U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
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Pre-Effective Amendment No. __________
Post-Effective Amendment No. __________
and/or
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
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Amendment No. __________
(Check appropriate box or boxes)
CLEARBROOK INVESTMENT TRUST
(Exact Name of Registrant as Specified in Charter)
8000 Towers Crescent Drive, Suite 1350
Vienna, Virginia 22182
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (703) 506-9400
David J. Ortiz
Clearbrook Investments, LLC
8000 Towers Crescent Drive, Suite 1350
Vienna, Virginia 22182
(Name and Address of Agent for Service)
Copies to:
Stephanie A. Djinis, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W., 2nd Floor
Washington, D.C. 20036-1800
Approximate Date of Proposed Public Offering: As soon as practicable after this
Registration Statement becomes effective.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a)
may determine.
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CLEARBROOK INVESTMENT TRUST
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(A)
UNDER THE SECURITIES ACT OF 1933
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PART A
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Item No. Registration Statement Caption Caption in Prospectus
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1. Front and Back Cover Pages Front and Back Cover Pages
2. Risk/Return Summary: Investment Summary
Investments, Risks, and Performance
3. Risk/Return Summary: Fee Table Expense Information
4. Investment Objectives, Principal Investment Details;
Investment Strategies, and Related Important Considerations
Risks
5. Management's Discussion of Fund Inapplicable
Performance
6. Management, Organization, and Management of the Fund
Capital Structure
7. Shareholder Information How to Invest in the Fund;
Purchasing Shares; Redeeming
Shares; Additional
Investment Information
8. Distribution Arrangements Distributions and Taxes;
Management of the Fund
9. Financial Highlights Information Inapplicable
PART B
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Caption in Statement
of Additional
Item No. Registration Statement Caption Information
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10. Cover Page and Table of Contents Cover Page and Table of
Contents
11. Fund History Description of the Fund
12. Description of the Fund and Its Description of the Fund;
Investments and Risks Investment Policies;
Investment Activities and
Risk Considerations
13. Management of the Fund Management of the Fund
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14. Control Persons and Principal Inapplicable
Holders of Securities
15. Investment Advisory and Other Services Management of the Fund
16. Brokerage Allocation and Other Brokerage Transactions
Practices
17. Capital Stock and Other Securities Description of the Fund
18. Purchase, Redemption and Pricing of Purchasing, Redeeming and
Shares Pricing of Shares
19. Taxation of the Fund Tax Information
20. Underwriters Management of the Fund
21. Calculation of Performance Data Performance Information
22. Financial Statements Statement of Assets and
Liabilities
PART C
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The information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
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Clearbrook
Investments
CLEARBROOK
TECHNOLOGY FUND
Prospectus
______, 1998
Like all mutual funds, these securities have not been approved or disapproved by
the Securities and Exchange Commission (the SEC). Also, the SEC has not passed
upon the accuracy or adequacy of this prospectus. Any representation to the
contrary is a criminal offense.
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CLEARBROOK TECHNOLOGY FUND
PROSPECTUS
___________, 1998
Table Of Contents
Investment Summary........................
Expense Information.......................
Investment Details........................
Important Considerations..................
Management of the Fund....................
How to Invest in the Fund.................
Purchasing Shares.........................
Redeeming Shares..........................
Additional Investment Information.........
Distributions and Taxes...................
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INVESTMENT SUMMARY
INVESTMENT OBJECTIVE
The Clearbrook Technology Fund (the Fund) seeks long-term growth of capital
primarily through equity investments in technology companies.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest at least 65% of its total
assets in the technology industry. The Fund does not require any particular
asset allocations in technology subsectors (e.g., computer hardware,
semiconductor).
The Fund will invest primarily in common stock of domestic companies and to a
lesser degree foreign companies. These investments may range from large,
well-known organizations to small companies and new companies issuing stock. The
Fund may at times invest in other types of securities including preferred stock,
warrants, and debt securities of the U.S. Government, states and municipalities,
or corporate issuers.
PRINCIPAL RISKS OF INVESTING IN THE FUND
The Fund is for investors that seek high investment returns and accept the
greater risk associated with an aggressive growth fund. Like all equity
investments, the Fund could experience significant price fluctuation in the
short term, although long-term results have historically exceeded those of more
conservative investments.
The Fund's investment return and net asset value fluctuate and when you sell
your shares you may receive more or less than the amount you paid for them. Loss
of money is a risk of investing in the Fund.
The Fund will concentrate 65% or more of its total assets in the technology
industry. Although this provides the potential for significant growth, it also
introduces greater risk (e.g., market, economic) because of this concentration
in a single industry.
The Fund is non-diversified and, as such, it has the option to commit a larger
portion of its assets to individual securities when investment opportunities
arise. If the price of one or more of these securities should decrease, it would
have a greater impact on the Fund's share price than on a diversified fund.
The Fund may invest a substantial portion of its assets in small capitalization
companies. While investments in smaller companies may have the potential for
rapid growth, they can involve greater risks and may be less liquid and more
volatile than investments in larger companies.
The Fund may invest up to 35% of its total assets in foreign securities. This
allows the Fund to participate in the growing technology innovation occurring
outside the U.S., but also introduces the Fund to additional risks that are not
typically associated with investing in domestic companies.
Please remember that mutual fund shares are not a deposit of a bank and are not
insured by the Federal Deposit Insurance Corporation or any other governmental
agency.
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EXPENSE INFORMATION
ANNUAL FUND OPERATING EXPENSES
The Technology Fund is "no-load" - you pay no sales charges or commissions when
you buy or sell Fund shares. The Fund does have operating expenses, however, and
your prorated share of these expenses are deducted from Fund assets. To help you
understand these costs, the following table shows expected expenses.
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Management Distribution Other Total Annual
Fees (12b-1) Fees Expenses Fund Expense
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Technology Fund 1.00% None* 0.98% 1.98%
Operating Expenses
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Management Fee: Paid to the Adviser to provide investment advice
to the Fund.
Distribution (12b-1) Fees: When a mutual fund charges this fee it is to pay
for certain costs of distributing its shares to
the public. Items that may be included in
distribution fees are marketing and promotional
activities and printing and distributing
prospectuses to prospective investors.
Other Expenses: Expenses incurred to operate the Fund, including,
among others, administration and transfer agency
fees, shareholder report expenses, registration
fees and custodian fees. These expenses are
estimated for the current fiscal year.
*The Fund has adopted a plan of distribution under Rule 12b-1. However, the Fund
does not expect to incur distribution (12b-1) expenses in the current fiscal
year and will not incur any such expenses until authorized by the Board of
Trustees.
EXAMPLE OF YOUR EXPENSES
The following Example is to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. Note: This is an illustration
only and does not represent the Fund's past or future expenses or return on
investment, which may be higher or lower than those shown.
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Assumptions used for comparison purposes:
o you invest $1,000 and keep it in the Fund for the time periods of one and
three years, redeeming all your shares at the end of each of these time
periods
o you receive a hypothetical 5% return on your investment each year (this is an
assumption, NOT actual or anticipated Fund returns)
o the Fund's operating expenses remain the same each year
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One Year Three Years
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Expenses $ 20 $ 62
(based on assumptions)
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INVESTMENT DETAILS
The investment objective of the Fund is to seek long-term growth of capital
primarily through equity investments in technology companies.
Technology has become an integral part of today's business environment,
providing a vehicle by which organizations can maintain and improve their
productivity and competitive position. Technology companies that supply these
products and services to businesses are experiencing tremendous growth. Small to
medium-sized technology firms often double their size in three to five years,
while large, well-positioned firms are often able to expand their market share
and increase profits.
The Fund uses a two-part approach to seek capital appreciation while aiming to
limit large price fluctuations of the Fund's shares.
The Fund invests primarily in rapidly growing technology companies that offer
products or services critical to business productivity or competitive
positioning. Without these technologies, businesses would leave themselves
vulnerable to encroachment by peers. In the best circumstances, these
technologies become almost mandatory and their purchase is not easily deferred.
Examples of products that have previously experienced this demand include supply
chain management systems in the manufacturing industry and electronic firewalls
used to protect companies moving operations to the Internet.
To balance the possible volatility of these stocks, the Fund invests in
technology companies that have undergone a marked decrease in the price of their
shares and appear poised for rebound. These investments may include technology
companies that have made market missteps, but appear to the Adviser to have
rectified the problems and are now positioned for growth, or fundamentally solid
technology companies with strong growth potential that appear to the Adviser to
have undergone a market overcorrection.
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SUMMARY OF STRATEGY
1) Investments in rapidly growing technology companies that offer products and
services critical to business and in high demand
2) Balanced by investments in technology companies that have undergone a marked
decrease in share price but now appear positioned for rebound
- misstep by a company but have now rectified the problem
- market overcorrection on a fundamentally solid company
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Industry Concentration
Under normal market conditions, the Fund will invest at least 65% of the
value of its total assets in the technology industry. The Fund does not
require asset allocations in any particular technology subsectors (e.g.,
computer hardware, semiconductor).
Equity Securities
The Fund will invest primarily in common stock of domestic companies and to
a lesser degree foreign companies. These investments may range from large,
well-known organizations to small companies and new companies issuing
stock. The Fund may at times invest in other types of equity securities,
including preferred stocks and warrants.
Foreign Securities
The Fund may invest up to 35% of its total assets in foreign securities.
Foreign securities in which the Fund may invest include securities in
foreign markets and denominated in foreign currency, or American Depository
Receipts which trade on U.S. stock exchanges.
Debt Securities
The Fund may also invest in debt obligations of corporate issuers, the U.S.
Government, states, municipalities or state or municipal government
agencies. The Fund may invest a portion of its assets in high yield/high
risk securities rated below investment grade (BB or lower by Standard &
Poor's Ratings Group or Ba or lower by Moody's Investors Service, Inc.).
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Futures, Options and Forward Contracts
The Fund may use futures, options and forward contracts to generate
additional income or to hedge the value of its portfolio against potential
adverse movements in securities prices, foreign currencies or interest
rates. Futures are an agreement to buy or sell a financial instrument at a
set price on a set date. Options are like futures but with the right or
"option" to buy or sell instead of the obligation. When using forward
contracts, the Fund initially pays a sum that is a fraction of the price of
the contract's underlying stocks, indexes or currencies, providing the
benefit of "owning" those securities or currencies without having to
purchase them directly.
Temporary Defensive Position
When the Adviser believes substantial price risks exist for common stocks
because of uncertainties in the investment outlook or when in the judgement
of the Adviser it is otherwise warranted in selling to manage the Fund's
portfolio, the Fund may temporarily hold for defensive purposes all or a
portion of its assets in short-term debt securities or cash equivalents,
overriding the Fund's otherwise applicable investment policies. During
these periods, the Fund may not participate in market advances or declines
to the same extent that it would if it remained more fully invested and it
may have more difficulty in achieving its investment objective.
Modifications To Objective and Policies
The Fund's investment objective, and some of its investment policies and
limitations, may be changed by the Board of Trustees after notification has
been given to shareholders and after this Prospectus has been revised
accordingly. Please see the Statement of Additional Information for more
information.
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IMPORTANT CONSIDERATIONS
Listed below are important aspects of the Fund for you to consider before
investing. More detail on these and other Fund considerations can be found in
the Statement of Additional Information.
<TABLE>
<CAPTION>
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PORTFOLIO POSSIBLE IMPACT DETAILS
ACTIVITY TO YOU
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Technology industry o Potential for higher returns but also Technology stocks often experience significant growth
concentration for greater fluctuation in the and price appreciation. Along with this growth potential,
Fund's share price due to though, are the introduction of risks such as rapid product
concentration in one industry obsolescence and the impact of a change to the economic
climate. Although the Fund actively seeks to minimize
o Potential that one event, such as fluctuations, it may experience, in a short period of time,
inflation, could have a greater a significant increase or decrease in share price.
impact on the Fund
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Non-diversification o Potential for higher returns but also When investment opportunities arise, the Fund, by being
for more price fluctuation than a non-diversified, has the option to commit a larger portion
diversified fund of its assets to one issuer and thereby receive more
benefit from that issuer's price appreciation. It should be
noted that the converse holds true and if the price
decreases, it would have a greater impact on the Fund's
share price than on a diversified fund.
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Small company stock o Potential for higher returns but also Small, nimble companies often introduce new products or
for greater price fluctuation services faster and more effectively than larger
competitors. The result can be considerable growth and
o May be more difficult for the Fund stock price appreciation. However, these companies,
to sell a portfolio holding and because of their size and limited resources, may
receive the desired price experience setbacks along the way, which cause their
price to fluctuate in the short term. Also, small company
stocks may be less liquid and more volatile than those of
larger companies.
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Foreign o Potential for higher returns but also Increasingly, foreign companies are developing market-
Securities for greater volatility driving technologies and present significant investment
opportunities to the Fund. These investments, though,
may be subject to risks not typically associated with
investing in domestic companies. For example, such
investment may be adversely affected by changes in
currency rates and exchange control regulations, future
political and economic developments and the possibility of
seizure or nationalization of companies, or the imposition
of withholding taxes on income.
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Portfolio Turnover o Potential for higher returns but also To capitalize on and benefit from the rapid changes in
for higher expenses because of technology, the Fund may buy and sell stocks more than
greater portfolio activity it would if investing in other industries. High turnover
may result in the Fund recognizing greater amounts of
income and capital gains and incurring increased Fund
expenses.
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Futures, Options o Potential benefits of portfolio The Fund may use futures, options and forward contracts
and Forward protection against adverse price to lock in potential profits or otherwise benefit the Fund.
Contracts changes in portfolio securities These instruments introduce risk and transaction costs
and/or income generation, but also and could limit the Fund's potential for profit or cause
of limiting profits if market the Fund to incur a loss.
conditions unexpectedly change
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High Yield/High Risk o Potential for higher returns but also High yield/high risk debt securities offer greater
Debt Securities introduces a higher degree of credit investment returns to investors than many other debt
risk securities. They also introduce risks, including the
possibility of default or bankruptcy of the issuers of such
securities and market price volatility based upon interest
rate sensitivity, creditworthiness and relative liquidity of
the secondary trading market. An economic downturn
could disrupt the market for such securities and adversely
affect the value of outstanding bonds and the issuer's
ability to repay principal and interest.
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MANAGEMENT OF THE FUND
INVESTMENT ADVISER - Clearbrook Investments LLC (the Adviser), 8000 Towers
Crescent Drive, Suite 1350, Vienna, Virginia 22182, is the investment adviser to
the Fund and is responsible for managing the investment portfolio and performing
the day-to-day business activities of the Fund. In this role, the Adviser
provides ongoing advice on the Fund's investments, in accordance with the Fund's
investment objective and policies. The Adviser is newly created and therefore
has not previously provided advisory services to an investment company.
Under the advisory agreement between the Trust and the Adviser, the Fund pays
the Adviser a fee at the annual rate of 1% of the Fund's average daily net
assets. If necessary, the Adviser has voluntarily agreed to waive its fee and/or
reimburse the Fund for other operating expenses in order to limit total
operating expenses to 1.98% of average daily net assets. The Fund may reimburse
the Adviser for any reductions in the Adviser's fees during the five years
following that reduction if such reimbursement is requested by the Adviser, if
such reimbursement can be achieved within the foregoing expense limit, and if
the Board of Trustees approves the reimbursement at the time of the request as
not inconsistent with the best interests of the Fund. The Adviser generally
seeks to reimburse the oldest reductions and waivers before payment of fees and
expenses for the current year.
PORTFOLIO MANAGER - David Ortiz, an officer of the Adviser, is the portfolio
manager of the Fund and is responsible for the day-to-day management of the
Fund's portfolio. Prior to February, 1998, Mr. Ortiz was a Partner at Booz Allen
& Hamilton, a leading management and technology consulting firm. As an officer
of the firm, he focused on business and technology issues of Fortune 500
companies in Financial Services, including banks, capital markets, and
insurance, and of companies in other industries. Over the past ten years, he has
helped these companies with strategies and solutions in areas including new
product introductions, mergers & acquisitions, cost reduction, and
infrastructure renewal. Mr. Ortiz has extensive experience and knowledge of the
business, financial and technology issues that organizations face. His business
experience spans from boardroom concerns to specific operational issues, and he
has helped clients develop detailed financial analyses, forecasts, and models.
His technology background spans from technology infrastructures, application
architectures, and information technology management to product development and
rollout. He has helped a broad cross-section of clients with the analysis,
development, and introduction of new technology capabilities including client
server and Internet offerings.
EXTENDED TEAM
ADMINISTRATOR/
TRANSFER AGENT:
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
The Administrator will provide
administrative services, accounting and
pricing services, dividend disbursing,
and shareholder servicing and transfer
agent services.
DISTRIBUTOR:
CW Fund Distributors, Inc.
312 Walnut Street, 21st floor
Cincinnati, Ohio 45202
The Distributor will be the Fund's
principal underwriter and the exclusive
agent for the distribution of its
shares.
FUND
CUSTODIAN:
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The Custodian will act as the Fund's
depository, safekeep its portfolio
securities, collect all income and other
payments, disburse funds as instructed
and maintain records of custodian
activities.
INDEPENDENT
AUDITORS:
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The Auditors will render their opinion
on the financial statements of the Fund,
review Fund tax returns, and advise the
Fund on tax matters.
DISTRIBUTION FEES
The Fund has adopted a plan of distribution (the Plan) pursuant to Rule 12b-1
under the Investment Company Act of 1940, permitting it to pay certain costs of
distributing its shares, including marketing and promotional activities,
printing and distributing prospectuses and reports to prospective shareholders,
printing and distributing Fund sales literature, compensation to dealers and
others who provide distribution, administrative services, and support services.
Under the Plan, the Fund may incur such expenses in an amount not exceeding .25%
of its average daily net assets in any fiscal year. These fees are paid out of
the Fund's assets on an on-going basis and over time will increase the cost of
your investment. The Fund does not expect to incur distribution expenses in the
current fiscal year and will not incur any such expenses until authorized by the
Board of Trustees.
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HOW TO INVEST IN THE FUND
MINIMUM INVESTMENTS
The minimum initial investment requirements of the Fund are shown below. The
recommended subsequent investment for a regular or tax-deferred account is
$1000, although no minimum has been formally established by the Fund at this
time.
o Regular accounts Initial investment ............... $5000
o IRAs and other
tax-deferred accounts Initial investment ............... $2500
o Automatic investment Initial investment ............... $200*
plans
* This program requires an automatic $200 investment each month until the
account balance reaches $2500.
REGULAR ACCOUNT
You can set up a regular account simply by completing an account application and
sending your investment to the Clearbrook Technology Fund, P.O. Box 5354,
Cincinnati, Ohio 45201-5354. We provide you several options for doing this,
including by mail, wire transfer and direct deposit. Details on purchasing or
redeeming shares are presented on the following pages.
TAX-DEFERRED ACCOUNT
You may decide to set up a tax-deferred account. The following tax-deferred
retirement plans are available with the Fund: Keogh Plans for self-employed
individuals; individual retirement account (IRA) plans for individuals and their
non-employed spouses, including Roth IRAs and Education IRAs; qualified pension
and profit-sharing plans for employees, including those profit-sharing plans
with a 401(k) provision; and 403(b)(7) custodial accounts for employees of
public school systems, hospitals, colleges and other non-profit organizations
meeting certain requirements of the Internal Revenue Code. These accounts allow
you to defer paying income tax on capital gains and dividends distributed by the
Fund. Consult your tax adviser for more information. To set up a tax deferred
account, please call the Fund at 888-____-_____.
AUTOMATIC INVESTMENT PLAN
You can make automatic monthly investments into the Fund from your bank, savings
and loan or other depository institution account. There is currently no charge
for these transfers, although the Fund reserves the right, upon thirty days'
written notice, to make reasonable charges for this service. Your depository
institution may impose its own charge for debiting your account which would
reduce your return from an investment in the Fund.
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<PAGE>
PURCHASING SHARES
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By mail INITIAL INVESTMENT
Send a check and a completed account application (see attached
Questions? application included with this prospectus) to:
call 888-
___-____ Clearbrook Technology Fund
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Checks should be made payable to Clearbrook Technology Fund. We
will send you a letter confirming your purchase of Fund shares
after your account is set up. If an order to purchase shares is
canceled because your check does not clear, you will be
responsible for any losses or fees incurred by the Fund or its
transfer agent in the transaction. The Fund does not accept
third party checks for the initial purchase of shares.
SUBSEQUENT INVESTMENTS
Send a check made payable to Clearbrook Technology Fund to the
address shown above. Please include the name of your account
and your account number to ensure proper processing.
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By wire INITIAL INVESTMENT
transfer
To purchase shares by wire transfer, please call the Fund at
888-___-____ to obtain the information your bank or financial
institution will need to perform the transfer.
Wired funds will not be credited to your account until an
account application has been sent to the Fund (see mail address
above) and has been processed. Your bank may impose a charge
for sending the wire. At this time, the Fund does not charge a
fee for receipt of wired funds, although it reserves the right
to charge for this service upon thirty days' prior notice to
shareholders.
SUBSEQUENT INVESTMENTS
Additional shares may be purchased by wire transfer using the
same information used for the initial wire transfer.
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By direct Fund shares may be purchased through direct deposit plans
deposit offered by certain employers and government agencies. These
plans enable you to have all or a portion of your payroll or
social security check transferred automatically to purchase
Fund shares. Please consult your employer for details.
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Through Fund shares can be purchased through brokerage firms or other
brokerage financial institutions that sell the Fund. These organizations
firms and may charge you transaction fees on purchases of Fund shares and
financial may impose other charges or restrictions or account options
institutions that differ from those applicable to shareholders who purchase
directly through the Fund.
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REDEEMING SHARES
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By mail Send a written request to:
Clearbrook Technology Fund
Questions? P.O. Box 5354
call 888- Cincinnati, Ohio 45201-5354
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The request should include the number of shares or the dollar
amount to be redeemed and your account number. The request must
be signed with your name exactly as it appears in your account
records.
If the shares to be redeemed have a value of $25,000 or more,
your signature must be guaranteed by any eligible guarantor
institution, such as a bank, brokerage firm, or credit union.
Proceeds of redemptions requested by mail are normally mailed
within three business days following receipt of instructions in
proper form. If you redeem shares from a newly opened account,
payment will be made only after the check has been collected,
which may be up to fifteen days from the purchase date. If you
request, your redemption can be deposited directly into the
bank account or brokerage account designated on your account
application. This bank or brokerage account can be changed at
any time by writing to the Fund with your signature guaranteed
by any eligible guarantor institution. Further documentation
will be required to change the designated account if a
corporation, fiduciary or other organization holds shares.
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By wire To redeem shares by wire transfer, please call the Fund at
transfer 888-___-____ so we can obtain the information about your bank
or financial institution needed to perform the transfer.
For wire transfers, you will be charged a processing fee by the
Fund's Custodian, which will be deducted from your account (the
Fund reserves the right, upon thirty days' written notice, to
change the processing fee for wire transfers). Your bank or
brokerage firm may also impose a charge for processing the
wire. In the event that wire transfer of funds is impossible or
impractical, the redemption proceeds will be sent by mail to
the designated account. If you request it, proceeds can be
deposited directly into your commercial bank or other
depository institution account via an Automated Clearing House
(ACH) transaction. There is currently no charge for ACH
transactions. Please call the Fund at 888-___-____ for more
information.
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Through Shares may be redeemed by placing a redemption request through
brokerage a brokage firm or financial institution. Unaffiliated brokage
firms and firms or financial institutions may impose a fee on the
financial shareholder for this service. You will receive the net asset
institutions value per share next determined after receipt by the Fund of
your redemption request. It is the responsibility of these
organizations to promptly transmit redemption orders.
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<PAGE>
ADDITIONAL INVESTMENT INFORMATION
PRICE RECEIVED WHEN PURCHASING/REDEEMING SHARES
The price for shares is based on the Net Asset Value (NAV) of the Fund next
calculated after your order is received by the Fund. The Fund's NAV is
calculated using the market price of the Fund's portfolio as of the close of the
regular session of trading on the New York Stock Exchange (currently 4:00 p.m.
Eastern time), on each day that the Exchange is open for trading. Presently, the
Exchange is open for trading on all days excluding Saturdays, Sundays and the
following holidays: New Year's Day, Presidents' Day, Martin Luther King Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas. Securities held by the Fund may be primarily listed on foreign
exchanges or traded in foreign markets which are open on days when the Exchange
is not open for business. As a result, the Fund's NAV may be significantly
affected by trading on days when the Fund is not open for business. The Fund's
NAV is calculated by dividing the sum of the value of the Fund's securities plus
cash or other assets minus all liabilities (including estimated accrued
expenses) by the total number of shares outstanding of the Fund, rounded to the
nearest cent.
If your order is received by a dealer prior to 4:00 p.m. (Eastern time) on any
business day and transmitted to the Fund's transfer agent, Countrywide Fund
Services, Inc., by 5:00 p.m. (Eastern time) of that same day, you will receive
that day's NAV. It is the responsibility of the dealer to transmit properly
completed orders so that they will be received by the Fund's transfer agent by
5:00 p.m. (Eastern time). Dealers may charge a fee for your order. Direct orders
received by the Fund's transfer agent by 4:00 p.m. (Eastern time) are confirmed
at that day's NAV.
Direct investments received by the Fund's transfer agent after 4:00 p.m.
(Eastern time) and orders received from dealers after 5:00 p.m. (Eastern time)
are based on the Net Asset Value determined on the next business day. Please see
the Statement of Additional Information for more details.
ACCOUNT BALANCES BELOW FUND MINIMUM
The Fund reserves the right to close your account if its value drops below $5000
(based on actual amounts invested, unaffected by market fluctuations), or $2500
in the case of tax-deferred retirement plans and automatic investment plans. For
automatic investment plans, the minimum does not apply until after deposits have
reached $2500. After notification, the Fund provides sixty days for you to
increase the value of your account to the minimum amount.
OTHER ACCOUNT INFORMATION
o The Fund may change minimum investments and account balances or waive them in
whole or in part for certain types of accounts.
o The Fund reserves the right to reject any order to purchase the Fund's
shares.
o The Fund reserves the right to close an account if the shareholder is deemed
to have engaged in activities which are illegal or otherwise believed to be
detrimental to the Fund.
o The Fund reserves the right to suspend the right of redemption or to postpone
the date of payment for more than three business days if unusual
circumstances occur as determined by the SEC.
o At the discretion of the Fund or its transfer agent, corporate investors and
other associations may be required to furnish appropriate certification
authorizing redemptions.
o The Fund's account application contains provisions that exclude the Fund, its
transfer agent and certain of their affiliates from certain liabilities
(including, among others, losses resulting from unauthorized shareholder
transactions) relating to the various services made available to investors.
REDEMPTION IN KIND
Under unusual circumstances, when the Board of Trustees deems it in the best
interests of the Fund's shareholders, the Fund may make payment for shares
repurchased or redeemed in whole or in part in securities of the Fund taken at
current value. If any such redemption in kind is to be made, the Fund intends to
make an election pursuant to Rule 18f-1 under the Investment Company Act of
1940. This election will require the Fund to redeem shares solely in cash up to
the lesser of $250,000 or 1% of the net asset value of the Fund during any 90
day period for any one shareholder. Should payment be made in securities, the
redeeming shareholder will generally incur brokerage costs in converting such
securities to cash. Portfolio securities which are issued in an in-kind
redemption will be readily marketable.
-13-
<PAGE>
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS BY THE FUND
In December, the Fund intends to make distributions of any net investment income
and realized capital gains to shareholders. By distributing capital gains and
dividends annually, the Fund intends to qualify for the special tax treatment
afforded a "regulated investment company" under Subchapter M of the Internal
Revenue Code. By so qualifying, the Fund will not be subject to federal income
tax on that part of its investment company taxable income and net realized
short-term and long-term capital gains it distributes to its shareholders in
accordance with the timing requirements of the Internal Revenue Code.
Distributions are paid out to all current shareholders and are based on the
Fund's investment activity for that calendar year, NOT by how long you have
owned Fund shares (see important tax note on distributions below).
DISTRIBUTION OPTIONS
Distributions are paid according to one of the following options:
Share Option - income distributions and capital gains distributions
reinvested in additional shares.
Income Option - income distributions and short-term capital gains
distributions paid in cash; long-term capital gains
distributions reinvested in additional shares.
Cash Option - income distributions and capital gains distributions
paid in cash.
You should indicate your choice of option on your application. If no option is
specified on your application, the Share option will be used. All distributions
will be based on the net asset value in effect on the payable date.
If you select the Income Option or the Cash Option and the U.S. Postal Service
cannot deliver your checks or if your checks remain uncashed for six months,
your dividends may be reinvested in your account at the then current net asset
value and your account will be converted to the Share Option. No interest will
accrue on amounts represented by uncashed distribution checks.
TAXES
You will generally owe taxes on all Fund distributions, even if you reinvest
your distributions to purchase additional shares. Some exceptions do exist,
including individuals with tax deferred accounts or those whose tax situation
may not require them to pay taxes. You may wish to consult with your tax adviser
to understand how investing in the Fund may affect your specific tax situation.
