USE OF INFORMATION OBTAINED THEREBY.
<PAGE> 36
c. Third-Party Data. Organizations from which State Street may
obtain certain data included in the System or the Data Access Services are
solely responsible for the contents of such data, and State Street shall have
no liability for claims arising out of the contents of such third-party data,
including, but not limited to, the accuracy thereof.
d. Regulatory Requirements. As between State Street and the
Customer, the Customer shall be solely responsible for the accuracy of any
accounting statements or reports produced using the Data Access Services and
the System and the conformity thereof with any requirements of law.
e. Force Majeure. Neither party shall be liable for any costs or
damages due to delay or nonperformance under this Addendum arising out of any
cause or event beyond such party's control, including without limitation,
cessation of services hereunder or any damages resulting therefrom to the other
party or the Customer as a result of work stoppage, power or other mechanical
failure, computer virus, natural disaster, governmental action, or
communication disruption.
6. INDEMNIFICATION
The Customer agrees to indemnify and hold State Street harmless from any loss,
damage or expense including reasonable attorney's fees, (a "loss") suffered by
State Street arising from (i) the negligence or willful misconduct in the use
by the Customer of the Data Access Services or the System, including any loss
incurred by State Street resulting from a security breach at the Designated
Location or committed by the Customer's employees or agents or the Investment
Advisor or the Independent Auditor and (ii) any loss resulting from incorrect
Client Originated Electronic Financial Instructions. State Street shall be
entitled to rely on the validity and authenticity of Client Originated
Electronic Financial Instructions without undertaking any further inquiry as
long as such instruction is undertaken in conformity with security procedures
established by State Street from time to time.
7. FEES
Fees and charges for the use of the System and the Data Access Services and
related payment terms shall be as set forth in the Custody Fee Schedule in
effect from time to time between the parties (the "Fee Schedule"). Any
tariffs, duties or taxes imposed or levied by any government or governmental
agency by reason of the transactions contemplated by this Addendum, including,
without limitation, federal, state and local taxes, use, value added and
personal property taxes (other than income, franchise or similar taxes which
may be imposed or assessed against State Street) shall be borne by the
Customer. Any claimed exemption from such tariffs, duties or taxes shall be
supported by proper documentary evidence delivered to State Street.
8. TRAINING, IMPLEMENTATION AND CONVERSION
a. Training. State Street agrees to provide training, at a
designated State Street training facility or at the Designated Location, to the
Customer's personnel in connection with the use of the System on the Designated
Configuration. The Customer agrees that it will set aside, during regular
business hours or at other times agreed upon by both parties, sufficient time
to enable all operators of the System and the Data Access Services, designated
by the Customer, to receive the training offered by State Street pursuant to
this Addendum.
b. Installation and Conversion. State Street shall be
responsible for the technical installation and conversion ("Installation and
Conversion") of the Designated Configuration. The Customer shall have the
following responsibilities in connection with Installation and Conversion of
the System:
(i) The Customer shall be solely responsible for the
timely acquisition and maintenance of the hardware
and software that attach to the Designated
Configuration in order to use the Data Access
Services at the Designated Location.
(ii) State Street and the Customer each agree that they
will assign qualified personnel to actively
participate during the Installation and Conversion
phase of the System implementation to enable both
parties to perform their respective obligations under
this Addendum.
9. SUPPORT
During the term of this Addendum, State Street agrees to provide the
support services set out in Attachment D to this Addendum.
10. TERM OF ADDENDUM
a. Term of Addendum. This Addendum shall become effective on the
date of its execution by State Street and shall remain in full force and effect
until terminated as herein provided.
b. Termination of Addendum. Either party may terminate this
Addendum (i) for any reason by giving the other party at least one-hundred and
eighty days' prior written notice in the case of notice of termination by State
Street to the Customer or thirty days' notice in the case of notice from the
Customer to State Street of termination; or (ii) immediately for failure of the
other party to comply with any material term and condition of the Addendum by
giving the other party written notice of termination. In the event the
Customer shall cease doing business, shall become subject to proceedings under
the bankruptcy laws (other than a petition for reorganization or similar
proceeding) or shall be adjudicated bankrupt, this Addendum and the rights
granted hereunder shall, at the option of State Street, immediately terminate
with notice to the Customer. This Addendum shall in any event terminate as to
any Customer within 90 days after the termination of the Custodian Agreement
applicable to such Customer.
<PAGE> 37
c. Termination of the Right to Use. Upon termination of this
Addendum for any reason, any right to use the System and access to the Data
Access Services shall terminate and the Customer shall immediately cease use of
the System and the Data Access Services. Immediately upon termination of this
Addendum for any reason, the Customer shall return to State Street all copies
of documentation and other Proprietary Information in its possession; provided,
however, that in the event that either party terminates this Addendum or the
Custodian Agreement for any reason other than the Customer's breach, State
Street shall provide the Data Access Services for a period of time and at a
price to be agreed upon by the parties.
11. MISCELLANEOUS
a. Assignment; Successors. This Addendum and the rights and
obligations of the Customer and State Street hereunder shall not be assigned by
either party without the prior written consent of the other party, except that
State Street may assign this Addendum to a successor of all or a substantial
portion of its business, or to a party controlling, controlled by, or under
common control with State Street.
b. Survival. All provisions regarding indemnification, warranty,
liability and limits thereon, and confidentiality and/or protection of
proprietary rights and trade secrets shall survive the termination of this
Addendum.
c. Entire Agreement. This Addendum and the attachments hereto
constitute the entire understanding of the parties hereto with respect to the
Data Access Services and the use of the System and supersede any and all prior
or contemporaneous representations or agreements, whether oral or written,
between the parties as such may relate to the Data Access Services or the
System, and cannot be modified or altered except in a writing duly executed by
the parties. This Addendum is not intended to supersede or modify the duties
and liabilities of the parties hereto under the Custodian Agreement or any
other agreement between the parties hereto except to the extent that any such
agreement specifically refers to the Data Access Services or the System. No
single waiver of any right hereunder shall be deemed to be a continuing waiver.
d. Severability. If any provision or provisions of this Addendum
shall be held to be invalid, unlawful, or unenforceable, the validity,
legality, and enforceability of the remaining provisions shall not in any way
be affected or impaired.
e. Governing Law. This Addendum shall be interpreted and
construed in accordance with the internal laws of The Commonwealth of
Massachusetts without regard to the conflict of laws provisions thereof.
<PAGE> 38
ATTACHMENT A
MULTICURRENCY HORIZON(SM) ACCOUNTING SYSTEM
SYSTEM PRODUCT DESCRIPTION
I. The Multicurrency HORIZON(SM) Accounting System is designed to provide
lot level portfolio and general ledger accounting for SEC and ERISA
type requirements and includes the following services: 1) recording of
general ledger entries; 2) calculation of daily income and expense; 3)
reconciliation of daily activity with the trial balance; and 4)
appropriate automated feeding mechanisms to (i) domestic and
international settlement systems, (ii) daily, weekly and monthly
evaluation services, (iii) portfolio performance and analytic
services, (iv) customer's internal computing systems and (v) various
State Street provided information services products.
II. GlobalQuest(R) is designed to provide customer access to the following
information maintained on The Multicurrency HORIZON(SM) Accounting
System: 1) cash transactions and balances; 2) purchases and sales; 3)
income receivables; 4) tax refund receivables; 5) daily priced
positions; 6) open trades; 7) settlement status; 8) foreign exchange
transactions; 9) trade history, and 10) daily, weekly and monthly
evaluation services.
III. HORIZON(R) Gateway. HORIZON(R) Gateway provides customers with the
ability to (i) generate reports using information maintained on the
Multicurrency HORIZON(R) Accounting System which may be viewed or
printed at the customer's location; (ii) extract and download data
from the Multicurrency HORIZON(R) Accounting System; and (iii) access
previous day and historical data. The following information which may
be accessed for these purposes: 1) holdings; 2) holdings pricing; 3)
transactions, 4) open trades; 5) income; 6) general ledger and 7)
cash.
IV. SaFiRe(SM). SaFiRe(SM) is designed to provide the customer with the
ability to prepare its own financial reports by permitting the
customer to access customer information maintained on the
Multicurrency HORIZON(R) Accounting System, to organize such
information in a flexible reporting format and to have such reports
printed on the customer's desktop or by its printing provider.
V. State Street Interchange. State Street Interchange is an open
information delivery architecture wherein proprietary communication
products, data formats and workstation tools are replaced by industry
standards and is designed to enable the connection of State Street's
network to customer networks, thereby facilitating the sharing of
information.
<PAGE> 39
ATTACHMENT B
DESIGNATED CONFIGURATION
<PAGE> 40
ATTACHMENT C
UNDERTAKING
The Undersigned understands that in the course of its employment as
Investment Advisor to Worldwide Index Funds (the "Customer") it will have
access to State Street Bank and Trust Company's ("State Street") Multicurrency
HORIZON(SM) Accounting System and other information systems (collectively, the
"System").
The Undersigned acknowledges that the System and the databases,
computer programs, screen formats, report formats, interactive design
techniques, documentation and other information made available to the
undersigned by State Street as part of the Data Access Services provided to the
Customer and through the use of the System constitute copyrighted, trade
secret, or other proprietary information of substantial value to State Street.
Any and all such information provided by State Street to the Undersigned shall
be deemed proprietary and confidential information of State Street (hereinafter
"Proprietary Information"). The undersigned agrees that it will hold such
Proprietary Information in confidence and secure and protect it in a manner
consistent with its own procedures for the protection of its own confidential
information and to take appropriate action by instruction or agreement with its
employees who are permitted access to the Proprietary Information to satisfy
its obligations hereunder.
The undersigned will not attempt to intercept data, gain access to
data in transmission, or attempt entry into any system or files for which it is
not authorized. It will not intentionally adversely affect the integrity of
the System through the introduction of unauthorized code or data or through
unauthorized deletion.
Upon notice by State Street for any reason, any right to use the
System and access to the Data Access Services shall terminate and the
undersigned shall immediately cease use of the System and the Data Access
Services. Immediately upon notice by State Street for any reason, the
undersigned shall return to State Street all copies of documentation and other
Proprietary Information in its possession.
WATERMARK INVESTMENT ADVISORS, LTD.
By:
------------------------
Title:
------------------------
Date:
------------------------
<PAGE> 41
ATTACHMENT C-1
UNDERTAKING
The Undersigned understands that in the course of its employment as
Independent Auditor to Worldwide Index Funds (the "Customer") it will have
access to State Street Bank and Trust Company's ("State Street") Multicurrency
HORIZON Accounting System and other information systems (collectively, the
"System").
The Undersigned acknowledges that the System and the databases,
computer programs, screen formats, report formats, interactive design
techniques, documentation, and other information made available to the
Undersigned by State Street as part of the Data Access Services provided to the
Customer and through the use of the System constitute copyrighted, trade
secret, or other proprietary information of substantial value to State Street.
Any and all such information provided by State Street to the Undersigned shall
be deemed proprietary and confidential information of State Street (hereinafter
"Proprietary Information"). The Undersigned agrees that it will hold such
Proprietary Information in confidence and secure and protect it in a manner
consistent with its own procedures for the protection of its own confidential
information and to take appropriate action by instruction or agreement with its
employees who are permitted access to the Proprietary Information to satisfy
its obligations hereunder.
The Undersigned will not attempt to intercept data, gain access to
data in transmission, or attempt entry into any system or files for which it is
not authorized. It will not intentionally adversely affect the integrity of
the System through the introduction of unauthorized code or data or through
unauthorized deletion.
Upon notice by State Street for any reason, any right to use the
System and access to the Data Access Services shall terminate and the
Undersigned shall immediately cease use of the System and the Data Access
Services. Immediately upon notice by State Street for any reason, the
Undersigned shall return to State Street all copies of documentation and other
Proprietary Information in its possession.
*[Name of Independent Auditor]
By:
Title:
Date:
<PAGE> 42
ATTACHMENT D
SUPPORT
During the term of this Addendum, State Street agrees to provide the
following on-going support services:
a. Telephone Support. The Customer Designated Persons may
contact State Street's Multicurrency HORIZON(SM) Help Desk and Customer
Assistance Center between the hours of 8 a.m. and 6 p.m. (Eastern time) on all
business days for the purpose of obtaining answers to questions about the use
of the System or to report apparent problems with the System. From time to
time, the Customer shall provide to State Street a list of persons, not to
exceed five in number, who shall be permitted to contact State Street for
assistance (such persons being referred to as "the Customer Designated
Persons").
b. Technical Support. State Street will provide technical
support to assist the Customer in using the System and the Data Access
Services. The total amount of technical support provided by State Street shall
not exceed 10 resource days per year. State Street shall provide such
additional technical support as is expressly set forth in the fee schedule in
effect from time to time between the parties (the "Fee Schedule"). Technical
support, including during installation and testing, is subject to the fees and
other terms set forth in the Fee Schedule.
c. Maintenance Support. State Street shall use commercially
reasonable efforts to correct system functions that do not work according to
the System Product Description as set forth on Attachment A in priority order
in the next scheduled delivery release or otherwise as soon as is practicable.
d. System Enhancements. State Street will provide to the
Customer any enhancements to the System developed by State Street and made a
part of the System; provided that, sixty (60) days prior to installing any such
enhancement, State Street shall notify the Customer and shall offer the
Customer reasonable training on the enhancement. Charges for system
enhancements shall be as provided in the Fee Schedule. State Street retains
the right to charge for related systems or products that may be developed and
separately made available for use other than through the System.
e. Custom Modifications. In the event the Customer desires
custom modifications in connection with its use of the System, the Customer
shall make a written request to State Street providing specifications for the
desired modification. Any custom modifications may be undertaken by State
Street in its sole discretion in accordance with the Fee Schedule.
f. Limitation on Support. State Street shall have no obligation
to support the Customer's use of the System: (i) for use on any computer
equipment or telecommunication facilities which does not conform to the
Designated Configuration or (ii) in the event the Customer has modified the
System in breach of this Addendum.
<PAGE> 1
EXHIBIT (h)(1)
SERVICES AGREEMENT
THIS AGREEMENT, dated as of this day of , 1998 (the
"Effective Date") between WORLDWIDE INDEX FUNDS (the "Fund"), a Massachusetts
business trust having its principal place of business at 790 E. Colorado
Boulevard, 9th Floor, Pasadena, CA 91101, LMI CAPITAL ADMINISTRATION LLC (the
"Administrator") a Delaware limited liability company having its principal
place of business at 790 E. Colorado Boulevard, 9th Floor, Pasadena, CA 91101,
and FIRST DATA INVESTOR SERVICES GROUP, INC. ("Investor Services Group"), a
Massachusetts corporation with principal offices at 4400 Computer Drive,
Westboro, Massachusetts 01581.
WITNESSETH
WHEREAS, the Fund is authorized to issue Shares in separate series,
with each such series representing interests in a separate portfolio of
securities or other assets;
WHEREAS, the Fund initially intends to offer Shares in those
Portfolios identified in the attached Schedule A, each such Portfolio, together
with all other Portfolios subsequently established by the Fund shall be subject
to this Agreement in accordance with Article 14;
WHEREAS, the Administrator provides administration services to the
Fund; and
WHEREAS, the Administrator and the Fund, on behalf of the Portfolios,
desire to appoint Investor Services Group as its servicing agent in connection
with certain sub-administration activities and Investor Services Group desires
to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, the Fund and Investor Services Group agree as follows:
Article 1 Definitions.
1.1 Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the following
meanings:
(a) "Articles of Incorporation" shall mean the Articles of
Incorporation, Declaration of Trust, or other similar organizational
document as the case may be, of the Fund as the same may be amended from
time to time.
(b) "Authorized Person" shall be deemed to include (i) any
authorized officer of the Administrator or the Fund; or (ii) any person,
whether or not such person is an officer or employee of the Administrator
or the Fund, duly authorized to give Oral Instructions or Written
Instructions on behalf of the Administrator or the Fund as indicated in
writing to Investor Services Group from time to time.
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(c) "Board Members" shall mean the Directors or Trustees of the
governing body of the Fund, as the case may be.
(d) "Board of Directors" shall mean the Board of Directors or
Board of Trustees of the Fund, as the case may be.
(e) "Commencement Date" shall mean the date on which Investor
Services Group commences providing services pursuant to this Agreement.
(f) "Commission" shall mean the Securities and Exchange
Commission.
(g) "Custodian" refers to any custodian or subcustodian of
securities and other property which the Fund may from time to time
deposit, or cause to be deposited or held under the name or account of
such a custodian pursuant to a Custodian Agreement.
(h) "1934 Act" shall mean the Securities Exchange Act of 1934
and the rules and regulations promulgated thereunder, all as amended from
time to time.
(i) "1940 Act" shall mean the Investment Company Act of 1940
and the rules and regulations promulgated thereunder, all as amended from
time to time.
(j) "Oral Instructions" shall mean instructions, other than
Written Instructions, actually received by Investor Services Group from a
person reasonably believed by Investor Services Group to be an Authorized
Person;
(k) "Portfolio" shall mean each separate series of shares
offered by the Fund representing interests in a separate portfolio of
securities and other assets;
(l) "Prospectus" shall mean the most recently dated Fund
Prospectus and Statement of Additional Information, including any
supplements thereto if any, which has become effective under the
Securities Act of 1933 and the 1940 Act.
(m) "Shares" refers collectively to such shares of capital
stock or beneficial interest, as the case may be, or class thereof, of
each respective Portfolio of the Fund as may be issued from time to time.
(n) "Shareholder" shall mean a record owner of Shares of each
respective Portfolio of the Fund.
(o) "Written Instructions" shall mean a written communication
signed by a person reasonably believed by Investor Services Group to be an
Authorized Person and actually received by Investor Services Group.
Written Instructions shall include manually executed originals and
authorized electronic transmissions, including telefacsimile of a manually
executed original or other process.
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Article 2 Appointment of Investor Services Group.
The Fund, on behalf of the Portfolios, and the Administrator hereby
appoint and constitute Investor Services Group as its as sub-administrator and
fund accounting agent for the Fund and Investor Services Group hereby accepts
such appointments and agrees to perform the duties hereinafter set forth. This
Agreement shall be effective as of the Effective Date.