Each year, on or before January 31st, the Fund will send you a Form 1099 that
details the distributions of capital gains and dividends that were made to your
non-retirement accounts. Capital gains, which are the gains or losses produced
when the Fund sells stocks during the calendar year, are taxable to you at
different rates as either short-term, mid-term, or long-term gains. Dividends,
which are earnings paid out to stockholders, are taxable to you as ordinary
income. The Form 1099 provides important tax information and will be needed when
you prepare your taxes.
Important
Note on
Distributions
If you purchase shares of the Fund just before a distribution of net investment
income and/or capital gains in December, a portion of what you paid for your
shares will be returned to you in the form of this distribution. Receiving this
distribution may have tax implications for you and therefore requires careful
consideration. For example, if the Fund declares $1 per share in distributions
and the price of the Fund is $13 per share, after the distribution is paid in
December, the price would reduce to $12 per share. If you invest in the Fund
just before the December distribution, you would pay $13 per share and almost
immediately receive back $1 per share in the form of the distribution. You would
then have $12 per share invested in the Fund, not the original $13 per share. If
you reinvest the $1 per share, you would again have $13 per share invested in
the Fund, but you would also have a potential tax liability. Unless you have set
up a tax-deferred account, the $1 per share of investment income and or capital
gains would be part of your gross income for that year and you would potentially
owe taxes on it.
-14-
<PAGE>
To Open an Account:
Call 888-____-______
or
Use options listed on
pg. 10 of this prospectus
Questions About Your Account:
Call 888-____-______
- ------------------
This prospectus gives you important information about the Clearbrook Technology
Fund. Please read it carefully before you invest in the Fund and keep it
available for future reference.
- ------------------
The Statement of Additional Information (SAI), which provides more information
about the Fund, is filed with the Securities and Exchange Commission (SEC) and
is incorporated by reference in its entirety. A copy of the SAI can be obtained
at no charge from the Fund by calling 888-___-____.
The SAI and other information about the Clearbrook Technology Fund can also be
found at the Web site maintained by the SEC (www.sec.gov) or can be reviewed and
copied at the SEC's Public Reference Room in Washington, D.C. Hours of operation
and procedures for the Public Reference Room are available by calling 1-800-SEC-
0330. Copies of the Fund's documents can be obtained, upon payment of a
duplicating fee, by writing the Public Reference Section of the SEC, Washington,
D.C. 20549-6009.
File number: 811-____
<PAGE>
CLEARBROOK INVESTMENT TRUST
8000 Towers Crescent Drive Suite 1350
Vienna, Virginia 22182
888-____-______
www.clearbrook.com
STATEMENT OF ADDITIONAL INFORMATION
________, 1998
For the:
CLEARBROOK
TECHNOLOGY FUND
This document is not a prospectus, and should be read in conjunction with the
Clearbrook Technology Fund prospectus dated ______, 1998. You can obtain a copy
of the prospectus by writing Clearbrook Technology Fund, P.O. Box 5354,
Cincinnati, Ohio 45201-5354, or calling us at 1-888-____-_____.
<PAGE>
CONTENTS
Overview.................................................... 1
Description of the Fund .................................... 1
Investment Policies......................................... 2
Investment Activities and Risk Considerations............... 3
Quality Ratings of Corporate Bonds
and Preferred Stocks................................... 11
Management of the Fund..................................... 14
Brokerage Transactions..................................... 18
Purchasing, Redeeming and Pricing Shares................... 19
Tax Information ........................................... 19
Performance Information.................................... 21
Statement of Assets and Liabilities........................ 22
<PAGE>
OVERVIEW
Thank you for expressing interest in Clearbrook Investments. This Statement of
Additional Information (SAI) is for investors who desire more detailed
information about the Clearbrook Technology Fund (the Fund). The SAI is intended
as a supplement to the Fund's prospectus, and information from the prospectus is
included only selectively in this document where it helps in addressing specific
topics.
This Statement of Additional Information presents more detailed and technical
information than is found in the prospectus and may introduce topics and
concepts not familiar to the reader. For these topics, we have tried to provide
information to help the reader understand the meaning and possible implications
of each topic. If you have questions, please feel free to call the Fund at
888-___-____.
DESCRIPTION OF THE FUND
Clearbrook Investment Trust (the Trust) was established as a Delaware business
trust on June 29, 1998. The Trust is categorized as an open-end, management
investment company which means that it pools money from shareholders and invests
it in a portfolio of securities. As an open-end investment company, the Fund
offers its shares on a continuous basis and a shareholder can redeem shares on
request. The Fund offers its shares in "series," with each series representing a
unique fund with its own investment objectives and policies. The Trust also
qualifies as a "non-diversified" investment company. This allows for investment
of a larger proportion of the Fund's assets in the securities of one issuer. In
doing this, the Fund has the opportunity to receive more benefit from the price
appreciation of one issuer, although it introduces greater risk than a
diversified fund.
Shares of the Fund have equal voting rights and liquidation rights, and are
voted in the aggregate and not by series except in matters where a separate vote
is required by the Investment Company Act of 1940 or when the matter affects
only the interest of a particular series. When matters are submitted to
shareholders for a vote, each shareholder is entitled to one vote for each full
share owned and fractional votes for fractional shares owned. The Trust does not
normally hold annual meetings of shareholders. The Trustees shall promptly call
and give notice of a meeting of shareholders for the purpose of voting upon
removal of any Trustee to the extent required by the Investment Company Act of
1940.
Each share of the Fund represents an equal proportionate interest in the assets
and liabilities belonging to the Fund with each other share of the Fund and is
entitled to such dividends and distributions out of the income belonging to the
Fund as are declared by the Trustees. The shares do not have cumulative voting
rights or any preemptive or conversion rights, and the Trustees have the
authority from time to time to divide or combine the shares of the Fund into a
greater or lesser number of shares so long as the proportionate beneficial
interest in the assets belonging to the Fund are in no way affected. In case of
any liquidation of the Fund, the holders of shares of the Fund will be entitled
to receive as a class a distribution out of the assets, net of the liabilities,
belonging to the Fund. No shareholder is liable to further calls or to
assessment by the Fund without his express consent.
Shareholders of the Trust enjoy the same personal liability protections as
extended to stockholders of a Delaware corporation - i.e., no shareholder shall
be personally liable for debts or other liabilities of the Trust or any
particular series (fund) of the Trust. As further protection, shareholders are
indemnified from all losses and expenses of the Trust, and the Trust's
obligations can only be enforced against the assets of the Trust itself.
Therefore, it is believed that there is negligible risk of personal liability to
the shareholder by owning shares in the Fund.
-1-
<PAGE>
INVESTMENT POLICIES
Two levels of investment policies have been instituted: (1) fundamental
policies, which require the vote of a majority of the Fund's outstanding shares
to modify; and (2) non-fundamental policies that further govern the Fund and
require only Trustee approval to modify.
The percentage limitations shown below, for both the fundamental and
non-fundamental policies, apply at the time the Fund purchases a security.
Except with respect to the Fund's policies on illiquid securities and borrowing,
if policy limits are exceeded due to market fluctuations or the sale of other
securities, the Fund will not be required to take action.
FUNDAMENTAL POLICIES
The following policies may not be changed without the vote of a majority of the
Fund's outstanding shares.
The Fund will not:
1. Act as a securities underwriter (except when the Fund is selling
securities and is deemed to be an underwriter under the Securities Act
of 1933).
2. Invest in real estate (except that the Fund may invest in shares of
real estate investment trusts).
3. Invest in commodities or commodity contracts (except that the Fund may
purchase and sell options on securities and securities indices;
financial futures; futures contracts on securities and securities
indices; options on such futures; forward foreign currency exchange
contracts; and forward contracts, as described in the Prospectus and
this SAI).
4. Purchase securities on margin (except for short-term credits as may be
necessary for the clearance of purchases and sales of securities).
5. Engage in short sales of securities.
6. Issue senior securities, except that the Fund may borrow money from
banks for temporary purposes. This amount may not exceed 25% of the
value of the Fund's total assets at the time of the borrowing. The
Fund will not purchase portfolio securities while its borrowings are
in excess of 5% of its total assets.
7. Make loans, except under the following conditions:
o Entering into repurchase agreements;
o Purchasing a portion of an issue of debt securities; and
o Lending portfolio securities in an amount up to one-third of the
value of its total assets.
8. Invest more than 25% of its total assets in securities of issuers in
any industry, except that the Fund will, under normal market
conditions, invest at least 25% of its total assets in securities of
issuers in the technology industry.
A majority of the Fund's outstanding shares means, for purposes of modifying the
foregoing investment policies, the lesser of (1) 67% or more of the outstanding
shares of the Fund present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented at such meeting or (2)
more than 50% of the outstanding shares of the Fund.
-2-
<PAGE>
NON-FUNDAMENTAL POLICIES
The following policies may not be changed without Trustee approval:
1. Under normal market conditions, the Fund will invest at least 65% of
its total assets in the technology industry.
2. The Fund will not invest more than 15% of its net assets in illiquid
securities.
3. The Fund will not invest in companies for the purpose of exercising
control or management.
4. The Fund will not purchase securities of any other investment company,
other than to the extent permitted by Section 12(d) of the Investment
Company Act of 1940.
-3-
<PAGE>
INVESTMENT ACTIVITIES AND RISK CONSIDERATIONS
The prospectus of the Fund describes the Fund's investment objective, investment
strategies, and the potential risks of investing in the Fund. In summary, the
Fund seeks long-term capital appreciation primarily through equity investments
in technology companies. It's investment strategy is based on a two part
approach of (1) investing in rapidly growing technology companies that offer
products and services critical to business and that are in high demand, and (2)
providing balance to the portfolio and aiming to limit large price fluctuations
by investing in technology companies that have undergone a marked decrease in
share price but are now poised for rebound in the Adviser's opinion (these could
either be companies that have made a misstep but appear to have now rectified
the problem or fundamentally solid companies that have undergone what is
believed to be a market overcorrection).
This section provides more details than the prospectus on how the Fund's
portfolio may be invested. Key topics that are covered include the investment
policies of the Fund and possible risks introduced by these investments.
INVESTMENT ACTIVITIES
The Fund invests primarily in the common stock of domestic technology companies.
The Adviser, at its discretion, may engage in other investment activities if it
believes these investments will benefit the Fund. Presented below is a summary
of investment activities that the Adviser may utilize and the relevant potential
risks.
Common and Preferred Stocks
- ---------------------------
Overview. The Fund may invest in common and preferred stocks of domestic
companies and, to a more limited extent, foreign companies. Stocks represent
ownership in a company. Common stocks offer a claim on the company's earnings
and assets and usually include voting rights to elect the board of directors.
Common stock dividends are not fixed, and are declared at the discretion of the
company's board of directors. If a company does well, common stocks provide the
greatest potential return to the shareholder. Different than common stocks,
preferred stocks usually offer a fixed dividend to the shareholder but do not
provide an ownership or equity stake in the company.
Risks. If a company experiences financial difficulties, bonds generally have
first claim, followed by preferred stock, and then common stock; therefore
common stocks introduce more risk. Common stock is also affected by the
company's earnings, and may have a large increase or decrease in stock price
based on these reported earnings. Additionally, stocks are subject to market
risk, with their price potentially fluctuating up and down in concert with the
general stock market. Preferred stocks, because of their fixed dividend and
seniority when a company is in financial difficulties, are generally less risky
although the Fund may decide to purchase higher risk preferred stock where the
issuer has omitted, or is in danger of omitting, payment of its dividends.
Securities of Small Companies
- -----------------------------
Overview. The Fund may invest in securities of small to mid-size companies
(defined by their market capitalization). Smaller companies have the potential
for substantial gains, often more so than larger companies. This is due to the
rapid revenue growth that a smaller company can experience when there is high
demand for its products and services.
Risks. Investments in smaller companies may involve greater price volatility and
investment risk than comparable investments in larger, more mature companies.
Some of the potential risks include: narrow product lines, limited market share,
limited financial resources, less depth in management than larger or more
established companies, and reduced market liquidity for their shares. Often to a
greater extent than large companies, small companies can experience large
movements in stock price based on reported earnings.
-4-
<PAGE>
Securities of Foreign Companies
- -------------------------------
Overview. The Fund may invest in foreign securities, although these investments
will generally be a smaller portion of the portfolio than investments in
domestic companies. The Fund's investments may include securities trading in
foreign markets and denominated in foreign currency or American Depository
Receipts which trade on U.S. stock exchanges.
Risks. Investments in foreign securities may involve greater risks than
investing in comparable securities of U.S. issuers. The primary risks include
political and economic, regulatory, currency, and market risk. Political and
economic risk occurs because of the national policies and legal systems in some
foreign countries that operate differently than in the U.S. Developing countries
have the additional risk of local economies that can change rapidly. Regulatory
risk occurs because the level of regulatory oversight and supervision in some
foreign countries differs from that in the U.S. Additionally, public information
may not undergo the same level of auditing and financial reporting as domestic
stocks. Currency risk occurs when the Fund buys a foreign security in foreign
currency. If the exchange rate of the foreign currency into U.S. dollars becomes
less favorable, the Fund's profits on the foreign security could be reduced or
even become a loss. Market risk occurs when foreign markets are more volatile
than domestic markets.
Securities of Companies with Limited Operating Histories
- --------------------------------------------------------
Overview. The Fund may invest in securities of companies with limited operating
histories, which is defined as less than three years of continuous operation.
Risks. Companies with limited operating histories generally offer less
information by which future growth and earnings can be estimated. The
fundamental analysis that can be performed on these companies is often more
limited, and a greater emphasis has to be placed on factors including the
potential strength of products and services and the experience of the management
team. Many companies with limited operating histories are small companies and
may also have risks associated with that type of company.
Warrants
- --------
Overview. The Fund may invest a portion of its assets in warrants. A warrant
gives the holder a right to purchase at any time during a specified period a
predetermined number of shares of common stock at a fixed price. Unlike
convertible debt securities or preferred stock, warrants do not pay a fixed
coupon or dividend.
Risks. Investments in warrants involve certain risks, including the possible
lack of a liquid market for resale of the warrants, potential price fluctuations
as a result of speculation or other factors, and failure of the price of the
underlying security to reach or have reasonable prospects of reaching a level at
which the warrant can be prudently exercised (in which event the warrant may
expire without being exercised, resulting in a loss of the Fund's entire
investment therein).
Securities that are Illiquid or Restricted
- ------------------------------------------
Overview. The Fund may invest in securities that may not be readily convertible
into cash. Factors that drive this may include frequency of trades and quoted
prices for the security, the number of dealers willing to make a market in the
security and whether the securities are registered under the securities Act of
1933.
Risks. Illiquid securities introduce the Fund to greater risks. The Fund may not
be able to sell an illiquid security as quickly as desired or at a reasonable
price. In reselling a restricted security, the Fund may also incur higher
expenses and experience delays and expenses associated with effecting
registration.
-5-
<PAGE>
Temporary Defensive Position
- ----------------------------
Overview. In special circumstances when the Adviser believes that the market
conditions warrant a temporary defensive position, the Fund may invest in debt
securities or cash equivalent securities beyond the limits established by the
Fund's policies. These investments may include U.S. government securities, or
other short-term, interest-bearing securities. During these periods, the Fund
may not participate in stock or bond market advances or declines to the same
extent that it would if the Fund was fully invested in stocks and bonds, and it
may be more difficult for the Fund to meet its investment objectives.
Cash equivalent securities may include U.S. Government Securities or corporate
debt obligations (including those subject to repurchase agreements) as described
herein, provided that they mature in thirteen months or less from the date of
acquisition and are otherwise eligible for purchase by the Fund. Cash equivalent
securities also may include Bankers' Acceptances and Certificates of Deposit of
domestic branches of U.S. banks, Commercial Paper and Variable Amount Demand
Master Notes ("Master Notes"). Bankers' Acceptances are time drafts drawn on and
"accepted" by a bank, are the customary means of effecting payment for
merchandise sold in import-export transactions and are a source of financing
used extensively in international trade. When a bank "accepts" such a time
draft, it assumes liability for its payment. When the Fund acquires a Bankers'
Acceptance, the bank which "accepted" the time draft is liable for payment of
interest and principal when due. The Bankers' Acceptance, therefore, carries the
full faith and credit of such bank. A Certificate of Deposit ("CD") is an
unsecured interest-bearing debt obligation of a bank. Commercial Paper is an
unsecured, short term debt obligation of a bank, corporation or other borrower.
Commercial Paper maturity generally ranges from two to 270 days and is usually
sold on a discounted basis rather than as an interest-bearing instrument. The
Fund will invest in Commercial Paper only if it is rated in the highest rating
category by any nationally recognized statistical rating organization ("NRSRO")
or, if not rated, the issuer must have an outstanding unsecured debt issue rated
in the three highest categories by any NRSRO or, if not so rated, be of
equivalent quality in the Adviser's assessment. Commercial Paper may include
Master Notes of the same quality. Master Notes are unsecured obligations which
are redeemable upon demand of the holder and which permit the investment of
fluctuating amounts at varying rates of interest. Master Notes are acquired by
the Fund only through the Master Note program of the Fund's custodian, acting as
administrator thereof. The Adviser will monitor, on a continuous basis, the
earnings power, cash flow and other liquidity ratios of the issuer of a Master
Note held by the Fund.
Debt Securities
- ---------------
Overview. Debt securities represent borrowed money that is to be repaid by the
issuer in fixed amounts. The issuer has a contractual obligation to pay interest
at a stated rate on specific dates and to repay principal on a specific maturity
date. Types of debt securities include bonds or debentures usually issued by
corporations and governments. The Fund may purchase debt securities rated at
least investment grade (rated Baa or better by Moody's Investors Service, Inc.
(Moody's) or BBB or better by Standard & Poor's Rating Group (S&P)). The Fund
may also invest a portion of the portfolio in high yield/high risk debt
securities rated below investment grade (Ba or lower by Moody's, BB or lower by
S&P). In cases where the ratings assigned by more than one rating agency differ,
the Fund will consider the security as rated in the higher category. If debt
securities purchased by a Fund are downgraded to below investment grade
following purchase, the Adviser will determine if any action should be taken.
(See "Quality Ratings of Corporate Bonds and Preferred Stocks")
Risks. Debt securities are subject to credit, interest rate, and market risk.
Credit risk represents the ability of the issuer to meet interest or principal
payments as they come due. The lower the rating given a security by a rating
service, the greater the estimated credit risk. Interest rate risk refers to the
fact that the value of debt securities generally fluctuates in response to
changes in interest rates. A decrease in interest rates will generally result in
an increase in the price of debt securities held by the Fund, while rising
interest rates will generally cause the value of debt securities to decline.
Longer-term securities generally offer the potential for higher returns but are
more sensitive to interest rate changes and are more volatile than shorter-term
securities.
-6-
<PAGE>
High yield/high risk debt securities generally offer higher returns but also
introduce a higher degree of credit risk and will have characteristics including
the possibility of default or bankruptcy of the issuers of such securities,
market price volatility based upon interest rate sensitivity, creditworthiness
and relative liquidity of the secondary trading market. Because high yield/high
risk debt securities have been found to be more sensitive to adverse economic
changes or individual corporate developments and less sensitive to interest rate
changes than higher-rated investments, an economic downturn could disrupt the
market for such securities and adversely affect the value of outstanding bonds
and the ability of issuers to repay principal and interest. In addition, in a
declining interest rate market, issuers of high yield/high risk debt securities
may exercise redemption or call provisions, which may force the Fund, to the
extent it owns such securities, to replace those securities with lower yielding
securities. This could result in a decreased return for investors. If an issuer
defaulted on a payment, the Fund would experience a reduction in income and
could expect a decline in the market value of that security. For convertible
securities there is also the risk of a decline in the market value of the
securities for reasons similar to the price fluctuations seen in common stocks.
U.S. Government Securities.
- ---------------------------
Overview. The Fund may invest in debt obligations which are issued or guaranteed
by the U.S. Government, its agencies and instrumentalities ("U.S. Government
Securities") as described herein. U.S. Government Securities include the
following securities: (1) U.S. Treasury obligations of various interest rates,
maturities and issue dates, such as U.S. Treasury bills (mature in one year or
less), U.S. Treasury notes (mature in one to seven years), and U.S. Treasury
bonds (mature in more than seven years), the payments of principal and interest
of which are all backed by the full faith and credit of the U.S. Government; (2)
obligations issued or guaranteed by U.S. Government agencies or
instrumentalities, some of which are backed by the full faith and credit of the
U.S. Government, e.g., obligations of the Government National Mortgage
Association ("GNMA"), the Farmers Home Administration and the Export Import
Bank; some of which do not carry the full faith and credit of the U.S.
Government but which are supported by the right of the issuer to borrow from the
U.S. Government, e.g., obligations of the Tennessee Valley Authority, the U.S.
Postal Service, the Federal National Mortgage Association ("FNMA"), and the
Federal Home Loan Mortgage Corporation ("FHLMC"); and some of which are backed
only by the credit of the issuer itself, e.g., obligations of the Student Loan
Marketing Association, the Federal Home Loan Banks and the Federal Farm Credit
Bank; and (3) any of the foregoing purchased subject to repurchase agreements as
described herein. The guarantee of the U.S. Government does not extend to the
yield or value of the Fund's shares.
Obligations of GNMA, FNMA and FHLMC may include direct pass-through
"Certificates," representing undivided ownership interests in pools of
mortgages. Such Certificates are guaranteed as to payment of principal and
interest (but not as to price and yield) by the U.S. Government or the issuing
agency. Mortgage Certificates are subject to more rapid prepayment than their
stated maturity date would indicate; their rate of prepayment tends to
accelerate during periods of declining interest rates and, as a result, the
proceeds from such prepayments may be reinvested in instruments which have lower
yields. To the extent such securities were purchased at a premium, such
prepayments could result in capital losses. The U.S. Government does not
guarantee premiums and market value of U.S. Government Securities.
Zero Coupon Securities and "Strips"
- -----------------------------------
Overview. The Fund may invest in zero coupon bonds and "strips." Zero coupon
bonds make no periodic interest payments but instead are sold at a discount from
face value. The buyer receives the rate of return from the appreciation of the
security which is redeemable at its face value on a given maturity date.
"Strips" are debt securities that are stripped of their interest coupon after
the securities are issued, but otherwise are comparable to zero coupon bonds.
-7-
<PAGE>
Risks. The market values of zero coupon bonds and "strips" generally fluctuate
in response to changes in interest rates to a greater degree than do
interest-paying securities of comparable term and quality. Additionally,
interest income must be paid on the portion of the original issue discount that
accrues during a given year. Since the Fund will not receive current cash
payments on the zero coupon, in some years it may need to sell other portfolio
holdings to satisfy the required cash distributions to shareholders. There is a
risk that the Fund may have to sell portfolio holdings earlier and at a less
advantageous position than it would otherwise need to.
Repurchase Agreements
- ---------------------
Overview. The Fund may invest in repurchase agreements with financial
organizations. In a repurchase agreement, the Fund purchases securities and at
the same time commits to resell that security to the seller at a set price and
on a specific number of days from the purchase. In effect, the Fund temporarily
loans money at an established interest rate to a financial institution, with the
financial institution's securities as the collateral. The securities acquired by
the Fund will have a market value at least equal to or in excess of the value of
the repurchase agreement and will be held by the Fund's custodian bank until
repurchased. The Adviser will limit repurchase agreements to financial
institutions that have been evaluated and deemed to be creditworthy.
Risks. Repurchase agreements involve certain risks. The Fund has a potential
credit risk if the other party defaults on its obligation and the Fund is
delayed or prevented from liquidating the collateral. If the other party to the
agreement becomes insolvent and subject to liquidation or reorganization, the
Fund may be delayed in closing out the transaction. In this situation it is also
possible that the Fund may be deemed an unsecured creditor of the other party to
the agreement.
Reverse Repurchase Agreements
- -----------------------------
Overview. The Fund may enter into reverse repurchase agreements, by temporarily
selling securities to another financial institution, in order to provide cash in
times of unusually heavy redemption requests or for other temporary purposes.
Risks. In a reverse repurchase agreement, there is a risk that the expense of
the transaction will be higher than the interest earned on the agreement and the
Fund therefore will lose some value. Additionally, a reverse repurchase
agreement may have the effect of increasing the leverage of the Fund's
portfolio, although this will be limited by segregating the Fund's assets in an
amount equal to that committed in the agreement.
Borrowing
- ---------
Overview. The Fund may borrow money from banks for temporary purposes.
Risks. The use of borrowing by the Fund involves special risk considerations
that may not be associated with other funds having similar policies. Since
substantially all of the Fund's assets fluctuate in value, whereas the interest
obligation resulting from a borrowing will be fixed by the terms of the Fund's
agreement with their lender, the asset value per share of the Fund will tend to
increase more when its portfolio securities increase in value and decrease more
when its portfolio securities decrease in value than would otherwise be the case
if the Fund did not borrow funds. In addition, interest costs on borrowings may
fluctuate with changing market rates of interest and may partially offset or
exceed the return earned on borrowed funds. Under adverse market conditions, the
Fund might have to sell portfolio securities to meet interest or principal
payments at a time when fundamental investment considerations would not favor
such sales.
-8-
<PAGE>
Lending of Portfolio Securities
- -------------------------------
Overview. The Fund may lend its securities to qualified financial institutions
in an amount not in excess of one-third of the Fund's total assets, as long as
the terms and the structure of such loans are consistent with the Investment
Company Act of 1940, or the rules and regulations or interpretations of the
Securities and Exchange Commission. The Fund requires that (a) the borrower
pledge and maintain with the Fund collateral consisting of cash, an irrevocable
letter of credit, or securities issued or guaranteed by the United States
government having a value at all times not less than 100% of the value of the
securities loaned, (b) the borrower add to such collateral whenever the price of
the securities loaned rises (i.e., the borrower "marks to the market" on a daily
basis), (c) the loan be made subject to termination by the Fund at any time, (d)
the Fund receives reasonable interest on the loan, which interest may include
the Fund's investing cash collateral in interest bearing short-term investments,
and (e) the Fund receives all dividends and distributions on the loaned
securities and any increase in the market value of the loaned securities.
Risks. The Fund is at risk that the other party to a securities lending
transaction will default on its obligations and the Fund will be delayed in or
prevented from exercising its rights to dispose of the collateral. These risks
may include a possible decline in the value of the collateral while the Fund
resolves the default situation, expenses incurred with these activities, and
potentially losing part of the income from the transaction.
Futures, Options and Forward Contracts
- --------------------------------------
Overview. The Fund may enter into futures, options and forward contracts. These
financial instruments are used most often to protect the Fund from a given risk,
although they may also be used at times to increase income or otherwise enhance
returns. The Fund is required to maintain a segregated account with its
custodian bank to "cover" its position in these contracts. The assets in this
account may either be cash or liquid portfolio securities.
Risks. Although futures, options and forward contracts are used to benefit the
Fund, they entail additional risks. The principal risks in utilizing futures
transactions, forward contracts and options are: (a) losses resulting from
market movements not anticipated by the Fund; (b) possible imperfect correlation
between movements in the prices of futures, forward contracts and options and
movements in the prices of the securities or currencies hedged or used to cover
such positions; (c) lack of assurance that a liquid secondary market will exist
for any particular futures or options at any particular time, and possible
exchange-imposed price fluctuation limits, either of which may make it difficult
or impossible to close a position when so desired; (d) lack of assurance that
the counterparty to a forward contract would be willing to negotiate an offset
or termination of the contract when so desired; and (e) the need for additional
information and skills beyond those required for the management of a portfolio
of traditional securities. Use of these strategies may have the potential of
producing a loss instead of the intended portfolio protection or income
generation. Any portfolio protection gained by using these strategies may have
the unintended affect of limiting the Fund's opportunity to profit from
unexpected favorable price movements in the underlying instruments. In addition,
when entering into such a contract, the Fund assumes the risk that the
counterparty will fail to perform its obligations.
Futures Contracts
- -----------------
Definition. A futures contract is an agreement to buy or sell a specific amount
of a financial instrument, at a particular price, at a future date. The contract
obligates the buyer to purchase the underlying financial instrument, and the
seller to sell it, unless the contract is sold to someone else before the
settlement date. Futures contracts are traded on exchanges which have been
designated "contract markets" by the Commodities Futures Trading Commission
(CFTC) and must be executed through a futures commission merchant (FCM) or
brokerage firm which is a member of the relevant market. When entering into a
futures contract, both the buyer and seller are required to deposit "initial
margin" with the FCM. Initial margins are a percentage of the contract's value
and can be maintained in liquid securities or cash. If the value of the initial
margin declines
-9-
<PAGE>
below the required level, additional "variation margin" must be added. In
general, the segregated assets used for the initial margin would be available to
the Fund immediately upon closing out the futures position. Initial and
variation margin is not considered purchasing securities on margin for purposes
of the Fund's investment policies. The Fund intends to comply with the
guidelines of eligibility for exclusion from being a "commodity pool operator"
with the CFTC and the National Futures Association.
Overview. The Fund will purchase futures contracts primarily to protect the Fund
from fluctuations in the value of portfolio securities or interest rates without
having to actually buy or sell the underlying security. Examples of when the
Fund would use futures contracts include if it plans to buy securities in the
future and wants to protect itself from the potential increase in price of those
securities, or if it currently holds securities and seeks to protect itself from
a potential decline in the value of those securities.