Article 3 Duties of Investor Services Group.
3.1 Investor Services Group shall be responsible for performing the
customary services of a sub-administrator, including corporate secretarial,
treasury and blue sky services, and fund accounting agent for the Fund, as more
fully described in the written schedule of Duties of Investor Services Group
annexed hereto as Schedule B and incorporated herein, and subject to the
supervision and direction of the Administrator.
3.2 In performing its duties under this Agreement, Investor Services
Group: (a) will act in accordance with the Articles of Incorporation, By-Laws,
Prospectuses and with the Oral Instructions and Written Instructions of the
Administrator or the Fund and will conform to and comply with the requirements
of the 1940 Act and all other applicable federal or state laws and regulations;
and (b) will consult with legal counsel to the Fund, as necessary and
appropriate. Furthermore, Investor Services Group shall not have or be
required to have any authority to supervise the investment or reinvestment of
the securities or other properties which comprise the assets of the Fund or any
of its Portfolios and shall not provide any investment advisory services to the
Fund or any of its Portfolios.
3.3 Investor Services Group agrees to provide the services described
herein in accordance with the Performance Standards annexed hereto as Exhibit 1
of Schedule A and incorporated herein (the "Performance Standards"). Such
Performance Standards may be amended from time to time upon written agreement
of the parties.
3.4 In addition to the duties set forth herein, Investor Services
Group shall perform such other duties and functions, and shall be paid such
amounts therefor, as may from time to time be agreed upon in writing between
the Fund, the Administrator and Investor Services Group.
Article 4 Recordkeeping and Other Information.
4.1 Investor Services Group shall create and maintain all records
required of it pursuant to its duties hereunder and as set forth in Schedule B
in accordance with all applicable laws, rules and regulations, including
records required by Section 31(a) of the 1940 Act. Where applicable, such
records shall be maintained by Investor Services Group for the periods and in
the places required by Rule 31a-2 under the 1940 Act.
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4.2 To the extent required by Section 31 of the 1940 Act, Investor
Services Group agrees that all such records prepared or maintained by Investor
Services Group relating to the services to be performed by Investor Services
Group hereunder are the property of the Fund and will be preserved, maintained
and made available in accordance with such section, and will be surrendered
promptly to the Fund on and in accordance with the Fund's or the
Administrator's request.
Article 5 Fund Instructions.
5.1 Investor Services Group will have no liability when acting upon
Written or Oral Instructions believed to have been executed or orally
communicated by an Authorized Person and will not be held to have any notice of
any change of authority of any person until receipt of a Written Instruction
thereof from the Administrator or the Fund.
5.2 At any time, Investor Services Group may request Written
Instructions from the Administrator or the Fund and may seek advice from legal
counsel for the Fund, or its own legal counsel, 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
such Written Instructions or in accordance with the opinion of counsel for the
Fund or for Investor Services Group. Written Instructions requested by
Investor Services Group will be provided by the Administrator or the Fund
within a reasonable period of time.
5.3 Investor Services Group, its officers, agents or employees,
shall accept Oral Instructions or Written Instructions given to them by any
person representing or acting on behalf of the administrator or the Fund only
if said representative is an Authorized Person. The Administrator and the Fund
agree that all Oral Instructions shall be followed within one business day by
confirming Written Instructions, and that the Administrator's or the Fund's
failure to so confirm shall not impair in any respect Investor Services Group's
right to rely on Oral Instructions.
Article 6 Compensation.
6.1 The Administrator will compensate Investor Services Group for
the performance of its obligations hereunder in accordance with the fees set
forth in the written Fee Schedule annexed hereto as Schedule C and incorporated
herein.
6.2 In addition to those fees set forth in Section 6.1 above, the
Administrator agrees to pay, and will be billed separately for, out-of-pocket
expenses incurred by Investor Services Group in the performance of its duties
hereunder. Out-of-pocket expenses shall include, but shall not be limited to,
the items specified in the written schedule of out-of-pocket charges annexed
hereto as Schedule D and incorporated herein. Schedule D may be modified by
written agreement between the parties. Unspecified out-of-pocket expenses
shall be limited to those out-of-pocket expenses reasonably incurred by
Investor Services Group in the performance of its obligations hereunder.
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6.3 The Administrator agrees to pay all fees and out-of-pocket
expenses to Investor Services Group by Federal Funds Wire within fifteen (15)
business days following the receipt of the respective invoice. In addition,
with respect to all fees under this Agreement, Investor Services Group may
charge a service fee equal to the lesser of (i) one and one half percent (1
1/2%) per month or (ii) the highest interest rate legally permitted on any past
due invoiced amounts.
6.4 Any compensation agreed to hereunder may be adjusted from time
to time by attaching to Schedule C, a revised Fee Schedule executed and dated
by the parties hereto.
6.5 The Administrator and the Fund acknowledge that the fees that
Investor Services Group charges under this Agreement reflect the allocation of
risk between the parties, including the disclaimer of warranties in Section 9.5
and the limitations on liability and exclusion of remedies in Section 11.2 and
Article 12. Modifying the allocation of risk from what is stated here would
affect the fees that Investor Services Group charges, and in consideration of
those fees, the Administrator and the Fund agrees to the stated allocation of
risk.
6.6 Investor Services Group will from time to time employ or
associate with itself such person or persons as Investor Services Group may
believe to be particularly suited to assist it in performing services under
this Agreement. Such person or persons may be officers and employees who are
employed by both Investor Services Group and the Fund. The compensation of
such person or persons shall be paid by Investor Services Group and no
obligation shall be incurred on behalf of the Administrator or the Fund in such
respect.
6.7 Investor Services Group shall not be required to pay any of the
following expenses incurred by the Administrator or the Fund: membership dues
in the Investment Company Institute or any similar organization; investment
advisory expenses; costs of printing and mailing stock certificates,
prospectuses, reports and notices; interest on borrowed money; brokerage
commissions; stock exchange listing fees; taxes and fees payable to Federal,
state and other governmental agencies; fees of Board Members of the Fund who
are not affiliated with Investor Services Group; outside auditing expenses;
outside legal expenses; Blue Sky registration or filing fees; or other expenses
not specified in this Section 6.7 which may be properly payable by the
Administrator or the Fund. Investor Services Group shall not be required to
pay any Blue Sky registration or filing fees unless and until it has received
the amount of such fees from the Administrator or the Fund.
Article 7 Documents.
In connection with the appointment of Investor Services Group, the
Administrator shall, on or before the date this Agreement goes into effect, but
in any case within a reasonable period of time for Investor Services Group to
prepare to perform its duties hereunder, deliver or caused to be delivered to
Investor Services Group the documents set forth in the written schedule of Fund
Documents annexed hereto as Schedule E.
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Article 8 Investor Services Group System.
8.1 Investor Services Group shall retain title to and ownership of
any and all data bases, computer programs, screen formats, report formats,
interactive design techniques, derivative works, inventions, discoveries,
patentable or copyrightable matters, concepts, expertise, patents, copyrights,
trade secrets, and other related legal rights utilized by Investor Services
Group in connection with the services provided by Investor Services Group to
the Administrator and the Fund herein (the "Investor Services Group System").
8.2 Investor Services Group hereby grants to the Administrator and
the Fund a limited license to the Investor Services Group System for the sole
and limited purpose of having Investor Services Group provide the services
contemplated hereunder and nothing contained in this Agreement shall be
construed or interpreted otherwise and such license shall immediately terminate
with the termination of this Agreement.
8.3 In the event that the Fund, including any affiliate or agent of
the Administrator or the Fund or any third party acting on behalf of the
Administrator or the Fund is provided with direct access to the Investor
Services Group System for either account inquiry or to transmit transaction
information, including but not limited to maintenance, exchanges, purchases and
redemptions, such direct access capability shall be limited to direct entry to
the Investor Services Group System by means of on-line mainframe terminal entry
or PC emulation of such mainframe terminal entry and any other non-conforming
method of transmission of information to the Investor Services Group System is
strictly prohibited without the prior written consent of Investor Services
Group.
Article 9 Representations and Warranties.
9.1 Investor Services Group represents and warrants to the
Administrator and the Fund that:
(a) it is a corporation duly organized, existing and in good
standing under the laws of the Commonwealth of Massachusetts;
(b) it is empowered under applicable laws and by its Articles
of Incorporation and By-Laws to enter into and perform this Agreement;
(c) all requisite corporate proceedings have been taken to
authorize it to enter into this Agreement; and
(d) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations
under this Agreement.
9.2 The Administrator represents and warrants to Investor Services
Group that:
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(a) it is duly organized, existing and in good standing under
the laws of the jurisdiction in which it is organized;
(b) it is empowered under applicable laws and by its Articles
of Incorporation and By-Laws to enter into and perform this Agreement;
(c) all requisite corporate proceedings have been taken to
authorize it to enter into this Agreement, and
(d) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations
under this Agreement.
9.3 The Fund represents and warrants to Investor Services Group
that:
(a) it is duly organized, existing and in good standing under
the laws of the jurisdiction in which it is organized;
(b) it is empowered under applicable laws and by its Articles
of Incorporation and By-Laws to enter into this Agreement;
(c) all corporate proceedings required by said Articles of
Incorporation, By-Laws and applicable laws have been taken to authorize it
to enter into this Agreement;
(d) a registration statement under the Securities Act of 1933,
as amended, and the 1940 Act on behalf of each of the Portfolios is
currently effective and will remain effective, and all appropriate state
securities law filings have been made and will continue to be made, with
respect to all Shares of the Fund being offered for sale;
(e) all outstanding Shares are validly issued, fully paid and
non-assessable and when Shares are hereafter issued in accordance with the
terms of the Fund's Articles of Incorporation and its Prospectus with
respect to each Portfolio, such Shares shall be validly issued, fully paid
and non-assessable; and
(f) as of the date hereof, each Portfolio is duly registered
and lawfully eligible for sale in each jurisdiction indicated for such
Portfolio on the list furnished to Investor Services Group pursuant to
Article 7 of this Agreement and that it will notify Investor Services
Group immediately of any changes to the aforementioned list.
9.4 Year 2000 Compliance. (a) For purposes of this Agreement,
"Year 2000 Compliant" means:
(i) date data will process without error or interruption
due solely to the change in century, in any level of computer hardware or
software investor Services Group provides, including, but not limited to,
microcode, firmware, system and application programs, files and databases;
and
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(ii) there will be no loss of any functionality of the
Investor Services Group System due solely to the change in century, with
respect to the introduction, processing or output of date records.
(b) Investor Services Group represents and warrants that:
(i) The Investor Services Group System will be Year 2000
Complaint by December 31, 1998; provided, however, that Investor Services
Group will be in a process of testing the Investor Services Group System
in regard to Year 2000 Compliance throughout calendar year 1999 and any
temporary and immaterial loss of functionality occurring during the
ordinary course of this testing and fixing process shall not be considered
a failure of Investor Services Group to be Year 2000 Compliant.
(ii) The Investor Services Group System will continue to be
interoperable, in the same manner as it is prior to January 1, 2000, with
software and hardware which may deliver records to, receive records from
or interact with the Investor Services Group System in the course of
processing data, provided that such other software and hardware is Year
2000 Compliant as defined herein and complies with the interface and
format standards specified by Investor Services Group.
(c) The Administrator and the Fund agree to cooperate fully,
and to ensure that its vendors cooperate fully, with Investor Services
Group to ensure the interoperability of the Investor Services Group System
with hardware and software of the Administrator and the Fund and its
vendors. Investor Services Group shall have the right, at its discretion,
to reject any data file which it in good faith believes will interfere
with the ability of the Investor Services Group System to be Year 2000
Compliant.
9.5 THIS IS A SERVICE AGREEMENT. EXCEPT AS EXPRESSLY PROVIDED IN
THIS AGREEMENT, INVESTOR SERVICES GROUP DISCLAIMS ALL OTHER REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, MADE TO THE FUND OR ANY OTHER PERSON, INCLUDING,
WITHOUT LIMITATION, ANY WARRANTIES REGARDING QUALITY, SUITABILITY,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE (IRRESPECTIVE OF
ANY COURSE OF DEALING, CUSTOM OR USAGE OF TRADE) OF ANY SERVICES OR ANY GOODS
PROVIDED INCIDENTAL TO SERVICES PROVIDED UNDER THIS AGREEMENT. INVESTOR
SERVICES GROUP DISCLAIMS ANY WARRANTY OF TITLE OR NON-INFRINGEMENT EXCEPT AS
OTHERWISE SET FORTH IN THIS AGREEMENT.
Article 10 Indemnification.
10.1 Investor Services Group shall not be responsible for and the
Fund on behalf of each Portfolio, and the Administrator jointly and severably
shall indemnify and hold Investor Services Group harmless from and against any
and all claims, costs, expenses (including reasonable attorneys' fees), losses,
damages, charges, payments and liabilities of any sort or kind
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which may be asserted against Investor Services Group or for which Investor
Services Group may be held to be liable (a "Claim") arising out of or
attributable to any of the following:
(a) any actions of Investor Services Group required to be taken
pursuant to this Agreement unless such Claim resulted from a negligent act
or omission to act or bad faith by Investor Services Group in the
performance of its duties hereunder;
(b) Investor Services Group's reasonable reliance on, or reasonable
use of information, data, records and documents (including but not limited
to magnetic tapes, computer printouts, hard copies and microfilm copies)
received by Investor Services Group from the Administrator or the Fund
including but not limited to the prior transfer agent for the Fund, in the
performance of Investor Services Group's duties and obligations hereunder;
(c) the reliance on, or the implementation of, any Written or Oral
Instructions or any other instructions or requests of the Administrator or
the Fund on behalf of the applicable Portfolio;
(d) the offer or sales of shares in violation of any requirement
under the securities laws or regulations of any state that such shares be
registered in such state or in violation of any stop order or other
determination or ruling by any state with respect to the offer or sale of
such shares in such state; and
(e) the Administrator's or the Fund's refusal or failure to comply
with the terms of this Agreement, or any Claim which arises out of the
Administrator's or the Fund's negligence or misconduct or the breach of
any representation or warranty of the Administrator or the Fund made
herein.
10.2 In any case in which the Administrator and/or the Fund (the
"Indemnifying Party") may be asked to indemnify or hold Investor Services Group
harmless, Investor Services Group will notify the Indemnifying Party promptly
after identifying any situation which it believes presents or appears likely to
present a claim for indemnification against the Indemnifying Party although the
failure to do so shall not prevent recovery by Investor Services Group and
shall keep the Indemnifying Party advised with respect to all developments
concerning such situation. The Indemnifying Party shall have the option to
defend Investor Services Group against any Claim which may be the subject of
this indemnification, and, in the event that the Indemnifying Party so elects,
such defense shall be conducted by counsel chosen by the Indemnifying Party and
satisfactory to Investor Services Group, and thereupon the Indemnifying Party
shall take over complete defense of the Claim and Investor Services Group shall
sustain no further legal or other expenses in respect of such Claim. Investor
Services Group will not confess any Claim or make any compromise in any case in
which the Indemnifying Party will be asked to provide indemnification, except
with the Indemnifying Party 's prior written consent. The obligations of the
parties hereto under this Article 10 shall survive the termination of this
Agreement.
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10.3 Any claim for indemnification under this Agreement must be made
prior to the earlier of:
(a) one year after the Indemnifying Party becomes aware of the
event for which indemnification is claimed; or
(b) one year after the earlier of the termination of this
Agreement or the expiration of the term of this Agreement.
10.4 Except for remedies that cannot be waived as a matter of law
(and injunctive or provisional relief), the provisions of this Article 10 shall
be Investor Services Group's sole and exclusive remedy for claims or other
actions or proceedings to which the Indemnifying Party's indemnification
obligations pursuant to this Article 10 may apply.
Article 11 Standard of Care.
11.1 Investor Services Group shall at all times act in good faith and
agrees to use its best efforts within commercially reasonable limits to ensure
the accuracy of all services performed under this Agreement, but assumes no
responsibility for loss or damage to the Administrator or the Fund unless said
errors are caused by Investor Services Group's own negligence, bad faith or
willful misconduct or that of its employees.
11.2 Notwithstanding any provision in this Agreement to the contrary,
Investor Services Group's cumulative liability for all losses, claims, suits,
controversies, breaches, or damages for any cause whatsoever (including but not
limited to those arising out of or related to this Agreement) and regardless of
the form of action or legal theory shall not exceed the lesser of (i) $500,000
or (ii) the fees received by Investor Services Group for services provided
under this Agreement during the twelve months immediately prior to the date of
such loss or damage. The Administrator and the Fund understand the limitation
on Investor Services Group's damages to be a reasonable allocation of risk and
the Administrator and the Fund expressly consent with respect to such
allocation of risk. In allocating risk under the Agreement, the parties agree
that the damage limitation set forth above shall apply to any alternative
remedy ordered by a court in the event such court determines that sole and
exclusive remedy provided for in the Agreement fails of its essential purpose.
11.3 No party may assert any cause of action against another party
under this Agreement that accrued more than two (2) years prior to the filing
of the suit (or commencement of arbitration proceedings) alleging such cause of
action.
11.4 Each party shall have the duty to mitigate damages for which the
other party may become responsible.
Article 12 Consequential Damages.
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NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO
EVENT SHALL INVESTOR SERVICES GROUP, ITS AFFILIATES OR ANY OF ITS OR THEIR
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE UNDER ANY
THEORY OF TORT, CONTRACT, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY
FOR LOST PROFITS, EXEMPLARY, PUNITIVE, SPECIAL, INCIDENTAL, INDIRECT OR
CONSEQUENTIAL DAMAGES, EACH OF WHICH IS HEREBY EXCLUDED BY AGREEMENT OF THE
PARTIES REGARDLESS OF WHETHER SUCH DAMAGES WERE FORESEEABLE OR WHETHER EITHER
PARTY OR ANY ENTITY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Article 13 Term and Termination.
13.1 This Agreement shall be effective on the date first written
above and shall continue for a period of ten (10) years (the "Initial Term").
13.2 Upon the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of three (3) years ("Renewal Terms")
each, unless the Administrator and the Fund, on the one hand, or Investor
Services Group, on the other hand, provides written notice to the other of its
intent not to renew. Such notice must be received not less than ninety (90)
days and not more than one-hundred eighty (180) days prior to the expiration of
the Initial Term or the then current Renewal Term.
13.3 In the event a termination notice is given by the Administrator
and the Fund, all expenses associated with movement of records and materials
and conversion thereof to a successor service provider will be borne by the
Administrator and the Fund.
13.4 If a party hereto is guilty of a material failure to perform its
duties and obligations hereunder (a "Defaulting Party") the other party (the
"Non-Defaulting Party") may give written notice thereof to the Defaulting
Party, and if such material breach shall not have been remedied within thirty
(30) days after such written notice is given, then the Non-Defaulting Party may
terminate this Agreement by giving thirty (30) days written notice of such
termination to the Defaulting Party. If Investor Services Group is the
Non-Defaulting Party, its termination of this Agreement shall not constitute a
waiver of any other rights or remedies of Investor Services Group with respect
to services performed prior to such termination of rights of Investor Services
Group to be reimbursed for out-of-pocket expenses. In all cases, termination
by the Non-Defaulting Party shall not constitute a waiver by the Non-Defaulting
Party of any other rights it might have under this Agreement or otherwise
against the Defaulting Party.
13.5 Notwithstanding anything contained in this Agreement to the
contrary, should the Administrator and the Fund desire to move any of the
services provided by Investor Services Group hereunder to a successor service
provider prior to the expiration of the then current Initial or Renewal Term,
or should the Administrator and the Fund or any of its or their affiliates take
any action which would result in Investor Services Group ceasing to provide
administration or fund accounting services to the Fund prior to the expiration
of the Initial or any Renewal Term,
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Investor Services Group shall make a good faith effort to facilitate the
conversion on such prior date, however, there can be no guarantee that Investor
Services Group will be able to facilitate a conversion of services on such
prior date. In connection with the foregoing, should services be converted to
a successor service provider or should the Administrator and the Fund or any of
its or their affiliates take any action which would result in Investor Services
Group ceasing to provide transfer agency, administration or fund accounting
services to the Fund prior to the expiration of the Initial or any Renewal
Term, the payment of fees to Investor Services Group as set forth herein shall
be accelerated to a date prior to the conversion or termination of services and
calculated as if the services had remained with Investor Services Group until
the expiration of the then current Initial or Renewal Term and calculated at
the asset and/or Shareholder account levels, as the case may be, on the date
notice of termination was given to Investor Services Group.
Article 14 Additional Portfolios
14.1 In the event that the Fund establishes one or more Portfolios in
addition to those identified in Schedule A, with respect to which the
Administrator and the Fund desire to have Investor Services Group render
services as transfer agent under the terms hereof, the Administrator shall so
notify Investor Services Group in writing, and if Investor Services Group
agrees in writing to provide such services, Schedule A shall be amended to
include such additional Portfolios.
Article 15 Confidentiality.
15.1 The parties agree that the Proprietary Information (defined
below) and the contents of this Agreement (collectively "Confidential
Information") are confidential information of the parties and their respective
licensors. Each party shall exercise at least the same degree of care, but not
less than reasonable care, to safeguard the confidentiality of the Confidential
Information of the other as it would exercise to protect its own confidential
information of a similar nature. Each party shall not duplicate, sell or
disclose to others the Confidential Information of the other, in whole or in
part, without the prior written permission of the other party. Each party may,
however, disclose Confidential Information to their respective parent
corporation, their respective affiliates, their subsidiaries and affiliated
companies and employees, provided that each shall use reasonable efforts to
ensure that the Confidential Information is not duplicated or disclosed in
breach of this Agreement. Each party may also disclose the Confidential
Information to independent contractors, auditors, and professional advisors,
provided they first agree in writing to be bound by the confidentiality
obligations substantially similar to this Section 15.1. Notwithstanding the
previous sentence, in no event shall any party disclose the Confidential
Information to any competitor of another party without specific, prior written
consent.
15.2 Proprietary Information means:
(a) any data or information that is competitively sensitive
material, and not generally known to the public, including, but not
limited to, information about product
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plans, marketing strategies, finance, operations, customer relationships,
customer profiles, sales estimates, business plans, and internal
performance results relating to the past, present or future business
activities of a party, their respective subsidiaries and affiliated
companies and the customers, clients and suppliers of any of them;
(b) any scientific or technical information, design, process,
procedure, formula, or improvement that is commercially valuable and
secret in the sense that its confidentiality affords a party a competitive
advantage over its competitors; and
(c) all confidential or proprietary concepts, documentation,
reports, data, specifications, computer software, source code, object
code, flow charts, databases, inventions, know-how, show-how and trade
secrets, whether or not patentable or copyrightable.
15.3 Confidential Information includes, without limitation, all
documents, inventions, substances, engineering and laboratory notebooks,
drawings, diagrams, specifications, bills of material, equipment, prototypes
and models, and any other tangible manifestation of the foregoing of either
party which now exist or come into the control or possession of the other.
15.4 The obligations of confidentiality and restriction on use herein
shall not apply to any Confidential Information that a party proves:
(a) Was in the public domain prior to the date of this
Agreement or subsequently came into the public domain through no fault of
such party; or
(b) Was lawfully received by the party from a third party free
of any obligation of confidence to such third party; or
(c) Was already in the possession of the party prior to receipt
thereof, directly or indirectly, from the other party; or
(d) Is required to be disclosed in a judicial or administrative
proceeding after all reasonable legal remedies for maintaining such
information in confidence have been exhausted including, but not limited
to, giving the other party as much advance notice of the possibility of
such disclosure as practical so the other party may attempt to stop such
disclosure or obtain a protective order concerning such disclosure; or
(f) Is subsequently and independently developed by employees,
consultants or agents of the party without reference to the Confidential
Information disclosed under this Agreement.
Article 16 Force Majeure.
No party shall be liable for any default or delay in the performance
of its obligations under this Agreement if and to the extent such default or
delay is caused, directly or indirectly,
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<PAGE> 14
by (i) fire, flood, elements of nature or other acts of God; (ii) any outbreak
or escalation of hostilities, war, riots or civil disorders in any country,
(iii) any act or omission of the other party or any governmental authority;
(iv) any labor disputes (whether or not the employees' demands are reasonable
or within the party's power to satisfy); or (v) nonperformance by a third party
or any similar cause beyond the reasonable control of such party, including
without limitation, failures or fluctuations in telecommunications or other
equipment. In any such event, the non-performing party shall be excused from
any further performance and observance of the obligations so affected only for
as long as such circumstances prevail and such party continues to use
commercially reasonable efforts to recommence performance or observance as soon
as practicable.
Article 17 Assignment and Subcontracting.
This Agreement, its benefits and obligations shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns. This Agreement may not be assigned or otherwise
transferred by either party hereto, without the prior written consent of the
other party, which consent shall not be unreasonably withheld; provided,
however, that Investor Services Group may, in its sole discretion, assign all
its right, title and interest in this Agreement to an affiliate, parent or
subsidiary, or to the purchaser of substantially all of its business. Investor
Services Group may, in its sole discretion, engage subcontractors to perform
any of the obligations contained in this Agreement to be performed by Investor
Services Group.
Article 18 Arbitration.
18.1 Any claim or controversy arising out of or relating to this
Agreement, or breach hereof, shall be settled by arbitration administered by
the American Arbitration Association in Boston, Massachusetts in accordance
with its applicable rules, except that the Federal Rules of Evidence and the
Federal Rules of Civil Procedure with respect to the discovery process shall
apply.
18.2 The parties hereby agree that judgment upon the award rendered
by the arbitrator may be entered in any court having jurisdiction.
18.3 The parties acknowledge and agree that the performance of the
obligations under this Agreement necessitates the use of instrumentalities of
interstate commerce and, notwithstanding other general choice of law provisions
in this Agreement, the parties agree that the Federal Arbitration Act shall
govern and control with respect to the provisions of this Article 18.
Article 19 Notice.
Any notice or other instrument authorized or required by this
Agreement to be given in writing to the Fund or Investor Services Group, shall
be sufficiently given if addressed to that
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<PAGE> 15
party and received by it at its office set forth below or at such other place
as it may from time to time designate in writing.
To the Fund:
Worldwide Index Funds
790 East Colorado Boulevard, 9th Floor
Pasadena, California 91101
Attention: F. Brian Cerini
To the Administrator:
LMI Capital Administration LLC
790 East Colorado Boulevard, 9th Floor
Pasedena, California 91101
Attention: F. Brian Cerini
To Investor Services Group:
First Data Investor Services Group, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Attention: President
with a copy to Investor Services Group's General Counsel
Article 20 Governing Law/Venue.
The laws of the Commonwealth of Massachusetts, excluding the laws on
conflicts of laws, shall govern the interpretation, validity, and enforcement
of this agreement. All actions arising from or related to this Agreement
shall be brought in the state and federal courts sitting in the City of Boston,
and Investor Services Group and the Fund hereby submit themselves to the
exclusive jurisdiction of those courts.
Article 21 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
Article 22 Captions.
The captions of 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.
Article 23 Publicity.
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<PAGE> 16
No party shall release or publish news releases, public announcements,
advertising or other publicity relating to this Agreement or to the
transactions contemplated by it without the prior review and written approval
of each other party; provided, however, that either party may make such
disclosures as are required by legal, accounting or regulatory requirements
after making reasonable efforts in the circumstances to consult in advance with
the other parties.
Article 24 Relationship of Parties/Non-Solicitation.
24.1 The parties agree that they are independent contractors and not
partners or co-venturers and nothing contained herein shall be interpreted or
construed otherwise.
24.2 During the term of this Agreement and for one (1) year
afterward, the Administrator or the Fund shall not recruit, solicit, employ or
engage, for the Administrator, the Fund or others, Investor Services Group's
employees.
Article 25 Entire Agreement; Severability.
25.1 This Agreement, including Schedules, Addenda, and Exhibits
hereto, constitutes the entire Agreement between the parties with respect to
the subject matter hereof and supersedes all prior and contemporaneous
proposals, agreements, contracts, representations, and understandings, whether
written or oral, between the parties with respect to the subject matter hereof.
No change, termination, modification, or waiver of any term or condition of the
Agreement shall be valid unless in writing signed by each party. No such
writing shall be effective as against Investor Services Group unless said
writing is executed by a Senior Vice President, Executive Vice President, or
President of Investor Services Group. A party's waiver of a breach of any term
or condition in the Agreement shall not be deemed a waiver of any subsequent
breach of the same or another term or condition.
25.2 The parties intend every provision of this Agreement to be
severable. If a court of competent jurisdiction determines that any term or
provision is illegal or invalid for any reason, the illegality or invalidity
shall not affect the validity of the remainder of this Agreement. In such
case, the parties shall in good faith modify or substitute such provision
consistent with the original intent of the parties. Without limiting the
generality of this paragraph, if a court determines that any remedy stated in
this Agreement has failed of its essential purpose, then all other provisions
of this Agreement, including the limitations on liability and exclusion of
damages, shall remain fully effective.
Article 26 Miscellaneous.
The parties agree that the obligations of the Fund under the
Agreement shall not be binding upon any of the Board Members, shareholders,
nominees, officers, employees or agents, whether past, present or future, of
the Fund individually, but are binding only upon the assets and property of the
Fund, as provided in the Articles of Incorporation. The execution and delivery
of this Agreement have been authorized by the Board Members of the Fund, and
signed by an
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<PAGE> 17
authorized officer of the Fund, acting as such, and neither such authorization
by such Board Members nor such execution and delivery by such officer shall be
deemed to have been made by any of them or any shareholder of the Fund
individually or to impose any liability on any of them or any shareholder of
the Fund personally, but shall bind only the assets and property of the Fund as
provided in the Articles of Incorporation.
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<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, as of the day and year first above
written.
WORLDWIDE INDEX FUNDS
By:
--------------------------------
Title:
-----------------------------
FIRST DATA INVESTOR SERVICES GROUP, INC.
By:
--------------------------------
Title:
-----------------------------
LMI CAPITAL ADMINISTRATION LLC
By:
--------------------------------
Title:
-----------------------------
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<PAGE> 19
SCHEDULE A
LIST OF PORTFOLIOS
Australia Index Fund
France Index Fund
Germany Index Fund
Hong Kong Index Fund
Italy Index Fund
Japan Index Fund
Netherlands Index Fund
Spain Index Fund
Sweden Index Fund
Switzerland Index Fund
United Kingdom Index Fund
Europe Index Fund
International Index Fund
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<PAGE> 20
SCHEDULE B
DUTIES OF INVESTOR SERVICES GROUP
I. SUB-ADMINISTRATION SERVICES
(a) Maintaining office facilities (which may be in the offices of
Investor Services Group or a corporate affiliate) and furnishing corporate
officers for the Fund;
(b) Furnishing data processing services, clerical services, and
executive and administrative services and standard stationery and office
supplies;
(c) Performing all functions ordinarily performed by the office of a
corporate treasurer, and furnishing the services and facilities ordinarily
incident thereto, as follows:
- Expense Accrual Monitoring
- Determination of Dividends
- Preparation materials for review by the Board, e.g., Rules 2a-7,10f-3,
17a-7, 17e-1 and 144A
- Tax and Financial Counsel
- Creation of expense pro formas for new Portfolios/classes
- Reporting to investment company reporting agencies (i.e., Lipper)
- Compliance Testing including Section 817(h) (periodically)
(d) Preparing reports to the Fund's Shareholders and the SEC including,
but not necessarily limited to, Annual Reports and Semi-Annual Reports on Form
N-SAR;
(e) Preparing and filing the Fund's tax returns and providing
shareholder tax information to the Fund's transfer agent;
(f) Assisting the Adviser, at the Adviser's request, in monitoring and
developing compliance procedures for the Fund which will include, among other
matters, procedures to assist the Adviser in monitoring compliance with each
Portfolio's investment objective, policies, restrictions, tax matters and
applicable laws and regulations;
(g) Performing "Blue Sky" compliance functions, as follows:
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<PAGE> 21
- Effecting and maintaining, as the case may be, the registration of Shares
of the Fund for sale under the securities laws of the jurisdictions listed
in the Written Instructions of the Fund, which instructions will include
the amount of Shares to be registered as well as the warning threshold to
be maintained. Any Written Instructions not received at least 45 days
prior to the date the Fund intends to offer or sell its Shares cannot be
guaranteed a timely notification to the states. In addition, Investor
Services Group shall not be responsible for providing to any other service
provider of the Fund a list of the states in which the Fund may offer and
sell its Shares.
- Filing with each appropriate jurisdiction the appropriate materials
relating to the Fund. The Administrator shall be responsible for
providing such materials to Investor Services Group, and Investor Services
Group shall make such filings promptly after receiving such materials.
- Providing to the Fund quarterly reports of sales activity in each
jurisdiction in accordance with the Written Instructions of the
Administrator or the Fund. Sales will be reported by shareholder
residence. NSCC trades and order clearance will be reported by the state
provided by the dealer at the point of sale. Trades by omnibus accounts
will be reported by trustee state of residence in accordance with the
Written Instructions of the Administrator or the Fund outlining the
entities which are permitted to maintain omnibus positions with the Fund.
- In the event sales of Shares in a particular jurisdiction reach or exceed
the warning levels provided in the Written Instructions of the Fund,
Investor Services Group will promptly notify the Administrator with a
recommendation of the amount of Shares to be registered in such
jurisdiction and the fee for such registration. Investor Services Group
will not register additional Shares in such jurisdiction unless and until
Investor Services Group shall have received Written Instructions from the
Administrator or the Fund to do so.
- If Investor Services Group is instructed by the Fund or the Administrator
not to register Shares in a particular jurisdiction, Investor Services
Group will use its best efforts to cause any sales in such jurisdictions
to be blocked, and such sales will not be reported to Investor Services
Group as sales of Shares of the Fund.
(h) Performing corporate secretarial services including the following:
- Assist in maintaining corporate records and good standing status of Fund
in its state of organization
- Develop and maintain calendar of annual and quarterly board approvals and
regulatory filings
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<PAGE> 22
- Prepare notice, agenda, memoranda, resolutions and background materials
for legal approvals at quarterly board meetings and committee meetings;
attend meetings; make presentations where appropriate; prepare minutes;
follow up on issues
- Provide support for one special in person board meeting per year and
written consent votes where needed
(i) Performing the following legal services:
- Prepare and file annual Post-Effective Amendment
- Prepare and file Rule 24f-2 Notice
- Review and file Form N-SAR
- Review, Edgarize and file Annual and Semi-Annual Financial Reports
- Communicate significant regulatory or legislative developments to Fund
management and directors and provide related planning assistance where
needed
- Consult with Fund management regarding portfolio compliance and Fund
corporate and regulatory issues as needed
- Maintain effective communication with outside counsel and review legal
bills of outside counsel
- Coordinate the printing and mailing process with outside printers for all
shareholder publications
- Arrange D&O/E&O insurance and fidelity bond coverage for Fund
- Assist in monitoring Fund Code of Ethics reporting and provide such
reports to the person designated under the Fund's Code
(j) Performing, in accordance with the Written Instructions of the Fund,
the following Special Legal Services in accordance with the pricing structure
listed on the Fee Schedule attached to this Agreement as Schedule C:
- Assist in managing SEC audit of the Fund at the Adviser's principal place
of business
- Review sales material and advertising for Fund Prospectus compliance
- Assist in new Portfolio start-up (to the extent requested) Coordinate time
and responsibility schedules
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<PAGE> 23
Prepare Fund corporate documents (MTA/by-laws) Draft/file
registration statement (including investment objectives/policies and
prospectuses)
Respond to and negotiate SEC comments
Draft notice, agenda and resolutions for organizational meeting;
attend board meeting; make presentations where appropriate; prepare
minutes and follow up on issues
- Assist in developing compliance guidelines and procedures to improve
overall compliance by Fund and service providers
- Prepare notice, agenda, memoranda and background materials for special
board meetings, make presentations where appropriate, prepare minutes and
follow up on issues
- Prepare proxy material for special meetings (including fund merger
documents)
- Prepare Post-Effective Amendments for special purposes (e.g., new funds or
classes, changes in advisory relationships, mergers, restructurings)
- Prepare special Prospectus supplements where needed
- Assist in extraordinary non-recurring projects, including providing
consultative legal services, e.g.,
Arrange CDSC financial programs
Prospectus simplification
Profile prospectuses
Exemptive order applications
(k) Serving as disbursing agent for the Fund with respect to payments to
be made to the Fund's service providers and vendors; provided that
Investor Services Group shall be under no obligation to make any such
payment unless and until it has received the amount of such payment
from the Administrator or the Fund.