Risks. Futures contracts involve certain risks. Although a futures contract is
used to benefit the Fund, the overall performance could be worse than if the
Fund had not entered into the futures contract. Some of the potential risks with
using futures contracts include an unexpected move of the market opposite to
what the futures contract is protecting; the inability to exactly match the
Fund's portfolio with a contract and therefore only benefiting from limited
protection; and the possibility that the contract may diverge from the price of
the underlying security, again not providing the desired protection. Additional
risks with using futures contracts are potential opportunity loss (assets are
set aside to cover the contract instead of being invested); the possibility that
the contract loses liquidity or cannot be easily replaced with a new position;
and the risk that a given FCM declares bankruptcy and the Fund may lose some or
all of the margin invested.
Options on Securities and Futures Contracts
- -------------------------------------------
Definition. An option gives the right, but not the obligation, to buy or sell a
security or futures contract at a specified price on or before a specified date
for a set premium. If the option is not exercised after a set period, the option
expires and the option buyer forfeits the premium.
Overview. The Fund may buy put and call options and write covered put and call
options on securities. The Fund uses options primarily to protect the value of
the Fund, although they may also be used to increase income or otherwise enhance
returns. As an example, the Fund may buy call options to lock in the price of
securities it plans to buy in the future or it may buy put options to defend
against an expected decline in the value of its portfolio securities.
The Fund will most often write covered options. For a call option, the Fund owns
the underlying security covered by the call or has an absolute and immediate
right to acquire that security without additional cash consideration, or the
Fund holds a call on the same security and in the same principal amount as the
call written and the exercise price of the call held is equal to or less than
the exercise price of the call written or is greater than the exercise price of
the call written if the difference is maintained by the Fund in cash and other
liquid portfolio securities in a segregated account with its custodian. For a
put option, the Fund either segregates cash not available for investment or
other liquid portfolio securities with a value equal to the exercise price of
the put with the Fund's custodian, or holds a put on the same security and in
the same principal amount as the put written and the exercise price of the put
held is equal to or greater than the exercise price of the put written. The Fund
also may write call options that are not covered for cross-hedging purposes. The
Fund collateralizes its obligation by segregating cash or other liquid portfolio
securities in an amount not less than the market value of the underlying
security, marked-to-market daily.
The writer of an option may have no control over when the underlying securities
must be sold, in the case of a call option, or bought, in the case of a put
option. If a call option is exercised, the writer experiences a profit or loss
from the sale of the underlying security. If a put option is exercised, the
writer must fulfill the obligation to buy the underlying security at the
exercise price, which will usually exceed the then market value of the
underlying security. The writer of an option that wishes to terminate its
obligation may effect a "closing
-10-
<PAGE>
purchase transaction." This is accomplished by buying an option of the same
series as the option previously written. In the case of a written call option,
effecting a closing transaction will permit the Fund to write another call
option on the underlying security with either a different exercise price or
expiration date or both. In the case of a written put option, such transaction
will permit a Fund to write another put option to the extent that the exercise
price is secured by other liquid assets. Likewise, an investor who is the holder
of an option may liquidate its position by effecting a "closing sale
transaction." This is accomplished by selling an option of the same series as
the option previously bought. There is no guarantee that either a closing
purchase or a closing sale transaction can be effected, and the Fund may have to
exercise the options in order to realize any profit.
The exercise price of a call option may be below ("in-the-money"), equal to
("at-the-money") or above ("out-of-the-money") the current value of the
underlying security at the time the option is written. If the call options are
exercised in such transactions, the Fund's maximum gain will be the premium
received by it for writing the option, adjusted upwards or downwards by the
difference between the Fund's purchase price of the security and the exercise
price. If the options are not exercised and the price of the underlying security
declines, the amount of such decline will be offset by the amount of premium
received.
Risks. Buying an option involves the risk of losing the premium paid. The
premium on an option is lost if the price of the underlying security does not
increase (in the case of a call) above the exercise price, or does not decrease
(in the case of a put) below the exercise price. Writing an option introduces
additional risks. When writing a call option, if the value of the underlying
security increases, then the call option may be exercised and the Fund's
potential for capital appreciation would be limited to the exercise price.
Additionally, when writing call options on a securities index, the Fund bears
the risk of loss resulting from the imperfect correlation of the price of the
securities index and the price of securities set aside to cover the position.
When writing put options, if the market price of the underlying security rises
above the exercise price, the put option will expire worthless and the Fund's
gain will be limited to the premium received. If the market price of the
underlying security declines or otherwise is below the exercise price, the Fund
may elect to close the position or take delivery of the security at the exercise
price and that Fund's return will be the premium received from the put options
minus the amount by which the market price of the security is below the exercise
price. In general, using options always has the potential to reduce profits that
might otherwise have been realized in the underlying security by the amount of
the premium paid for the option and by transaction costs.
Forward Contracts
- -----------------
Definition. A forward contract is an agreement between two parties in which one
party is obligated to deliver a stated amount of a stated asset at a specified
time in the future and the other party is obligated to pay a specified amount
for the assets at the time of delivery. Forward contracts generally are traded
in an interbank market conducted directly between traders (usually large
commercial banks) and their customers, and can be specifically drawn to meet the
needs of the parties. A forward contract can be offset or terminated before its
maturity, or may be held to maturity.
Overview. The Fund may enter into forward currency contracts with stated
contract values of up to the value of the Fund's assets. Forward contracts may
be used by the Fund to buy and sell currencies through forward currency
contracts in order to fix a price for the security (transaction hedge). The Fund
also may hedge some or all of its investments denominated in a foreign currency
or exposed to foreign currency fluctuations against a decline in the value of
that currency relative to the U.S. dollar. This may be done by entering into
forward currency contracts to sell an amount of that currency approximating the
value of some or all of its portfolio securities denominated in that currency
(position hedge). The Fund also may enter into a forward currency contract with
respect to a currency where the Fund is considering the purchase or sale of
investments denominated in that currency but has not yet selected the specific
investments (anticipatory hedge). In any of these circumstances the Fund may,
alternatively, enter into a forward currency contract to purchase or sell one
foreign currency for a second currency that is expected to perform more
favorably relative to the U.S. dollar if the portfolio manager believes there is
a reasonable degree of correlation between movements in the two currencies
(cross-hedge).
-11-
<PAGE>
The Fund will cover outstanding forward currency contracts by maintaining liquid
portfolio securities denominated in or whose value is tied to, the currency
underlying the forward contract or the currency being hedged. To the extent that
the Fund is not able to cover its forward currency positions with underlying
portfolio securities, the Fund's custodian will segregate cash or other liquid
portfolio securities having a value equal to the aggregate amount of the Fund's
commitments under forward contracts. If the value of the securities used to
cover a position or the value of segregated assets declines, the Fund will find
alternative cover or segregate additional cash or liquid portfolio securities on
a daily basis so that the value of the covered and segregated assets will be
equal to the amount of the Fund's commitments with respect to such contracts. As
an alternative to segregating assets, the Fund may buy call options permitting
the Fund to buy the amount of foreign currency being hedged by a forward sale
contract. Alternatively, the Fund may buy put options permitting it to sell the
amount of foreign currency subject to a forward buy contract.
Risks. Forward contracts seek to minimize the effect of currency appreciation as
well as depreciation, but do not eliminate fluctuations in the underlying U.S.
dollar equivalent value of the proceeds of or rates of return on a Fund's
foreign currency denominated portfolio securities. Their is a risk that the
matching of the increase in value of a forward contract and the decline in the
U.S. dollar equivalent value of the foreign currency denominated asset that is
being hedged may not be precise. Additionally, shifting a Fund's currency
exposure from one foreign currency to another removes that Fund's opportunity to
profit from increases in the value of the original currency and involves a risk
of increased losses to such Fund if its portfolio manager's projection of future
exchange rates is inaccurate. Another risk with forward contracts is that they
are not currently regulated by the CFTC. The CFTC may in the future assert
authority to regulate forward contacts. In such event, the Fund's ability to
utilize forward contracts may be restricted. In addition, the Fund may not
always be able to enter into forward contracts at attractive prices and may be
limited in its ability to use these contracts to hedge Fund assets.
-12-
<PAGE>
QUALITY RATINGS OF CORPORATE BONDS AND PREFERRED STOCKS
The ratings of Moody's and Standard & Poor's for corporate bonds in which the
Fund may invest are as follows:
Moody's
- -------
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterize bonds in this class.
B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Standard & Poor's
- -----------------
AAA - Bonds rated AAA have the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA - Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
-13-
<PAGE>
A - Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB rating.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default
and is dependent upon favorable business, financial or economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have the
capacity to pay interest or repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC - The rating CC is typically applied to debt subordinated to senior debt
that is assigned an actual or implied CCC rating.
C - The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may be
used to cover a situation where a bankruptcy has been filed but debt service
payments are continued.
CI - The rating CI is reserved for income bonds on which no interest is
being paid.
D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition and debt service payments are jeopardized.
The ratings of Moody's and Standard & Poor's for PREFERRED STOCKS in which the
Fund may invest are as follows:
Moody's
- -------
aaa - An issue which is rated aaa is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the least risk
of dividend impairment within the universe of preferred stocks.
aa - An issue which is rated aa is considered a high-grade preferred stock.
This rating indicates that there is reasonable assurance that earnings and asset
protection will remain relatively well maintained in the foreseeable future.
-14-
<PAGE>
a - An issue which is rated a is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than in the aaa
and aa classifications, earnings and asset protection are, nevertheless,
expected to be maintained at adequate levels.
baa - An issue which is rated baa is considered to be medium grade, neither
highly protected nor poorly secured. Earnings and asset protection appear
adequate at present but may be questionable over any great length of time.
ba - An issue which is rated ba is considered to have speculative elements
and its future cannot be considered well assured. Earnings and asset protection
may be very moderate and not well safeguarded during adverse periods.
Uncertainty of position characterizes preferred stocks in this class.
b - An issue which is rated b generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of other
terms of the issue over any long period of time may be small.
caa - An issue which is rated caa is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the future status
of payments.
Standard & Poor's
- -----------------
AAA - This is the highest rating that may be assigned by Standard & Poor's
to a preferred stock issue and indicates an extremely strong capacity to pay the
preferred stock obligations.
AA - A preferred stock issue rated AA also qualifies as a high-quality
fixed-income security. The capacity to pay preferred stock obligations is very
strong, although not as overwhelming as for issues rated AAA.
A - An issue rated A is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the diverse
effects of changes in circumstances and economic conditions.
BBB - An issue rated BBB is regarded as backed by an adequate capacity to
pay the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the A category.
BB, B and CCC - Preferred stock rated BB, B and CCC are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay preferred stock obligations. BB indicates the lowest degree of speculation
and CCC the highest degree of speculation. While such issues will likely have
some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
CC - The rating CC is reserved for a preferred stock issue in arrears on
dividends or sinking fund payments but that is currently paying.
C - A preferred stock rated C is a non-paying issue.
D - A preferred stock rated D is a non-paying issue with the issuer in
default on debt instruments.
-15-
<PAGE>
MANAGEMENT OF THE FUND
TRUSTEES AND OFFICERS OF THE FUND
The Trustees are responsible for overseeing the business affairs of the Fund. A
major responsibility they have is to make or modify Fund policies that are not
governed by shareholder vote. The Trustees have delegated day-to-day management
of the Fund to the Adviser. The Trustees and the Adviser's management team meet
periodically to review important Fund matters including investment policies,
performance, and expenses.
The Trustees and officers of the Fund are listed below. Information includes the
person's name, their age, and the position they hold with the Fund.
Estimated Annual
Compensation
Name Age Position Held From the Trust
- ---- --- ------------- --------------
Robert Dorsey 41 Vice President 0
*David Ortiz 35 Trustee / President 0
Mark Seger 36 Treasurer 0
John Splain 41 Secretary 0
[Name] [Age] Trustee $500
[Name] [Age] Trustee $500
[Name] [Age] Trustee $500
[Name] [Age] Trustee $500
* This individual is an "interested person" (as defined in the Investment
Company Act of 1940) of the Fund.
The principal occupation(s) during the past five years of the Trustees and
officers of the Fund are set forth below:
Robert Dorsey President and Treasurer of Countrywide Fund Services, Inc.
(a registered transfer agent) and CW Fund Distributors, Inc.
(the Fund's principal underwriter) and Treasurer of
Countrywide Investments, Inc. (a registered broker-dealer
and investment adviser) and Countrywide Financial Services,
Inc. (a financial services company and parent of Countrywide
Fund Services, Inc. and Countrywide Investments, Inc.) all
of which are located at 312 Walnut Street, Cincinnati, Ohio
45202.
-16-
<PAGE>
David Ortiz Officer of the Fund's Adviser, Clearbrook Investments LLC,
8000 Towers Crescent Drive, Suite 1350, Vienna, VA, 22182.
From 1984 to 1997, Partner/management consultant at Booz
Allen & Hamilton (a leading management and technology
consulting firm).
Mark Seger C.P.A. and Vice President of Countrywide Financial Services,
Inc. and CW Fund Distributors, Inc. and Vice President and
Chief Operating Officer of Countrywide Fund Services, Inc.
all of which are located at 312 Walnut Street, Cincinnati,
Ohio 45202.
John Splain Secretary and General Counsel of Countrywide Fund Services,
Inc., CW Fund Distributors, Inc. Countrywide Investments,
Inc. and Countrywide Financial Services, Inc. all of which
are located at 312 Walnut Street, Cincinnati, Ohio 45202.
[Name]
[Name]
[Name]
[Name]
INVESTMENT ADVISER
Clearbrook Investments, LLC (the Adviser) is the investment adviser to the Fund.
The Adviser was organized as a Virginia limited liability company in April 1998.
David Ortiz, who is an officer of the Adviser and President and a Trustee of the
Trust, has a controlling voting interest in the Adviser. As of the date of this
Statement of Additional Information, the Adviser is the sole shareholder of the
Fund.
Pursuant to an Advisory Agreement, the Adviser provides ongoing advice on the
Fund's investments, in accordance with the Fund's investment objective and
policies. The Adviser pays from its own resources the cost of providing
investment advice to the Fund; compensation and expenses of Trustees affiliated
with the Adviser, compensation of the Adviser's officers and staff; and facility
costs for the Adviser.
The Fund bears all other expenses that are not assumed by the Adviser as
described above. These include fund administration, custodian and transfer agent
fees; legal and accounting fees; compensation for Trustees not affiliated with
the Adviser; brokerage commissions; and costs associated with reports to
shareholders and government agencies. The Fund is also responsible for
nonrecurring expenses that may arise, including litigation to which the Fund may
be a party. The Fund may also have an obligation to indemnify its Trustees and
officers with respect to any such litigation.
The Advisory Agreement will continue in effect until ________, 2000. Thereafter,
the Agreement is renewable from year to year so long as such continuance is
approved annually by the majority vote of those Trustees who are not "interested
persons" of the Adviser or the Trust, and either (1) by the majority vote of the
full Board of Trustees, or (2) by the majority vote of the outstanding shares of
the Fund. The Advisory Agreement will terminate upon its assignment or, without
payment of penalty, on 60 days' written notice from either the Trust or the
Adviser or a majority of the Fund's outstanding shares. The Adviser may, in
addition to its advisory role to the Fund, provide investment advisory and other
services for individuals, corporations or other investment companies.
-17-
<PAGE>
The Fund pays the Adviser a monthly fee at the rate of 1% per annum of the
average daily net assets of the Fund. If necessary, the Adviser has voluntarily
agreed to waive its fee and/or reimburse the Fund for other operating expenses
in order to limit total operating expenses to 1.98% of average net assets. Any
reductions made by the Adviser in its fees are subject to reimbursement by the
Fund within the following five years provided the Fund is able to effect such
reimbursement and remain in compliance with the foregoing expense limitation.
The Adviser generally seeks reimbursement for the oldest reductions before
payment by the Fund for fees and expenses for the current year. In considering
approval of the Trust's Advisory Agreement, the Board of Trustees specifically
considered and approved the provision which permits the Adviser to seek
reimbursement of any reduction made to its fees within the five year period. The
Adviser's ability to request reimbursement is subject to various conditions.
First, any reimbursement is subject to the Fund's ability to effect such
reimbursement and remain in compliance with the 1.98% limitation on annual
operating expenses. Second, the Adviser must specifically request the
reimbursement from the Board of Trustees. Third, the Board of Trustees must
approve such reimbursement as appropriate and not inconsistent with the best
interests of the Fund and the shareholders at the time such reimbursement is
requested. Because of these substantial contingencies, the potential
reimbursements will be accounted for as contingent liabilities that are not
recordable on the balance sheet of the Fund until collection is probable; but
the full amount of the potential liability will appear in a footnote to the
Fund's financial statements. At such time as it appears probable that the Fund
is able to effect such reimbursement, that the Adviser intends to seek such
reimbursement and that the Board of Trustees has or is likely to approve the
payment of such reimbursement, the amount of the reimbursement will be accrued
as an expense of the Fund for that current period.
KEY SERVICE PROVIDERS
Distributor
- -----------
CW Fund Distributors, Inc. (the Distributor), 312 Walnut Street, 21st Floor,
Cincinnati, Ohio 45202, serves as principal underwriter for the Trust pursuant
to an Underwriting Agreement. Shares are sold on a continuous basis by the
Distributor. The Distributor has agreed to use its best efforts to solicit
orders for the sale of Trust shares, but it is not obliged to sell any
particular amount of shares. The Underwriting Agreement provides that, unless
sooner terminated, it will continue in effect for two years from the date of its
execution, and for continuous one-year periods thereafter if such continuance is
approved at least annually (i) by vote of a majority of the Board of Trustees or
a vote of a majority of the outstanding shares of the Fund, and (ii) by a
majority of the Trustees who are not interested persons of the Trust or of the
Distributor by a vote cast in person at a meeting called for the purpose of
voting on such approval.
The Underwriting Agreement may be terminated by the Trust at any time on 60
days' written notice to the Distributor, without the payment of any penalty, by
a vote of a majority of the Board of Trustees or by a vote of a majority of the
outstanding shares of the Fund. The Underwriting Agreement will automatically
terminate in the event of its assignment.
The Distributor is an indirect wholly-owned subsidiary of Countrywide Credit
Industries, Inc., a New York Stock Exchange listed company principally engaged
in the business of residential mortgage lending.
Administrator/Transfer Agent
- ----------------------------
Countrywide Fund Services, Inc. (Countrywide), 312 Walnut Street, Cincinnati,
Ohio 45202, is retained by the Adviser to maintain the records of each
shareholder's account, process purchases and redemptions of the Fund's shares
and act as dividend and distribution disbursing agent. Countrywide also provides
administrative services to the Fund, calculates daily net asset value per share
and maintains such books and records as are necessary to enable Countrywide to
perform its duties.
For the performance of these services, the Fund pays Countrywide (i) a fee for
administrative services at the annual rate of .15% of the average value of the
Fund's daily net assets up to $25,000,000, .125% of such assets from $25,000,000
to $50,000,000 and .10% of such assets in excess of $50,000,000 (subject to a
minimum fee of $1,500 per month); (ii) a fee for transfer agency and shareholder
services at the annual rate of $20 per shareholder account of the Fund (subject
to a minimum fee of $1,500 per month); and (iii) a monthly fee for accounting
and pricing services which will vary according to the Fund's average net assets
during such month. In addition, the Fund reimburses Countrywide for
out-of-pocket expenses, including but not limited to, postage, stationery,
checks, drafts, forms, reports, record storage, communication lines and the
costs of external pricing services.
Countrywide is an indirect wholly-owned subsidiary of Countrywide Credit
Industries, Inc., a New York Stock Exchange listed company principally engaged
in the business of residential mortgage lending.
-18-
<PAGE>
Custodian
- ---------
_______________, _____________, _________________, has been retained to act as
Custodian for the investments of the Fund. ___________________ acts as the
Fund's depository, safekeeps its portfolio securities, collects all income and
other payments with respect thereto, disburses funds as instructed and maintains
records in connection with its duties.
Independent Auditor
- -------------------
The firm of _________________ has been selected as independent auditors for the
Trust. _________________, ____________________, __________, ____, performs an
annual audit of the Trust's financial statements and advises the Trust as to
certain accounting matters.
DISTRIBUTION PLAN
The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the Plan), which would allow the Fund to pay
expenses associated with the distribution of the Fund's shares. The types of
expenses may include payments to the Fund's Distributor or to securities dealers
and financial institutions for distributing the Fund's shares, costs for
marketing and promotional activities, costs of printing and distributing
prospectuses and reports to prospective shareholders of the Fund, and costs for
preparing, printing and distributing sales literature. In accordance with the
Plan, the Fund may pay expenses of up to a limit of .25% per annum of the Fund's
average daily net assets.
At this time, the Trustees have not authorized the payment of any distribution
fees. The Trustees will authorize such payments only if they believe that there
is a reasonable likelihood that the Plan will benefit the Fund and its
shareholders. If the Trustees do authorize the payment of distribution fees, the
Trustees will review quarterly and annually the purpose of these fees and the
amounts that have been expended.
The Plan must be approved each year by a majority vote of the Board of Trustees
and by majority vote of the Trustees who are not "interested persons" of the
Trust and have no direct or indirect financial interest in the Plan (the
Independent Trustees) at a meeting called for the purpose of voting on such
continuance. The Plan may be terminated at any time by majority vote of the
Independent Trustees or by a majority vote of the outstanding shares of the
Fund.
By reason of his controlling interest in the Adviser, David J. Ortiz may be
deemed to have a financial interest in the operation of the Plan and related
agreements.
BROKERAGE TRANSACTIONS
The Adviser, with supervision by the Trustees, is responsible for negotiating
and placing portfolio transactions for the Fund. As specified in the Advisory
Agreement, portfolio transactions will be placed with brokers and dealers who
either (1) provide the most favorable price and efficient execution of
transactions, or (2) provide a reasonable rate of commission in relation to
brokerage and research services provided to the Fund or the Adviser.
The types of research services that may be provided to the Fund by the broker
include broker and other third-party equity research, information as to the
availability of securities for purchase or sale, evaluations of portfolio
securities, computerized stock market and business news services, economic
research and account performance data, and computerized stock quotation and
trading services. In seeking to determine the reasonableness of brokerage
commissions paid in any transaction, the Adviser relies upon its experience and
knowledge regarding commissions generally charged by various brokers and on its
judgment in evaluating the brokerage and research
-19-
<PAGE>
services received from the broker effecting the transaction. These research
services may help the Adviser in the analysis and evaluation of securities in
which the Fund may invest, although they are not expected to decrease the
expenses that the Adviser will incur in the performing investment advisory
services for the Fund.
Generally, the Fund attempts to deal directly with the dealers who make a market
in the securities involved unless better prices and execution are available
elsewhere. Such dealers usually act as principals for their own account. On
occasion, portfolio securities for the Fund may be purchased directly from the
issuer. Principal securities transactions are generally traded on a net basis
and these transactions do not normally involve brokerage commissions. When
securities are traded on a net basis (without commission) through broker-dealers
and banks acting for their own account, such firms attempt to profit from buying
at the bid price and selling at the higher asked price of the market, the
difference being referred to as the spread. The cost of principal transactions
by the Fund will include dealer or underwriter spreads.
The Fund has no obligation to deal with any broker or dealer in the execution of
securities transactions. However, the Adviser and other affiliates of the Trust
may effect securities transactions which are executed on a national securities
exchange or transactions in the over-the-counter market conducted on an agency
basis. The Fund will not effect any brokerage transactions in its portfolio
securities with the Adviser if such transactions would be unfair or unreasonable
to its shareholders. Over-the-counter transactions will be placed either
directly with principal market makers or with broker-dealers. Although the Fund
does not anticipate any ongoing arrangements with other brokerage firms,
brokerage business may be transacted from time to time with other firms. Neither
the Adviser, nor affiliates of the Trust, the Distributor or the Adviser, will
receive reciprocal brokerage business as a result of the brokerage business
transacted by the Fund with other brokers.
PURCHASING, REDEEMING AND PRICING SHARES
The Fund provides investors several options for purchasing and redeeming shares.
If any questions arise on how to purchase shares, please call the Fund at
888-____-_____.
PRICE RECEIVED WHEN PURCHASING/REDEEMING SHARES
U.S. Government obligations are valued at their most recent bid prices as
obtained from one or more of the major market makers for such securities. Other
portfolio securities are valued as follows: (i) securities which are traded on
stock exchanges or are quoted by NASDAQ are valued at the last reported sale
price as of the close of the regular session of trading on the New York Stock
Exchange on the day the securities are being valued, or, if not traded on a
particular day, at the closing bid price, (ii) securities traded in the
over-the-counter market, and which are not quoted by NASDAQ, are valued at the
last sale price (or, if the last sale price is not readily available, at the
last bid price as quoted by brokers that make markets in the securities) as of
the close of the regular session of trading on the New York Stock Exchange on
the day the securities are being valued, (iii) securities which are traded both
in the over-the-counter market and on a stock exchange are valued according to
the broadest and most representative market, and (iv) securities (and other
assets) for which market quotations are not readily available are valued at
their fair value as determined in good faith in accordance with consistently
applied procedures established by and under the general supervision of the Board
of Trustees. The net asset value per share of the Fund will fluctuate with the
value of the securities it holds.
A security listed or traded on an exchange, domestic or foreign, is valued at
its last sales price on the principal exchange on which it is traded prior to
the time when assets are valued. If no sale is reported at that time, the most
recent bid price is used. When market quotations for options and futures
positions held by a Fund are readily available, those positions will be valued
based upon such quotations. Securities and other assets for which market
quotations are not readily available, or for which the Adviser has reason to
question the validity of quotations received, are valued at fair value as
determined in good faith by the Board. For valuation purposes, quotations of
foreign securities or other assets denominated in foreign currencies are
translated to U.S.
-20-
<PAGE>
dollar equivalents using the net foreign exchange rate in effect at the close of
the stock exchange in the country where the security is issued.
The value of non-dollar denominated portfolio instruments held by the
International Value Fund will be determined by converting all assets and
liabilities initially expressed in foreign currency values into U.S. dollar
values at the mean between the bid and offered quotations of such currencies
against U.S. dollars as last quoted by any recognized dealer. If such quotations
are not available, the rate of exchange will be determined in accordance with
policies established in good faith by the Board of Trustees. Gains or losses
between trade and settlement dates resulting from changes in exchange rates
between the U.S. dollar and a foreign currency are borne by the International
Value Fund. To protect against such losses, the Fund may enter into forward
foreign currency exchange contracts, which will also have the effect of limiting
any such gains.
TAX INFORMATION
The information presented below provides more detail on potential income tax
issues relating to the Fund. It is not meant to be a complete discussion of tax
implications. You may wish to consult with your tax adviser to understand in
more detail how investing in the Fund may affect your specific tax situation.
STATUS AS A REGULATED INVESTMENT COMPANY
The Fund intends to qualify as a "regulated investment company" under Subchapter
M of the Internal Revenue Code. By doing this, the Fund will generally be
relieved of federal income taxes, which benefits the shareholders because
distributions are not "double taxed" (i.e., not taxed at both the business and
individual level). To qualify as a regulated investment company (RIC) under the
Internal Revenue Code, the Fund must distribute to its shareholders for each
taxable year at least 90% of its investment company taxable income (consisting
generally of net investment income, net short-term capital gains, and net gains
from certain foreign currency transactions). The Fund must also meet several
additional requirements: (1) the Fund must derive at least 90% of its gross
income each taxable year from dividends, interest, payments with respect to
securities loans, and gains from the sale or other disposition of securities or
foreign currencies, or other income (including gains from options, futures, or
forward contracts) derived with respect to its business of investing in
securities or those currencies; and (2) at the close of each quarter of the
Fund's taxable year, (i) at least 50% of the market value of its total assets
must be represented by cash and cash items, U.S. Government securities,
securities of other RICs, and other securities, with those other securities
limited, in respect of any one issuer, to an amount that does not exceed 5% of
the value of the Fund's total assets and that does not represent more than 10%
of the issuer's outstanding voting securities, and (ii) not more than 25% of the
value of its total assets may be invested in securities (other than U.S.
Government securities or the securities of other RICs) of any one issuer.
Although the Fund intends to satisfy all the foregoing requirements, there is no
assurance that the Fund will be able to do so.
DISTRIBUTIONS AND REDEMPTIONS
Distributions are taxed based on how long the Fund has held the shares, not by
how long the shareholder has owned the shares. Generally, net capital gains from
assets held for more than 18 months will be subject to a maximum tax rate of
20%; net capital gains from assets held for more than one year but no more than
18 months will be subject to a maximum tax rate of 28%; and net capital gains
from assets held for one year or less will be taxed as ordinary income.
If Fund shares are sold at a loss after being held for six months or less, the
loss will be treated as a long-term, instead of short-term, capital loss to the
extent of any capital gain distributions received on those shares. Also, income
tax laws may not allow a loss on the sale of Fund shares if the shareholder
reinvests in the Fund shortly before or after that sale.
-21-
<PAGE>
The Fund's net realized capital gains from securities transactions will be
distributed only after reducing such gains by the amount of any available
capital loss carryforwards. Capital losses may be carried forward to offset any
capital gains for eight years, after which any undeducted capital loss remaining
is lost as a deduction.