II. FUND ACCOUNTING SERVICES
(a) Performing fund accounting and bookkeeping services (including the
maintenance of such accounts, books and records of the Fund as may be required
by Section 31(a) of the 1940 Act) as follows:
- Daily, Weekly, and Monthly Reporting
- Portfolio and General Ledger Accounting
- Daily Valuation of all Portfolio Securities
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<PAGE> 24
- Daily Valuation and NAV Calculation
- Comparison of NAV to market movement
- Review research of price tolerance/fluctuation report to market movements
and events
- Research of items appearing on the price exception report
- Weekly cost monitoring along with market-to-market valuations in
accordance with Rule 2a-7
- Security trade processing
- Daily cash and position reconciliation with the custodian bank
- Daily updating of price and distribution rate information to the Transfer
Agent/Insurance Agent
- Daily support and report delivery to Portfolio Management
- Daily calculation of Portfolio adviser fees and waivers
- Daily calculation of distribution rates
- Daily investable cash call
- Monitor and research aged receivables
- Collect aged income items and perform reclaims
- Update NASDAQ reporting
- Daily maintenance of each Portfolio's general ledger including expense
accruals
- Daily NAV per share notification to other vendors as required
- Calculation of 30-day SEC yields and total returns
- Preparation of month-end reconciliation package
- Monthly reconciliation of Portfolio expense records
- Application of monthly pay down gain/loss
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<PAGE> 25
- Preparation of all annual and semi-annual audit work papers
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<PAGE> 26
Exhibit 1 of Schedule B
Performance Standards
Investor Services Group's obligation to meet the following Performance
Standards shall be measured in the aggregate with respect to all Portfolios.
Investor Services Group will report to the Administrator on a monthly basis the
percent of items completed within standard as well as a quality rating.
Reporting will be detailed to the transaction type level. A pass/fail
determination for contractual penalties will however be based on the categories
listed below. For example, the accuracy of purchases, redemptions, exchanges
and adjustments will be reported to the Administrator on an individual basis
and as a collective group. Investor Services Group will receive a "fail" for
the month if the collective score for all financials falls below the
contractual level. Note that completion standards are measured in business
days.
CATEGORY COMPONENTS (TO BE REPORTED INDIVIDUALLY)
FUND ACCOUNTING SERVICES
- - NAVs calculated accurately, provided that all information received from
external vendors or Fund managers is correct and timely.
Minimum Acceptable Quality Score: 98%
- - Information to NASDAQ is reported accurately and within appropriate time
frames in order to be distributed to major newspapers
- - Minimum Acceptable Quality Score: 98%
- - Daily Bulletin is released by 7:00 pm EST, provided that all information
received from external vendors or Fund managers is received on a timely
basis.
Minimum Acceptable Quality Score: 98%
- - Dividends and Capital Gains paid correctly.
Minimum Acceptable Quality Score: 98%
FUND ADMINISTRATION SERVICES
- - Annual and Semi-Annual reporting has begun mailing by Day 60 following the
period end date, provided that all information is received from external
vendors, Fund and Fund managers is received on a timely basis.
Minimum Acceptable Quality Score: 98%
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<PAGE> 27
SCHEDULE C
FEE SCHEDULE
1. Standard Fees
Fund Accounting Fees:
- $35,385 per Portfolio per annum for 11 Portfolios
- Fund of Funds fee is waived for 2 Portfolios
Administration Fees:
- Asset based fees: Up to $500 million in assets 5.0 bp
Over $500 to $1 billion in assets 8.0 bp
Over $1 billion to $2 billion in assets 10.0 bp
Over $2 billion in assets 7.5 bp
- At each breakpoint, all fees are adjusted to the applicable level
Marketing Fees:
- Projects will be estimated upon request by the Fund and will include
a 15% ISG project management fee.
After the one year anniversary of the effective date of this Agreement,
Investor Services Group may adjust the above fees once per calendar year, upon
thirty (30) days prior written notice in an amount not to exceed the cumulative
percentage increase in the Consumer Price Index for All Urban Consumers (CPI-U)
U.S. City Average, All items (unadjusted) - (1982-84=100), published by the
U.S. Department of Labor since the last such adjustment in the Client's monthly
fees (or the Effective Date absent a prior such adjustment).
2. Programming Costs
(a) Dedicated Team:
Programmer $150,000 per annum
BSA $ 85,000 per annum
Tester $ 65,000 per annum
(b) System Enhancements (Non Dedicated Team):
Programmer $150.00 per hour
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<PAGE> 28
The above rates are subject to an annual 5% increase after the one year
anniversary of the effective date of this Agreement.
3. Investor Services Group shall be entitled to the following fee for the
performance of any Special Legal Services as described in Schedule B in
accordance with the Written Instructions of the Fund: $185 per hour subject to
certain project caps as may be agreed to by Investor Services Group and the
Fund. Services and charges may vary based on volume.
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SCHEDULE D
OUT-OF-POCKET EXPENSES
The Administrator shall reimburse Investor Services Group monthly for
applicable out-of-pocket expenses, including, but not limited to the following
items:
- Microfiche/microfilm production
- Magnetic media tapes and freight
- Printing costs, including certificates, envelopes, checks and
stationery
- Postage (bulk, pre-sort, ZIP+4, barcoding, first class) direct pass
through to the Fund
- Due diligence mailings
- Telephone and telecommunication costs, including all lease, maintenance
and line costs
- Ad hoc reports
- Proxy solicitations, mailings and tabulations
- Daily & Distribution advice mailings
- Shipping, Certified and Overnight mail and insurance
- Year-end form production and mailings
- Terminals, communication lines, printers and other equipment and any
expenses incurred in connection with such terminals and lines
- Duplicating services
- Courier services
- Incoming and outgoing wire charges
- Federal Reserve charges for check clearance
- Overtime, as approved by the Fund
- Temporary staff, as approved by the Fund
- Travel to and from Board meetings
- Travel and entertainment, as approved by the Fund
- Record retention, retrieval and destruction costs, including, but not
limited to exit fees charged by third party record keeping vendors
- Third party audit reviews
- Ad hoc SQL time
- Insurance
- Pricing services (or services used to determine Fund NAV)
- Forms and supplies for the preparation of Board meetings and other
materials for the Fund
- Vendor set-up charges for Blue Sky services
- Customized programming requests
- Blue Sky filing or registration fees
- SAS 70
- Cold Storage
- Document Retrieval
- Vendor pricing comparison
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<PAGE> 30
- Manual pricing
- Licensing and registration fees for registered representatives
magnetic tape
- retention of records
- data subscription services
- voice and data lines/access charges/set-up/installation of all
communications hardware and software
- transmitting lines, modems and any other expenses incurred in
connection with such terminals and lines
- sales tax, if applicable
- post office box charges
- 800 number usage at a rate of $0.10 per minute
- software enhancements at a rate of $150.00 per hour
- state registration fees, if applicable
- licensing costs of all software applications of Fund data
- Such other miscellaneous expenses reasonably incurred by Investor
- Services Group in performing its duties and responsibilities under this
Agreement.
The Administrator agrees that postage and mailing expenses will be paid on
the day of or prior to mailing as agreed with Investor Services Group. In
addition, the Administrator will promptly reimburse Investor Services Group for
any other unscheduled expenses incurred by Investor Services Group whenever the
Administrator and Investor Services Group mutually agree that such expenses are
not otherwise properly borne by Investor Services Group as part of its duties
and obligations under the Agreement.
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<PAGE> 31
SCHEDULE E
FUND DOCUMENTS
- Certified copy of the Articles of Incorporation of the Fund, as
amended
- Certified copy of the By-laws of the Fund, as amended
- Copy of the resolution of the Board of Directors authorizing the
execution and delivery of this Agreement
- Copies of all agreements between the Fund and its service providers
- All account application forms and other documents relating to
Shareholder accounts or to any plan, program or service offered by
the Fund
- All notices issued by the Fund with respect to the Shares in
accordance with and pursuant to the Articles of Incorporation or
By-laws of the Fund or as required by law and shall perform such
other specific duties as are set forth in the Articles of
Incorporation including the giving of notice of any special or annual
meetings of shareholders and any other notices required thereby.
- A listing of all jurisdictions in which each Portfolio is registered
and lawfully available for sale as of the date of this Agreement and
all information relative to the monitoring of sales and registrations
of Fund shares in such jurisdictions
- Each Fund's most recent post-effective amendment to its Registration
Statement
- Each Fund's most recent prospectus and statement of additional
information, if applicable, and all amendments and supplements
thereto
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<PAGE> 1
EXHIBIT (h)(2)
TRANSFER AGENCY AND SERVICES AGREEMENT
THIS AGREEMENT, dated as of this day of , 1998 (the
"Effective Date") between WORLDWIDE INDEX FUNDS (the "Fund"), a Massachusetts
business trust having its principal place of business at 790 E. Colorado
Boulevard, 9th Floor, Pasadena, CA 91101, and FIRST DATA INVESTOR SERVICES
GROUP, INC. ("Investor Services Group"), a Massachusetts corporation with
principal offices at 4400 Computer Drive, Westboro, Massachusetts 01581.
WITNESSETH
WHEREAS, the Fund is authorized to issue Shares in separate series, with
each such series representing interests in a separate portfolio of securities
or other assets.
WHEREAS, the Fund initially intends to offer Shares in those Portfolios
identified in the attached Schedule A, each such Portfolio, together with all
other Portfolios subsequently established by the Fund shall be subject to this
Agreement in accordance with Article 14;
WHEREAS, the Fund, on behalf of the Portfolios, desires to appoint
Investor Services Group as its transfer agent in connection with certain other
activities and Investor Services Group desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, the Fund and Investor Services Group agree as follows:
Article 1 Definitions.
1.1 Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
(a) "Articles of Incorporation" shall mean the Articles of
Incorporation, Declaration of Trust, or other similar organizational
document as the case may be, of the Fund as the same may be amended from
time to time.
(b) "Authorized Person" shall be deemed to include (i) any
authorized officer of the Fund; or (ii) any person, whether or not such
person is an officer or employee of the Fund, duly authorized to give Oral
Instructions or Written Instructions on behalf of the Fund as indicated in
writing to Investor Services Group from time to time.
(c) "Board Members" shall mean the Directors or Trustees of the
governing body of the Fund, as the case may be.
(d) "Board of Directors" shall mean the Board of Directors or
Board of Trustees of the Fund, as the case may be.
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<PAGE> 2
(e) "Commencement Date" shall mean the date on which Investor
Services Group commences providing services to the Fund pursuant to this
Agreement.
(f) "Commission" shall mean the Securities and Exchange
Commission.
(g) "Custodian" refers to any custodian or subcustodian of
securities and other property which the Fund may from time to time
deposit, or cause to be deposited or held under the name or account of
such a custodian pursuant to a Custodian Agreement.
(h) "NASD" shall mean the National Association of Securities
Dealers, Inc.
(i) "1934 Act" shall mean the Securities Exchange Act of 1934
and the rules and regulations promulgated thereunder, all as amended from
time to time.
(j) "1940 Act" shall mean the Investment Company Act of 1940 and
the rules and regulations promulgated thereunder, all as amended from time
to time.
(k) "Oral Instructions" shall mean instructions, other than
Written Instructions, actually received by Investor Services Group from a
person reasonably believed by Investor Services Group to be an Authorized
Person;
(l) "Portfolio" shall mean each separate series of shares offered
by the Fund representing interests in a separate portfolio of securities
and other assets;
(m) "Prospectus" shall mean the most recently dated Fund
Prospectus and Statement of Additional Information, including any
supplements thereto if any, which has become effective under the
Securities Act of 1933 and the 1940 Act.
(n) "Shares" refers collectively to such shares of capital stock
or beneficial interest, as the case may be, or class thereof, of each
respective Portfolio of the Fund as may be issued from time to time.
(o) "Shareholder" shall mean a record owner of Shares of each
respective Portfolio of the Fund.
(p) "Written Instructions" shall mean a written communication
signed by a person reasonably believed by Investor Services Group to be an
Authorized Person and actually received by Investor Services Group.
Written Instructions shall include manually executed originals and
authorized electronic transmissions, including telefacsimile of a manually
executed original or other process.
Article 2 Appointment of Investor Services Group.
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<PAGE> 3
The Fund, on behalf of the Portfolios, hereby appoints and constitutes
Investor Services Group as its sole and exclusive transfer agent and dividend
disbursing agent for Shares of each respective Portfolio of the Fund and as
shareholder servicing agent for the Fund and Investor Services Group hereby
accepts such appointments and agrees to perform the duties hereinafter set
forth. This Agreement shall be effective as of the Effective Date.
Article 3 Duties of Investor Services Group.
3.1 Investor Services Group shall be responsible for:
(a) Administering and/or performing the customary services of a
transfer agent; acting as service agent in connection with dividend and
distribution functions; and for performing shareholder account and
administrative agent functions in connection with the issuance, transfer
and redemption or repurchase (including coordination with the Custodian)
of Shares of each Portfolio, as more fully described in the written
schedule of Duties of Investor Services Group annexed hereto as Schedule B
and incorporated herein, and in accordance with the terms of the
Prospectus of the Fund on behalf of the applicable Portfolio, applicable
law and the procedures established from time to time between Investor
Services Group and the Fund.
(b) Recording the issuance of Shares and maintaining pursuant to
Rule 17Ad-10(e) of the 1934 Act a record of the total number of Shares of
each Portfolio which are authorized, based upon data provided to it by the
Fund, and issued and outstanding. Investor Services Group shall provide
the Fund on a regular basis with the total number of Shares of each
Portfolio which are authorized and issued and outstanding and shall have
no obligation, when recording the issuance of Shares, to monitor the
issuance of such Shares or to take cognizance of any laws relating to the
issue or sale of such Shares, which functions shall be the sole
responsibility of the Fund.
(c) Through its affiliate, First Data Distributors, Inc., perform
the customary services of a teleservicing agent, as more fully described
in Schedule B. It is understood and agreed that all teleservicing
representatives shall be registered and in good standing with the NASD and
applicable state securities authorities to the extent determined by
Investor Services Group to be required and to the best of Investor
Services Group's knowledge are not currently under investigation by any
securities regulatory authority.
(d) In addition to providing the foregoing services, the Fund
hereby engages Investor Services Group as its exclusive service provider
with respect to the Print/Mail Services as set forth in Schedule C for the
fees also identified in Schedule C. Investor Services Group agrees to
perform the services and its obligations subject to the terms and
conditions of this Agreement.
(e) Notwithstanding any of the foregoing provisions of this
Agreement, Investor Services Group shall be under no duty or obligation to
inquire into, and shall not be liable for: (i) the legality of the
issuance or sale of any Shares or the sufficiency of the
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amount to be received therefor; (ii) the legality of the redemption of any
Shares, or the propriety of the amount to be paid therefor; (iii) the
legality of the declaration of any dividend by the Board of Directors, or
the legality of the issuance of any Shares in payment of any dividend; or
(iv) the legality of any recapitalization or readjustment of the Shares.
3.2 In addition, the Fund shall (i) identify to Investor Services Group
in writing those transactions and assets to be treated as exempt from blue sky
reporting for each State and (ii) verify the establishment of transactions for
each State on the system prior to activation and thereafter monitor the daily
activity for each State. The responsibility of Investor Services Group for the
Fund's blue sky State registration status is solely limited to the initial
establishment of transactions subject to blue sky compliance by the Fund and
the reporting of such transactions to the Fund as provided above.
3.3 In performing its duties under this Agreement, Investor Services
Group: (a) will act in accordance with the Articles of Incorporation, By-Laws,
Prospectuses and with the Oral Instructions and Written Instructions of the
Fund and will conform to and comply with the requirements of the 1940 Act and
all other applicable federal or state laws and regulations; and (b) will
consult with legal counsel to the Fund, as necessary and appropriate.
Furthermore, Investor Services Group shall not have or be required to have any
authority to supervise the investment or reinvestment of the securities or
other properties which comprise the assets of the Fund or any of its Portfolios
and shall not provide any investment advisory services to the Fund or any of
its Portfolios.
3.4 Investor Services Group agrees to provide the services described
herein in accordance with the Performance Standards annexed hereto as Exhibit 1
of Schedule A and incorporated herein (the "Performance Standards"). Such
Performance Standards may be amended from time to time upon written agreement
of the parties.
3.5 In addition to the duties set forth herein, Investor Services Group
shall perform such other duties and functions, and shall be paid such amounts
therefor, as may from time to time be agreed upon in writing between the Fund
and Investor Services Group.
Article 4 Recordkeeping and Other Information.
4.1 Investor Services Group shall create and maintain all records
required of it pursuant to its duties hereunder and as set forth in Schedule B
in accordance with all applicable laws, rules and regulations, including
records required by Section 31(a) of the 1940 Act. Where applicable, such
records shall be maintained by Investor Services Group for the periods and in
the places required by Rule 31a-2 under the 1940 Act.
4.2 To the extent required by Section 31 of the 1940 Act, Investor
Services Group agrees that all such records prepared or maintained by Investor
Services Group relating to the services to be performed by Investor Services
Group hereunder are the property of the Fund and
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will be preserved, maintained and made available in accordance with such
section, and will be surrendered promptly to the Fund on and in accordance with
the Fund's request.
4.3 In case of any requests or demands for the inspection of Shareholder
records of the Fund, Investor Services Group will endeavor to notify the Fund
of such request and secure Written Instructions as to the handling of such
request. Investor Services Group reserves the right, however, to exhibit the
Shareholder records to any person whenever it is advised by its counsel that it
may be held liable for the failure to comply with such request.
Article 5 Fund Instructions.
5.1 Investor Services Group will have no liability when acting upon
Written or Oral Instructions believed to have been executed or orally
communicated by an Authorized Person and will not be held to have any notice of
any change of authority of any person until receipt of a Written Instruction
thereof from the Fund. Investor Services Group will also have no liability
when processing Share certificates which it reasonably believes to bear the
proper manual or facsimile signatures of the officers of the Fund and the
proper countersignature of Investor Services Group.
5.2 At any time, Investor Services Group may request Written
Instructions from the Fund and may seek advice from legal counsel for the Fund,
or its own legal counsel, 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 such Written Instructions or
in accordance with the opinion of counsel for the Fund or for Investor Services
Group. Written Instructions requested by Investor Services Group will be
provided by the Fund within a reasonable period of time.
5.3 Investor Services Group, its officers, agents or employees, shall
accept Oral Instructions or Written Instructions given to them by any person
representing or acting on behalf of the Fund only if said representative is an
Authorized Person. The Fund agrees that all Oral Instructions shall be
followed within one business day by confirming Written Instructions, and that
the Fund's failure to so confirm shall not impair in any respect Investor
Services Group's right to rely on Oral Instructions.
Article 6 Compensation.
6.1 The Fund on behalf of each of the Portfolios will compensate
Investor Services Group for the performance of its obligations hereunder in
accordance with the fees set forth in the written Fee Schedule annexed hereto
as Schedule C and incorporated herein.
6.2 In addition to those fees set forth in Section 6.1 above, the Fund
on behalf of each of the Portfolios agrees to pay, and will be billed
separately for, out-of-pocket expenses incurred by Investor Services Group in
the performance of its duties hereunder. Out-of-pocket expenses shall include,
but shall not be limited to, the items specified in the written schedule of
out-of-pocket charges annexed hereto as Schedule D and incorporated herein.
Schedule D may
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be modified by written agreement between the parties. Unspecified
out-of-pocket expenses shall be limited to those out-of-pocket expenses
reasonably incurred by Investor Services Group in the performance of its
obligations hereunder.
6.3 The Fund on behalf of each of the Portfolios agrees to pay all fees
and out-of-pocket expenses to Investor Services Group by Federal Funds Wire
within fifteen (15) business days following the receipt of the respective
invoice. In addition, with respect to all fees under this Agreement, Investor
Services Group may charge a service fee equal to the lesser of (i) one and one
half percent (1 1/2%) per month or (ii) the highest interest rate legally
permitted on any past due invoiced amounts.
6.4 Any compensation agreed to hereunder may be adjusted from time to
time by attaching to Schedule C, a revised Fee Schedule executed and dated by
the parties hereto.
6.5 The Fund acknowledges that the fees that Investor Services Group
charges the Fund under this Agreement reflect the allocation of risk between
the parties, including the disclaimer of warranties in Section 9.4 and the
limitations on liability and exclusion of remedies in Section 11.2 and Article
12. Modifying the allocation of risk from what is stated here would affect the
fees that Investor Services Group charges, and in consideration of those fees,
the Fund agrees to the stated allocation of risk.
6.6 Investor Services Group will from time to time employ or associate
with itself such person or persons as Investor Services Group may believe to be
particularly suited to assist it in performing services under this Agreement.
Such person or persons may be officers and employees who are employed by both
Investor Services Group and the Fund. The compensation of such person or
persons shall be paid by Investor Services Group and no obligation shall be
incurred on behalf of the Fund in such respect.
Article 7 Documents.
In connection with the appointment of Investor Services Group, the Fund
shall, on or before the date this Agreement goes into effect, but in any case
within a reasonable period of time for Investor Services Group to prepare to
perform its duties hereunder, deliver or caused to be delivered to Investor
Services Group the documents set forth in the written schedule of Fund
Documents annexed hereto as Schedule E.
Article 8 Investor Services Group System.
8.1 Investor Services Group shall retain title to and ownership of any
and all data bases, computer programs, screen formats, report formats,
interactive design techniques, derivative works, inventions, discoveries,
patentable or copyrightable matters, concepts, expertise, patents, copyrights,
trade secrets, and other related legal rights utilized by Investor Services
Group in connection with the services provided by Investor Services Group to
the Fund herein (the "Investor Services Group System").
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<PAGE> 7
8.2 Investor Services Group hereby grants to the Fund a limited license
to the Investor Services Group System for the sole and limited purpose of
having Investor Services Group provide the services contemplated hereunder and
nothing contained in this Agreement shall be construed or interpreted otherwise
and such license shall immediately terminate with the termination of this
Agreement.
8.3 In the event that the Fund, including any affiliate or agent of the
Fund or any third party acting on behalf of the Fund is provided with direct
access to the Investor Services Group System for either account inquiry or to
transmit transaction information, including but not limited to maintenance,
exchanges, purchases and redemptions, such direct access capability shall be
limited to direct entry to the Investor Services Group System by means of
on-line mainframe terminal entry or PC emulation of such mainframe terminal
entry and any other non-conforming method of transmission of information to
the Investor Services Group System is strictly prohibited without the prior
written consent of Investor Services Group.
Article 9 Representations and Warranties.
9.1 Investor Services Group represents and warrants to the Fund that:
(a) it is a corporation duly organized, existing and in good
standing under the laws of the Commonwealth of Massachusetts;
(b) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement;
(c) all requisite corporate proceedings have been taken to
authorize it to enter into this Agreement;
(d) it is duly registered with its appropriate regulatory agency
as a transfer agent and such registration will remain in effect for the
duration of this Agreement;
(e) First Data Distributors, Inc. is duly registered with its
appropriate regulatory authority as a broker-dealer and such registration
will remain in effect for the duration of this Agreement; and
(f) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations
under this Agreement.
9.2 The Fund represents and warrants to Investor Services Group that:
(a) it is duly organized, existing and in good standing under the
laws of the jurisdiction in which it is organized;
(b) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into this Agreement;
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<PAGE> 8
(c) all corporate proceedings required by said Articles of
Incorporation, By-Laws and applicable laws have been taken to authorize it
to enter into this Agreement;
(d) a registration statement under the Securities Act of 1933, as
amended, and the 1940 Act on behalf of each of the Portfolios is currently
effective and will remain effective, and all appropriate state securities
law filings have been made and will continue to be made, with respect to
all Shares of the Fund being offered for sale;
(e) all outstanding Shares are validly issued, fully paid and
non-assessable and when Shares are hereafter issued in accordance with the
terms of the Fund's Articles of Incorporation and its Prospectus with
respect to each Portfolio, such Shares shall be validly issued, fully paid
and non-assessable; and
9.3 Year 2000 Compliance: (a) For purposes of this Agreement, "Year
2000 Compliant" means:
(i) date data will process without error or interruption due
solely to the change in century, in any level of computer hardware or
software Investor Services Group provides, including, but not limited to,
microcode, firmware, system and application programs, files and databases;
and
(ii) there will be no loss of any functionality of the Investor
Services Group System due solely to the change in century, with respect to
the introduction, processing or output of date records.
(b) Investor Services Group represents and warrants that:
(i) The Investor Services Group System will be Year 2000
Complaint by December 31, 1998; provided, however, that Investor Services
Group will be in a process of testing the Investor Services Group System
in regard to Year 2000 Compliance throughout calendar year 1999 and any
temporary and immaterial loss of functionality occurring during the
ordinary course of this testing and fixing process shall not be considered
a failure of Investor Services Group to be Year 2000 Complaint; and
(ii) The Investor Services Group System will continue to be
interoperable, in the same manner as it is prior to January 1, 2000, with
software and hardware which may deliver records to, receive records from
or interact with the Investor Services Group System in the course of
processing data, provided that such other software and hardware is Year
2000 Compliant as defined herein and complies with the interface and
format standards specified by Investor Services Group.
(c) The Fund agrees to cooperate fully, and to ensure that its vendors
cooperate fully, with Investor Services Group to ensure the
interoperability of the Investor Services Group System with hardware and
software of the Fund and its vendors. Investor Services Group
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shall have the right, at its discretion, to reject any data file which it
in good faith believes will interfere with the ability of the Investor
Services Group System to be Year 2000 Compliant.
9.4 THIS IS A SERVICE AGREEMENT. EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, INVESTOR SERVICES GROUP DISCLAIMS ALL OTHER REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, MADE TO THE FUND OR ANY OTHER PERSON,
INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES REGARDING QUALITY, SUITABILITY,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE (IRRESPECTIVE OF
ANY COURSE OF DEALING, CUSTOM OR USAGE OF TRADE) OF ANY SERVICES OR ANY GOODS
PROVIDED INCIDENTAL TO SERVICES PROVIDED UNDER THIS AGREEMENT. INVESTOR
SERVICES GROUP DISCLAIMS ANY WARRANTY OF TITLE OR NON-INFRINGEMENT EXCEPT AS
OTHERWISE SET FORTH IN THIS AGREEMENT.
Article 10 Indemnification.
10.1 Investor Services Group shall not be responsible for and the Fund on
behalf of each Portfolio shall indemnify and hold Investor Services Group
harmless from and against any and all claims, costs, expenses (including
reasonable attorneys' fees), losses, damages, charges, payments and liabilities
of any sort or kind which may be asserted against Investor Services Group or
for which Investor Services Group may be held to be liable (a "Claim") arising
out of or attributable to any of the following:
(a) any actions of Investor Services Group required to be taken
pursuant to this Agreement unless such Claim resulted from a negligent act
or omission to act or bad faith by Investor Services Group in the
performance of its duties hereunder;
(b) Investor Services Group's reasonable reliance on, or
reasonable use of information, data, records and documents (including but
not limited to magnetic tapes, computer printouts, hard copies and
microfilm copies) received by Investor Services Group from the Fund, or
any authorized third party acting on behalf of the Fund, including but not
limited to the prior transfer agent for the Fund, in the performance of
Investor Services Group's duties and obligations hereunder;
(c) the reliance on, or the implementation of, any Written or
Oral Instructions or any other instructions or requests of the Fund on
behalf of the applicable Portfolio;
(d) the offer or sales of shares in violation of any requirement
under the securities laws or regulations of any state that such shares be
registered in such state or in violation of any stop order or other
determination or ruling by any state with respect to the offer or sale of
such shares in such state; and
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<PAGE> 10
(e) the Fund's refusal or failure to comply with the terms of
this Agreement, or any Claim which arises out of the Fund's negligence or
misconduct or the breach of any representation or warranty of the Fund
made herein.
10.2 In any case in which the Fund may be asked to indemnify or hold
Investor Services Group harmless, Investor Services Group will notify the Fund
promptly after identifying any situation which it believes presents or appears
likely to present a claim for indemnification against the Fund although the
failure to do so shall not prevent recovery by Investor Services Group and
shall keep the Fund advised with respect to all developments concerning such
situation. The Fund shall have the option to defend Investor Services Group
against any Claim which may be the subject of this indemnification, and, in the
event that the Fund so elects, such defense shall be conducted by counsel
chosen by the Fund and satisfactory to Investor Services Group, and thereupon
the Fund shall take over complete defense of the Claim and Investor Services
Group shall sustain no further legal or other expenses in respect of such
Claim. Investor Services Group will not confess any Claim or make any
compromise in any case in which the Fund will be asked to provide
indemnification, except with the Fund's prior written consent. The obligations
of the parties hereto under this Article 10 shall survive the termination of
this Agreement.
10.3 Any claim for indemnification under this Agreement must be made
prior to the earlier of:
(a) one year after the Fund becomes aware of the event for which
indemnification is claimed; or
(b) one year after the earlier of the termination of this
Agreement or the expiration of the term of this Agreement.
10.4 Except for remedies that cannot be waived as a matter of law (and
injunctive or provisional relief), the provisions of this Article 10 shall be
Investor Services Group's sole and exclusive remedy for claims or other actions
or proceedings to which the Fund's indemnification obligations pursuant to this
Article 10 may apply.
Article 11 Standard of Care.
11.1 Investor Services Group shall at all times act in good faith and
agrees to use its best efforts within commercially reasonable limits to ensure
the accuracy of all services performed under this Agreement, but assumes no
responsibility for loss or damage to the Fund unless said errors are caused by
Investor Services Group's own negligence, bad faith or willful misconduct or
that of its employees.
11.2 Notwithstanding any provision in this Agreement to the contrary,
Investor Services Group's cumulative liability (to the Fund) for all losses,
claims, suits, controversies, breaches, or damages for any cause whatsoever
(including but not limited to those arising out of
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or related to this Agreement) and regardless of the form of action or legal
theory shall not exceed the lesser of (i) $500,000 or (ii) the fees received by
Investor Services Group for services provided under this Agreement during the
twelve months immediately prior to the date of such loss or damage. Fund
understands the limitation on Investor Services Group's damages to be a
reasonable allocation of risk and Fund expressly consents with respect to such
allocation of risk. In allocating risk under the Agreement, the parties agree
that the damage limitation set forth above shall apply to any alternative
remedy ordered by a court in the event such court determines that sole and
exclusive remedy provided for in the Agreement fails of its essential purpose.
11.3 Neither party may assert any cause of action against the other party
under this Agreement that accrued more than two (2) years prior to the filing
of the suit (or commencement of arbitration proceedings) alleging such cause of
action.
11.4 Each party shall have the duty to mitigate damages for which the
other party may become responsible.
Article 12 Consequential Damages.
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT
SHALL INVESTOR SERVICES GROUP, ITS AFFILIATES OR ANY OF ITS OR THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE UNDER ANY THEORY OF
TORT, CONTRACT, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR LOST
PROFITS, EXEMPLARY, PUNITIVE, SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL
DAMAGES, EACH OF WHICH IS HEREBY EXCLUDED BY AGREEMENT OF THE PARTIES
REGARDLESS OF WHETHER SUCH DAMAGES WERE FORESEEABLE OR WHETHER EITHER PARTY OR
ANY ENTITY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Article 13 Term and Termination.
13.1 This Agreement shall be effective on the date first written above
and shall continue for a period of ten (10) years (the "Initial Term").
13.2 Upon the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of three (3) years ("Renewal Terms")
each, unless the Fund or Investor Services Group provides written notice to the
other of its intent not to renew. Such notice must be received not less than
ninety (90) days and not more than one-hundred eighty (180) days prior to the
expiration of the Initial Term or the then current Renewal Term.
13.3 In the event a termination notice is given by the Fund, all expenses
associated with movement of records and materials and conversion thereof to a
successor transfer agent will be borne by the Fund.
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<PAGE> 12
13.4 If a party hereto is guilty of a material failure to perform its
duties and obligations hereunder (a "Defaulting Party") the other party (the
"Non-Defaulting Party") may give written notice thereof to the Defaulting
Party, and if such material breach shall not have been remedied within thirty
(30) days after such written notice is given, then the Non-Defaulting Party may
terminate this Agreement by giving thirty (30) days written notice of such
termination to the Defaulting Party. If Investor Services Group is the
Non-Defaulting Party, its termination of this Agreement shall not constitute a
waiver of any other rights or remedies of Investor Services Group with respect
to services performed prior to such termination of rights of Investor Services
Group to be reimbursed for out-of-pocket expenses. In all cases, termination
by the Non-Defaulting Party shall not constitute a waiver by the Non-Defaulting
Party of any other rights it might have under this Agreement or otherwise
against the Defaulting Party.
13.5 Notwithstanding anything contained in this Agreement to the
contrary, should the Fund desire to move any of the services provided by
Investor Services Group hereunder to a successor service provider prior to the
expiration of the then current Initial or Renewal Term, or should the Fund or
any of its affiliates take any action which would result in Investor Services
Group ceasing to provide transfer agency services to the Fund prior to the
expiration of the Initial or any Renewal Term, Investor Services Group shall
make a good faith effort to facilitate the conversion on such prior date,
however, there can be no guarantee that Investor Services Group will be able to
facilitate a conversion of services on such prior date. In connection with the
foregoing, should services be converted to a successor service provider or
should the Fund or any of its affiliates take any action which would result in
Investor Services Group ceasing to provide transfer agency services to the Fund
prior to the expiration of the Initial or any Renewal Term, the payment of fees
to Investor Services Group as set forth herein shall be accelerated to a date
prior to the conversion or termination of services and calculated as if the
services had remained with Investor Services Group until the expiration of the
then current Initial or Renewal Term and calculated at the asset and/or
Shareholder account levels, as the case may be, on the date notice of
termination was given to Investor Services Group.
Article 14 Additional Portfolios
14.1 In the event that the Fund establishes one or more Portfolios in
addition to those identified in Schedule A, with respect to which the Fund
desires to have Investor Services Group render services as transfer agent under
the terms hereof, the Fund shall so notify Investor Services Group in writing,
and if Investor Services Group agrees in writing to provide such services,
Schedule A shall be amended to include such additional Portfolios.
Article 15 Confidentiality.
15.1 The parties agree that the Proprietary Information (defined below)
and the contents of this Agreement (collectively "Confidential Information")
are confidential information of the parties and their respective licensors.
The Fund and Investor Services Group shall exercise at least the same degree of
care, but not less than reasonable care, to safeguard the confidentiality of
the Confidential Information of the other as it would exercise to protect its
own confidential information of a similar nature. The Fund and Investor
Services Group shall not duplicate, sell or
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disclose to others the Confidential Information of the other, in whole or in
part, without the prior written permission of the other party. The Fund and
Investor Services Group may, however, disclose Confidential Information to
their respective parent corporation, their respective affiliates, their
subsidiaries and affiliated companies and employees, provided that each shall
use reasonable efforts to ensure that the Confidential Information is not
duplicated or disclosed in breach of this Agreement. The Fund and Investor
Services Group may also disclose the Confidential Information to independent
contractors, auditors, and professional advisors, provided they first agree in
writing to be bound by the confidentiality obligations substantially similar to
this Section 15.1. Notwithstanding the previous sentence, in no event shall
either the Fund or Investor Services Group disclose the Confidential
Information to any competitor of the other without specific, prior written
consent.