A federal excise tax at the rate of 4% will be imposed on the excess, if any, of
the Fund's "required distribution" over actual distributions in any calendar
year. Generally, the "required distribution" is 98% of the Fund's ordinary
income for the calendar year plus 98% of its net capital gains recognized during
the one year period ending on October 31 of the calendar year plus undistributed
amounts from prior years. The Fund intends to make distributions sufficient to
avoid imposition of the excise tax.
The Trust is required to withhold and remit to the U.S. Treasury a portion (31%)
of dividend income on any account unless the shareholder provides a taxpayer
identification number and certifies that such number is correct and that the
shareholder is not subject to backup withholding.
FOREIGN SOURCES OF INCOME
The Fund may purchase securities of certain foreign corporations considered to
be passive foreign investment companies by the IRS. In order to avoid taxes and
interest that must be paid by the Fund if these instruments are profitable, the
Fund may make various elections permitted by the tax laws. However, these
elections could require that the Fund recognize taxable income, which in turn
must be distributed.
Some foreign securities purchased by the Fund may be subject to foreign taxes
that could reduce the yield on such securities. The amount of such foreign taxes
is expected to be insignificant. The Fund may from year to year make the
election permitted under Section 853 of the Internal Revenue Code to pass
through such taxes to shareholders, who will each decide whether to deduct such
taxes or claim a foreign tax credit. If such election is not made, foreign taxes
paid or accrued will represent an expense to the Fund that will reduce its
investment company taxable income.
-22-
<PAGE>
PERFORMANCE INFORMATION
The Fund's total returns are based on the overall dollar or percentage change in
value of a hypothetical investment in the Fund, assuming all dividends and
distributions are reinvested. Average annual total return reflects the
hypothetical annually compounded return that would have produced the same
cumulative total return if the Fund's performance had been constant over the
entire period presented. Because average annual total returns tend to smooth out
variations in the Fund's returns, investors should recognize that they are not
the same as actual year-by-year returns.
For the purposes of quoting and comparing the performance of the Fund to that of
other mutual funds and to other relevant market indices in advertisements,
performance will be stated in terms of average annual total return. Under
regulations adopted by the Securities and Exchange Commission, funds that intend
to advertise performance must include average annual total return quotations
calculated according to the following formula:
P(1+T)n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (1, 5, or 10)
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1-, 5-, or 10-year period, at the end of such period
(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 of the Fund's existence or shorter periods dating from the
commencement of the Fund's operations. In calculating the ending redeemable
value, all dividends and distributions by the Fund are assumed to have been
reinvested at net asset value as described in the Prospectus on the reinvestment
dates during the period. Additionally, redemption of shares is assumed to occur
at the end of each applicable time period.
The foregoing information should be considered in light of the Fund's investment
objectives and policies, as well as the risks incurred in the Fund's investment
practices. Future results will be affected by the future composition of the
Fund's portfolio, as well as by changes in the general level of interest rates,
and general economic and other market conditions.
The Fund may also advertise total return (a "nonstandardized quotation") which
is calculated differently from average annual total return. A nonstandardized
quotation of total return may be a cumulative return which measures the
percentage change in the value of an account between the beginning and end of a
period, assuming no activity in the account other than reinvestment of dividends
and capital gains distributions. A nonstandardized quotation may also indicate
average annual compounded rates of return over periods other than those
specified for average annual total return. A nonstandardized quotation of total
return will always be accompanied by the Fund's average annual total return as
described above.
To help investors better evaluate how an investment in the Fund might satisfy
their investment objective, advertisements regarding the Fund may discuss
various measures of Fund performance, including current performance ratings
and/or rankings appearing in financial magazines, newspapers and publications
which track mutual fund performance. Advertisements may also compare performance
(using the calculation methods set forth in the Prospectus) to performance as
reported by other investments, indices and averages. When advertising current
ratings or rankings, the Fund may use the following publications or indices to
discuss or compare Fund performance:
-23-
<PAGE>
Lipper Mutual Fund Performance Analysis measures total return and average
current yield for the mutual fund industry and ranks individual mutual fund
performance over specified time periods assuming reinvestment of all
distributions, exclusive of sales loads. The Fund may provide comparative
performance information appearing in any appropriate category published by
Lipper Analytical Services, Inc. In addition, the Fund may use comparative
performance information of relevant indices, including the S&P 500 Index, the
Dow Jones Industrial Average, the Russell 2000 Index, the NASDAQ Composite Index
and the Value Line Composite Index. The S&P 500 Index is an unmanaged index of
500 stocks, the purpose of which is to portray the pattern of common stock price
movement. The Dow Jones Industrial Average is a measurement of general market
price movement for 30 widely held stocks listed on the New York Stock Exchange.
The Russell 2000 Index, representing approximately 11% of the U.S. equity
market, is an unmanaged index comprised of the 2,000 smallest U.S. domiciled
publicly-traded common stocks in the Russell 3000 Index (an unmanaged index of
the 3,000 largest U.S. domiciled publicly-traded common stocks by market
capitalization representing approximately 98% of the U.S. publicly-traded equity
market). The NASDAQ Composite Index is an unmanaged index which averages the
trading prices of more than 3,000 domestic over-the-counter companies. The Value
Line Composite Index is an unmanaged index comprised of approximately 1,700
stocks, the purpose of which is to portray the pattern of common stock price
movement.
In assessing such comparisons of performance an investor should keep in mind
that the composition of the investments in the reported indices and averages is
not identical to the Fund's portfolio, that the averages are generally unmanaged
and that the items included in the calculations of such averages may not be
identical to the formula used by the Fund to calculate its performance. In
addition, there can be no assurance that the Fund will continue this performance
as compared to such other averages.
STATEMENT OF ASSETS AND LIABILITIES
The Fund's Statement of Assets and Liabilities as of __________, 1998, which has
been audited by ___________, is attached to this Statement of Additional
Information.
-24-
<PAGE>
CLEARBROOK INVESTMENT TRUST
---------------------------
PART C: OTHER INFORMATION
- ------- -----------------
Item 23. EXHIBITS
- -------- --------
(a) Declaration of Trust
(b) By-Laws
(c) See Declaration of Trust and By-Laws
(d) Form of Advisory Agreement with Clearbrook Investments, LLC
(e) Form of Underwriting Agreement with CW Fund Distributors,
Inc.
(f) Inapplicable
(g) Form of Custody Agreement
(h) (i) Form of Administration Agreement with Countrywide Fund
Services, Inc.
(ii) Form of Accounting Services Agreement with Countrywide Fund
Services, Inc.
(iii) Form of Transfer, Dividend Disbursing, Shareholder Service
and Plan Agency Agreement with Countrywide Fund Services,
Inc.
(iv) Form of License Agreement with Clearbrook Investments, LLC
(i) Opinion and Consent of Counsel
(j) Consent of Independent Accountants*
(k) Inapplicable
(l) Form of Agreement Relating to Initial Capital
(m) Form of Plan of Distribution Pursuant to Rule 12b-1
(n) Financial Data Schedule*
(o) Inapplicable
- --------------------------------------
* To be filed by amendment.
<PAGE>
Item 24. Persons Controlled by or Under Common Control with the Fund.
- -------- ------------------------------------------------------------
After commencement of the public offering of the Registrant's shares,
the Registrant expects that no person will be directly or indirectly
controlled by or under common control with the Registrant.
Item 25. Indemnification
- -------- ---------------
Article VII of the Registrant's Declaration of Trust, incorporated
herein by reference, provides for the indemnification of officers and
Trustees.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to Trustees, officers, employees and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a Trustee, officer, employee or controlling person
of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, officer, employee or
controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
The Registrant expects to maintain a standard mutual fund and
investment advisory professional and directors and officers liability
policy. The policy provides coverage to the Registrant, its Trustees
and officers, and Clearbrook Investments, LLC (the "Adviser").
Coverage under the policy will include losses by reason of any act,
error, omission, misstatement, misleading statement, neglect or breach
of duty.
The Advisory Agreement with the Adviser provides that the Adviser
shall not be liable for any action taken, omitted or suffered to be
taken by it in its reasonable judgment, in good faith and believed by
it to be authorized or within the discretion or rights or powers
conferred upon it by this Agreement, or in accordance
- 2 -
<PAGE>
with (or in the absence of) specific directions or instructions from
the Trust, provided, however, that such acts or omissions shall not
have resulted from the Adviser's willful misfeasance, bad faith or
gross negligence, a violation of the standard of care established by
and applicable to the Adviser in its actions under the Agreement or
breach of its duty or of its obligations thereunder.
The Underwriting Agreement provides that the Underwriter, its
directors, officers, employees, shareholders and control persons shall
not be liable for any error of judgment or mistake of law or for any
loss suffered by Registrant in connection with the matters to which
the Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of any of such
persons in the performance of Underwriter's duties or from the
reckless disregard by any of such persons of Underwriter's obligations
and duties under the Agreement. Registrant will advance attorneys'
fees or other expenses incurred by any such person in defending a
proceeding, upon the undertaking by or on behalf of such person to
repay the advance if it is ultimately determined that such person is
not entitled to indemnification.
Item 26. Business and Other Connections of the Investment Adviser
- -------- --------------------------------------------------------
The Adviser is a registered investment adviser, providing investment
advisory services to the Registrant. The Adviser is a newly-organized
Virginia limited liability company. The Adviser has not previously
provided investment advisory services to a registered investment
company.
The directors and officers of the Adviser and any other business,
profession, vocation or employment of a substantial nature engaged in
at any time during the past two years:
(i) David J. Ortiz - Officer of the Adviser. From 1984 to 1997, Mr.
Ortiz was a Partner/management consultant at Booz Allen &
Hamilton (a leading management and technology consulting firm).
- 3 -
<PAGE>
Item 27. Principal Underwriters
- -------- ----------------------
(a) CW Fund Distributors, Inc. (the "Distributor") also acts as
principal underwriter for other open-end investment companies:
the Milestone Funds, Brundage, Story and Rose Investment Trust,
Profit Funds Investment Trust, Firsthand Funds, the Lake Shore
Family of Funds, UC Investment Trust and The James Advantage
Funds.
(b) The following list sets forth the directors and executive
officers of the Distributor. Unless otherwise noted with an
asterisk(*), the address of the persons named below is 312 Walnut
Street, Cincinnati, Ohio 45202.
*The address is 4500 Park Granada Boulevard, Calabasas,
California 91302.
Position Position
with with
Name Distributor Registrant
---- ----------- ----------
*Angelo R. Mozilo Chairman of None
the Board/
Director
*Andrew S. Bielanski Director None
*Thomas H. Boone Director None
*Marshall M. Gates Director None
Robert H. Leshner Vice Chairman/ None
Director
Robert G. Dorsey President Vice
President
Maryellen Peretzky Vice President None
John F. Splain Vice President, Secretary
Secretary and
General Counsel
M. Kathleen Leugers Vice President None
Mark J. Seger Vice President Treasurer
Christina H. Kelso Vice President None
Terrie A. Wiedenheft Treasurer None
(c) Inapplicable
- 4 -
<PAGE>
Item 28. Location of Accounts and Records
- -------- --------------------------------
Accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules
promulgated thereunder will be maintained by the Registrant at its
offices located at 8000 Towers Crescent Drove, Suite 1350, Vienna,
Virginia 22182 as well as at the offices of the Registrant's
administrator and transfer agent located at 312 Walnut Street, 21st
Floor, Cincinnati, Ohio 45202.
Item 29. Management Services
- -------- -------------------
Not Applicable
Item 30. Undertakings
- -------- ------------
Not Applicable
- 5 -
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed below on its behalf by the undersigned, thereunto duly
authorized, in the City of Vienna and State of Virginia, on the 1st day of July,
1998.
CLEARBROOK INVESTMENT TRUST
By: /s/ David J. Ortiz
---------------------------
David J. Ortiz
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ David J. Ortiz President July 1, 1998
- ------------------------ and Trustee
David J. Ortiz
/s/ Mark J. Seger Treasurer July 1, 1998
- ------------------------
Mark J. Seger
<PAGE>
INDEX TO EXHIBITS
-----------------
(a) Declaration of Trust
(b) By-Laws
(c) See Declaration of Trust and By-Laws
(d) Form of Advisory Agreement
(e) Form of Underwriting Agreement
(f) Inapplicable
(g) Form of Custody Agreement
(h) (i) Form of Administration Agreement
(ii) Form of Accounting Services Agreement
(iii) Form of Transfer, Dividend Disbursing, Shareholder
Service and Plan Agency Agreement
(iv) Form of License Agreement
(i) Opinion and Consent of Counsel
(j) Consent of Independent Accountants*
(k) Inapplicable
(l) Form of Agreement Relating to Initial Capital
(m) Form of Plan of Distribution Pursuant to Rule 12b-1
(n) Financial Data Schedule*
(o) Inapplicable
- ----------------------------
* To be filed by amendment.
DECLARATION OF TRUST
of
CLEARBROOK INVESTMENT TRUST
a Delaware Business Trust
Principal Place of Business:
8000 Towers Crescent Drive
Suite 1350
Vienna, Virginia 22182
Agent for Service of
Process in Delaware:
Corporation Trust Company
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
<PAGE>
TABLE OF CONTENTS
-----------------
DECLARATION OF TRUST
ARTICLE I Name and Definitions.............................................1
1. Name ........................................................1
2. Definitions......................................................1
(a) Adviser(s)..............................................1
(b By-Laws.................................................1
(c) Certificate of Trust....................................1
(d) Class...................................................1
(e) Commission..............................................2
(f) Declaration of Trust....................................2
(g) Delaware Act............................................2
(h) Interested Person.......................................2
(i) 1940 Act................................................2
(j) Person..................................................2
(k) Principal Underwriter...................................2
(l) Series..................................................2
(m) Shareholder.............................................2
(n) Shares..................................................2
(o) Trust...................................................2
(p) Trust Property..........................................2
(q) Trustees................................................3
ARTICLE II Purpose of Trust.................................................3
ARTICLE III Shares...........................................................3
1. Division of Beneficial Interest..................................3
2. Ownership of Shares..............................................4
3. Transfer of Shares...............................................4
4. Investments in the Trust.........................................5
5. Status of Shares and Limitation of Personal Liability............5
6. Establishment, Designation, Abolition or
Termination, etc. of Series or Class.............................5
(a) Assets Held with Respect to a Particular Series.........6
(b) Liabilities Held with Respect to a Particular Series....6
(c) Dividends, Distributions, Redemptions,
and Repurchases.........................................7
(d) Equality................................................7
(e) Fractions...............................................8
(f) Exchange Privilege......................................8
(g) Combination of Series...................................8
<PAGE>
ARTICLE IV Trustees.........................................................8
1. Number, Election, and Tenure.....................................8
2. Effect of Death, Resignation, etc. of a Trustee..................9
3. Powers...........................................................9
4. Payment of Expenses by the Trust................................14
5. Payment of Expenses by Shareholder..............................14
6. Ownership of Assets of the Trust................................15
7. Service Contracts...............................................15
8. Trustees and Officers as Shareholders...........................16
9. Certain Transactions............................................16
10. Further Powers..................................................17
11. Compensation....................................................17
ARTICLE V Shareholders' Voting Powers and Meetings........................17
1. Voting Powers, Meetings, Notice and Record Dates................17
2. Quorum and Required Vote........................................18
3. Record Dates....................................................18
4. Additional Provisions...........................................18
ARTICLE VI Net Asset Value, Distributions and Redemptions..................18
1. Determination of Net Asset Value, Net Income
and Distributions...............................................18
2. Redemptions and Repurchases.....................................19
ARTICLE VII Limitation of Liability; Indemnification........................20
1. Trustees, Shareholders, etc. Not Personally
Liable; Notice..................................................20
2. Trustees' Good Faith Action; Expert Advice;
No Bond or Surety...............................................21
3. Indemnification of Shareholders.................................21
4. Indemnification of Trustees, Officers, etc......................22
5. Compromise Payment..............................................23
6. Indemnification Not Exclusive, etc..............................23
7. Liability of Third Persons Dealing with Trustees................24
8. Insurance.......................................................24
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ARTICLE VIII Miscellaneous...................................................24
1. Termination of the Trust or Any Series or Class.................24
2. Reorganization..................................................25
3. Amendments......................................................25
4. Filing of Copies; References; Headings..........................26
5. Applicable Law..................................................26
6. Provisions in Conflict with Law or Regulations..................27
7. Business Trust Only.............................................27
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DECLARATION OF TRUST
CLEARBROOK INVESTMENT TRUST
THIS DECLARATION OF TRUST is made and entered into as of the date set forth
below by the Trustees named hereunder for the purpose of forming a Delaware
business trust in accordance with the provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby direct that the Certificate of Trust be
filed with the Office of the Secretary of State of the State of Delaware and do
hereby declare that the Trustees will hold IN TRUST all cash, securities and
other assets which the Trust now possesses or may hereafter acquire from time to
time in any manner and manage and dispose of the same upon the following terms
and conditions for the benefit of the holders of Shares of this Trust.
ARTICLE I
Name and Definitions
SECTION 1. NAME. This Trust shall be known as Clearbrook Investment Trust
and the Trustees shall conduct the business of the Trust under that name or any
other name as they may from time to time determine.
SECTION 2. DEFINITIONS. Whenever used herein, unless otherwise required by
the context or specifically provided:
(a) "Adviser(s)" means a party or parties furnishing services to the Trust
pursuant to any investment advisory or investment management contract described
in Article IV, Section 6(a) hereof;
(b) "By-Laws" shall mean the By-Laws of the Trust as amended from time to
time, which By-Laws are expressly herein incorporated by reference as part of
the "governing instrument" within the meaning of the Delaware Act;
(c) "Certificate of Trust" means the certificate of trust, as amended or
restated from time to time, filed by the Trustees in the Office of the Secretary
of State of the State of Delaware in accordance with the Delaware Act;
(d) "Class" means a class of Shares of a Series of the Trust established in
accordance with the provisions of Article III hereof;
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(e) "Commission" shall have the meaning given such term in the 1940 Act;
(f) "Declaration of Trust" means this Declaration of Trust, as amended or
restated from time to time;
(g) "Delaware Act" means the Delaware Business Trust Act, 12 Del. C. ss.ss.
3801 et seq., as amended from time to time;
(h) "Interested Person" shall have the meaning given it in Section 2(a)(19)
of the 1940 Act;
(i) "1940 Act" means the Investment Company Act of 1940 and the rules and
regulations thereunder, all as amended from time to time;
(j) "Person" means and includes individuals, corporations, partnerships,
trusts, associations, joint ventures, estates, and other entities, whether or
not legal entities, and governments and agencies and political subdivisions
thereof, whether domestic or foreign;
(k) "Principal Underwriter" shall have the meaning given such term in the
1940 Act;
(l) "Series" means each Series of Shares established and designated under
or in accordance with the provisions of Article III hereof; and where the
context requires or where appropriate, shall be deemed to include "Class" or
"Classes";
(m) "Shareholder" means a record owner of outstanding Shares;
(n) "Shares" means the shares of beneficial interest into which the
beneficial interest in the Trust shall be divided from time to time and includes
fractions of Shares as well as whole Shares;
(o) "Trust" means the Delaware Business Trust established under the
Delaware Act by this Declaration of Trust and the filing of the Certificate of
Trust in the Office of the Secretary of State of the State of Delaware;
(p) "Trust Property" means any and all property, real or personal, tangible
or intangible, which is from time to time owned or held by or for the account of
the Trust; and
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(q) "Trustees" means the Person or Persons who have signed this Declaration
of Trust and all other Persons who may from time to time be duly elected or
appointed to serve as Trustees in accordance with the provisions hereof, in each
case so long as such Person shall continue in office in accordance with the
terms of this Declaration of Trust, and reference herein to a Trustee or the
Trustees shall refer to such Person or Persons in his or her or their capacity
as Trustees hereunder.
ARTICLE II
Purpose of Trust
The purpose of the Trust is to conduct, operate and carry on the business
of an investment company registered under the 1940 Act through one or more
Series and to carry on such other business as the Trustees may from time to time
determine. The Trustees shall not be limited by any law limiting the investments
which may be made by fiduciaries.
ARTICLE III
Shares
SECTION 1. DIVISION OF BENEFICIAL INTEREST. The beneficial interest in the
Trust shall be divided into one or more Series. The Trustees may divide each
Series into Classes. Subject to the further provisions of this Article III and
any applicable requirements of the 1940 Act, the Trustees shall have full power
and authority, in their sole discretion, and without obtaining any authorization
or vote of the Shareholders of any Series or Class thereof, (i) to divide the
beneficial interest in each Series or Class thereof into Shares, with or without
par value as the Trustees shall determine, (ii) to issue Shares without
limitation as to number (including fractional Shares) to such Persons and for
such amount and type of consideration, including cash or securities, subject to
any restriction set forth in the By-Laws, at such time or times and on such
terms as the Trustees may deem appropriate, (iii) to establish and designate and
to change in any manner any Series or Class thereof and to fix such preferences,
voting powers, rights, duties and privileges and business purpose of each Series
or Class thereof as the Trustees may from time to time determine, which
preferences, voting powers, rights, duties and privileges may be senior or
subordinate to (or in the case of business purpose, different from) any existing
Series or Class thereof and may be limited to specified property or obligations
of the Trust or profits and losses associated with specified property or
obligations of the Trust, (iv) to divide or combine the Shares of any Series or
Class thereof into a greater or lesser number without thereby materially
changing the proportionate beneficial interest of the Shares of such Series or
Class thereof in the assets held with respect to that Series, (v) to classify or
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reclassify any issued Shares of any Series or Class thereof into shares of one
or more Series or Classes thereof; (vi) to change the name of any Series or
Class thereof; (vii) to abolish or terminate any one or more Series or Classes
thereof; (viii) to refuse to issue Shares to any Person or class of Persons; and
(ix) to take such other action with respect to the Shares as the Trustees may
deem desirable.
Subject to the distinctions permitted among Classes of the same Series as
established by the Trustees, consistent with the requirements of the 1940 Act,
each Share of a Series of the Trust shall represent an equal beneficial interest
in the net assets of such Series, and each holder of Shares of a Series shall be
entitled to receive such Shareholder's pro rata share of distributions of income
and capital gains, if any, made with respect to such Series and upon redemption
of the Shares of any Series, such Shareholder shall be paid solely out of the
funds and property of such Series of the Trust.
All references to Shares in this Declaration of Trust shall be deemed to be
Shares of any or all Series or Classes thereof, as the context may require. All
provisions herein relating to the Trust shall apply equally to each Series of
the Trust and each Class thereof, except as the context otherwise requires.
All Shares issued hereunder, including, without limitation, Shares issued
in connection with a dividend or other distribution in Shares or a split or
reverse split of Shares, shall be fully paid and nonassessable. Except as
otherwise provided by the Trustees, Shareholders shall have no preemptive or
other right to subscribe to any additional Shares or other securities issued by
the Trust.
SECTION 2. OWNERSHIP OF SHARES. The ownership of Shares shall be recorded
on the books of the Trust or those of a transfer or similar agent for the Trust,
which books shall be maintained separately for the Shares of each Series or
Class of the Trust. No certificates certifying the ownership of Shares shall be
issued except as the Trustees may otherwise determine from time to time. The
Trustees may make such rules as they consider appropriate for the issuance of
Share certificates, the transfer of Shares of each Series or Class of the Trust
and similar matters. The record books of the Trust as kept by the Trust or any
transfer or similar agent, as the case may be, shall be conclusive as to the
identity of the Shareholders of each Series or Class of the Trust and as to the
number of Shares of each Series or Class of the Trust held from time to time by
each Shareholder.
SECTION 3. TRANSFER OF SHARES. Except as otherwise provided by the
Trustees, Shares shall be transferable on the books of the Trust only by the
record holder thereof or by his or her duly authorized agent upon delivery to
the Trustees or the Trust's transfer agent of a duly executed instrument of
transfer, together with a Share
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certificate if one is outstanding, and such evidence of the genuineness of each
such execution and authorization and of such other matters as may be required by
the Trustees. Upon such delivery, and subject to any further requirements
specified by the Trustees or contained in the By-Laws, the transfer shall be
recorded on the books of the Trust. Until a transfer is so recorded, the holder
of record of Shares shall be deemed to be the holder of such Shares for all
purposes hereunder and neither the Trustees nor the Trust, nor any transfer
agent or registrar or any officer, employee, or agent of the Trust, shall be
affected by any notice of a proposed transfer.
SECTION 4. INVESTMENTS IN THE TRUST. Investments may be accepted by the
Trust from Persons, at such times, on such terms, and for such consideration as
the Trustees from time to time may authorize.
SECTION 5. STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY. Shares
shall be deemed to be personal property giving only the rights provided in this
instrument. Every Shareholder by virtue of having become a Shareholder shall be
held to have expressly assented and agreed to the terms hereof. The death,
incapacity, dissolution, termination, or bankruptcy of a Shareholder during the
existence of the Trust shall not operate to terminate the Trust, nor entitle the
representative of any such Shareholder to an accounting or to take any action in
court or elsewhere against the Trust or the Trustees, but shall entitle such
representative only to the rights of such Shareholder under this Trust.
Ownership of Shares shall not entitle the Shareholder to any title in or to the
whole or any part of the Trust Property or any right to call for a participation
or division of the same or for an accounting, nor shall the ownership of Shares
constitute the Shareholders as partners. No Shareholder shall be personally
liable for the debts, liabilities, obligations and expenses incurred by,
contracted for, or otherwise existing with respect to, the Trust or any Series.
Neither the Trust nor the Trustees, nor any officer, employee, or agent of the
Trust shall have any power to bind personally any Shareholder, nor, except as
specifically provided herein, to call upon any Shareholder for the payment of
any sum of money or assessment whatsoever other than such as the Shareholder may
at any time personally agree to pay. Shareholders shall have the same limitation
of personal liability as is extended to shareholders of a private corporation
for profit incorporated in the State of Delaware. Any written instrument or
obligation of the Trust or any Series may contain a statement to the effect that
such instrument or obligation may only be enforced against the Trust Property or
the assets belonging to that Series, as the case may be; however, the omission
of such statement shall not operate to bind or create personal liability for any
Shareholder or Trustee thereunder.
SECTION 6. ESTABLISHMENT, DESIGNATION, ABOLITION OR TERMINATION ETC. OF
SERIES OR CLASS. The establishment and designation of any Series or Class of
Shares of the Trust shall be effective upon the adoption by a majority of the
Trustees then in office
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of a resolution that sets forth such establishment and designation and the
relative rights and preferences of such Series or Class of the Trust, whether
directly in such resolution or by reference to another document including,
without limitation, any registration statement of the Trust, or as otherwise
provided in such resolution. The abolition or termination of any Series or Class
of Shares of the Trust shall be effective upon the adoption by a majority of the
Trustees then in office of a resolution that abolishes or terminates such Series
or Class.
Shares of each Series or Class of the Trust established pursuant to this
Article III, unless otherwise provided in the resolution establishing such
Series or Class, shall have the following relative rights and preferences:
(a) ASSETS HELD WITH RESPECT TO A PARTICULAR SERIES. All consideration
received by the Trust for the issue or sale of Shares of a particular Series,
together with all assets in which such consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof from whatever source derived
(including, without limitation, any proceeds derived from the sale, exchange or
liquidation of such assets and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be) shall
irrevocably be held separate with respect to that Series for all purposes, and
shall be so recorded upon the books of account of the Trust. Such consideration,
assets, income, earnings, profits and proceeds thereof, from whatever source
derived, (including, without limitation) any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or payments derived from
any reinvestment of such proceeds), in whatever form the same may be, are herein
referred to as "assets held with respect to" that Series. In the event that
there are any assets, income, earnings, profits and proceeds thereof, funds or
payments which are not readily identifiable as assets held with respect to any
particular Series (collectively "General Assets"), the Trustees shall allocate
such General Assets to, between or among any one or more of the Series in such
manner and on such basis as the Trustees, in their sole discretion, deem fair
and equitable, and any General Assets so allocated to a particular Series shall
be held with respect to that Series. Each such allocation by the Trustees shall
be conclusive and binding upon the Shareholders of all Series for all purposes.
Separate and distinct records shall be maintained for each Series and the assets
held with respect to each Series shall be held and accounted for separately from
the assets held with respect to all other Series and the General Assets of the
Trust not allocated to such Series.
(b) LIABILITIES HELD WITH RESPECT TO A PARTICULAR SERIES. The assets of the
Trust held with respect to each particular Series shall be charged against the
liabilities of the Trust held with respect to that Series and all expenses,
costs, charges, and reserves attributable to that Series, except that
liabilities and expenses allocated solely to a particular Class shall be borne
by that Class. Any general liabilities of the Trust
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which are not readily identifiable as being held with respect to any particular
Series or Class shall be allocated and charged by the Trustees to and among any
one or more of the Series or Classes in such manner and on such basis as the
Trustees in their sole discretion deem fair and equitable. All liabilities,
expenses, costs, charges, and reserves so charged to a Series or Class are
herein referred to as "liabilities held with respect to" that Series or Class.