15.2 Proprietary Information means:
(a) any data or information that is competitively sensitive
material, and not generally known to the public, including, but not
limited to, information about product plans, marketing strategies,
finance, operations, customer relationships, customer profiles, sales
estimates, business plans, and internal performance results relating to
the past, present or future business activities of the Fund or Investor
Services Group, their respective subsidiaries and affiliated companies and
the customers, clients and suppliers of any of them;
(b) any scientific or technical information, design, process,
procedure, formula, or improvement that is commercially valuable and
secret in the sense that its confidentiality affords the Fund or Investor
Services Group a competitive advantage over its competitors; and
(c) all confidential or proprietary concepts, documentation,
reports, data, specifications, computer software, source code, object
code, flow charts, databases, inventions, know-how, show-how and trade
secrets, whether or not patentable or copyrightable.
15.3 Confidential Information includes, without limitation, all
documents, inventions, substances, engineering and laboratory notebooks,
drawings, diagrams, specifications, bills of material, equipment, prototypes
and models, and any other tangible manifestation of the foregoing of either
party which now exist or come into the control or possession of the other.
15.4 The obligations of confidentiality and restriction on use herein
shall not apply to any Confidential Information that a party proves:
(a) Was in the public domain prior to the date of this Agreement
or subsequently came into the public domain through no fault of such
party; or
(b) Was lawfully received by the party from a third party free of
any obligation of confidence to such third party; or
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<PAGE> 14
(c) Was already in the possession of the party prior to receipt
thereof, directly or indirectly, from the other party; or
(d) Is required to be disclosed in a judicial or administrative
proceeding after all reasonable legal remedies for maintaining such
information in confidence have been exhausted including, but not limited
to, giving the other party as much advance notice of the possibility of
such disclosure as practical so the other party may attempt to stop such
disclosure or obtain a protective order concerning such disclosure; or
(f) Is subsequently and independently developed by employees,
consultants or agents of the party without reference to the Confidential
Information disclosed under this Agreement.
Article 16 Force Majeure.
No party shall be liable for any default or delay in the performance of
its obligations under this Agreement if and to the extent such default or delay
is caused, directly or indirectly, by (i) fire, flood, elements of nature or
other acts of God; (ii) any outbreak or escalation of hostilities, war, riots
or civil disorders in any country, (iii) any act or omission of the other party
or any governmental authority; (iv) any labor disputes (whether or not the
employees' demands are reasonable or within the party's power to satisfy); or
(v) nonperformance by a third party or any similar cause beyond the reasonable
control of such party, including without limitation, failures or fluctuations
in telecommunications or other equipment. In any such event, the
non-performing party shall be excused from any further performance and
observance of the obligations so affected only for as long as such
circumstances prevail and such party continues to use commercially reasonable
efforts to recommence performance or observance as soon as practicable.
Article 17 Assignment and Subcontracting.
This Agreement, its benefits and obligations shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement may not be assigned or otherwise transferred
by either party hereto, without the prior written consent of the other party,
which consent shall not be unreasonably withheld; provided, however, that
Investor Services Group may, in its sole discretion, assign all its right,
title and interest in this Agreement to an affiliate, parent or subsidiary, or
to the purchaser of substantially all of its business. Investor Services Group
may, in its sole discretion, engage subcontractors to perform any of the
obligations contained in this Agreement to be performed by Investor Services
Group.
Article 18 Arbitration.
18.1 Any claim or controversy arising out of or relating to this
Agreement, or breach hereof, shall be settled by arbitration administered by
the American Arbitration Association in
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Boston, Massachusetts in accordance with its applicable rules, except that the
Federal Rules of Evidence and the Federal Rules of Civil Procedure with respect
to the discovery process shall apply.
18.2 The parties hereby agree that judgment upon the award rendered by
the arbitrator may be entered in any court having jurisdiction.
18.3 The parties acknowledge and agree that the performance of the
obligations under this Agreement necessitates the use of instrumentalities of
interstate commerce and, notwithstanding other general choice of law provisions
in this Agreement, the parties agree that the Federal Arbitration Act shall
govern and control with respect to the provisions of this Article 18.
Article 19 Notice.
Any notice or other instrument authorized or required by this Agreement to
be given in writing to the Fund or Investor Services Group, shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.
To the Fund:
Worldwide Index Funds
790 East Colorado Boulevard, 9th Floor
Pasadena, California 91101
Attention: F. Brian Cerini
To Investor Services Group:
First Data Investor Services Group, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Attention: President
with a copy to Investor Services Group's General Counsel
Article 20 Governing Law/Venue.
The laws of the Commonwealth of Massachusetts, excluding the laws on
conflicts of laws, shall govern the interpretation, validity, and enforcement
of this Agreement. All actions arising from or related to this Agreement
shall be brought in the state and federal courts sitting in the City of Boston,
and Investor Services Group and the Fund hereby submit themselves to the
exclusive jurisdiction of those courts.
Article 21 Counterparts.
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This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
Article 22 Captions.
The captions of 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.
Article 23 Publicity.
Neither Investor Services Group nor the Fund shall release or publish news
releases, public announcements, advertising or other publicity relating to this
Agreement or to the transactions contemplated by it without the prior review
and written approval of the other party; provided, however, that either party
may make such disclosures as are required by legal, accounting or regulatory
requirements after making reasonable efforts in the circumstances to consult in
advance with the other party.
Article 24 Relationship of Parties/Non-Solicitation.
24.1 The parties agree that they are independent contractors and not
partners or co-venturers and nothing contained herein shall be interpreted or
construed otherwise.
24.2 During the term of this Agreement and for one (1) year afterward,
the Fund shall not recruit, solicit, employ or engage, for the Fund or others,
Investor Services Group's employees.
Article 25 Entire Agreement; Severability.
25.1 This Agreement, including Schedules, Addenda, and Exhibits hereto,
constitutes the entire Agreement between the parties with respect to the
subject matter hereof and supersedes all prior and contemporaneous proposals,
agreements, contracts, representations, and understandings, whether written or
oral, between the parties with respect to the subject matter hereof. No
change, termination, modification, or waiver of any term or condition of the
Agreement shall be valid unless in writing signed by each party. No such
writing shall be effective as against Investor Services Group unless said
writing is executed by a Senior Vice President, Executive Vice President, or
President of Investor Services Group. A party's waiver of a breach of any term
or condition in the Agreement shall not be deemed a waiver of any subsequent
breach of the same or another term or condition.
25.2 The parties intend every provision of this Agreement to be
severable. If a court of competent jurisdiction determines that any term or
provision is illegal or invalid for any reason, the illegality or invalidity
shall not affect the validity of the remainder of this Agreement. In such
case, the parties shall in good faith modify or substitute such provision
consistent with the original intent of the parties. Without limiting the
generality of this paragraph, if a court
- 16 -
<PAGE> 17
determines that any remedy stated in this Agreement has failed of its essential
purpose, then all other provisions of this Agreement, including the limitations
on liability and exclusion of damages, shall remain fully effective.
Article 26 Miscellaneous.
The Fund and Investor Services Group agree that the obligations of the
Fund under the Agreement shall not be binding upon any of the Board Members,
shareholders, nominees, officers, employees or agents, whether past, present or
future, of the Fund individually, but are binding only upon the assets and
property of the Fund, as provided in the Articles of Incorporation. The
execution and delivery of this Agreement have been authorized by the Board
Members of the Fund, and signed by an authorized officer of the Fund, acting as
such, and neither such authorization by such Board Members nor such execution
and delivery by such officer shall be deemed to have been made by any of them
or any shareholder of the Fund individually or to impose any liability on any
of them or any shareholder of the Fund personally, but shall bind only the
assets and property of the Fund as provided in the Articles of Incorporation.
- 17 -
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, as of the day and year first above
written.
WORLDWIDE INDEX FUNDS
By:
-----------------------------------------------
Title:
--------------------------------------------
FIRST DATA INVESTOR SERVICES GROUP, INC.
By:
-----------------------------------------------
Title:
--------------------------------------------
Agreed to and Accepted:
FIRST DATA DISTRIBUTORS, INC.
By:
-----------------------------------------------
Title:
--------------------------------------------
- 18 -
<PAGE> 19
SCHEDULE A
LIST OF PORTFOLIOS
Australia Index Fund
France Index Fund
Germany Index Fund
Hong Kong Index Fund
Italy Index Fund
Japan Index Fund
Netherlands Index Fund
Spain Index Fund
Sweden Index Fund
Switzerland Index Fund
United Kingdom Index Fund
Europe Index Fund
International Index Fund
- 19 -
<PAGE> 20
SCHEDULE B
DUTIES OF INVESTOR SERVICES GROUP
I. TRANSFER AGENCY SERVICES
(a) Shareholder Information. Investor Services Group shall maintain a
record of the number of Shares held by each Shareholder of record which shall
include name, address, taxpayer identification and which shall indicate whether
such Shares are held in certificates or uncertificated form.
(b) Shareholder Services. Investor Services Group shall respond as
appropriate to all inquiries and communications from Shareholders relating to
Shareholder accounts with respect to its duties hereunder and as may be from
time to time mutually agreed upon between Investor Services Group and the Fund.
(c) Mailing Communications to Shareholders; Proxy Materials. Investor
Services Group will address and mail to Shareholders of the Fund, all reports
to Shareholders, dividend and distribution notices and proxy material for the
Fund's meetings of Shareholders. In connection with meetings of Shareholders,
Investor Services Group will prepare Shareholder lists, mail and certify as to
the mailing of proxy materials, process and tabulate returned proxy cards,
report on proxies voted prior to meetings, act as inspector of election at
meetings and certify Shares voted at meetings.
(d) Sales of Shares.
- Investor Services Group shall not be required to issue any Shares of the
Fund where it has received a Written Instruction from the Fund or official
notice from any appropriate authority that the sale of the Shares of the
Fund has been suspended or discontinued. The existence of such Written
Instructions or such official notice shall be conclusive evidence of the
right of Investor Services Group to rely on such Written Instructions or
official notice.
- In the event that any check or other order for the payment of money is
returned unpaid for any reason, Investor Services Group will endeavor to:
(i) give prompt notice of such return to the Fund or its designee; (ii)
place a stop transfer order against all Shares issued as a result of such
check or order; and (iii) take such actions as Investor Services Group may
from time to time deem appropriate.
(e) Transfer and Repurchase.
- Investor Services Group shall process all requests to transfer or redeem
Shares in accordance with the transfer or repurchase procedures set forth
in the Fund's Prospectus.
- 20 -
<PAGE> 21
- Investor Services Group will transfer or repurchase Shares upon receipt of
Oral or Written Instructions or otherwise pursuant to the Prospectus and
Share certificates, if any, properly endorsed for transfer or redemption,
accompanied by such documents as Investor Services Group reasonably may
deem necessary.
- Investor Services Group reserves the right to refuse to transfer or
repurchase Shares until it is satisfied that the endorsement on the
instructions is valid and genuine. Investor Services Group also reserves
the right to refuse to transfer or repurchase Shares until it is satisfied
that the requested transfer or repurchase is legally authorized, and it
shall incur no liability for the refusal, in good faith, to make transfers
or repurchases which Investor Services Group, in its good judgment, deems
improper or unauthorized, or until it is reasonably satisfied that there
is no basis to any claims adverse to such transfer or repurchase.
- When Shares are redeemed, Investor Services Group shall, upon receipt of
the instructions and documents in proper form, deliver to the Custodian
and the Fund or its designee a notification setting forth the number of
Shares to be repurchased. Such repurchased shares shall be reflected on
appropriate accounts maintained by Investor Services Group reflecting
outstanding Shares of the Fund and Shares attributed to individual
accounts.
- Investor Services Group shall upon receipt of the monies provided to it by
the Custodian for the repurchase of Shares, pay such monies as are
received from the Custodian, all in accordance with the procedures
described in the written instruction received by Investor Services Group
from the Fund.
- Investor Services Group shall not process or effect any repurchase with
respect to Shares of the Fund after receipt by Investor Services Group or
its agent of notification of the suspension of the determination of the
net asset value of the Fund.
(f) Dividends.
- Upon the declaration of each dividend and each capital gains distribution
by the Board of Directors of the Fund with respect to Shares of the Fund,
the Fund shall furnish or cause to be furnished to Investor Services Group
Written Instructions setting forth the date of the declaration of such
dividend or distribution, the ex-dividend date, the date of payment
thereof, the record date as of which Shareholders entitled to payment
shall be determined, the amount payable per Share to the Shareholders of
record as of that date, the total amount payable on the payment date and
whether such dividend or distribution is to be paid in Shares at net asset
value.
- 21 -
<PAGE> 22
- On or before the payment date specified in such resolution of the Board of
Directors, the Fund will provide Investor Services Group with sufficient
cash to make payment to the Shareholders of record as of such payment
date.
- If Investor Services Group does not receive sufficient cash from the Fund
to make total dividend and/or distribution payments to all Shareholders of
the Fund as of the record date, Investor Services Group will, upon
notifying the Fund, withhold payment to all Shareholders of record as of
the record date until sufficient cash is provided to Investor Services
Group.
(g) Miscellaneous. In addition to and neither in lieu nor in
contravention of the services set forth above, Investor Services Group shall
perform all the customary services of a transfer agent, registrar, dividend
disbursing agent and agent of the dividend reinvestment and cash purchase plan
as described herein consistent with those requirements in effect as at the date
of this Agreement. Investor Services Group agrees to mail cost basis
accounting forms to applicable shareholders. The detailed definition,
frequency, limitations and associated costs (if any) set out in the attached
fee schedule, include but are not limited to: maintaining all Shareholder
accounts, preparing Shareholder meeting lists, mailing proxies, tabulating
proxies, mailing Shareholder reports to current Shareholders, withholding taxes
on U.S. resident and non-resident alien accounts where applicable, preparing
and filing U.S. Treasury Department Forms 1099 and other appropriate forms
required with respect to dividends and distributions by federal authorities for
all Shareholders.
II. TELESERVICING SERVICES:
(a) Provide inbound and outbound teleservicing support in accordance
with specific programs and telephone scripts provided by or developed in
connection with the Fund.
(b) Receive, on behalf of the Fund, orders from customers for
prospectuses;
(c) Answer questions from customers to the extent that they are
answerable based upon information supplied to Investor Services Group by the
Fund.
(d) Complete data entry into the teleservicing system for coupons
received directly from the customer.
(e) Perform data entry into the teleservicing system for leads received
directly from the Fund.
(f) Provide daily transmission of lead information to the Fund's
fulfillment center and/or, as agreed to by the parties, another location
designated by the Fund.
(g) Provide the Fund with operational reports, the form and content of
which will be agreed upon by Investor Services Group and the Fund.
- 22 -
<PAGE> 23
(h) Incorporate new information into the above referred script as
necessary and appropriate in a timely manner upon approval by the Fund.
- 23 -
<PAGE> 24
Exhibit 1 of Schedule B
Performance Standards
Investor Services Group's obligation to meet the following Performance
Standards shall be measured in the aggregate with respect to all Portfolios.
Investor Services Group will report to the Fund on a monthly basis the percent
of items completed within standard as well as a quality rating. Reporting will
be detailed to the transaction type level. A pass/fail determination for
contractual penalties will however be based on the categories listed below.
For example, the accuracy of purchases, redemptions, exchanges and adjustments
will be reported to the Fund on an individual basis and as a collective group.
Investor Services Group will receive a "fail" for the month if the collective
score for all financials falls below the contractual level. Note that
completion standards are measured in business days.
<TABLE>
<CAPTION>
CATEGORY COMPONENTS (TO BE REPORTED INDIVIDUALLY)
- ---------------------------------------------------------------------------------
TRANSFER AGENT SERVICES
<S> <C>
Financials Purchases, Redemptions, Exchanges, Adjustments (both
financial and non-financial adjustments)
Minimum Acceptable Quality Control Review: 100%
Minimum Acceptable Quality Assurance Score: 98%
Minimum Acceptable Review: 10%
Non-Financials Maintenance (including address changes, option changes,
ROA/LOI), Legal Transfers, New Accounts
Minimum Acceptable Quality Assurance Score: 98%
Minimum Acceptable Review: 10%
Minimum Acceptable New Account Review: 15%
Print Mail Statements, Confirms, Checks
Minimum Acceptable Quality Score: 98%
Shareholder Service Telephones, Correspondence
Minimum Acceptable Correspondence Quality Score: 98%
Minimum Acceptable Telephone Thru-put Quality Score: 98%
</TABLE>
- 24 -
<PAGE> 25
COMPLETION STANDARDS
TRANSACTION PROCESSING
A. Complete on day of receipt:
- Purchases, redemptions, exchanges, financial adjustments, new accounts
B. Complete within three days of receipt:
- Non-financial adjustments
C. Complete within 5 days of receipt
- Maintenance, legal transfers
PRINT MAIL *
A. Mailed on day of receipt (post date + 1 business day)
- Shareholder Checks
B. Mailed within one day of receipt (post date + 2 business days)
- Confirms
C. Mailed within five business days following the end of the reporting period
- Statements, Commission Checks
* Note that Print Mail performance standards will be in effect only
for those mailings where services are provided by Investor Services
Group.
SHAREHOLDER SERVICES
A. Telephone calls abandoned no greater than 2% of calls received (excluding
calls that abandon in less than 20 seconds)
B. Financial Correspondence mailed within two days of receipt
C. Non-financial Correspondence mailed within five days of receipt
Quality Assurance on Telephone Calls
A. Measurement Categories - Certain services provided by Investor Services
Group will be measured against to the following categories.
Minimum Acceptable Overall Quality Score: 90%
1. Qualitative Criteria of Telephone Services (100 points):
- Opening of Call (5 points)
- Account Verification (10 points)
- Response to Inquiry (55 points)
- Resolution and Closing (5 points)
- Objective Criteria (25 points)
- Bonus Points (extra 5 points)
- 25 -
<PAGE> 26
2. Qualitative Criteria of Telephone Sales (100 points):
- Opening of Call (5 points)
- Marketing Requirements (65 points)
- Resolution and Closing (5 points)
- Objective Criteria (25 points)
- Bonus Points (extra 5 points)
- 26 -
<PAGE> 27
SCHEDULE C
FEE SCHEDULE
1. Standard Fees
Transfer Agency Fees:
- $20,000 per Portfolio per annum minimum for 11 Portfolios - Fund of
Funds minimum fee is waived for 2 Portfolios
- Upon account base reaching open 1,333 accounts per Portfolio, fee
converts to $15.00 per open account per annum; and $2.00 per closed
account per annum.
Cost Basis Accounting Fees:
- Cost basis accounting development cost of $25,000
IMPRESSNet Fees:
- Design estimate will be based on requirements and deliverable dates
- billed at a rate of $150.00 per hour. Estimate will be based upon
Fund specifications
- IMPRESSNet annual maintenance and transaction fees are waived for
year 1
- Year 2 and thereafter, annual maintenance fee of $40,000, an inquiry
fee of $0.10 and per transaction fee of $0.50 per access
DAZL Fees:
- DAZL Interactive set-up fee and on-going monthly support are waived
- Transaction fees are $0.015 per price record, $0.01 per Schwab
record fee and $0.025 for all other b/d records
Teleservicing Fees:
- $33.00 per hour per representative. Minimum number of
representatives is three (3). Additional representatives may be
added at the request of the Fund.
After the one year anniversary of the effective date of this Agreement,
Investor Services Group may adjust the above fees once per calendar year, upon
thirty (30) days prior written notice in an amount not to exceed the cumulative
percentage increase in the Consumer Price Index for All Urban Consumers (CPI-U)
U.S. City Average, All items (unadjusted) - (1982-84=100), published by the
U.S. Department of Labor since the last such adjustment in the Client's monthly
fees (or the Effective Date absent a prior such adjustment).
- 27 -
<PAGE> 28
2. Programming Costs
(a) Dedicated Team:
Programmer $150,000 per annum
BSA $ 85,000 per annum
Tester $ 65,000 per annum
(b) System Enhancements (Non Dedicated Team):
Programmer $150.00 per hour
The above rates are subject to an annual 5% increase after the one year
anniversary of the effective date of this Agreement.
3. Print/Mail Fees.
Regular Mailings:
IMPLEMENTATION FEE:
$ 5000.00
$ 150.00 / hr. Multi-check and Non Standard
TESTING APPLICATION OR DATA REQUIREMENTS:
$3.00 / fax to client or Record Keeper
WORK ORDER:
$15.00 per workorder
DAILY WORK (CONFIRMS):
HAND: $71/K with $75.00 minimum (includes 1 insert)
$0.07/each additional insert
MACHINE: $42/K with $50.00 minimum (includes 1 insert)
$0.01/each additional insert
DAILY CHECKS:
HAND: $91/K with $100.00 minimum daily (includes 1 insert)
$0.08/each additional insert
MACHINE: $52/K with $75.00 minimum (includes 1 insert)
$0.01/each additional insert
- 28 -
<PAGE> 29
* There is a $3.00 charge for each 3606 Form sent.
STATEMENTS:
HAND: $78/K with $75.00 minimum (includes 1 insert)
$0.08/each additional insert
$125/K for intelligent inserting
MACHINE: $52/K with $75.00 minimum (includes 1 insert)
$0.01 each additional insert
$58/K for intelligent inserting
PERIODIC CHECKS:
HAND: $91/K with $100.00 minimum (includes 1 insert)
$0.08/each additional insert
MACHINE: $52/K with $100.00 minimum (includes 1 insert)
$0.01/each additional insert
12B1/DEALER COMMISSION CHECKS/STATEMENTS:
$0.78/each envelope with $100.00 minimum
SPAC REPORTS/GROUP STATEMENTS:
$78/K with $75.00 minimum
LISTBILLS:
$0.78 per envelope with $75.00 minimum
PRINTING CHARGES: (price ranges dependent on volumes)
$0.08/per confirm/statement/page
$0.10/per check
FOLDING (MACHINE):
$18/K
FOLDING (HAND):
$.12 each
- 29 -
<PAGE> 30
PRESORT CHARGE:
$0.277 postage rate
$0.035 per piece
COURIER CHARGE:
$15.00 for each on call courier trip/or actual cost for on demand
OVERNIGHT CHARGE:
$3.50 per package service charge plus Federal Express/Airborne charge
INVENTORY STORAGE:
$20.00 for each inventory location as of the 15th of the month
INVENTORY RECEIPT:
$20.00 for each SKU / Shipment
HOURLY WORK; SPECIAL PROJECTS, OPENING ENVELOPES, ETC...
$24.00 per hour
SPECIAL PULLS
$2.50 per account pull
BOXES/ENVELOPES:
Shipping boxes $0.85 each
Oversized Envelopes $0.45 each
FORMS DEVELOPMENT/PROGRAMMING FEE:
$100/hr
SYSTEMS TESTING:
$85/hr
CUTTING CHARGES:
$10.00/K
- 30 -
<PAGE> 31
Special Mailings:
This pricing is based on appropriate notification (standard of 30 day
notification) and scheduling for special mailings. Scheduling requirements
include having collateral arrive at agreed upon times in advance of deadlines.
Mailings which arise with shorter time frames and turns will be billed at a
maximum premium of 50% based on turn around requirements.
WORK ORDER:
$30.00 per Workorder
DAILY WORK (CONFIRMS):
HAND: $135.00 to create an admark tape
$10.00/K to zip + 4 data enhance with $125.00 minimum
$80.00/hr for any data manipulation
$6.00/K combo charge
ADMARK & MACHINE INSERT
#10, #11, 6x9
$62/K to admark envelope and machine insert 1 piece, with $125.00 min
$2.50/K for each additional insert
$38/K to admark only with $75.00 minimum
$25.00/K hand sort
9x12
$100/K to admark envelope and machine insert 1 piece, with $125.00
min
$5.00/K for each additional insert
$38/K to admark only with $75.00 minimum
$0.08 for each hand insert
ADMARK & HAND INSERT
#10, #11, 6x9
$0.08 for each hand insert
$25.00/K hand sort
9x12
$0.09 for each hand insert
$25.00/K hand sort
PRESSURE/SENSITIVE LABELS:
- 31 -
<PAGE> 32
$0.32 each to create, affix and hand insert 1 piece, with a $75.00
minimum
$0.08 for each hand insert
$0.10 to affix labels only
$0.10 to create labels only
LEGAL DROP:
$150.00 / compliant legal drop per job and processing fees
CREATE MAILING LIST:
$0.40 per entry with $75.00 minimum
PRESORT FEE:
$0.035 per piece
- 32 -
<PAGE> 33
SCHEDULE D
OUT-OF-POCKET EXPENSES
The Fund shall reimburse Investor Services Group monthly for applicable
out-of-pocket expenses, including, but not limited to the following items:
- Microfiche/microfilm production
- Magnetic media tapes and freight
- Printing costs, including certificates, envelopes, checks and
stationery
- Postage (bulk, pre-sort, ZIP+4, barcoding, first class) direct pass
through to the Fund
- Due diligence mailings
- Telephone and telecommunication costs, including all lease,
maintenance and line costs
- Ad hoc reports
- Proxy solicitations, mailings and tabulations
- Daily & Distribution advice mailings
- Shipping, Certified and Overnight mail and insurance
- Year-end form production and mailings
- Terminals, communication lines, printers and other equipment and any
expenses incurred in connection with such terminals and lines
- Duplicating services
- Courier services
- Incoming and outgoing wire charges
- Federal Reserve charges for check clearance
- Overtime, as approved by the Fund
- Temporary staff, as approved by the Fund
- Travel to and from Board meetings
- Travel and entertainment, as approved by the Fund
- Record retention, retrieval and destruction costs, including, but not
limited to exit fees charged by third party record keeping vendors
- Third party audit reviews
- Ad hoc SQL time
- Insurance
- Pricing services (or services used to determine Fund NAV)
- Forms and supplies for the preparation of Board meetings and other
materials for the Fund
- Vendor set-up charges for Blue Sky services
- Customized programming requests
- Blue Sky filing or registration fees
- SAS 70
- Cold Storage
- Document Retrieval
- Vendor pricing comparison
- 33 -
<PAGE> 34
- Manual pricing
- Licensing and registration fees for registered representatives
- magnetic tape
- retention of records
- data subscription services
- voice and data lines/access charges/set-up/installation of all
communications hardware and software
- transmitting lines, modems and any other expenses incurred in
connection with such terminals and lines
- sales tax, if applicable
- post office box charges
- 800 number usage at a rate of $0.10 per minute
- software enhancements at a rate of $150.00 per hour
- state registration fees, if applicable
- licensing costs of all software applications of Fund data
- Such other miscellaneous expenses reasonably incurred by Investor
Services Group in performing its duties and responsibilities under
this Agreement.
The Fund agrees that postage and mailing expenses will be paid on the day
of or prior to mailing as agreed with Investor Services Group. In addition,
the Fund will promptly reimburse Investor Services Group for any other
unscheduled expenses incurred by Investor Services Group whenever the Fund and
Investor Services Group mutually agree that such expenses are not otherwise
properly borne by Investor Services Group as part of its duties and obligations
under the Agreement.
- 34 -
<PAGE> 35
SCHEDULE E
FUND DOCUMENTS
- Certified copy of the Articles of Incorporation of the Fund, as
amended
- Certified copy of the By-laws of the Fund, as amended
- Copy of the resolution of the Board of Directors authorizing the
execution and delivery of this Agreement
- Copies of all agreements between the Fund and its service providers
- All account application forms and other documents relating to
Shareholder accounts or to any plan, program or service offered by
the Fund
- All notices issued by the Fund with respect to the Shares in
accordance with and pursuant to the Articles of Incorporation or
By-laws of the Fund or as required by law and shall perform such
other specific duties as are set forth in the Articles of
Incorporation including the giving of notice of any special or
annual meetings of shareholders and any other notices required
thereby.
- A listing of all jurisdictions in which each Portfolio is
registered and lawfully available for sale as of the date of
this Agreement and all information relative to the monitoring of
sales and registrations of Fund shares in such jurisdictions
- Each Fund's most recent post-effective amendment to its
Registration Statement
- Each Fund's most recent prospectus and statement of additional
information, if applicable, and all amendments and supplements
thereto
- 35 -
<PAGE> 1
EXHIBIT (h)(3)
FORM OF ADMINISTRATION AGREEMENT
July 29, 1998
LMI Capital Administration LLC
790 East Colorado Boulevard, 9th Floor
Pasadena, California 91101
Ladies and Gentlemen:
The Worldwide Index Funds (the "Trust"), a business trust organized under
the laws of the Commonwealth of Massachusetts, confirms its agreements with LMI
Capital Administration LLC (the "Administrator"), a limited liability company
organized under the laws of the state of Delaware, regarding administration
services to be provided by the Administrator in connection with each of the
investment funds offered from time to time by the Trust (individually, a "Fund"
and together, the "Funds"). The Administrator agrees to provide services upon
the following terms and conditions:
1. Investment Description; Appointment
The Trust desires to employ the Trust's capital by investing and
reinvesting (a) in investments of the kind and in accordance with the
limitations specified in (i) the Trust's Agreement and Declaration of Trust
dated June 1, 1998, as amended from time to time (the "Declaration of Trust"),
and (ii) the prospectus (the "Prospectus") and statement of additional
information (the "SAI") relating to the Trust contained in the Trust's
Registration statement on Form N-1A, File No. 33-56445, filed with the
Securities and Exchange Commission (the "Registration Statement") and (b) in
such manner and to such extent as may from time to time be approved by the
Trust's Board of Trustees. Copies of the Prospectus, the SAI and the Declaration
of Trust have been submitted to the Administrator. The Trust desires to employ
and hereby appoints the Administrator to act as the Trust's administrator. The
Administrator accepts this appointment and agrees to furnish the services
described herein for the compensation set forth below.
2. Services as Administrator
Subject to the supervision and direction of the Board of Trustees of the
Trust, the Administrator is responsible for all administrative functions with
respect to the Trust and will (a) assist in supervising all aspects of the
operations of the Trust except those performed by the Trust's investment adviser
and/or sub-advisers under their respective investment management, investment
advisory and sub-advisory agreements; (b) supply the Trust with office
facilities (which may be in the Administrator's own offices), statistical and
research data, data processing services, clerical, accounting and bookkeeping
services (including, but not limited to, the calculation of the net asset values
of shares of the Trust, internal auditing and legal services,
<PAGE> 2
internal executive and administrative services, and stationery and office
supplies; (c) prepare reports to the Trust's shareholders and materials for the
Board of Trustees of the Trust; (d) prepare tax returns and reports to and
filings with the Securities and Exchange Commission and state Blue Sky
authorities; (e) cooperate with the Trust's transfer agent for the purpose of
establishing and implementing procedures to ensure that the Trust's transfer
agency and shareholder relations functions are efficiently carried out; and (f)
provide such other similar services as the Trust may reasonably request to the
extent permitted under application statutes, rules and regulations. The services
to be performed by the Administrator hereunder may be delegated by it, in whole
or in part, to one or more sub-administrators provided that any delegation of
duties to a sub-administrator shall not relieve the Administrator of its
responsibilities hereunder. Notwithstanding anything to the contrary in this
Agreement, the Administrator shall not be responsible for the performance of any
duties which are required to be performed by the Trust's transfer agent.
3. Compensation
(a) In consideration of services rendered pursuant to this Agreement, the
Trust will pay the Administrator on the first business day of each month a fee
for the previous month at an annual rate based on each Fund's average daily net
assets, as set forth in Schedule A attached hereto. The Administrator shall pay
expenses as described in Paragraph 4 including, without limitation, fees to any
sub-administrator and the custodian. The fee for the period from the date the
Trust commences operations to the end of that month shall be prorated according
to the proportion such period bears to the full monthly period.
(b) Upon any termination of this Agreement before the end of any month,
the fee such part of a month shall be prorated according to the proportion which
such period bears to the full monthly period and shall be payable upon the date
of termination of this Agreement. For the purpose of determining fees payable to
the Administrator, the value of each Fund's net assets shall be computed at the
times and in the manner specified in the Prospectus and/or the Statement
relating to the Fund as from time to time in effect.
4. Expenses
The Administrator will bear all expenses in connection with the
performance of its services under this Agreement, including, without limitation,
payment of the fee to the custodian, and any sub-administrator described in
Paragraph 3 above. The Trust will bear certain other expenses to be incurred in
its operation, including: organizational expenses; taxes, interest, brokerage
fees and commissions, if any; fees of trustees of the Trust who are not
officers, director, or employees of LMI Capital Administration LLC and LMI
Capital Management LLC, any sub-adviser or sub-administrator, or any of their
affiliates; transfer agent fees; Securities and Exchange Commission fees and
state Blue Sky qualification fees; out-of-pocket expenses of custodians,
transfer and dividend disbursing agents and the Trust's sub-administrator and
transaction charges of custodians; insurance premiums; outside auditing and
legal expenses;
-2-
<PAGE> 3
costs of maintenance of the Trust's existence; costs attributable to investor
services, including, without limitation, telephone and personnel expenses; costs
of preparing and printing prospectuses and statements of additional information
for regulatory purposes and for distribution to existing shareholders; costs of
shareholders' reports and meetings of the shareholders of the Trust and of the
officers or Board of Trustees of the Trust; and any extraordinary expenses.
5. Standard of Care
The Administrator shall exercise its best judgment in rendering the
services listed in Paragraph 2 above. The Administrator shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates, except (a) a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services (in which case any award of damages shall be limited
to the period and the amount set forth in Section 36(b)(3) of the 1940 Act), or
(b) a loss resulting from willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or from reckless disregard by it of
its obligations and duties under this Agreement.
6. Term of Agreement
This Agreement shall become effective as of the date the Trust commences
its investment operations and shall continue for an initial two-year term and
shall continue automatically from year-to-year thereafter unless terminated in
accordance with the following sentence. This Agreement is terminable at any
time, without penalty, on 60 days' written notice, by the Board of Trustees of
the Trust or upon 90 days' written notice, by the Administrator.
7. Service to Other Companies or Accounts
The Trust understands that the Administrator may act in the future as
administrator to other investment companies or series of investment companies,
and the Trust has no objection to the Administrator's so acting in such
capacity. The Trust understands that the persons employed by the Administrator
to assist in the performance of the Administrator's duties under this Agreement
will not devote their full time to such service and nothing contained in this
Agreement shall be deemed to limit or restrict the right of the Administrator
affiliate or any affiliate of the Administrator to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature.
8. Representations of the Trust and The Administrator
The Trust represents that (i) a copy of the Declaration of Trust is on
file in the office of the Secretary of the Commonwealth of Massachusetts, (ii)
the appointment of the Administrator has been duly authorized and (iii) it has
acted and will continue to act in conformity with the
-3-
<PAGE> 4
1940 Act and other applicable laws. The Administrator represents that it is
authorized to perform the services described herein.
9. Limitation of Liability
The copy of the Declaration of Trust is on file with the Secretary of the
Commonwealth of Massachusetts, and notice is hereby given that this instrument
is executed on behalf of the Trustees of the Trust as Trustees and not
individually and that the obligations of this instrument are not binding upon
any of the Trustees, officers or shareholders individually but are binding only
upon the assets and property of the Trust.
10. Entire Agreement
This Agreement constitutes the entire agreement between the parties
hereto.
11. Governing Law
This Agreement shall be governed in accordance with the laws of the
Commonwealth of Massachusetts.
If the foregoing accurately sets forth our agreement, kindly indicate
your acceptance hereof by signing and returning the enclosed copy hereof.