Each allocation of liabilities, expenses, costs, charges, and reserves by the
Trustees shall be conclusive and binding upon the Shareholders of all Series or
Classes for all purposes. Without limiting the foregoing, but subject to the
right of the Trustees to allocate general liabilities, expenses, costs, charges
or reserves as herein provided, the debts, liabilities, obligations and expenses
incurred, contracted for or otherwise existing with respect to a particular
Series shall be enforceable against the assets held with respect to such Series
only and not against the assets of the Trust generally or against the assets
held with respect to any other Series. Notice of this contractual limitation on
liabilities among Series may, in the Trustees' discretion, be set forth in the
Certificate of Trust and upon the giving of such notice in the Certificate of
Trust, the statutory provisions of Section 3804 of the Delaware Act relating to
limitations on liabilities among Series (and the statutory effect under Section
3804 of setting forth such notice in the certificate of trust) shall become
applicable to the Trust and each Series. Any person extending credit to,
contracting with or having any claim against any Series may look only to the
assets of that Series to satisfy or enforce any debt, with respect to that
Series. No Shareholder or former Shareholder of any Series shall have a claim on
or any right to any assets allocated or belonging to any other Series.
(c) DIVIDENDS, DISTRIBUTIONS. REDEMPTIONS, AND REPURCHASES. Notwithstanding
any other provisions of this Declaration of Trust, including, without
limitation, Article Vl, no dividend or distribution, including, without
limitation, any distribution paid upon termination of the Trust or of any Series
or Class with respect to, nor any redemption or repurchase of, the Shares of any
Series or Class, shall be effected by the Trust other than from the assets held
with respect to such Series, nor shall any Shareholder or any particular Series
or Class otherwise have any right or claim against the assets held with respect
to any other Series except to the extent that such Shareholder has such a right
or claim hereunder as a Shareholder of such other Series. The Trustees shall
have full discretion, to the extent not inconsistent with the 1940 Act, to
determine which items shall be treated as income and which items as capital, and
each such determination and allocation shall be conclusive and binding upon the
Shareholders.
(d) EQUALITY. All the Shares of each particular Series shall represent an
equal proportionate interest in the assets held with respect to that Series
(subject to the liabilities held with respect to that Series or Class thereof
and such rights and preferences as may have been established and designated with
respect to any Class
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within such Series), and each Share of any particular Series shall be equal to
each other Share of that Series. With respect to any Class of a Series, each
such Class shall represent interests in the assets held with respect to that
Series and shall have identical voting, dividend, liquidation and other rights
and the same terms and conditions, except that expenses allocated to a Class may
be borne solely by such Class as determined by the Trustees and a Class may have
exclusive voting rights with respect to matters affecting only that Class.
(e) FRACTIONS. Any fractional Share of a Series or Class thereof shall
carry proportionately all the rights and obligations of a whole Share of that
Series or Class, including rights with respect to voting, receipt of dividends
and distributions, redemption of Shares and termination of the Trust.
(f) EXCHANGE PRIVILEGE. The Trustees shall have the authority to provide
that the holders of Shares of any Series or Class shall have the right to
exchange said Shares for Shares of one or more other Series of Shares or Class
of Shares of the Trust or of other investment companies registered under the
1940 Act in accordance with such requirements and procedures as may be
established by the Trustees.
(g) COMBINATION OF SERIES. The Trustees shall have the authority, without
the approval of the Shareholders of any Series or Class unless otherwise
required by applicable law, to combine the assets and liabilities held with
respect to any two or more Series or Classes into assets and liabilities held
with respect to a single Series or Class.
ARTICLE IV
Trustees
SECTION 1. NUMBER, ELECTION AND TENURE. The number of Trustees shall
initially be one (1), who shall be David J. Ortiz. Thereafter, the number of
Trustees shall at all times be at least two and no more than such number as
determined, from time to time, by the Trustees pursuant to Section 3 of this
Article IV. Each Trustee shall serve during the lifetime of the Trust until he
or she dies, resigns, has reached any mandatory retirement age as set by the
Trustees, is declared bankrupt or incompetent by a court of appropriate
jurisdiction, or is removed, or, if sooner, until the next meeting of
Shareholders called for the purpose of electing Trustees and until the election
and qualification of his or her successor. Whenever a vacancy exists among the
Trustees, regardless of the reason for such vacancy, the remaining Trustees
shall appoint any person they determine in their sole discretion to fill that
vacancy, consistent with the limitations under the 1940 Act. Such appointment
shall be made by a written instrument signed by a majority of the Trustees or by
a resolution of the
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Trustees, duly adopted and recorded in the records of the Trust, specifying the
effective date of appointment. The Trustees may appoint a new Trustee as
provided above in anticipation of a vacancy expected to occur provided that such
appointment shall become effective only at or after the expected vacancy occurs
and shall be subject to Section 16(a) of the 1940 Act. Upon acceptance of any
such appointment in writing, the appointee shall thereafter be deemed a Trustee
hereunder. In the event that less than a majority of the Trustees holding office
have been elected by the Shareholders, the Trustees then in office shall take
such actions as may be necessary under applicable law for the election of
Trustees. Any Trustee may resign at any time by written instrument signed by him
or her and delivered to any officer of the Trust or to a meeting of the
Trustees. Such resignation shall be effective upon receipt unless specified to
be effective at some other time. Except to the extent expressly provided in a
written agreement with the Trust, no Trustee resigning and no Trustee removed
shall have any right to any compensation for any period following his or her
resignation or removal, or any right to damages on account of such removal. The
Shareholders may elect Trustees at any meeting of Shareholders called by the
Trustees for that purpose. Any Trustee may be removed at any meeting of
Shareholders by a vote of two-thirds of the outstanding Shares of the Trust.
SECTION 2. EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE. The death,
declination to serve, resignation, retirement, removal or incapacity of one or
more Trustees, or all of them, shall not operate to annul the Trust or to revoke
any existing agency created pursuant to the terms of this Declaration of Trust.
Whenever there shall be fewer than the designated number of Trustees, until
additional Trustees are elected or appointed as provided herein to bring the
total number of Trustees equal to the designated number, the Trustees in office,
regardless of their number, shall have all the powers granted to the Trustees
and shall discharge all the duties imposed upon the Trustees by this Declaration
of Trust. As conclusive evidence of such vacancy, a written instrument
certifying the existence of such vacancy may be executed by an officer of the
Trust or by a majority of the Trustees. In the event of the death, declination,
resignation, retirement, removal, or incapacity of all the then Trustees within
a short period of time and without the opportunity for at least one Trustee
being able to appoint additional Trustees to replace those no longer serving,
the Trust's Adviser(s) are empowered to appoint new Trustees subject to the
provisions of the 1940 Act.
SECTION 3. POWERS. Subject to the provisions of this Declaration of Trust,
the business of the Trust shall be managed by the Trustees, and the Trustees
shall have all powers necessary or convenient to carry out that responsibility
including the power to engage in transactions of all kinds on behalf of the
Trust as described in this Declaration of Trust. The Trustees shall not in any
way be bound or limited by current or future laws or customs applicable to trust
investments but shall have full power and
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authority to make any investments that they, in their sole discretion, deem
proper to accomplish any purposes of the Trust. The Trustees may exercise all of
their powers without recourse to any court or other authority. Without limiting
the foregoing, the Trustees may: operate as and carry on the business of a
Registered Investment Company and to exercise all the powers necessary and
proper to conduct such a business; adopt By-Laws not inconsistent with this
Declaration of Trust providing for the management of the affairs of the Trust
and may amend and repeal such By-Laws to the extent that such By-Laws do not
reserve that right to the Shareholders; enlarge or reduce the number of
Trustees; remove any Trustee with or without cause at any time by written
instrument signed by at least two-thirds of the number of Trustees prior to such
removal, specifying the date when such removal shall become effective, and fill
vacancies caused by enlargement of their number or by the death, resignation,
retirement or removal of a Trustee; elect and remove, with or without cause,
such officers and appoint and terminate such agents as they consider
appropriate; appoint from their own number and establish and terminate one or
more committees, consisting of two or more Trustees, that may exercise the
powers and authority of the Board of Trustees to the extent that the Trustees so
determine; employ one or more custodians of the assets of the Trust and may
authorize such custodians to employ subcustodians and to deposit all or any part
of such assets in a system or systems for the central handling of securities or
with a Federal Reserve Bank; employ an administrator for the Trust and may
authorize such administrator to employ subadministrators; employ an investment
adviser or investment advisers to the Trust and may authorize such Advisers to
employ subadvisers; retain one or more transfer agents or shareholder servicing
agents, or both; provide for the issuance and distribution of Shares by the
Trust directly or through one or more Principal Underwriters or otherwise;
redeem, repurchase and transfer Shares pursuant to applicable law; set record
dates for the determination of Shareholders with respect to various matters;
declare and pay dividends and distributions to Shareholders of each Series from
the assets of such Series; and in general delegate such authority as they
consider desirable to any officer of the Trust, to any committee of the Trustees
and to any agent or employee of the Trust or to any such custodian, transfer or
shareholder servicing agent, or Principal Underwriter. Any determination as to
what is in the interests of the Trust made by the Trustees in good faith shall
be conclusive. In construing the provisions of this Declaration of Trust, the
presumption shall be in favor of a grant of power to the Trustees. Unless
otherwise specified herein or in the By-Laws or required by law, any action by
the Trustees shall be deemed effective if approved or taken by a majority of the
Trustees present at a meeting of Trustees at which a quorum of Trustees is
present, within or without the State of Delaware.
Without limiting the foregoing, the Trustees shall have the power and
authority to cause the Trust (or to act on behalf of the Trust):
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(a) To invest and reinvest cash, to hold cash uninvested, and to subscribe
for, invest in, reinvest in, purchase or otherwise acquire, own, hold, pledge,
sell, assign, transfer, exchange, distribute, write options on, lend or
otherwise deal in or dispose of contracts for the future acquisition or delivery
of fixed income or other securities, and securities of every nature and kind,
including, without limitation, all types of bonds, debentures, stocks,
negotiable or non-negotiable instruments, obligations, evidences of
indebtedness, certificates of deposit or indebtedness, commercial papers,
repurchase agreements, bankers' acceptances, and other securities of any kind,
issued, created, guaranteed, or sponsored by any and all Persons, including
without limitation, states, territories, and possessions of the United States
and the District of Columbia and any political subdivision, agency, or
instrumentality thereof, any foreign government or any political subdivision of
the United States Government or any foreign government, or any international
instrumentality, or by any bank or savings institution, or by any corporation or
organization organized under the laws of the United States or of any state,
territory, or possession thereof, or by any corporation or organization
organized under any foreign law, or in "when issued" contracts for any such
securities, to change the investments of the assets of the Trust; and to
exercise any and all rights, powers, and privileges of ownership or interest in
respect of any and all such investments of every kind and description,
including, without limitation, the right to consent and otherwise act with
respect thereto, with power to designate one or more Persons to exercise any of
said rights, powers, and privileges in respect of any of said instruments;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate, lease, or write
options (including, options on futures contracts) with respect to or otherwise
deal in any property rights relating to any or all of the assets of the Trust or
any Series;
(c) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
proxies or powers of attorney to such Person or Persons as the Trustees shall
deem proper, granting to such Person or Persons such power and discretion with
relation to securities or property as the Trustees shall deem proper;
(d) To exercise powers and rights of subscription or otherwise which in any
manner arise out of ownership of securities;
(e) To hold any security or property in a form not indicating any trust,
whether in bearer, unregistered or other negotiable form, or in its own name or
in the name of a custodian or subcustodian or a nominee or nominees or
otherwise;
(f) To make distributions of net income and of net capital gains to
Shareholders in the manner herein provided for;
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(g) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer of any security which is
held in the Trust; to consent to any contract, lease, mortgage, purchase or sale
of property by such corporation or issuer; and to pay calls or subscriptions
with respect to any security held in the Trust;
(h) To join with other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to deposit any
security with, or transfer any security to, any such committee, depositary or
trustee, and to delegate to them such power and authority with relation to any
security (whether or not so deposited or transferred) as the Trustees shall deem
proper, and to agree to pay, and to pay, such portion of the expenses and
compensation of such committee, depositary or trustee as the Trustees shall deem
proper;
(i) To compromise, arbitrate or otherwise adjust claims in favor of or
against the Trust or any matter in controversy, including, but not limited to,
claims for taxes;
(j) To enter into joint ventures, general or limited partnerships and any
other combinations or associations;
(k) To borrow funds or other property in the name of the Trust exclusively
for Trust purposes and in connection therewith to issue notes or other evidences
of indebtedness; and to mortgage and pledge the Trust Property or any part
thereof to secure any or all of such indebtedness;
(l) To endorse or guarantee the payment of any notes or other obligations
of any Person; to make contracts of guaranty or suretyship, or otherwise assume
liability for payment thereof; and to mortgage and pledge the Trust Property or
any part thereof to secure any of or all of such obligations;
(m) To purchase and pay for entirely out of Trust Property such insurance
as the Trustees may deem necessary or appropriate for the conduct of the
business, including, without limitation, insurance policies insuring the assets
of the Trust or payment of distributions and principal on its portfolio
investments, and insurance polices insuring the Shareholders, Trustees,
officers, employees, agents, investment advisers, principal underwriters, or
independent contractors of the Trust, individually against all claims and
liabilities of every nature arising by reason of holding, being or having held
any such office or position, or by reason of any action alleged to have been
taken or omitted by any such Person as Trustee, officer, employee, agent,
investment adviser, principal underwriter, or independent contractor, including
any action taken or omitted that may be determined to constitute negligence,
whether or not the Trust would have the power to indemnify such Person against
liability;
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(n) To adopt, establish and carry out pension, profit-sharing, share bonus,
share purchase, savings, thrift and other retirement, incentive and benefit
plans and trusts, including the purchasing of life insurance and annuity
contracts as a means of providing such retirement and other benefits, for any or
all of the Trustees, officers, employees and agents of the Trust;
(o) To operate as and carry out the business of an investment company, and
exercise all the powers necessary or appropriate to the conduct of such
operations;
(p) To enter into contracts of any kind and description;
(q) To employ as custodian of any assets of the Trust one or more banks,
trust companies or companies that are members of a national securities exchange
or such other entities as the Commission may permit as custodians of the Trust,
subject to any conditions set forth in this Declaration of Trust or in the
By-Laws;
(r) To employ auditors, counsel or other agents of the Trust, subject to
any conditions set forth in this Declaration of Trust or in the By-Laws;
(s) To interpret the investment policies, practices, or limitations of any
Series or Class;
(t) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes, and with
separate Shares representing beneficial interests in such Series, and to
establish separate Classes, all in accordance with the provisions of Article
III;
(u) To establish, from time to time, a minimum total investment for
Shareholders, and to require the redemption of the Shares of any Shareholders
whose investment is less than such minimum upon giving notice to such
Shareholder;
(v) To the full extent permitted by the Delaware Act, to allocate assets,
liabilities and expenses of the Trust to a particular Series and Class or to
apportion the same between or among two or more Series or Classes, provided that
any liabilities or expenses incurred by a particular Series or Class shall be
payable solely out of the assets belonging to that Series or Class as provided
for in Article III;
(w) To invest all of the assets of the Trust, or any Series or any Class
thereof in a single investment company;
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(x) To select such name for the Trust, or any Series or Class, as the
Trustees deem proper in their discretion, without Shareholder approval, in which
event the Trust may hold its property and conduct its activities under such
other name;
(y) To carry on any other business in connection with or incidental to any
of the foregoing powers, to do everything necessary or desirable to accomplish
any purpose or to further any of the foregoing powers, and to take every other
action incidental to the foregoing business or purposes, objects or powers; and
(z) Subject to the 1940 Act, to engage in any other lawful act or activity
in which a business trust organized under the Delaware Act may engage.
The Trust shall not be limited to investing in obligations maturing before
the possible termination of the Trust or one or more of its Series. The Trust
shall not in any way be bound or limited by any present or future law or custom
in regard to investment by fiduciaries. The Trust shall not be required to
obtain any court order to deal with any assets of the Trust or take any other
action hereunder.
SECTION 4. PAYMENT OF EXPENSES BY THE TRUST. The Trustees are authorized to
pay or cause to be paid out of the principal or income of the Trust, or partly
out of the principal and partly out of income, as they deem fair, all expenses,
fees, charges, taxes and liabilities incurred or arising in connection with the
Trust, or in connection with the management thereof, including, but not limited
to, the Trustees' compensation and such expenses and charges for the services of
the Trust's officers, employees, Advisers, Principal Underwriter, auditors,
counsel, custodian, transfer agent, shareholder servicing agent, and such other
agents or independent contractors and such other expenses and charges as the
Trustees may deem necessary or proper to incur, which expenses, fees, charges,
taxes and liabilities shall be allocated in accordance with Article III, Section
6 hereof.
SECTION 5. PAYMENT OF EXPENSES BY SHAREHOLDERS. The Trustees shall have the
power, as frequently as they may determine, to cause each Shareholder, or each
Shareholder of any particular Series, to pay directly, in advance or arrears,
expenses of the Trust as described in Section 4 of this Article IV ("Expenses"),
in an amount fixed from time to time by the Trustees, by setting off such
Expenses due from such Shareholder from declared but unpaid dividends owed such
Shareholder and/or by reducing the number of Shares in the account of such
Shareholder by that number of full and/or fractional Shares which represents the
outstanding amount of such Expenses due from such Shareholder, provided that the
direct payment of such Expenses by Shareholders is permitted under applicable
law.
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SECTION 6. OWNERSHIP OF ASSETS OF THE TRUST. Title to all of the assets of
the Trust shall at all times be considered as vested in the Trust, except that
the Trustees shall have power to cause legal title to any Trust Property to be
held by or in the name of one or more of the Trustees, or in the name of the
Trust, or in the name of any other Person as nominee, on such terms as the
Trustees may determine. The right, title and interest of the Trustees in the
Trust Property shall vest automatically in each Person who may hereafter become
a Trustee. Upon the resignation, removal or death of a Trustee, he or she shall
automatically cease to have any right, title or interest in any of the Trust
Property, and the right, title and interest of such Trustee in the Trust
property shall vest automatically in the remaining Trustees. Such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered.
SECTION 7. SERVICE CONTRACTS.
(a) Subject to such requirements and restrictions as may be set forth under
federal and/or state law and in the By-Laws, including, without limitation, the
requirements of Section 15 of the 1940 Act, the Trustees may, at any time and
from time to time, contract for exclusive or nonexclusive advisory, management
and/or administrative services for the Trust or for any Series (or Class
thereof) with any Person and any such contract may contain such other terms as
the Trustees may determine, including, without limitation, authority for the
Adviser(s) or administrator to delegate certain or all of its duties under such
contracts to other qualified investment advisers and administrators and to
determine from time to time without prior consultation with the Trustees what
investments shall be purchased, held sold or exchanged and what portion, if any,
of the assets of the Trust shall be held uninvested and to make changes in the
Trust's investments, or such other activities as may specifically be delegated
to such party.
(b) The Trustees may also, at any time and from time to time, contract with
any Person, appointing such Person exclusive or nonexclusive distributor or
Principal Underwriter for the Shares of one or more of the Series (or Classes)
or other securities to be issued by the Trust.
(c) The Trustees are also empowered, at any time and from time to time, to
contract with any Person, appointing such Person or Persons the custodian,
transfer agent and/or shareholder servicing agent for the Trust or one or more
of its Series.
(d) The Trustees are further empowered, at any time and from time to time,
to contract with any Person to provide such other services to the Trust or one
or more of the Series, as the Trustees determine to be in the best interests of
the Trust and the applicable Series.
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(e) The fact that:
(i) any of the Shareholders, Trustees, or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee,
Adviser, Principal Underwriter, distributor, or affiliate or
agent of or for any Person, or for any parent or affiliate of any
Person with which an advisory, management, or administration
contract, or Principal Underwriter's or distributor's contract,
or transfer agent, shareholder servicing agent or other type of
service contract may have been or may hereafter be made, or that
any such organization, or any parent or affiliate thereof, is a
Shareholder or has an interest in the Trust; or that
(ii) any Person with which an advisory, management, or administration
contract or Principal Underwriter's or distributor's contract, or
transfer agent or shareholder servicing agent contract may have
been or may hereafter be made also has an advisory, management,
or administration contract, or Principal Underwriter's or
distributor's or other service contract with one or more other
Persons, or has other business or interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same, or create any liability or accountability to the Trust or its
shareholders.
SECTION 8. TRUSTEES AND OFFICERS AS SHAREHOLDERS. Any Trustee, officer or
agent of the Trust may acquire, own and dispose of Shares to the same extent as
if he or she were not a Trustee, officer or agent; and the Trustees may issue
and sell and cause to be issued and sold Shares to, and redeem such Shares from,
any such Person or any firm or company in which such Person is interested,
subject only to the general limitations contained herein or in the By-Laws
relating to the sale and redemption of such Shares.
SECTION 9. CERTAIN TRANSACTIONS. Except as prohibited by applicable law,
the Trustees may, on behalf of the Trust, buy any securities from or sell any
securities to, or lend any assets of the Trust to, any Trustee or officer of the
Trust or any firm of which any such Trustee or officer is a member acting as
principal, or have any such dealings with any investment adviser or
administrator for the Trust or with any Interested Person of such person.
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SECTION 10. FURTHER POWERS. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices, whether within or without the State of Delaware, in any
and all states of the United States, in the District of Columbia, and in any and
all commonwealths, territories, dependencies, colonies, possessions, agencies,
or instrumentalities of the United States and of foreign governments, and to do
all such other things and execute all such instruments as they deem necessary,
proper, or desirable in order to promote the interests of the Trust although
such things are not herein specifically mentioned. Any determination made by the
Trustees in good faith as to what is in the interests of the Trust shall be
conclusive. In construing this declaration, the presumption shall be in favor of
a grant of power to the Trustees.
SECTION 11. COMPENSATION. The Trustees in such capacity shall be entitled
to reasonable compensation from the Trust and they may fix the amount of such
compensation. Nothing herein shall in any way prevent the employment of any
Trustee for advisory, management, legal, accounting, investment banking or other
services and payment for such services by the Trust.
ARTICLE V
Shareholders' Voting Powers and Meetings
SECTION 1. VOTING POWERS. MEETINGS. NOTICE. AND RECORD DATES. The
Shareholders shall have power to vote only: (i) for the election or removal of
Trustees as provided in Article IV, Section 1 hereof, and (ii) with respect to
such additional matters relating to the Trust as may be required by applicable
law, this Declaration of Trust, the By-Laws or any registration statement of the
Trust with the Commission (or any successor agency) or as the Trustees may
consider necessary or desirable. Each whole share shall be entitled to one vote
as to any matter on which it is entitled to vote and each fractional share will
be entitled to a proportionate fractional vote. Notwithstanding any other
provision of this Declaration of Trust, on any matters submitted to a vote of
the Shareholders, all shares of the Trust then entitled to vote shall be voted
in aggregate, except: (i) when required by the 1940 Act, Shares shall be voted
by individual Series; (ii) when the matter involves any action that the Trustees
have determined will affect only the interests of one or more Series, then only
Shareholders of such Series shall be entitled to vote thereon; and (iii) when
the matter involves any action that the Trustees have determined will affect
only the interests of one or more Classes, then only the Shareholders of such
Class or Classes shall be entitled to vote thereon. There shall be no cumulative
voting in the election of Trustees. Shares may be voted in person or by proxy. A
proxy may be given in writing. The By-Laws may provide that proxies may also, or
may instead, be given by
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an electronic or telecommunications device or in any other manner. Until Shares
are issued, the Trustees may exercise all rights of Shareholders and may take
any action required by law, this Declaration of Trust or the By-Laws to be taken
by the Shareholders. Meetings of the Shareholders shall be called and notice
thereof and record dates therefor shall be given and set as provided in the
By-Laws.
SECTION 2. QUORUM AND REQUIRED VOTE. Except when a larger quorum is
required by applicable law, by the By-Laws or by this Declaration of Trust,
thirty-three and one-third percent (33 1/3%) of the Shares issued and
outstanding shall constitute a quorum at a Shareholders' meeting but any lesser
number shall be sufficient for adjourned sessions. When any one or more Series
(or Classes) is to vote as a single Series (or Class) separate from any other
Shares, thirty three and one-third percent (33 1/3%) of the Shares of each such
Series (or Class) issued and outstanding shall constitute a quorum at a
Shareholders' meeting of that Series (or Class). Except when a larger vote is
required by any provision of this Declaration of Trust or the By-Laws or by
applicable law, when a quorum is present at any meeting, a majority of the
Shares voted shall decide any questions and a plurality of the Shares voted
shall elect a Trustee, provided that where any provision of law or of this
Declaration of Trust requires that the holders of any Series shall vote as a
Series (or that holders of a Class shall vote as a Class), then a majority of
the Shares of that Series (or Class) voted on the matter (or a plurality with
respect to the election of a Trustee) shall decide that matter insofar as that
Series (or Class) is concerned.
SECTION 3. RECORD DATES. For the purpose of determining the Shareholders of
any Series (or Class) who are entitled to receive payment of any dividend or of
any other distribution, the Trustees may from time to time fix a date, which
shall be before the date for the payment of such dividend or such other payment,
as the record date for determining the Shareholders of such Series (or Class)
having the right to receive such dividend or distribution. Without fixing a
record date, the Trustees may for distribution purposes close the register or
transfer books for one or more Series (or Classes) at any time prior to the
payment of a distribution. Nothing in this Section shall be construed as
precluding the Trustees from setting different record dates for different Series
(or Classes).
SECTION 4. ADDITIONAL PROVISIONS. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters.
ARTICLE VI
Net Asset Value, Distributions and Redemptions
SECTION 1. DETERMINATION OF NET ASSET VALUE, NET INCOME AND DISTRIBUTIONS.
Subject to applicable law and Article III, Section 6 hereof, the Trustees, in
their absolute discretion, may prescribe and shall set forth in the By-Laws or
in a duly
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adopted vote of the Trustees such bases and time for determining the per Share
or net asset value of the Shares of any Series or Class or net income
attributable to the Shares of any Series or Class, or the declaration and
payment of dividends and distributions on the Shares of any Series or Class, as
they may deem necessary or desirable. The Trustees may delegate the power and
duty to determine Net Asset Value per Share to one or more Trustees, or officers
of the Trust, or to an investment manager, administrator or investment adviser,
custodian, depository, or other agent appointed for such purpose.
SECTION 2. REDEMPTIONS AND REPURCHASES.
(a) The Trust shall purchase such Shares as are offered by any Shareholder
for redemption, upon the presentation of a proper instrument of transfer
together with a request directed to the Trust, or a Person designated by the
Trust, that the Trust purchase such Shares or in accordance with such other
procedures for redemption as the Trustees may from time to time authorize; and
the Trust will pay therefor the net asset value thereof as determined by the
Trustees (or on their behalf), in accordance with any applicable provisions of
the By-Laws, any registration statement of the Trust and applicable law. Unless
extraordinary circumstances exist, payment for said Shares shall be made by the
Trust to the Shareholder in accordance with the 1940 Act and any rules and
regulations thereunder or as otherwise required by the Commission. The
obligation set forth in this Section 2(a) is subject to the provision that,
during any emergency which makes it impracticable for the Trust to dispose of
the investments of the applicable Series or to determine fairly the value of the
net assets held with respect to such Series, such obligation may be suspended or
postponed by the Trustees. In the case of a suspension of the right of
redemption as provided herein, a Shareholder may either withdraw the request for
redemption or receive payment based on the net asset value per share next
determined after the termination of such suspension.
(b) The redemption price may in any case or cases be paid wholly or partly
in kind if the Trustees determine that such payment is advisable in the interest
of the remaining Shareholders of the Series or Class thereof for which the
Shares are being redeemed. Subject to the foregoing, the fair value, selection
and quantity of securities or other property so paid or delivered as all or part
of the redemption price may be determined by or under authority of the Trustees.
In no case shall the Trust be liable for any delay of any Adviser or other
Person in transferring securities selected for delivery as all or part of any
payment-in-kind.
(c) If the Trustees shall, at any time and in good faith, determine that
direct or indirect ownership of Shares of any Series or Class thereof has or may
become concentrated in any Person to an extent that would disqualify any Series
as a
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regulated investment company under the Internal Revenue Code of 1986, as amended
(or any successor statute thereof), then the Trustees shall have the power (but
not the obligation) by such means as they deem equitable (i) to call for the
redemption by any such Person of a number, or principal amount, of Shares
sufficient to maintain or bring the direct or indirect ownership of Shares into
conformity with the requirements for such qualification, (ii) to refuse to
transfer or issue Shares of any Series or Class thereof to such Person whose
acquisition of the Shares in question would result in such disqualification, or
(iii) to take such other actions as they deem necessary and appropriate to avoid
such disqualification. Any such redemption shall be effected at the redemption
price and in the manner provided in this Article VI.
(d) The holders of Shares shall upon demand disclose to the Trustees in
writing such information with respect to direct and indirect ownership of Shares
as the Trustees deem necessary to comply with the provisions of the Internal
Revenue Code of 1986, as amended (or any successor statute thereto), or to
comply with the requirements of any other taxing authority.