Very truly yours,
WORLDWIDE INDEX FUNDS
By:
-------------------
Name: F. Brian Cerini
Title: President
Accepted:
LMI CAPITAL ADMINISTRATION LLC
By:
------------------
Name: F. Brian Cerini
Title: President
-4-
<PAGE> 5
Schedule A
FORM OF ADMINISTRATION AGREEMENT
Dated July 29, 1998
FUND AND FEE SCHEDULE
(Pursuant to Section 3)
The following Funds (as defined in the Administration Agreement attached
hereto) are governed by such Agreement and the Trust will pay the Administrator
(as such parties are defined in the Agreement) fees at the annual rate set forth
opposite the name of such Fund below:
<TABLE>
<CAPTION>
Fund Annual Rate
---- -----------
<S> <C>
Australia Index Fund 0.20%
France Index Fund 0.20%
Germany Index Fund 0.20%
Hong Kong Index Fund 0.20%
Italy Index Fund 0.20%
Japan Index Fund 0.20%
Netherlands Index Fund 0.20%
Spain Index Fund 0.20%
Sweden Index Fund 0.20%
Switzerland Index Fund 0.20%
United Kingdom Index Fund 0.20%
Europe Index Fund 0.05%
International Index Fund 0.05%
</TABLE>
Schedule Adopted as of July 29, 1998
The Administrator agrees, by waiving its fees and reimbursing expenses as
necessary, to limit each Fund's total expense ratio to no greater than 0.99% for
R Class shares and 0.74% for I Class shares over a calendar year until December
31, 2001 (Expense Limits). Any amount waived or reimbursed by the Administrator
pursuant to the Expense Limits for a given calendar year shall be reimbursed by
each Fund to the Administrator in a subsequent year, provided that (1) no such
reimbursements shall be made to the Administrator after 3 years following the
year any amount is waived or reimbursed; and (2) such reimbursements shall only
be made to the extent that they do not result in any Fund's aggregate expenses
exceeding an expense limit of 0.99% for R Class shares and 0.74% for I Class
shares.
-5-
<PAGE> 1
EXHIBIT (i)
[ MLB LETTERHEAD ]
DRAFT
August 18, 1998
Worldwide Index Funds
790 East Colorado Boulevard, 9th Floor
Pasadena, California 91101
Ladies and Gentlemen:
We are furnishing this opinion with respect to the proposed offer and sale from
time to time of an indefinite number of units of beneficial interest, without
par value (the "Shares"), of Worldwide Index Funds (the "Trust"), a
Massachusetts business trust, in registration under the Securities Act of 1933
by a Registration Statement on Form N-1A (File No. 333-56445; 811-08805) as
amended from time to time (the "Registration Statement").
We have acted as counsel to the Trust since its inception, and we are familiar
with the actions taken by its Trustees to authorize the issuance of the Shares.
We have reviewed the Declaration of Trust, the By-laws, and the minute books of
the Trust, and such other certificates, documents and opinions of counsel as we
deem necessary for the purpose of this opinion.
We have reviewed the Trust's Notification of Registration on Form N-8A under the
Investment Company Act of 1940. We have assisted in the preparation of the
Trust's Registration Statement, including all pre-effective amendments thereto,
filed or to be filed with the Securities and Exchange Commission.
In our review we have assumed the genuineness of all signatures, the
authenticity and completeness of all documents purporting to be originals
(whether reviewed by us in original or in copy form), and the conformity to the
originals of all documents purporting to be copies.
We have assumed the appropriate action will be taken to register or qualify the
sale of the Shares under any applicable state and federal laws regulating sales
and offerings of securities.
<PAGE> 2
Worldwide Index Funds
Page 2
Based upon the foregoing, we are of the opinion that:
1. The Trust is a business trust validly existing under the laws of the
Commonwealth of Massachusetts. The Trust is authorized under its
Declaration of Trust to issue an unlimited number of Shares in series
representing interests in the Australia Index Fund, France Index Fund,
Germany Index Fund, Hong Kong Index Fund, Italy Index Fund, Japan Index
Fund, Netherlands Index Funds, Spain Index Fund, Sweden Index Fund,
Switzerland index Fund, United Kingdom Index Fund, Europe Index Fund, and
International Index Fund, and in such other series or classes as the
Trustees may hereafter duly authorize.
2. Upon the issuance of any Shares of any of the series or classes of the
Trust for payment therefor as described in, and in accordance with, the
Registration Statement and the Declaration of Trust and By-laws of the
Trust, the Shares so issued will be validly issued, fully paid and
non-assessable, except that, as set forth in the Registration Statement,
shareholders of the Shares of the Trust may under certain circumstances
be held personally liable for its obligations.
This opinion is intended only for your use in connection with the
offering of Shares and may not be relied upon by any other person.
We hereby consent to the inclusion of this opinion as Exhibit (i) to the
Trust's Pre-Effective Amendment No. 2 to be filed with the Securities and
Exchange Commission and to the reference to our firm under the caption
"Legal Counsel" in the Statement of Additional Information filed as part
of such Amendment.
Very truly yours,
Morgan, Lewis & Bockius LLP
<PAGE> 1
EXHIBIT 99.J
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Pre-Effective Amendment No. 2 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated August
7, 1998, relating to the statement of assets and liabilities of France Index
Fund (one of the portfolios constituting Worldwide Index Funds), which appears
in such Statement of Additional Information. We also consent to the reference to
us under the heading "Experts" in such Statement of Additional Information.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 25, 1998
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER]
[NAME] WORLDWIDE FRANCE INDEX FUND
<TABLE>
<S> <C>
[PERIOD-TYPE]
[FISCAL-YEAR-END] JULY-31-1999
[PERIOD-END] JULY-30-1998
[INVESTMENTS-AT-COST] 0
[INVESTMENTS-AT-VALUE] 0
[RECEIVABLES] 0
[ASSETS-OTHER] 100,000
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 100,000
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 0
[TOTAL-LIABILITIES] 0
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 100,000
[SHARES-COMMON-STOCK] 10,000
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 100,000
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 0
[OTHER-INCOME] 0
[EXPENSES-NET] 0
[NET-INVESTMENT-INCOME] 0
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 0
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 10,000
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 100,000
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 0
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 0
[AVERAGE-NET-ASSETS] 100,000
[PER-SHARE-NAV-BEGIN] 10.00
[PER-SHARE-NII] 0.00
[PER-SHARE-GAIN-APPREC] 0.00
[PER-SHARE-DIVIDEND] 0.00
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 10.00
[EXPENSE-RATIO] 0.00
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
EXHIBIT (o)
WORLDWIDE INDEX FUNDS
RULE 18f-3
MULTIPLE CLASS PLAN
JULY 29, 1998
Worldwide Index Funds (the "Trust"), a registered investment company
that currently consists of a number of separately managed funds, has elected to
rely on Rule 18f-3 under the Investment Company Act of 1940, as amended (the
"1940 Act"), in offering multiple classes of shares in each fund listed on
Schedule A hereto (each a "Fund" and together the "Funds").
A. ATTRIBUTES OF SHARE CLASSES
1. The rights of each class of shares of the Funds shall be as set
forth in the respective Certificate of Class Designation for each class (each a
"Certificate") as each such Certificate is approved by the Trust's Board of
Trustees and as attached hereto as Exhibits.
2. With respect to each class of shares created hereunder, each share
of a Fund will represent an equal pro rata interest in the Fund and will have
identical terms and conditions, except that: (i) each new class will have a
different class name (or other designation) that identifies the class as
separate from any other class; (ii) each class will be offered and sold only to
investors meeting the qualifications set forth in the Certificate and disclosed
in the Trust's Prospectus; (iii) if applicable, each class will separately bear
any distribution fees that are payable in connection with a distribution plan
adopted pursuant to Rule 12b-1 under the 1940 Act (a "Distribution Plan"), and
separately bear any other service fees ("service fees") that are payable under
any service agreement entered into with respect to that class which are not
contemplated by or within the scope of a Distribution Plan; (iv) each class may
bear, consistent with rulings and other published statements of position by the
Internal Revenue Service, the expenses of the Fund's operations which are
directly attributable to such class ("Class Expenses"); and (v) shareholders of
each class will have exclusive voting rights regarding any matter (such as a
Distribution Plan or service agreement relating to a class) submitted to
shareholders that relates solely to such class, and will have separate voting
rights on any matter submitted to shareholders in which the interests of that
class differ from the interests of any other class.
B. EXPENSE ALLOCATIONS
With respect to each Fund, the expenses of each class shall be
allocated as follows: (i) any Rule 12b-1 fees relating to a particular class of
shares associated with a
<PAGE> 2
Distribution Plan or service fees relating to a particular class of shares are
(or will be) borne exclusively by that class; (ii) any incremental transfer
agency fees relating to a particular class are (or will be) borne exclusively by
that class; and (iii) Class Expenses relating to a particular class are (or will
be) borne exclusively by that class.
Non-class specific expenses shall be allocated in accordance with Rule
18f-3(c).
C. AMENDMENT OF PLAN; PERIODIC REVIEW
This Multiple Class Plan must be amended to properly describe (through
additional exhibits hereto) each new class of shares upon its approval by the
Board of Trustees.
The Board of Trustees of the Trust, including a majority of the
Trustees who are not "interested persons" of the Trust as defined in the 1940
Act, must periodically review this Multiple Class Plan for its continued
appropriateness, and must approve any material amendment of the Multiple Class
Plan as it relates to any class of any Fund covered by the Multiple Class Plan.
In approving any material amendment to the Multiple Class Plan, the Trustees,
including a majority of the Trustees who are not interested persons of the
Trust, must find that the amendment is in the best interests of each class
individually and the Trust as a whole.
<PAGE> 3
Schedule A
WORLDWIDE INDEX FUNDS
Fund
Australia Index Fund
France Index Fund
Germany Index Fund
Hong Kong Index Fund
Italy Index Fund
Japan Index Fund
Netherlands Index Fund
Spain Index Fund
Sweden Index Fund
Switzerland Index Fund
United Kingdom Index Fund
Europe Index Fund
International Index Fund
<PAGE> 4
Exhibit A
WORLDWIDE INDEX FUNDS
CERTIFICATE OF CLASS DESIGNATION
R CLASS SHARES
1. Class-Specific Distribution Arrangements; Other Expenses.
R Class Shares are subject to a transaction fee equal to .50% of a Funds
net asset value, and are subject to asset-based fees under a Shareholder
Services Plan and Agreement (the "Plan"). The Trust, on behalf of the applicable
Fund, will make monthly payments to LMI Capital Administration LLC or any
service provider (the "Servicers") for providing shareholder services under the
Plan approved by the Board of Trustees at an annual rate of .25% of each Fund's
average daily net assets attributable to the R Class Shares, as compensation for
providing some or all of the following shareholder services including: (i)
maintaining accounts relating to Clients that invest in R Class Shares; (ii)
arranging for bank wires; (iii) responding to Client inquiries relating to the
services performed by the Servicers; (iv) responding to inquiries from Clients
concerning their investment in R Class Shares; (v) assisting Clients in changing
dividend options, account designations and addresses; (vi) providing information
periodically to Clients showing their position in R Class Shares; (vii)
forwarding shareholder communications from the Funds such as proxies,
shareholder reports, annual reports, and dividend distribution and tax notices
to Clients; (viii) processing purchase exchange and redemption requests from
Clients and placing orders with the Funds or its service providers; (ix)
providing sub-accounting with respect to R Class Shares beneficially owned by
Clients; and (x) processing dividend payments from the Funds on behalf of
Clients.
2. Eligibility of Purchasers
R Class Shares generally require a minimum initial investment of $5,000. R
Class Shares are sold directly from the Funds, from the Distributor or through
certain third party financial intermediaries.
3. Exchange Privileges
R Class Shares of each Fund may be exchanged for R Class Shares of each
other Fund of the Trust in accordance with the procedures disclosed in the
Trust's Prospectuses, and subject to any applicable limitations resulting from
the closing of Funds to new investors.
4. Voting Rights
Each R Class Shareholder will have one vote for each full R Class Share
held and a fractional vote for each fractional R Class Share held. R Class
Shareholders will have exclusive
<PAGE> 5
voting rights regarding any matter submitted to shareholders that relates solely
to R Class Shares (such as a distribution plan or service agreement relating to
R Class Shares), and will have separate voting rights on any other matter
submitted to shareholders in which the interests of the R Class Shareholders
differ from the interests of holders of any other class.
5. Conversion Rights
R Class Shares do not have a conversion feature.
<PAGE> 6
Exhibit B
WORLDWIDE INDEX FUNDS
CERTIFICATE OF CLASS DESIGNATION
I CLASS SHARES
1. Class-Specific Distribution Arrangements; Other Expenses.
I Class Shares are subject to a transaction fee equal to .50% of a Funds
net asset value, but are sold without a sales charge or asset-based distribution
or shareholder servicing fee.
2. Eligibility of Purchasers
I Class Shares generally require a minimum initial investment of $100,000,
in the aggregate.
3. Exchange Privileges
I Class Shares of a Trust's Fund may be exchanged for I Class Shares of
each other Fund of the Trust in accordance with the procedures disclosed in the
Trust's Prospectuses, and subject to any applicable limitations resulting from
the closing of Funds to new investors.
4. Voting Rights
Each I Class Shareholder will have one vote for each full I Class Share
held and a fractional vote for each fractional I Class Share held. I Class
Shareholders will have exclusive voting rights regarding any matter submitted to
I Class Shareholders that relates solely to I Class Shares and will have
separate voting rights on any other matter submitted to I Class Shareholders in
which the interests of I Class Shareholders differ from the interests of holders
of any other class.
5. Conversion Rights
I Class Shares do not have a conversion feature.
<PAGE> 1
EXHIBIT (p)
WORLDWIDE INDEX FUNDS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee of
Worldwide Index Funds (the "Trust"), a business trust organized under the laws
of the Commonwealth of Massachusetts, hereby constitutes and appoints F. Brian
Cerini, Keith B. Pipes, Michael D. Goth, Richard W. Grant, and W. John McGuire,
and each of them singly, his true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, to sign for him and in his name,
place and stead, and in the capacity indicated below, to sign any and all
Registration Statements and all amendments thereto relating to the offering of
the Trust's shares under the provisions of the Investment Company Act of 1940
and/or the Securities Act of 1933, each such Act as amended, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, acting alone, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.
/s/ Christopher LaBonge Date: July 29, 1998
- --------------------------------
Christopher LaBonge
Trustee
<PAGE> 2
WORLDWIDE INDEX FUNDS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee of
Worldwide Index Funds (the "Trust"), a business trust organized under the laws
of the Commonwealth of Massachusetts, hereby constitutes and appoints F. Brian
Cerini, Keith B. Pipes, Michael D. Goth, Richard W. Grant, and W. John McGuire,
and each of them singly, his true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, to sign for him and in his name,
place and stead, and in the capacity indicated below, to sign any and all
Registration Statements and all amendments thereto relating to the offering of
the Trust's shares under the provisions of the Investment Company Act of 1940
and/or the Securities Act of 1933, each such Act as amended, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, acting alone, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.
/s/ Kunduck Moon Date: June 29, 1998
- --------------------
Kunduck Moon
Trustee
<PAGE> 3
WORLDWIDE INDEX FUNDS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee of
Worldwide Index Funds (the "Trust"), a business trust organized under the laws
of the Commonwealth of Massachusetts, hereby constitutes and appoints F. Brian
Cerini, Keith B. Pipes, Michael D. Goth, Richard W. Grant, and W. John McGuire,
and each of them singly, his true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, to sign for him and in his name,
place and stead, and in the capacity indicated below, to sign any and all
Registration Statements and all amendments thereto relating to the offering of
the Trust's shares under the provisions of the Investment Company Act of 1940
and/or the Securities Act of 1933, each such Act as amended, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, acting alone, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.
/s/ Al Osborne Date: July 29, 1998
- ----------------------
Al Osborne
Trustee
<PAGE> 4
WORLDWIDE INDEX FUNDS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee of
Worldwide Index Funds (the "Trust"), a business trust organized under the laws
of the Commonwealth of Massachusetts, hereby constitutes and appoints F. Brian
Cerini, Keith B. Pipes, Michael D. Goth, Richard W. Grant, and W. John McGuire,
and each of them singly, his true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, to sign for him and in his name,
place and stead, and in the capacity indicated below, to sign any and all
Registration Statements and all amendments thereto relating to the offering of
the Trust's shares under the provisions of the Investment Company Act of 1940
and/or the Securities Act of 1933, each such Act as amended, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, acting alone, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.
/s/ Lawrence J. Sheehan Date: July 29, 1998
- --------------------------
Lawrence J. Sheehan
Trustee
<PAGE> 5
WORLDWIDE INDEX FUNDS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned Treasurer and
Chief Financial Officer of Worldwide Index Funds (the "Trust"), a business trust
organized under the laws of the Commonwealth of Massachusetts, hereby
constitutes and appoints F. Brian Cerini, Michael D. Goth, Richard W. Grant, and
W. John McGuire, and each of them singly, his true and lawful attorneys-in-fact
and agents with full power of substitution and resubstitution, to sign for him
and in his name, place and stead, and in the capacity indicated below, to sign
any and all Registration Statements and all amendments thereto relating to the
offering of the Trust's shares under the provisions of the Investment Company
Act of 1940 and/or the Securities Act of 1933, each such Act as amended, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, acting alone, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.
/s/ Keith B. Pipes Date: July 27, 1998
- ---------------------
Keith B. Pipes
Chief Financial Officer
<PAGE> 6
WORLDWIDE INDEX FUNDS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned Trustee,
President, and Chief Executive Officer of Worldwide Index Funds (the "Trust"), a
business trust organized under the laws of the Commonwealth of Massachusetts,
hereby constitutes and appoints Keith B. Pipes, Michael D. Goth, Richard W.
Grant, and W. John McGuire, and each of them singly, his true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
to sign for him and in his name, place and stead, and in the capacity indicated
below, to sign any and all Registration Statements and all amendments thereto
relating to the offering of the Trust's shares under the provisions of the
Investment Company Act of 1940 and/or the Securities Act of 1933, each such Act
as amended, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, acting alone, full
power and authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.
/s/ F. Brian Cerini Date: July 27, 1998
- --------------------------
F. Brian Cerini
President