ARTICLE VII
Limitation of Liability; Indemnification
SECTION 1. TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE; NOTICE. The
Trustees, officers, employees and agents of the Trust, in incurring any debts,
liabilities or obligations, or in limiting or omitting any other actions for or
in connection with the Trust, are or shall be deemed to be acting as Trustees,
officers, employees or agents of the Trust and not in their own capacities. No
Shareholder shall be subject to any personal liability whatsoever in tort,
contract or otherwise to any other Person or Persons in connection with the
assets or the affairs of the Trust or of any Series, and subject to Section 4 of
this Article VII, no Trustee, officer, employee or agent of the Trust shall be
subject to any personal liability whatsoever in tort, contract, or otherwise, to
any other Person or Persons in connection with the assets or affairs of the
Trust or of any Series, save only that arising from his or her own willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office or the discharge of his or her
functions. The Trust (or if the matter relates only to a particular Series, that
Series) shall be solely liable for any and all debts, claims, demands,
judgments, decrees, liabilities or obligations of any and every kind, against or
with respect to the Trust or such Series in tort, contract or otherwise in
connection with the assets or the affairs of the Trust or such Series, and all
Persons dealing with the Trust or any Series shall be deemed to have agreed
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that resort shall be had solely to the Trust Property of the Trust (or if the
matter relates only to a particular Series, that of such Series), for the
payment or performance thereof.
The Trustees may provide that every note, bond, contract, instrument,
certificate or undertaking made or issued by the Trustees or by any officers or
officer shall give notice that a Certificate of Trust in respect of the Trust is
on file with the Secretary of State of the State of Delaware and may recite to
the effect that the same was executed or made by or on behalf of the Trust or by
them as Trustees or Trustee or as officers or officer, and not individually, and
that the obligations of any instrument made or issued by the Trustees or by any
officer of officers of the Trust are not binding upon any of them or the
Shareholders individually but are binding only upon the assets and property of
the Trust, or the particular Series in question, as the case may be. The
omission of any statement to such effect from such instrument shall not operate
to bind any Trustees or Trustee or officers or officer or Shareholders or
Shareholder individually, or to subject the assets of any Series to the
obligations of any other Series.
SECTION 2. TRUSTEES' GOOD FAITH ACTION; EXPERT ADVICE; NO BOND OR SURETY.
The exercise by the Trustees of their powers and discretions hereunder shall be
binding upon everyone interested. Subject to Section 4 of this Article VII, a
Trustee shall be liable for his or her own willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee, and for nothing else, and shall not be liable for errors of
judgment or mistakes of fact or law. Subject to the foregoing, (i) the Trustees
shall not be responsible or liable in any event for any neglect or wrongdoing of
any officer, agent, employee, consultant, Adviser, administrator, distributor or
Principal Underwriter, custodian or transfer agent, dividend disbursing agent,
shareholder servicing agent or accounting agent of the Trust, nor shall any
Trustee be responsible for the act or omission of any other Trustee; (ii) the
Trustees may take advice of counsel or other experts with respect to the meaning
and operation of this Declaration of Trust and their duties as Trustees, and
shall be under no liability for any act or omission in accordance with such
advice or for failing to follow such advice; and (iii) in discharging their
duties, the Trustees, when acting in good faith, shall be entitled to rely upon
the books of account of the Trust and upon written reports made to the Trustees
by any officer appointed by them, any independent public accountant, and (with
respect to the subject matter of the contract involved) any officer, partner or
responsible employee of a contracting party employed by the Trust. The Trustees
as such shall not be required to give any bond or surety or any other security
for the performance of their duties.
SECTION 3. INDEMNIFICATION OF SHAREHOLDERS. If any Shareholder (or former
Shareholder) of the Trust shall be charged or held to be personally liable for
any
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obligation or liability of the Trust solely by reason of being or having been a
Shareholder and not because of such Shareholder's acts or omissions or for some
other reason, the Trust (upon proper and timely request by the Shareholder) may
assume the defense against such charge and satisfy any judgment thereon or may
reimburse the Shareholders for expenses, and the Shareholder or former
Shareholder (or the heirs, executors, administrators or other legal
representatives thereof, or in the case of a corporation or other entity, its
corporate or other general successor) shall be entitled (but solely out of the
assets of the Series of which such Shareholder or former Shareholder is or was
the holder of Shares) to be held harmless from and indemnified against all loss
and expense arising from such liability.
SECTION 4. INDEMNIFICATION OF TRUSTEES, OFFICERS, ETC. Subject to the
limitations, if applicable, hereinafter set forth in this Section 4, the Trust
shall indemnify (from the assets of one or more Series to which the conduct in
question relates) each of its Trustees, officers and employees, investment
advisers or managers of the Trust, and agents (including Persons who serve at
the Trust's request as directors, officers or trustees of another organization
in which the Trust has any interest as a shareholder, creditor or otherwise
(hereinafter, together with such Person's heirs, executors, administrators or
personal representative, referred to as a "Covered Person")) against all
liabilities, including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and expenses, including
reasonable accountants' and counsel fees, incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal or other including appeals, before any
court or administrative or legislative body, in which such Covered Person may be
or may have been involved as a party or otherwise or with which such Covered
Person may be or may have been threatened, while in office or thereafter, by
reason of being or having held such a position, except with respect to any
matter as to which it has been determined that such Covered Person (i) did not
act in good faith in the reasonable belief that such Covered Person's action was
in or not opposed to the best interests of the Trust; or (ii) had acted with
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office; and (iii) for a
criminal proceeding, had reasonable cause to believe that his or her conduct was
unlawful (the conduct described in (i), (ii) and (iii) being referred to
hereafter as "Disabling Conduct"). A determination that the Covered Person is
entitled to indemnification may be made by (i) a final decision on the merits by
a court or other body before whom the proceeding was brought that the Covered
Person to be indemnified was not liable by reason of Disabling Conduct, (ii)
dismissal of a court action or an administrative proceeding against a Covered
Person for insufficiency of evidence of Disabling Conduct, or (iii) a reasonable
determination, based upon a review of the facts, that the indemnitee was not
liable by reason of Disabling Conduct by (a) a vote of a majority of a quorum of
the Trustees who are neither "interested
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persons" of the Trust as defined in the 1940 Act nor parties to the proceeding
(the "Disinterested Trustees"), or (b) an independent legal counsel in a written
opinion. Expenses, including accountants' and counsel fees so incurred by any
such Covered Person (but excluding amounts paid in satisfaction of judgments, in
compromise or as fines or penalties), may be paid from time to time by one or
more Series to which the conduct in question related in advance of the final
disposition of any such action, suit or proceeding; PROVIDED that the Covered
Person shall have undertaken to repay the amounts so paid to such Series if it
is ultimately determined that indemnification of such expenses is not authorized
under this Article VII and (i) the Covered Person shall have provided security
for such undertaking, (ii) the Trust shall be insured against losses arising by
reason of any lawful advances, or (iii) a majority of a quorum of the
Disinterested Trustees, or an independent legal counsel in a written opinion,
shall have determined, based on a review of readily available facts (as opposed
to a full trial type inquiry), that there is reason to believe that the Covered
Person ultimately will be found entitled to indemnification.
SECTION 5. COMPROMISE PAYMENT. As to any matter disposed of by a compromise
payment by any such Covered Person referred to in Section 4 of this Article VII,
pursuant to a consent decree or otherwise, no such indemnification either for
said payment or for any other expenses shall be provided unless such
indemnification shall be approved (i) by a majority of a quorum of the
Disinterested Trustees or (ii) by an independent legal counsel in a written
opinion. Approval by the Trustees pursuant to clause (i) or by independent legal
counsel pursuant to clause (ii) shall not prevent the recovery from any Covered
Person of any amount paid to such Covered Person in accordance with either of
such clauses as indemnification if such Covered Person is subsequently
adjudicated by a court of competent jurisdiction not to have acted in good faith
in the reasonable belief that such Covered Person's action was in or not opposed
to the best interests of the Trust or to have been liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of the Covered Person's
office.
SECTION 6. INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of indemnification
provided by this Article VII shall not be exclusive of or affect any other
rights to which any such Covered Person or shareholder may be entitled. As used
in this Article VII, a "disinterested" Person is one against whom none of the
actions, suits or other proceedings in question, and no other action, suit or
other proceeding on the same or similar grounds is then or has been pending or
threatened. Nothing contained in this Article VII shall affect any rights to
indemnification to which personnel of the Trust, other than Trustees and
officers, and other Persons may be entitled by contract or otherwise under law,
nor the power of the Trust to purchase and maintain liability insurance on
behalf of any such Person.
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SECTION 7. LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
SECTION 8. INSURANCE. The Trustees shall be entitled and empowered to the
fullest extent permitted by law to purchase with Trust assets insurance for
liability and for all expenses reasonably incurred or paid or expected to be
paid by a Trustee, officer, employee, or agent of the Trust in connection with
any claim, action, suit, or proceeding in which he or she may become involved by
virtue of his or her capacity or former capacity as a Trustee of the Trust.
ARTICLE VIII
Miscellaneous
SECTION 1. TERMINATION OF THE TRUST OR ANY SERIES OR CLASS.
(a) Unless terminated as provided herein, the Trust shall continue without
limitation of time. The Trustees in their sole discretion may terminate the
Trust.
(b) Upon the requisite action by the Trustees to terminate the Trust or any
one or more Series of Shares or any Class thereof, after paying or otherwise
providing for all charges, taxes, expenses, and liabilities, whether due or
accrued or anticipated, of the Trust or of the particular Series or any Class
thereof as may be determined by the Trustees, the Trust shall in accordance with
such procedures as the Trustees may consider appropriate reduce the remaining
assets of the Trust or of the affected Series or Class to distributable form in
cash or Shares (if any Series remain) or other securities, or any combination
thereof, and distribute the proceeds to the Shareholders of the Series or
Classes involved, ratably according to the number of Shares of such Series or
Class held by the Shareholders of such Series or Class on the date of
distribution. Thereupon, the Trust or any affected Series or Class shall
terminate and the Trustees and the Trust shall be discharged from any and all
further liabilities and duties relating thereto or arising therefrom, and the
right, title, and interest of all parties with respect to the Trust or such
Series or Class shall be canceled and discharged.
(c) Upon termination of the Trust, following completion of winding up of
its business, the Trustees shall cause a certificate of cancellation of the
Trust's Certificate of Trust to be filed in accordance with the Delaware Act,
which certificate of cancellation may be signed by any one Trustee.
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<PAGE>
SECTION 2. REORGANIZATION.
(a) Notwithstanding anything else herein, the Trustees may, without
Shareholder approval unless such approval is required by applicable law, (i)
cause the Trust to merge or consolidate with or into or transfer its assets and
any liabilities to one or more trusts (or series thereof to the extent permitted
by law), partnerships, associations, corporations or other business entities
(including trusts, partnerships, associations, corporations or other business
entities created by the Trustees to accomplish such merger or consolidation or
transfer of assets and any liabilities) so long as the surviving or resulting
entity is an investment company as defined in the 1940 Act, or is a series
thereof, that will succeed to or assume the Trust's registration under the 1940
Act and that is formed, organized, or existing under the laws of the United
States or of a state, commonwealth, possession or colony of the United States,
unless otherwise permitted under the 1940 Act, (ii) cause any one or more Series
(or Classes) of the Trust to merge or consolidate with or into or transfer its
assets and any liabilities to any one or more other Series (or Classes) of the
Trust, one or more trusts (or series or classes thereof to the extent permitted
by law), partnerships, associations, corporations, (iii) cause the Shares to be
exchanged under or pursuant to any state or federal statute to the extent
permitted by law or (iv) cause the Trust to reorganize as a corporation, limited
liability company or limited liability partnership under the laws of Delaware or
any other state or jurisdiction.
(b) Pursuant to and in accordance with the provisions of Section 3815(f) of
the Delaware Act, and notwithstanding anything to the contrary contained in this
Declaration of Trust, an agreement of merger or consolidation or exchange or
transfer of assets and liabilities approved by the Trustees in accordance with
this Section 2 may (i) effect any amendment to the governing instrument of the
Trust or (ii) effect the adoption of a new governing instrument of the Trust if
the Trust is the surviving or resulting trust in the merger or consolidation.
(c) The Trustees may create one or more business trusts to which all or any
part of the assets, liabilities, profits, or losses of the Trust or any Series
or Class thereof may be transferred and may provide for the conversion of Shares
in the Trust or any Series or Class thereof into beneficial interests in any
such newly created trust or trusts or any series or classes thereof.
SECTION 3. AMENDMENTS. Except as specifically provided in this Section 3,
the Trustees may, without Shareholder vote, restate, amend, or otherwise
supplement this Declaration of Trust. Shareholders shall have the right to vote
on (i) any amendment that would affect their right to vote granted in Article V,
Section 1 hereof, (ii) any amendment to this Section 3 of Article VIII; (iii)
any amendment that may require their vote under applicable law or by the Trust's
registration statement, as filed with the
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<PAGE>
Commission, and (iv) any amendment submitted to them for their vote by the
Trustees. Any amendment required or permitted to be submitted to the
Shareholders that, as the Trustees determine, shall affect the Shareholders of
one or more Series shall be authorized by a vote of the Shareholders of each
Series affected and no vote of Shareholders of a Series not affected shall be
required. Notwithstanding anything else herein, no amendment hereof shall limit
the rights to insurance provided by Article VII hereof with respect to any acts
or omissions of Persons covered thereby prior to such amendment nor shall any
such amendment limit the rights to indemnification referenced in Article VIl
hereof as provided in the By-Laws with respect to any actions or omissions of
Persons covered thereby prior to such amendment. The Trustees may, without
Shareholder vote, restate, amend, or otherwise supplement the Certificate of
Trust as they deem necessary or desirable.
SECTION 4. FILING OF COPIES; REFERENCES; HEADINGS. The original or a copy
of this instrument and of each restatement and/or amendment hereto shall be kept
at the office of the Trust where it may be inspected by any Shareholder. Anyone
dealing with the Trust may rely on a certificate by an officer of the Trust as
to whether or not any such restatements and/or amendments have been made and as
to any matters in connection with the Trust hereunder; and, with the same effect
as if it were the original, may rely on a copy certified by an officer of the
Trust to be a copy of this instrument or of any such restatements and/or
amendments. In this instrument and in any such restatements and/or amendments,
references to this instrument, and all expressions such as "herein," "hereof,"
and "hereunder," shall be deemed to refer to this instrument as amended or
affected by any such restatements and/or amendments. Headings are placed herein
for convenience of reference only and shall not be taken as a part hereof or
control or affect the meaning, construction or effect of this instrument.
Whenever the singular number is used herein, the same shall include the plural;
and the neuter, masculine and feminine genders shall include each other, as
applicable. This instrument may be executed in any number of counterparts each
of which shall be deemed an original.
SECTION 5. APPLICABLE LAW.
(a) The Trust is created under, and this Declaration of Trust is to be
governed by, and construed and enforced in accordance with, the laws of the
State of Delaware. The Trust shall be of the type commonly called a business
trust, and without limiting the provisions hereof, the Trust specifically
reserves the right to exercise any of the powers or privileges afforded to
business trusts or actions that may be engaged in by business trusts under the
Delaware Act, and the absence of a specific reference herein to any such power,
privilege, or action shall not imply that the Trust may not exercise such power
or privilege or take such actions.
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<PAGE>
(b) Notwithstanding the first sentence of Section 5(a) of this Article
VIII, there shall not be applicable to the Trust, the Trustees, or this
Declaration of Trust either the provisions of Section 3540 of Title 12 of the
Delaware Code or any provisions of the laws (statutory or common) of the State
of Delaware (other than the Delaware Act) pertaining to trusts that relate to or
regulate: (i) the filing with any court or governmental body or agency of
Trustee accounts or schedules of trustee fees and charges; (ii) affirmative
requirements to post bonds for trustees, officers, agents, or employees of a
trust; (iii) the necessity for obtaining a court or other governmental approval
concerning the acquisition, holding, or disposition of real or personal
property; (iv) fees or other sums applicable to trustees, officers, agents or
employees of a trust; (v) the allocation of receipts and expenditures to income
or principal; (vi) restrictions or limitations on the permissible nature,
amount, or concentration of trust investments or requirements relating to the
titling, storage, or other manner of holding of trust assets; or (vii) the
establishment of fiduciary or other standards or responsibilities or limitations
on the acts or powers or liabilities or authorities and powers of trustees that
are inconsistent with the limitations or liabilities or authorities and powers
of the Trustees set forth or referenced in this Declaration of Trust; or (viii)
activities similar to those referenced in the foregoing items (i) through (vii).
SECTION 6. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS.
(a) The provisions of this Declaration of Trust are severable, and if the
Trustees shall determine, with the advice of counsel, that any such provision is
in conflict with the 1940 Act, the regulated investment company provisions of
the Internal Revenue Code of 1986, as amended (or any successor statute
thereto), and the regulations thereunder, the Delaware Act or with other
applicable laws and regulations, the conflicting provision shall be deemed never
to have constituted a part of this Declaration of Trust; provided, however, that
such decision shall not affect any of the remaining provisions of this
Declaration of Trust or render invalid or improper any action taken or omitted
prior to such determination.
(b) If any provision of this Declaration of Trust shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall, not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration of Trust in any jurisdiction.
SECTION 7. BUSINESS TRUST ONLY. It is the intention of the Trustees to
create a business trust pursuant to the Delaware Act. It is not the intention of
the Trustees to create a general partnership, limited partnership, joint stock
association, corporation, bailment, or any form of legal relationship other than
a business trust pursuant to the Delaware Act. Nothing in this Declaration of
Trust shall be construed to make the Shareholders, either by themselves or with
the Trustees, partners, or members of a joint stock association.
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IN WITNESS WHEREOF, the Trustees named below do hereby make and enter into
this Declaration of Trust as of the 26th day of June, 1998.
/s/ David J. Ortiz
-------------------------------
David J. Ortiz
as Trustee and not individually
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BY-LAWS
OF
CLEARBROOK INVESTMENT TRUST
A DELAWARE BUSINESS TRUST
<PAGE>
TABLE OF CONTENTS
-----------------
INTRODUCTION...................................................................1
A. Declaration of Trust.....................................................1
B. Definitions..............................................................1
ARTICLE I OFFICES.............................................................1
Section 1. Principal Office.................................................1
Section 2. Delaware Office..................................................1
Section 3. Other Offices....................................................1
ARTICLE II MEETINGS OF SHAREHOLDERS...........................................1
Section 1. Place of Meetings................................................1
Section 2. Call of Meetings.................................................2
Section 3. Notice of Meetings of Shareholders...............................2
Section 4. Manner of Giving Notice: Affidavit of Notice.....................2
Section 5. Adjourned Meeting; Notice........................................2
Section 6. Voting...........................................................3
Section 7. Waiver of Notice; Consent of Absent Shareholders.................3
Section 8. Shareholder Action by Written Consent Without a Meeting..........3
Section 9. Record Date for Shareholder Notice;
Voting and Giving Consents.....................................4
Section 10. Proxies.........................................................5
Section 11. Inspectors of Election..........................................5
ARTICLE III TRUSTEES..........................................................6
Section 1. Powers...........................................................6
Section 2. Number of Trustees...............................................6
Section 3. Vacancies........................................................6
Section 4. Chair............................................................6
Section 5. Place of Meetings and Meetings by Telephone......................6
Section 6. Regular Meetings.................................................7
Section 7. Special Meetings.................................................7
Section 8. Quorum...........................................................7
Section 9. Waiver of Notice.................................................7
Section 10. Adjournment.....................................................7
Section 11. Notice of Adjournment...........................................8
Section 12. Action Without a Meeting........................................8
Section 13. Fees and Compensation of Trustees...............................8
Section 14. Delegation of Power to Other Trustees...........................8
ARTICLE IV COMMITTEES.........................................................8
Section 1. Committees of Trustees...........................................8
Section 2. Meetings and Action of Committees................................9
<PAGE>
ARTICLE V OFFICERS............................................................9
Section 1. Officers.........................................................9
Section 2. Election of Officers............................................10
Section 3. Subordinate Officers............................................10
Section 4. Removal and Resignation of Officers.............................10
Section 5. Vacancies in Offices............................................10
Section 6. President.......................................................10
Section 7. Vice Presidents.................................................10
Section 8. Secretary.......................................................11
Section 9. Treasurer.......................................................11
ARTICLE VI INSPECTION OF RECORDS AND REPORTS.................................11
Section 1. Inspection by Shareholders......................................11
Section 2. Inspection by Trustees..........................................12
ARTICLE VII GENERAL MATTERS..................................................12
Section 1. Checks, Drafts, Evidences of Indebtedness.......................12
Section 2. Contracts and Instruments: How Executed.........................12
Section 3. Fiscal Year.....................................................12
Section 4. Seal............................................................12
ARTICLE VIII AMENDMENTS......................................................12
Section 1. Amendment.......................................................12
<PAGE>
BY-LAWS
OF
CLEARBROOK INVESTMENT TRUST
A DELAWARE BUSINESS TRUST
INTRODUCTION
A. DECLARATION OF TRUST. These By-Laws shall be subject to the Declaration
of Trust, as from time to time in effect (the "Declaration of Trust"), of
Clearbrook Investment Trust, a Delaware business trust (the "Trust"). In the
event of any inconsistency between the terms hereof and the terms of the
Declaration of Trust, the terms of the Declaration of Trust shall control.
B. DEFINITIONS. Capitalized terms used herein and not herein defined are
used as defined in the Declaration of Trust.
ARTICLE I OFFICES
Section 1. PRINCIPAL OFFICE. The Trustees shall fix and, from time to time,
may change the location of the principal executive office of the Trust at any
place within or without the State of Delaware.
Section 2. DELAWARE OFFICE. The Trustees shall establish a registered
office in the State of Delaware and shall appoint as the Trust's registered
agent for service of process in the State of Delaware an individual who is a
resident of the State of Delaware or a Delaware corporation or a corporation
authorized to transact business in the State of Delaware; in each case the
business office of such registered agent for service of process shall be
identical with the registered Delaware office of the Trust.
Section 3. OTHER OFFICES. The Trustees may at any time establish branch or
subordinate offices at any place or places within or without the State of
Delaware where the Trust intends to do business.
ARTICLE II MEETINGS OF SHAREHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of Shareholders shall be held at any
place designated by the Trustees. In the absence of any such designation,
Shareholders' meetings shall be held at the principal executive office of the
Trust.
<PAGE>
Section 2. CALL OF MEETINGS. There shall be no annual Shareholders'
meetings. Special meetings of the Shareholders may be called at any time by the
Trustees, the President or any other officer designated for the purpose by the
Trustees, for the purpose of seeking action upon any matter requiring the vote
or authority of the Shareholders as herein provided or provided in the
Declaration of Trust or upon any other matter as to which such vote or authority
is deemed by the Trustees or the President to be necessary or desirable. To the
extent required by the Investment Company Act of 1940, as amended ("1940 Act"),
meetings of the Shareholders for the purpose of voting on the removal of any
Trustee shall be called promptly by the Trustees.
Section 3. NOTICE OF MEETINGS OF SHAREHOLDERS. All notices of meetings of
Shareholders shall be sent or otherwise given to Shareholders in accordance with
Section 4 of this Article II not less than ten (10) nor more than ninety (90)
days before the date of the meeting. The notice shall specify (i) the place,
date and hour of the meeting, and (ii) the general nature of the business to be
transacted.
Section 4. MANNER OF GIVING NOTICE: AFFIDAVIT OF NOTICE. Notice of any
meeting of Shareholders shall be (i) given either by hand delivery, first-class
mail, telegraphic or other written communication, charges prepaid, and (ii)
addressed to the Shareholder at the address of that Shareholder appearing on the
books of the Trust or its transfer agent or given by the Shareholder to the
Trust for the purpose of notice. Notice shall be deemed to have been given at
the time when delivered personally or deposited in the mail or sent by telegram
or other means of written communication or, where notice is given by
publication, on the date of publication.
An affidavit of the mailing or other means of giving any notice of any
meeting of Shareholders shall be filed and maintained in the minute book of the
Trust.
Section 5. ADJOURNED MEETING; NOTICE. Any meeting of Shareholders, whether
or not a quorum is present, may be adjourned from time to time by: (a) the vote
of the majority of the Shares represented at that meeting, either in person or
by proxy; or (b) in his or her discretion by the chair of the meeting.
When any meeting of Shareholders is adjourned to another time or place,
notice need not be given of the adjourned meeting at which the adjournment is
taken, unless a new record date of the adjourned meeting is fixed. Notice of any
such adjourned meeting shall be given to each Shareholder of record entitled to
vote at the adjourned meeting in accordance with the provisions of Sections 3
and 4 of this Article II. At any adjourned meeting, any business may be
transacted which might have been transacted at the original meeting.
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<PAGE>
Section 6. VOTING. The Shareholders entitled to vote at any meeting of
Shareholders shall be determined in accordance with the provisions of the
Declaration of Trust of the Trust, as in effect at such time. The Shareholders'
vote may be by voice vote or by ballot, provided, however, that any election for
Trustees must be by ballot if demanded by any Shareholder before the voting has
begun.
Section 7. WAIVER OF NOTICE; CONSENT OF ABSENT SHAREHOLDERS. The
transaction of business and any actions taken at a meeting of Shareholders,
however called and noticed and wherever held, shall be as valid as though taken
at a meeting duly held after regular call and notice provided a quorum is
present either in person or by proxy at the meeting of Shareholders and if
either before or after the meeting, each Shareholder entitled to vote who was
not present in person or by proxy at the meeting of the Shareholders signs a
written waiver of notice or a consent to a holding of the meeting or an approval
of the minutes. The waiver of notice or consent need not specify either the
business to be transacted or the purpose of any meeting of Shareholders.
Attendance by a Shareholder at a meeting of Shareholders shall constitute a
waiver of notice of that meeting, except if the Shareholder objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened and except that attendance at a meeting of
Shareholders is not a waiver of any right to object to the consideration of
matters not included in the notice of the meeting of Shareholders if that
objection is expressly made at the beginning of the meeting.
Section 8. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Except
as provided in the Declaration of Trust, any action that may be taken at any
meeting of Shareholders may be taken without a meeting and without prior notice
if a consent in writing setting forth the action to be taken is signed by the
holders of outstanding Shares having not less than the minimum number of votes
that would be necessary to authorize or take that action at a meeting at which
all Shares entitled to vote on that action were present and voted, provided,
however, that the Shareholders receive any necessary Information Statement or
other necessary documentation in conformity with the requirements of the
Securities Exchange Act of 1934 or the rules or regulations thereunder. All such
consents shall be filed with the Secretary of the Trust and shall be maintained
in the Trust's records. Any Shareholder giving a written consent or the
Shareholder's proxy holders or a transferee of the Shares or a personal
representative of the Shareholder or their respective proxy holders may revoke
the Shareholder's written consent by a writing received by the Secretary of the
Trust before written consents of the number of Shares required to authorize the
proposed action have been filed with the Secretary.
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<PAGE>
If the consents of all Shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
Shareholders shall not have been received, the Secretary shall give prompt
notice of the action approved by the Shareholders without a meeting. This notice
shall be given in the manner specified in Section 4 of this Article II.
Section 9. RECORD DATE FOR SHAREHOLDER NOTICE; VOTING AND GIVING CONSENTS.
(a) For purposes of determining the Shareholders entitled to vote or act at
any meeting or adjournment thereof, the Trustees may fix in advance a record
date which shall not be more than ninety (90) days nor less than ten (10) days
before the date of any such meeting. Without fixing a record date for a meeting,
the Trustees may for voting and notice purposes close the register or transfer
books for one or more Series (or Classes) for all or any part of the period
between the earliest date on which a record date for such meeting could be set
in accordance herewith and the date of such meeting.
If the Trustees do not so fix a record date or close the register or
transfer books of the affected Series or Classes, the record date for
determining Shareholders entitled to notice of or to vote at a meeting of
Shareholders shall be the close of business on the business day next preceding
the day on which notice is given or if notice is waived, at the close of
business on the business day next preceding the day on which the meeting is
held.
(b) The record date for determining Shareholders entitled to give consent
to action in writing without a meeting, (a) when no prior action of the Trustees
has been taken, shall be the day on which the first written consent is given, or
(b) when prior action of the Trustees has been taken, shall be (i) such date as
determined for that purpose by the Trustees, which record date shall not precede
the date upon which the resolution fixing it is adopted by the Trustees and
shall not be more than twenty (20) days after the date of such resolution, or
(ii) if no record date is fixed by the Trustees, the record date shall be the
close of business on the day on which the Trustees adopt the resolution relating
to that action. Nothing in this Section shall be constituted as precluding the
Trustees from setting different record dates for different Series or Classes.
Only Shareholders of record on the record date as herein determined shall have
any right to vote or to act at any meeting or give consent to any action
relating to such record date, notwithstanding any transfer of Shares on the
books of the Trust after such record date.
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<PAGE>
Section 10. PROXIES. Subject to the provisions of the Declaration of Trust,
every Person entitled to vote for Trustees or on any other matter shall have the
right to do so either in person or by proxy, provided that either (i) an
instrument authorizing such a proxy to act is executed by the Shareholder in
writing or (ii) the Trustees adopt an electronic, telephonic, computerized or
other alternative to the execution of a written instrument authorizing the proxy
to act. A proxy shall be deemed executed by a Shareholder if the Shareholder's
name is placed on the proxy (whether by manual signature, typewriting,
telegraphic transmission or otherwise) by the Shareholder or the Shareholder's
attorney-in-fact. A valid proxy which does not state that it is irrevocable
shall continue in full force and effect unless (i) revoked by the Person
executing it before the vote pursuant to that proxy is taken, (a) by a writing
delivered to the Trust stating that the proxy is revoked, or (b) by a subsequent
proxy executed by such Person, or (c) attendance at the meeting and voting in
person by the Person executing that proxy, or (d) revocation by such Person
using any electronic, telephonic, computerized or other alternative means
authorized by the Trustees for authorizing the proxy to act; or (ii) written
notice of the death or incapacity of the maker of that proxy is received by the
Trust before the vote pursuant to that proxy is counted. A proxy with respect to
Shares held in the name of two or more Persons shall be valid if executed by any
one of them unless at or prior to exercise of the proxy the Trust receives a
specific written notice to the contrary from any one of the two or more Persons.
A proxy purporting to be executed by or on behalf of a Shareholder shall be
deemed valid unless challenged at or prior to its exercise and the burden of
proving invalidity shall rest on the challenger.
Section 11. INSPECTORS OF ELECTION. Before any meeting of Shareholders, the
Trustees may appoint any persons other than nominees for office to act as
inspectors of election at the meeting or its adjournments. If no inspectors of
election are so appointed, the Chairman of the meeting may appoint inspectors of
election at the meeting. The number of inspectors shall be two (2). If any
person appointed as inspector fails to appear or fails or refuses to act, the
Chairman of the meeting may appoint a person to fill the vacancy.
These inspectors shall:
(a) Determine the number of Shares outstanding and the voting power of
each, the Shares represented at the meeting, the existence of a quorum
and the authenticity, validity and effect of proxies;
(b) Receive votes, ballots or consents;
(c) Hear and determine all challenges and questions in any way arising in
connection with the right to vote;
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<PAGE>
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the election or vote
with fairness to all Shareholders.
ARTICLE III TRUSTEES
Section 1. POWERS. Subject to the applicable provisions of the 1940 Act,
the Declaration of Trust and these By-Laws relating to action required to be
approved by the Shareholders, the business and affairs of the Trust shall be
managed and all powers shall be exercised by or under the direction of the
Trustees.
Section 2. NUMBER OF TRUSTEES. The exact number of Trustees within the
limits specified in the Declaration of Trust shall be fixed from time to time by
a resolution of the Trustees.
Section 3. VACANCIES. Vacancies in the authorized number of Trustees may be
filled as provided in the Declaration of Trust.
Section 4. CHAIR. The Trustees shall have the power to appoint from among
the members of the Board of Trustees a Chair. Such appointment shall be by
majority vote of the Trustees. Such Chair shall serve until his or her successor
is appointed or until his or her earlier death, resignation or removal. The
Chair shall preside at meetings of the Trustees and shall, subject to the
control of the Trustees, perform such other powers and duties as may be from
time to time assigned to him or her by the Trustees or prescribed by the
Declaration of Trust or these By-Laws, consistent with his or her position. The
Chair need not be a Shareholder.
Section 5. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. All meetings of the
Trustees may be held at any place that has been selected from time to time by
the Trustees. In the absence of such an election, regular meetings shall be held
at the principal executive office of the Trust. Subject to any applicable
requirements of the 1940 Act, any meeting, regular or special, may be held by
conference telephone or similar communication equipment, so long as all Trustees
participating in the meeting can hear one another and all such Trustees shall be
deemed to be present in person at the meeting.
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<PAGE>
Section 6. REGULAR MEETINGS. Regular meetings of the Trustees shall be held
without call at such time as shall from time to time be fixed by the Trustees.
Such regular meetings may be held without notice.
Section 7. SPECIAL MEETINGS. Special meetings of the Trustees for any
purpose or purposes may be called at any time by the Chair, the President or the
Secretary or any two (2) Trustees.
Notice of the time and place of special meetings shall be delivered orally
in person or by telephone to each Trustee or sent written by nationally
recognized overnight courier, charges prepaid, addressed to each Trustee at that
Trustee's address as it is shown on the records of the Trust. If the notice is
sent by overnight courier, it shall be sent at least seven (7) calendar days
before the time of the holding of the meeting and signed for by an individual at
that address. If the notice is delivered personally or by telephone, it shall be
given at least twenty four (24) hours before the time of the holding of the
meeting. Any oral notice given personally or by telephone must be communicated
only to the Trustee. The notice need not specify the purpose of the meeting or
the place of the meeting, if the meeting is to be held at the principal
executive office of the Trust. Notice of a meeting need not be given to any
Trustee if a written waiver of notice, executed by such Trustee before or after
the meeting, is filed with the records of the meeting, or to any Trustee who
attends the meeting without protesting, prior thereto or at its commencement,
the lack of notice to such Trustee.
Section 8. QUORUM. Twenty-five percent (25%) of the Trustees shall
constitute a quorum for the transaction of business, except to adjourn as
provided in Section 10 of this Article III. Every act or decision done or made
by a majority of the Trustees present at a meeting duly held at which a quorum
is present shall be regarded as the act of the Trustees, subject to the
provisions of the Declaration of Trust. A meeting at which a quorum is initially
present may continue to transact business notwithstanding the withdrawal of
Trustees if any action taken is approved by at least a majority of the required
quorum for that meeting.
Section 9. WAIVER OF NOTICE. Notice of any meeting need not be given to any
Trustee who either before or after the meeting signs a written waiver of notice,
a consent to holding the meeting, or an approval of the minutes. The waiver of
notice or consent need not specify the purpose of the meeting. All such waivers,
consents, and approvals shall be filed with the records of the Trust or made a
part of the minutes of the meeting. Notice of a meeting shall also be deemed
given to any Trustee who attends the meeting without protesting, prior to or at
its commencement, the lack of notice to that Trustee.
Section 10. ADJOURNMENT. A majority of the Trustees present, whether or not
constituting a quorum, may adjourn any meeting to another time and place.
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<PAGE>
Section 11. NOTICE OF ADJOURNMENT. Notice of the time and place of holding
an adjourned meeting need not be given.
Section 12. ACTION WITHOUT A MEETING. Unless the 1940 Act requires that a
particular action be taken only at a meeting at which the Trustees are present
in person, any action to be taken by the Trustees at a meeting may be taken
without such meeting by the written consent of a majority of the Trustees then
in office. Any such written consent may be executed and given by telecopy or
similar electronic means. Such written consents shall be filed with the minutes
of the proceedings of the Trustees. If any action is so taken by the Trustees by
the written consent of less than all of the Trustees, prompt notice of the
taking of such action shall be furnished to each Trustee who did not execute
such written consent, provided that the effectiveness of such action shall not
be impaired by any delay or failure to furnish such notice.
Section 13. FEES AND COMPENSATION OF TRUSTEES. Trustees and members of
committees may receive such compensation, if any, for their services and such
reimbursement of expenses as may be fixed or determined by resolution of the
Trustees. This Section 13 of Article III shall not be construed to preclude any
Trustee from serving the Trust in any other capacity as an officer, agent,
employee, or otherwise and receiving compensation for those services.
Section 14. DELEGATION OF POWER TO OTHER TRUSTEES. Any Trustee may, by
power of attorney, delegate his or her power for a period not exceeding one (1)
month at any one time to any other Trustee. Except where applicable law may
require a Trustee to be present in person, a Trustee represented by another
Trustee, pursuant to such power of attorney, shall be deemed to be present for
purpose of establishing a quorum and satisfying the required majority vote.
ARTICLE IV COMMITTEES
Section 1. COMMITTEES OF TRUSTEES. The Trustees may by resolution designate
one or more committees, each consisting of two (2) or more Trustees, to serve at
the pleasure of the Trustees. The Trustees may designate one or more Trustees as
alternate members of any committee who may replace any absent member at any
meeting of the committee. Any committee, to the extent provided for by
resolution of the Trustees, shall have the authority of the Trustees, except
with respect to:
(a) the approval of any action which under applicable law requires
approval by a majority of the Trustees or certain Trustees;
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(b) the filling of vacancies of Trustees;
(c) the fixing of compensation of the Trustees for services generally or
as a member of any committee;
(d) the amendment or termination of the Declaration of Trust or any Series
or Class or the amendment of the By-Laws or the adoption of new
By-Laws;
(e) the amendment or repeal of any resolution of the Trustees which by its
express terms is not so amendable or repealable;
(f) a distribution to the Shareholders of the Trust, except at a rate or
in a periodic amount or within a designated range determined by the
Trustees; or
(g) the appointment of any other committees of the Trustees or the members
of such new committees.
Section 2. MEETINGS AND ACTION OF COMMITTEES. Meetings and action of
committees shall be governed by, held and taken in accordance with the
provisions of Article III of these By-Laws, with such changes in the context
thereof as are necessary to substitute the committee and its members for the
Trustees generally, except that the time of regular meetings of committees may
be determined either by resolution of the Trustees or by resolution of the
committee. Special meetings of committees may also be called by resolution of
the Trustees. Alternate members shall be given notice of meetings of committees
and shall have the right to attend all meetings of committees. The Trustees may
adopt rules for the governance of any committee not inconsistent with the
provisions of these By-Laws.
ARTICLE V OFFICERS
Section 1. OFFICERS. The officers of the Trust shall be a President, a
Secretary, and a Treasurer. The Trust may also have, at the discretion of the
Trustees, one or more Vice Presidents, one or more Assistant Secretaries, one or
more Assistant Treasurers, and such other officers as may be appointed in
accordance with the provisions of Section 3 of this Article V. Any number of
offices may be held by the same person. Any officer may be, but need not be, a
Trustee or Shareholder.
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<PAGE>
Section 2. ELECTION OF OFFICERS. The officers of the Trust, except such
officers as may be appointed in accordance with the provisions of Section 3 or
Section 5 of this Article V, shall be chosen by the Trustees, and each shall
serve at the pleasure of the Trustees, subject to the rights, if any, of an
officer under any contract of employment.
Section 3. SUBORDINATE OFFICERS. The Trustees may appoint and may empower
the President to appoint such other officers as the business of the Trust may
require, each of whom shall hold office for such period, have such authority and
perform such duties as are provided in these By-Laws or as the Trustees may from
time to time determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights, if
any, of an officer under any contract of employment, any officer may be removed,
either with or without cause, by the Trustees at any regular or special meeting
of the Trustees or by such officer upon whom such power of removal may be
conferred by the Trustees.
Any officer may resign at any time by giving written notice to the Trust.
Any resignation shall take effect at the date of the receipt of that notice or
at any later time specified in that notice; and unless otherwise specified in
that notice, the acceptance of the resignation shall not be necessary to make it
effective. Any resignation is without prejudice to the rights, if any, of the
Trust under any contract to which the officer is a party.
Section 5. VACANCIES IN OFFICES. A vacancy in any office because of death,
resignation, removal, disqualification or other cause shall be filled in the
manner prescribed in these By-Laws for regular appointment to that office. The
President may make temporary appointments to a vacant office pending action by
the Trustees.
Section 6. PRESIDENT. The President shall be the chief operating and chief
executive officer of the Trust and shall, subject to the control of the
Trustees, have general supervision, direction and control of the business and
the officers of the Trust. He or she or his or her designee, shall preside at
all meetings of the Shareholders. He or she shall have the general powers and
duties of a president of a corporation and shall have such other powers and
duties as may be prescribed by the Trustees, the Declaration of Trust or these
By-Laws.
Section 7. VICE PRESIDENTS. In the absence or disability of the President,
any Vice President, unless there is an Executive Vice President, shall perform
all the duties of the President and when so acting shall have all powers of and
be subject to all the restrictions upon the President. The Executive Vice
President or Vice Presidents, whichever the case may be, shall have such other
powers and shall perform such other duties as from time to time may be
prescribed for them respectively by the Trustees or the President or by these
By-Laws.
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Section 8. SECRETARY. The Secretary shall keep or cause to be kept at the
principal executive office of the Trust, or such other place as the Trustees may
direct, a book of minutes of all meetings and actions of Trustees, committees of
Trustees and Shareholders with the time and place of holding, whether regular or
special, and if special, how authorized, the notice given, the names of those
present at Trustees' meetings or committee meetings, the number of Shares
present or represented at meetings of Shareholders and the proceedings of the
meetings.
The Secretary shall keep or cause to be kept at the principal executive
office of the Trust or at the office of the Trust's transfer agent or registrar,
a share register or a duplicate share register showing the names of all
Shareholders and their addresses, the number and classes of Shares held by each,
and if applicable, the number and date of certificates issued for the same and
the number and date of cancellation of every certificate surrendered for
cancellation.
The Secretary shall give or cause to be given notice of all meetings of the
Shareholders and of the Trustees (or committees thereof) required to be given by
these By-Laws or by applicable law and shall have such other powers and perform
such other duties as may be prescribed by the Trustees or by these By-Laws.
Section 9. TREASURER. The Treasurer shall be the chief financial officer
and chief accounting officer of the Trust and shall keep and maintain or cause
to be kept and maintained adequate and correct books and records of accounts of
the properties and business transactions of the Trust and each Series or Class
thereof, including accounts of the assets, liabilities, receipts, disbursements,
gains, losses, capital and retained earnings of all Series or Classes thereof.
The books of account shall at all reasonable times be open to inspection by any
Trustee.
The Treasurer shall deposit all monies and other valuables in the name and
to the credit of the Trust with such depositaries as may be designated by the
Board of Trustees. He or she shall disburse the funds of the Trust as may be
ordered by the Trustees, shall render to the President and Trustees, whenever
they request it, an account of all of his or her transactions as chief financial
officer and of the financial condition of the Trust and shall have other powers
and perform such other duties as may be prescribed by the Trustees or these
By-Laws.
ARTICLE VI INSPECTION OF RECORDS AND REPORTS
Section 1. INSPECTION BY SHAREHOLDERS. The Trustees shall from time to time
determine whether and to what extent, and at what times and places, and under
what conditions and regulations the accounts and books of the Trust or any of
them shall be open to the inspection of the Shareholders; and no Shareholder
shall have any right to inspect any account or book or document of the Trust
except as conferred by law or otherwise by the Trustees or by resolution of the
Shareholders.
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<PAGE>
Section 2. INSPECTION BY TRUSTEES. Every Trustee shall have the absolute
right at any reasonable time to inspect all books, records, and documents of
every kind and the physical properties of the Trust. This inspection by a
Trustee may be made in person or by an agent or attorney and the right of
inspection includes the right to copy and make extracts of documents.
ARTICLE VII GENERAL MATTERS
Section 1. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS. All checks, drafts,
or other orders for payment of money, notes or other evidences of indebtedness
issued in the name of or payable to the Trust shall be signed or endorsed in
such manner and by such person or persons as shall be designated from time to
time in accordance with the resolution of the Board of Trustees.
Section 2. CONTRACTS AND INSTRUMENTS: HOW EXECUTED. The Trustees, except as
otherwise provided in these By-Laws, may authorize any officer or officers,
agent or agents, to enter into any contract or execute any instrument in the
name of and on behalf of the Trust and this authority may be general or confined
to specific instances; and unless so authorized or ratified by the Trustees or
within the agency power of an officer, no officer, agent, or employee shall have
any power or authority to bind the Trust by any contract or engagement or to
pledge its credit or to render it liable for any purpose or for any amount.
Section 3. FISCAL YEAR. The fiscal year of each series of the Trust shall
be fixed and refixed or changed from time to time by the Trustees.
Section 4. SEAL. The seal of the Trust shall consist of a flat-faced dye
with the name of the Trust cut or engraved thereon. However, unless otherwise
required by the Trustees, the seal shall not be necessary to be placed on, and
its absence shall not impair the validity of, any document, instrument or other
paper executed and delivered by or on behalf of the Trust.
ARTICLE VIII AMENDMENTS
Section 1. AMENDMENT. Except as otherwise provided by applicable law or by
the Declaration of Trust, these By-Laws may be restated, amended, supplemented
or repealed by a majority vote of the Trustees.
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Clearbrook Investments, LLC
8000 Towers Crescent Drive, Suite 1350
Vienna, Virginia 22182
Re: Advisory Agreement
Ladies and Gentlemen:
Clearbrook Investment Trust (the "Trust") is an open-end management
investment company registered under the Investment Company Act of 1940, as
amended (the "Act"), and subject to the rules and regulations promulgated
thereunder. The Trust's shares of beneficial interest may be divided into
separate series, one of which is the Clearbrook Technology Fund, referred to
herein as the "Fund." Each share of the Fund represents an undivided interest in
the assets, subject to the liabilities, allocated to the Fund.
1. APPOINTMENT AS ADVISER. The Trust being duly authorized hereby
appoints and employs Clearbrook Investments, LLC (the "Adviser") as
discretionary portfolio manager on the terms and conditions set forth herein of
the Fund.
2. ACCEPTANCE OF APPOINTMENT; STANDARD OF PERFORMANCE. The Adviser
accepts the appointment as discretionary portfolio manager and agrees to use its
best professional judgement to make timely investment decisions for the Fund in
accordance with the provisions of this Agreement.
3. PORTFOLIO MANAGEMENT SERVICES OF THE ADVISER. The Adviser is hereby
employed and authorized to select portfolio securities for investment by the
Trust on behalf of the Fund, to
<PAGE>
purchase and sell securities of the Fund, and, upon making any purchase or sale
decision, to place orders for the execution of such portfolio transactions in
accordance with paragraphs 5 and 6 hereof. In providing portfolio management
services to the Fund, the Adviser shall be subject to such investment
restrictions as are set forth in the Act and the rules thereunder, the Internal
Revenue Code of 1986, applicable state securities laws, the supervision and
control of the Trustees of the Trust, such specific instructions as the Trustees
may adopt and communicate to the Adviser and the investment objectives, policies
and restrictions of the Trust applicable to the Fund furnished pursuant to
paragraph 4. The Adviser is not authorized by the Trust to take any action,
including the purchase or sale of securities for the Fund, in contravention of
any restriction, limitation, objective, policy or instruction described in the
previous sentence. The Adviser shall maintain on behalf of the Trust the records
listed in Schedule A hereto (as amended from time to time). At the Trust's
reasonable request, the Adviser will consult with the Trust with respect to any
decision made by it with respect to the investments of the Fund.
4. INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS. The Trust will
provide the Adviser with the statement of investment objectives, policies and
restrictions applicable to the Fund as contained in the Trust's registration
statement under the Act and the Securities Act of 1933, and any instructions
adopted by the Trustees supplemental thereto. The Trust will provide the
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<PAGE>
Adviser with such further information concerning the investment objectives,
policies and restrictions applicable thereto as the Adviser may from time to
time reasonably request. The Trust retains the right, on written notice to the
Adviser from the Trust, to modify any such objectives, policies or restrictions
in any manner at any time.
5. TRANSACTION PROCEDURES. All transactions will be consummated by
payment to or delivery by the Custodian, or such depositories or agents as may
be designated by the Custodian in writing, as custodian for the Trust, of all
cash and/or securities due to or from the Fund, and the Adviser shall not have
possession or custody thereof. The Adviser shall advise the Custodian and
confirm in writing to the Trust and to Countrywide Fund Services, Inc. or any
other designated agent of the Trust, all investment orders for the Fund placed
by it with brokers and dealers. The Adviser shall issue to the Custodian such
instructions as may be appropriate in connection with the settlement of any
transaction initiated by the Adviser.
6. ALLOCATION OF BROKERAGE. The Adviser shall have authority and
discretion to select brokers and dealers to execute portfolio transactions
initiated by the Adviser and to select the markets on or in which the
transactions will be executed.
In the selection of brokers and the placement of orders for the purchase
and sale of portfolio investments for the Trust, the Adviser shall use its best
efforts to obtain the most favorable price and execution available, except to
the extent it may be
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<PAGE>
permitted to pay higher brokerage commissions for brokerage and research
services as described below. In using its best efforts to obtain the most
favorable price and execution available, the Adviser, bearing in mind the
Trust's best interests at all times, shall consider all factors it deems
relevant, including by way of illustration, price, the size of the transaction,
the nature of the market for the security, the amount of the commission, the
timing of the transaction taking into account market prices and trends, the
reputation, experience and financial stability of the broker involved and the
quality of service rendered by the broker in other transactions. Subject to such
policies as the Trustees may determine, the Adviser shall not be deemed to have
acted unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of its having caused the Trust to pay a broker that
provides brokerage and research services to the Adviser an amount of commission
for effecting a portfolio investment transaction in excess of the amount of
commission another broker would have charged for effecting that transaction if
the Adviser determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker, viewed in terms of either that particular transaction
or the Adviser's overall responsibilities with respect to the Trust and to other
clients of the Adviser as to which the Adviser exercises investment discretion.
It is understood that neither the Trust nor the Adviser has adopted a formula
for allocation of the
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<PAGE>
Fund's investment transaction business. It is also understood that it is
desirable for the Trust that the Adviser have access to supplemental investment
and market research and security and economic analyses provided by certain
brokers who may execute brokerage transactions at a higher commission to the
Fund than may result when allocating brokerage to other brokers on the basis of
seeking the lowest commission. Therefore, the Adviser is authorized to place
orders for the purchase and sale of securities for the Fund with such certain
brokers, subject to review by the Trust's Trustees from time to time with
respect to the extent and continuation of this practice. It is understood that
the services provided by such brokers may be useful to the Adviser in connection
with its services to other clients.
On occasions when the Adviser deems the purchase or sale of a security to
be in the best interest of the Fund as well as other clients, the Adviser, to
the extent permitted by applicable laws and regulations, may, but shall be under
no obligation to, aggregate the securities to be sold or purchased in order to
obtain the most favorable price or lower brokerage commissions and efficient
execution. In such event, allocation of the securities so purchased or sold, as
well as expenses incurred in the transaction, will be made by the Adviser in the
manner it considers to be the most equitable and consistent with its fiduciary
obligations to the Trust and to such other clients.
For each fiscal quarter of the Trust, the Adviser shall prepare and render
reports to the Trust's Trustees of the total brokerage business placed and the
manner in which the allocation
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<PAGE>
has been accomplished. Such reports shall set forth at a minimum the information
required to be maintained by Rule 31a-1(b)(9) under the Act.
7. PROXIES. The Trust will vote all proxies solicited by or with respect
to the issuers of securities in which assets of the Fund may be invested from
time to time. At the request of the Trust, the Adviser shall provide the Trust
with its recommendations as to the voting of such proxies.
8. REPORTS TO THE ADVISER. The Trust will provide the Adviser with such
periodic reports concerning the status of the Fund as the Adviser may reasonably
request.
9. FEES FOR SERVICES. For all of the services to be rendered and payments
made as provided in this Agreement, the Fund will pay the Adviser a fee,
computed and accrued daily and paid monthly, at the annual rate of 1.00% of its
average daily net assets.
The Adviser may, but is not required to, waive all or a portion of its fee
and/or reimburse the Fund for other expenses in order to reduce the operating
expenses of the Fund. Any fee reduction pursuant to this paragraph shall be
reimbursed by the Fund to the Adviser at any time during the first five fiscal
years next succeeding the fiscal year of the reduction if the aggregate
operating expenses for such succeeding fiscal year do not exceed the annual rate
of 1.98% of the Fund's average daily net assets. The Adviser generally may
request and receive reimbursement for the oldest reductions before payment for
fees and expenses for the current year.
10. ALLOCATION OF CHARGES AND EXPENSES. The Adviser shall employ or
provide and compensate the executive, administrative, secretarial and clerical
personnel necessary to provide the services set forth herein, and shall bear the
expense thereof. The Adviser shall compensate all Trustees, officers and
employees of the Trust who are also employees of the Adviser. The Adviser will
pay all expenses incurred in connection with the sale or distribution of the
Fund's shares to the extent such expenses are not assumed by the Fund under the
Trust's Distribution Expense Plan.
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<PAGE>
The Fund will be responsible for the payment of all operating expenses of
the Fund, including fees and expenses incurred by the Fund in connection with
membership in investment company organizations, brokerage fees and commissions,
legal, auditing and accounting expenses, expenses of registering shares under
federal and state securities laws, insurance expenses, taxes or governmental
fees, fees and expenses of the custodian, the transfer, shareholder service and
dividend disbursing agent and the accounting and pricing agent of the Fund,
expenses including clerical expenses of the issue, sale, redemption or
repurchase of shares of the Fund, the fees and expenses of Trustees of the Trust
who are not employees, members, or officers of the Adviser, the cost of
preparing, printing and distributing prospectuses, statements, reports and other
documents to shareholders, expenses of shareholders' meetings and proxy
solicitations, and such extraordinary or non-recurring expenses as may arise,
including litigation to which the Trust may be a party and indemnification of
the Trust's officers and Trustees with respect thereto, or any other expense not
specifically described above incurred in the performance of the Trust's
obligations. All other expenses not expressly assumed by the Adviser herein
incurred in connection with the organization, registration of shares and
operations of the Fund will be borne by the Fund.
11. OTHER INVESTMENT ACTIVITIES OF THE ADVISER. The Trust acknowledges
that the Adviser or one or more of its affiliates may have investment
responsibilities or render investment advice
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to or perform other investment advisory services for other individuals or
entities and that the Adviser, its affiliates or any of its or their directors,
officers, agents or employees may buy, sell or trade in any securities for its
or their respective accounts ("Affiliated Accounts"). Subject to the provisions
of paragraph 2 hereof, the Trust agrees that the Adviser or its affiliates may
give advice or exercise investment responsibility and take such other action
with respect to other Affiliated Accounts which may differ from the advice given
or the timing or nature of action taken with respect to the Fund, provided that
the Adviser acts in good faith, and provided further, that it is the Adviser's
policy to allocate, within its reasonable discretion, investment opportunities
to the Fund over a period of time on a fair and equitable basis relative to the
Affiliated Accounts, taking into account the investment objectives and policies
of the Fund and any specific investment restrictions applicable thereto. The
Trust acknowledges that one or more of the Affiliated Accounts may at any time
hold, acquire, increase, decrease, dispose of or otherwise deal with positions
in investments in which the Fund may have an interest from time to time, whether
in transactions which involve the Fund or otherwise. The Adviser shall have no
obligation to acquire for the Fund a position in any investment which any
Affiliated Account may acquire, and the Trust shall have no first refusal,
co-investment or other rights in respect of any such investment, either for the
Fund or otherwise.
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<PAGE>
12. CERTIFICATE OF AUTHORITY. The Trust and the Adviser shall furnish to
each other from time to time certified copies of the resolutions of their
Trustees or Board of Directors or executive committees, as the case may be,
evidencing the authority of officers and employees who are authorized to act on
behalf of the Trust, the Fund and/or the Adviser.
13. LIMITATION OF LIABILITY. The Adviser shall not be liable for any
action taken, omitted or suffered to be taken by it in its reasonable judgment,
in good faith and believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Agreement, or in accordance with (or
in the absence of) specific directions or instructions from the Trust, provided,
however, that such acts or omissions shall not have resulted from the Adviser's
willful misfeasance, bad faith or gross negligence, a violation of the standard
of care established by and applicable to the Adviser in its actions under this
Agreement or breach of its duty or of its obligations hereunder. Nothing in this
paragraph 13 shall be construed in a manner inconsistent with Sections 17(h) and
(i) of the Act.
14. CONFIDENTIALITY. Subject to the duty of the Adviser and the Trust to
comply with applicable law, including any demand of any regulatory or taxing
authority having jurisdiction, the parties hereto shall treat as confidential
all information pertaining to the Fund and the actions of the Adviser and the
Trust in respect thereof.
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<PAGE>
15. ASSIGNMENT. No assignment of this Agreement shall be made by the
Adviser, and this Agreement shall terminate automatically in the event of such
assignment. The Adviser shall notify the Trust in writing sufficiently in
advance of any proposed change of control, as defined in Section 2(a)(9) of the
Act, as will enable the Trust to consider whether an assignment will occur, and
to take the steps necessary to enter into a new contract with the Adviser.
16. REPRESENTATION, WARRANTIES AND AGREEMENTS OF THE TRUST. The Trust
represents, warrants and agrees that:
A. The Adviser has been duly appointed by the Trustees of the Trust to
provide investment advisory services to the Fund as contemplated hereby.
B. The Trust will deliver to the Adviser true and complete copies of
its then current prospectuses and statements of additional information as
effective from time to time and such other documents or instruments governing
the investments of the Fund and such other information as is necessary for the
Adviser to carry out its obligations under this Agreement.
C. The Trust is currently in compliance and shall at all times comply
with the requirements imposed upon the Trust by applicable law and regulations.
17. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE ADVISER. The Adviser
represents, warrants and agrees that:
A. The Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940.
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<PAGE>
B. The Adviser will maintain, keep current and preserve on behalf of
the Trust, in the manner and for the time periods required or permitted by the
Act, the records identified in Schedule A. The Adviser agrees that such records
(unless otherwise indicated on Schedule A) are the property of the Trust, and
will be surrendered to the Trust promptly upon request.
C. The Adviser will complete such reports concerning purchases or
sales of securities on behalf of the Fund as the Trust may from time to time
require to ensure compliance with the Act, the Internal Revenue Code of 1986 and
applicable state securities laws.
D. The Adviser has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the Act and will provide the Trust with a copy
of the code of ethics and evidence of its adoption. Within forty-five (45) days
of the end of the last calendar quarter of each year while this Agreement is in
effect, an executive officer of the Adviser shall certify to the Trust that the
Adviser has complied with the requirements of Rule 17j-1 during the previous
year and that there has been no violation of the Adviser's code of ethics or, if
such a violation has occurred, that appropriate action was taken in response to
such violation. Upon the written request of the Trust, the Adviser shall permit
the Trust, its employees or its agents to examine the reports required to be
made to the Adviser by Rule 17j-1(c)(1).
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<PAGE>
E. The Adviser will, promptly after filing with the Securities and
Exchange Commission an amendment to its Form ADV, furnish a copy of such
amendment to the Trust.
F. The Adviser will immediately notify the Trust of the occurrence of
any event which would disqualify the Adviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the Act or
otherwise.
18. AMENDMENT. This Agreement may be amended at any time, but only by
written agreement between the Adviser and the Trust, which amendment, other than
amendments to Schedule A, is subject to the approval of the Trustees and the
shareholders of the Fund in the manner required by the Act and the rules
thereunder, subject to any applicable exemptive order of the Securities and
Exchange Commission modifying the provisions of the Act with respect to approval
of amendments to this Agreement.
19. EFFECTIVE DATE; TERM. This Agreement shall become effective on the
date of its execution and shall remain in force for a period of two (2) years
from such date, and from year to year thereafter but only so long as such
continuance is specifically approved at least annually by the vote of a majority
of the Trustees who are not interested persons of the Trust or the Adviser, cast
in person at a meeting called for the purpose of voting on such approval, and by
a vote of the majority of the Board of Trustees or of a majority of the
outstanding voting securities of the Fund. The aforesaid requirement that this
Agreement may be continued "annually" shall be construed in a manner consistent
with the Act and the rules and regulations thereunder.
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<PAGE>
20. TERMINATION. This Agreement may be terminated by either party hereto,
without the payment of any penalty, immediately upon written notice to the other
in the event of a breach of any provision thereof by the party so notified, or
otherwise upon sixty (60) days' written notice to the other, but any such
termination shall not affect the status, obligations or liabilities of any party
hereto to the other.
21. OBLIGATIONS OF THE TRUST. It is expressly agreed that the obligations
of the Trust hereunder shall not be binding upon any of the trustees,
shareholders, nominees, officers, agents or employees of the Trust, personally,
but bind only the trust property of the Trust. The execution and delivery of
this Agreement have been authorized by the Trustees of the Trust and signed by
an officer of the Trust, acting as such, and neither such authorization by such
trustees nor such execution and delivery by such officer shall be deemed to have
been made by any of them individually or to impose any liability on any of them
personally, but shall bind only the trust property of the Trust.
22. DEFINITIONS. As used in paragraphs 15 and 19 of this Agreement, the
terms "assignment," "interested person" and "vote of a majority of the
outstanding voting securities" shall have the meanings set forth in the Act and
the rules and regulations hereunder.
23. APPLICABLE LAW. To the extent that state law is not preempted by the
provisions of any law of the United States heretofore or hereafter enacted, as
the same may be amended from time to time, this Agreement shall be administered,
construed and enforced according to the laws of the State of Delaware.
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<PAGE>
CLEARBROOK INVESTMENT TRUST
By: __________________________
Title: President
Date: _____________, 1998
ACCEPTANCE
----------
The foregoing Agreement is hereby accepted.
CLEARBROOK INVESTMENTS, LLC
By: __________________________
Title: Officer
Date: _____________, 1998
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<PAGE>
SCHEDULE A
RECORDS TO BE MAINTAINED BY THE ADVISER
---------------------------------------
1. (Rule 31a-1(b)(5) and (6)) A record of each brokerage order, and all other
portfolio purchases or sales, given by the Adviser on behalf of the Fund
for, or in connection with, the purchase or sale of securities, whether
executed or unexecuted. Such records shall include:
A. The name of the broker;
B. The terms and conditions of the order and of any modification or
cancellation thereof;
C. The time of entry or cancellation;
D. The price at which executed;
E. The time of receipt of a report of execution; and
F. The name of the person who placed the order on behalf of the Trust.
2. (Rule 31a-1(b)(9)) A record for each fiscal quarter, completed within ten
(10) days after the end of the quarter, showing specifically the basis or
bases upon which the allocation of orders for the purchase and sale of
portfolio securities to named brokers or dealers was effected, and the
division of brokerage commissions or other compensation on such purchase
and sale orders. Such record:
A. Shall include the consideration given to:
(i) The sale of shares of the Fund by brokers or dealers.
(ii) The supplying of services or benefits by brokers or dealers to:
(a) The Trust;
(b) The Adviser; and,
(c) Any person affiliated with the foregoing persons.
(iii) Any other consideration other than the technical qualifications
of the brokers and dealers as such.
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<PAGE>
B. Shall show the nature of the services or benefits made available.
C. Shall describe in detail the application of any general or specific
formula or other determinant used in arriving at such allocation of
purchase and sale orders and such division of brokerage commissions or
other compensation.
D. The name of the person responsible for making the determination of
such allocation and such division of brokerage commissions or other
compensation.
3. (Rule 31a-1(b)(10)) A record in the form of an appropriate memorandum
identifying the person or persons, committees or groups authorizing the
purchase or sale of portfolio securities. Where an authorization is made by
a committee or group, a record shall be kept of the names of its members
who participate in the authorization. There shall be retained as part of
this record any memorandum, recommendation or instruction supporting or
authorizing the purchase or sale of portfolio securities and such other
information as is appropriate to support the authorization.*
4. (Rule 31a-1(f)) Such accounts, books and other documents as are required to
be maintained by registered investment advisers by rule adopted under
Section 204 of the Investment Advisers Act of 1940, to the extent such
records are necessary or appropriate to record the Adviser's transactions
with respect to the Fund.
- -----------------------
* Such information might include: the current Form 10-K, annual and quarterly
reports, press releases, reports by analysts and from brokerage firms (including
their recommendation; i.e., buy, sell, hold) or any internal reports or
portfolio adviser reviews.
- 16 -
UNDERWRITING AGREEMENT
----------------------
This Agreement made as of , 1998 by and between Clearbrook Investment Trust
(the "Trust"), a Delaware business trust, Clearbrook Investments, LLC (the
"Manager"), a Virginia limited liability company, and CW Fund Distributors,
Inc., a Delaware corporation (the "Underwriter").
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, the Manager is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and is employed by the Trust to
provide it with investment advisory and management services; and
WHEREAS, Underwriter is a broker-dealer registered with the Securities and
Exchange Commission and a member of the National Association of Securities
Dealers, Inc. (the "NASD") and is registered with the relevant securities
regulatory agencies in all fifty states, the District of Columbia and Puerto
Rico; and
WHEREAS, the Trust and Underwriter are desirous of entering into an
agreement providing for the distribution by Underwriter of shares of beneficial
interest (the "Shares") of each series of shares of the Trust (the "Series") to
the public in accordance with the applicable federal and state securities laws;
NOW, THEREFORE, in consideration of the promises and agreements of the
parties contained herein, the parties agree as follows:
<PAGE>
1. Appointment.
------------
The Trust hereby appoints, for the period of this Agreement,
Underwriter as its exclusive agent for the distribution of the Shares, and
Underwriter hereby accepts such appointment under the terms of this Agreement.
While this Agreement is in force, the Trust shall not sell any Shares except on
the terms set forth in this Agreement. Notwithstanding any other provision
hereof, the Trust may terminate, suspend or withdraw the offering of Shares
whenever, in its sole discretion, it deems such action to be desirable.
Underwriter will undertake and discharge its obligations hereunder as an
independent contractor and shall have no authority or power to obligate or bind
the Trust by its actions, conduct or contracts except as described in this
Agreement.
2. Sale And Repurchase of Shares.
------------------------------
(a) Underwriter will have the right, as agent for the Trust, to enter
into dealer agreements with responsible investment dealers, and to sell Shares
to such investment dealers against orders therefor at the public offering price
(as defined in subparagraph 2(d) hereof) stated in the Trust's effective
Registration Statement on Form N-1A under the Securities Act of 1933, as
amended, including the then current prospectus and statement of additional
information (the "Registration Statement"). Upon receipt of an order to purchase
Shares from a dealer with whom Underwriter has a dealer agreement, Underwriter
will promptly cause such order to be filled by the Trust.
- 2 -
<PAGE>
(b) Underwriter will also have the right, as agent for the Trust, to
sell such Shares to the public against orders therefor at the public offering
price.
(c) Underwriter will also have the right to take, as agent for the
Trust, all actions which, in Underwriter's judgment, are necessary to carry into
effect the distribution of the Shares.
(d) The public offering price for the Shares of each Series shall be
the respective net asset value of the Shares of that Series then in effect, plus
any applicable sales charge determined in the manner set forth in the
Registration Statement or as permitted by the Act and the rules and regulations
of the Securities and Exchange Commission promulgated thereunder. In no event
shall any applicable sales charge exceed the maximum sales charge permitted by
the Rules of the NASD. Any payments to dealers shall be governed by a separate
agreement between Underwriter and such dealer and the Registration Statement.
(e) The net asset value of the Shares of each Series shall be
determined in the manner provided in the Registration Statement, and when
determined shall be applicable to transactions as provided for in the
Registration Statement. The net asset value of the Shares of each Series shall
be calculated by the Trust or by another entity on behalf of the Trust.
Underwriter shall have no duty to inquire into or liability for the accuracy of
the net asset value per Share as calculated.
- 3 -
<PAGE>
(f) On every sale, the Trust shall receive the applicable net asset
value of the Shares promptly, but in no event later than the third business day
following the date on which Underwriter shall have received an order for the
purchase of the Shares.
(g) Upon receipt of purchase instructions, Underwriter will transmit
such instructions to the Trust or its transfer agent for registration of the
Shares purchased.
(h) Exchanges of shares between Series will be effected in the manner
and subject to the restrictions and charges described in the Registration
Statement. The handling of exchanges will be further subject to such other
procedures as may be mutually agreed upon from time to time.
(i) Nothing in this Agreement shall prevent Underwriter or any
affiliated person (as defined in the Act) of Underwriter from acting as
underwriter or distributor for any other person, firm or corporation (including
other investment companies) or in any way limit or restrict Underwriter or any
such affiliated person from buying, selling or trading any securities for its or
their own account or for the accounts of others for whom it or they may be
acting; provided, however, that Underwriter expressly represents that it will
undertake no activities which will adversely affect its obligations to the Trust
under this Agreement.
(j) Underwriter, as agent of and for the account of the Trust, may
repurchase the Shares at such prices and upon such
- 4 -
<PAGE>
terms and conditions as shall be specified in the Registration Statement.
3. Sale of Shares by the Trust.
----------------------------
The Trust reserves the right to issue any Shares at any time directly
to the holders of Shares ("Shareholders"), to sell Shares to its Shareholders or
to other persons approved by Underwriter at not less than net asset value and to
issue Shares in exchange for substantially all the assets of any corporation or
trust or for the shares of any corporation or trust.
4. Basis of Sale of Shares.
------------------------
Underwriter does not agree to sell any specific number of Shares.
Underwriter, as agent for the Trust, undertakes to sell Shares on a best efforts
basis only against orders therefor.
5. Rules of NASD, etc.
-------------------
(a) Underwriter will conform to the Rules of the NASD and the
securities laws of any jurisdiction in which it sells, directly or indirectly,
any Shares.
(b) Underwriter will require each dealer with whom Underwriter has a
dealer agreement to conform to the applicable provisions hereof and the
Registration Statement with respect to the public offering price of the Shares,
and neither Underwriter nor any such dealers shall withhold the placing of
purchase orders so as to make a profit thereby.
(c) Underwriter agrees to furnish to the Trust sufficient copies of
any agreements, plans or other materials it intends to use in connection with
any sales of Shares in adequate
- 5 -
<PAGE>
time for the Trust to file and clear them with the proper authorities before
they are put in use, and not to use them until so filed and cleared.
(d) Underwriter, at its own expense, will qualify as dealer or broker,
or otherwise, under all applicable State or federal laws required in order that
Shares may be sold in such States as may be mutually agreed upon by the parties.
(e) Underwriter shall not make, or permit any representative, broker
or dealer to make, in connection with any sale or solicitation of a sale of the
Shares, any representations concerning the Shares except those contained in the
then current prospectus and statement of additional information covering the
Shares and in printed information approved by the Trust as information
supplemental to such prospectus and statement of additional information. Copies
of the then effective prospectus and statement of additional information and any
such printed supplemental information will be supplied by the Trust to
Underwriter in reasonable quantities upon request.
(f) Underwriter shall file Trust advertisements, sales literature and
other marketing and sales related materials with the appropriate regulatory
agencies and shall obtain such approvals for their use as may be required by the
Securities and Exchange Commission, the NASD and/or state securities
administrators. Underwriter shall not disseminate to the public any such
materials without prior approval by the Trust.
- 6 -
<PAGE>
6. Records to be Supplied by Trust.
--------------------------------
The Trust shall furnish to Underwriter copies of all information,
financial statements and other papers which Underwriter may reasonably request
for use in connection with the distribution of the Shares, and this shall
include, but shall not be limited to, one certified copy, upon request by
Underwriter, of all financial statements prepared for the Trust by independent
public accountants.
7. Fees and Expenses.
------------------
For performing its services under this Agreement, Underwriter shall
receive from the Manager a fee of $5,000 per year. Fees shall be paid monthly in
arrears. The Manager shall promptly reimburse Underwriter for any expenses which
are to be paid by the Manager in accordance with the following paragraph.
In the performance of its obligations under this Agreement,
Underwriter will pay only the costs incurred in qualifying as a broker or dealer
under state and federal laws and in establishing and maintaining its
relationships with the dealers selling the Shares. All other costs in connection
with the offering of the Shares will be paid by the Manager in accordance with
agreements between them as permitted by applicable law, including the Act and
rules and regulations promulgated thereunder. These costs include, but are not
limited to, licensing fees, filing fees, travel and such other expenses as may
be incurred by Underwriter on behalf of the Trust and the Manager.
- 7 -
<PAGE>
8. Indemnification of Trust and Manager.
-------------------------------------
Underwriter shall indemnify and hold harmless the Trust, the Manager,
and each person who has been, is, or may hereafter be a trustee, director,
officer, employee, shareholder or control person of the Trust or the Manager,
from and against any and all claims, demands, losses, expenses, and liabilities
(whether with or without basis in fact or law) of any and every nature
(including reasonable attorneys' fees) which the Trust may sustain or incur or
which may be asserted against the Trust by any person arising out of or
attributed to any action taken or omitted to be taken by Underwriter as a result
of Underwriter's refusal or failure to comply with the terms of this Agreement,
or is alleged to arise out of or is based upon any untrue statement or alleged
untrue statement of a material fact, or the omission or alleged omission to
state a material fact necessary to make the statement not misleading that is not
based on written material furnished by the Trust or the Manger, or from bad
faith, gross negligence, or willful misconduct of Underwriter or any of its
employees and agents or other person for whose acts Underwriter is responsible.
The Underwriter will advance attorneys' fees or other expenses incurred by any
such person defending a proceeding, upon the undertaking by or on behalf of such
person to repay the advance if it is ultimately determined that such person is
not entitled to indemnification. The foregoing rights of indemnification shall
be in addition to any
- 8 -
<PAGE>
other rights to which the Trust, the Manager or each such person may be entitled
as a matter of law.
9. Indemnification of Underwriter.
-------------------------------
Underwriter shall exercise reasonable care and act in good faith in
the performance of its duties under this Agreement. The Trust agrees to
indemnify and hold harmless Underwriter and each person who has been, is, or may
hereafter be a director, officer, employee, shareholder or control person of
Underwriter against any loss, damage or expense (including the reasonable costs
of investigation) reasonably incurred by any of them in connection with the
matters to which this Agreement relates, except a loss resulting from any
refusal or failure to comply with the terms of this Agreement or by reason of
willful misfeasance, bad faith or gross negligence on the part of any of such
persons in the performance of Underwriter's duties or from the reckless
disregard by any of such persons of Underwriter's obligations and duties under
this Agreement. The Trust will advance attorneys' fees or other expenses
incurred by any such person in defending a proceeding, upon the undertaking by
or on behalf of such person to repay the advance if it is ultimately determined
that such person is not entitled to indemnification. Any person employed by
Underwriter who may also be or become an officer or employee of the Trust shall
be deemed, when acting within the scope of his employment by the Trust, to be
acting in such employment solely for the Trust and not as an employee or agent
of Underwriter. In the event of a mechanical breakdown or
- 9 -
<PAGE>
failure of communication or power supplies beyond its control, Underwriter shall
take all reasonable steps to minimize service interruptions for any period that
such interruption continues beyond Underwriter's control. Underwriter will make
very reasonable effort to restore any lost or damaged data and correct any
errors resulting from such a breakdown at the expense of Underwriter.
Underwriter agrees that it shall, at all times, have reasonable contingency
plans with appropriate parties, making reasonable provision for emergency use of
electrical data processing equipment to the extent appropriate equipment is
available. Representatives of the Trust and Manager shall be entitled to inspect
Underwriter's premises and operating capabilities at any time during regular
business hours of Underwriter, upon reasonable notice to Underwriter.
10. Termination and Amendment of this Agreement.
--------------------------------------------
This Agreement shall automatically terminate, without the payment of
any penalty, in the event of its assignment. This Agreement may be amended only
if such amendment is approved (i) by Underwriter, (ii) either by action of the
Board of Trustees of the Trust or at a meeting of the Shareholders of the Trust
by the affirmative vote of a majority of the outstanding Shares, and (iii) by a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of Underwriter by vote cast in person at a meeting called for the
purpose of voting on such approval.
- 10 -
<PAGE>
Either the Trust or Underwriter may at any time terminate this
Agreement on sixty (60) days' written notice delivered or mailed by registered
mail, postage prepaid, to the other party.
11. Effective Period of this Agreement.
-----------------------------------
This Agreement shall take effect upon its execution and shall remain
in full force and effect for a period of two (2) years from the date of its
execution (unless terminated automatically as set forth in Section 10), and from
year to year thereafter, subject to annual approval (i) by Underwriter, (ii) by
the Board of Trustees of the Trust or a vote of a majority of the outstanding
Shares, and (iii) by a majority of the Trustees of the Trust who are not
interested persons of the Trust or of Underwriter by vote cast in person at a
meeting called for the purpose of voting on such approval.
12. New Series.
-----------
The terms and provisions of this Agreement shall become automatically
applicable to any additional series of the Trust established during the initial
or renewal term of this Agreement.
13. Successor Investment Company.
-----------------------------
Unless this Agreement has been terminated in accordance with Paragraph
10, the terms and provisions of this Agreement shall become automatically
applicable to any investment company which is a successor to the Trust as a
result of reorganization, recapitalization or change of domicile.
- 11 -
<PAGE>
14. Limitation of Liability.
------------------------
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust, personally, but bind only the trust property
of the Trust. The execution and delivery of this Agreement have been authorized
by the Trustees of the Trust and signed by an officer of the Trust, acting as
such, and neither such authorization by such Trustees nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but shall
bind only the trust property of the Trust.
15. Confidentiality.
----------------
Underwriter agrees on behalf of itself and its employees and agents to
treat confidentially all information relating to the Trust or Manager's business
which is received by Underwriter during the course of rendering any service
hereunder. Underwriter agrees on behalf of itself and its employees and agents
to treat confidentially all records and other information relative to the
Manger, Trust and its shareholders and shall not disclose to any other party,
except after prior notification to and approval in writing by the Trust or
Manager, which approval shall not be unreasonably withheld and may not be
withheld where Underwriter may be exposed to civil or criminal contempt
proceedings for failure to comply after being requested to divulge such
information by duly constituted authorities.
- 12 -
<PAGE>
16. Severability.
-------------
In the event any provision of this Agreement is determined to be void
or unenforceable, such determination shall not affect the remainder of this
Agreement, which shall continue to be in force.
17. Questions of Interpretation.
----------------------------
(a) This Agreement shall be governed by the laws of the State of
Delaware.
(b) Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or provision
of the Act shall be resolved by reference to such term or provision of the Act
and to interpretation thereof, if any, by the United States courts or in the
absence of any controlling decision of any such court, by rules, regulations or
orders of the Securities and Exchange Commission issued pursuant to said Act. In
addition, where the effect of a requirement of the Act, reflected in any
provision of this Agreement is revised by rule, regulation or order of the
Securities and Exchange Commission, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
18. Notices.
--------
Any notices under this Agreement shall be in writing, addressed and
delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is
- 13 -
<PAGE>
agreed that the address of the Trust and the Manager for this purpose shall be
8000 Towers Crescent Drive, Suite 1350, Vienna, Virginia 22182, and that the
address of Underwriter for this purpose shall be 312 Walnut Street, Cincinnati,
Ohio 45202.
IN WITNESS WHEREOF, the Trust, the Manager and Underwriter have each
caused this Agreement to be signed in duplicate on their behalf, all as of the
day and year first above written.
CLEARBROOK INVESTMENT TRUST
By:________________________________
Its:President
CLEARBROOK INVESTMENTS, LLC
By:________________________________
Its:Officer
CW FUND DISTRIBUTORS, INC.
By:________________________________
Its:President
- 14 -
CUSTODY AGREEMENT
-----------------
This AGREEMENT, dated as of , 1998, by and between CLEARBROOK INVESTMENT
TRUST (the "Trust"), a business trust organized under the laws of the State of
Delaware, acting with respect to the CLEARBROOK TECHNOLOGY FUND (the "Fund"), a
series of the Trust and operated and administered by the Trust, and
_______________, a banking company organized under the laws of the State of Ohio
(the "Custodian").
W I T N E S S E T H:
--------------------
WHEREAS, the Trust desires that the Fund's Securities and cash be held and
administered by the Custodian pursuant to this Agreement; and
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Trust and the Custodian hereby agree as follows:
<PAGE>
ARTICLE I
---------
DEFINITIONS
-----------
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
1.1 "AUTHORIZED PERSON" means any Officer or other person duly authorized
by resolution of the Board of Trustees to give Oral Instructions and Written
Instructions on behalf of the Fund and named in Exhibit A hereto or in such
resolutions of the Board of Trustees, certified by an Officer, as may be
received by the Custodian from time to time.
1.2 "BOARD OF TRUSTEES" shall mean the Trustees from time to time serving
under the Trust's Declaration of Trust, as from time to time amended.
1.3 "BOOK-ENTRY SYSTEM" shall mean a federal book-entry system as provided
in Subpart O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of 31 CFR
Part 350, or in such book-entry regulations of federal agencies as are
substantially in the form of such Subpart O.
1.4 "BUSINESS DAY" shall mean any day recognized as a settlement day by The
New York Stock Exchange, Inc. and any other day for which the Trust computes the
net asset value of Shares of the Fund.
1.5 "NASD" shall mean The National Association of Securities Dealers, Inc.
- 2 -
<PAGE>
1.6 "OFFICER" shall mean the President, any Vice President, the Secretary,
any Assistant Secretary, the Treasurer, or any Assistant Treasurer of the Trust.
1.7 "ORAL INSTRUCTIONS" shall mean instructions orally transmitted to and
accepted by the Custodian because such instructions are: (i) reasonably believed
by the Custodian to have been given by an Authorized Person, (ii) recorded and
kept among the records of the Custodian made in the ordinary course of business
and (iii) orally confirmed by the Custodian. The Trust shall cause all Oral
Instructions to be confirmed by Written Instructions. If such Written
Instructions confirming Oral Instructions are not received by the Custodian
prior to a transaction, it shall in no way affect the validity of the
transaction or the authorization thereof by the Trust. If Oral Instructions vary
from the Written Instructions which purport to confirm them, the Custodian shall
notify the Trust of such variance but such Oral Instructions will govern unless
the Custodian has not yet acted.
1.8 "FUND CUSTODY ACCOUNT" shall mean any of the accounts in the name of
the Trust, which are provided for in Section 3.2 below.
1.9 "PROPER INSTRUCTIONS" shall mean Oral Instructions or Written
Instructions. Proper Instructions may be continuing Written Instructions when
deemed appropriate by both parties.
- 3 -
<PAGE>
1.10 "SECURITIES DEPOSITORY" shall mean The Participants Trust Company or
The Depository Trust Company and (provided that Custodian shall have received a
copy of a resolution of the Board of Trustees, certified by an Officer,
specifically approving the use of such clearing agency as a depository for the
Fund) any other clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities and Exchange Act of 1934 (the
"1934 Act"), which acts as a system for the central handling of Securities where
all Securities of any particular class or series of an issuer deposited within
the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of the Securities.
1.11 "SECURITIES" shall include, without limitation, common and preferred
stocks, bonds, call options, put options, debentures, notes, bank certificates
of deposit, bankers' acceptances, mortgage-backed securities, other money market
instruments or other obligations, and any certificates, receipts, warrants or
other instruments or documents representing rights to receive, purchase or
subscribe for the same, or evidencing or representing any other rights or
interests therein, or any similar property or assets that the Custodian has the
facilities to clear and to service.
1.12 "SHARES" shall mean the units of beneficial interest issued by the
Trust on account of the Fund.
- 4 -
<PAGE>
1.13 "WRITTEN INSTRUCTIONS" shall mean (i) written communications actually
received by the Custodian and signed by one or more Authorized Persons, or (ii)
communications by telex or any other such system from a person or persons
reasonably believed by the Custodian to be Authorized Persons, or (iii)
communications transmitted electronically through the Institutional Delivery
System (IDS), or any other similar electronic instruction system acceptable to
Custodian and approved by resolutions of the Board of Trustees, a copy of which,
certified by an Officer, shall have been delivered to the Custodian.
ARTICLE II
----------
APPOINTMENT OF CUSTODIAN
------------------------
2.1 APPOINTMENT. The Trust hereby constitutes and appoints the Custodian as
custodian of all Securities and cash owned by or in the possession of the Trust
at any time during the period of this Agreement, provided that such Securities
and cash at all times shall be and remain the property of the Trust.
2.2 ACCEPTANCE. The Custodian hereby accepts appointment as such custodian
and agrees to perform the duties thereof as hereinafter set forth.
- 5 -
<PAGE>
ARTICLE III
-----------
CUSTODY OF CASH AND SECURITIES
------------------------------
3.1 SEGREGATION. All Securities and non-cash property held by the Custodian
for the account of the Fund (other than Securities maintained in a Securities
Depository or Book-Entry System) shall be physically segregated from other
Securities and non-cash property in the possession of the Custodian (including
the Securities and non-cash property of any other fund) and shall be identified
as subject to this Agreement.
3.2 FUND CUSTODY ACCOUNTS. The Custodian shall open and maintain in its
trust department a custody account in the name of the Trust coupled with the
name of the Fund, subject only to draft or order of the Custodian, in which the
Custodian shall enter and carry all Securities, cash and other assets of the
Fund which are delivered to it.
3.3 APPOINTMENT OF AGENTS. (a) In its discretion, the Custodian may
appoint, and at any time remove, any domestic bank or trust company, which has
been approved by the Board of Trustees and is qualified to act as a custodian
under the 1940 Act, as sub-custodian to hold Securities and cash of the Fund and
to carry out such other provisions of this Agreement as it may determine, and
may also open and maintain one or more banking accounts with such a bank or
trust company (any such accounts to be in the name of the Custodian and subject
only to its draft or order), provided, however, that the appointment of any such
agent
- 6 -
<PAGE>
shall not relieve the Custodian of any of its obligations or liabilities under
this Agreement.
3.4 DELIVERY OF ASSETS TO CUSTODIAN. The Trust shall deliver, or cause to
be delivered, to the Custodian all of the Fund's Securities, cash and other
assets, including (a) all payments of income, payments or principal and capital
distributions received by the Fund with respect to such Securities, cash or
other assets owned by the Fund at any time during the period of this Agreement,
and (b) all cash received by the Fund for the issuance, at any time during such
period, of Shares. The Custodian shall not be responsible for such Securities,
cash or other assets until actually received by it.
3.5 SECURITIES DEPOSITORIES AND BOOK-ENTRY SYSTEMS. The Custodian may
deposit and/or maintain Securities of the Fund in a Securities Depository or in
a Book-Entry System, subject to the following provisions:
(a) Prior to a deposit of Securities of the Fund in any Securities
Depository or Book-Entry System, the Trust shall deliver to the
Custodian a resolution of the Board of Trustees, certified by an
Officer, authorizing and instructing the Custodian on an on-going
basis to deposit in such Securities Depository or Book-Entry System
all Securities eligible for deposit therein and to make use of such
Securities Depository or Book-Entry System to the extent possible and
practical in
- 7 -
<PAGE>
connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales of
Securities, loans of Securities, and deliveries and returns of
collateral consisting of Securities. So long as such Securities
Depository or Book-Entry System shall continue to be employed for the
deposit of Securities of the Fund, the Trust shall annually re-adopt
such resolution and deliver a copy thereof, certified by an Officer,
to the Custodian.
(b) Securities of the Fund kept in a Book-Entry System or Securities
Depository shall be kept in an account ("Depository Account") of the
Custodian in such Book-Entry System or Securities Depository which
includes only assets held by the Custodian as a fiduciary, custodian
or otherwise for customers.
(c) The records of the Custodian and the Custodian's account on the books
of the Book-Entry System and Securities Depository as the case may be,
with respect to Securities of the Fund maintained in a Book-Entry
System or Securities Depository shall, by book-entry or otherwise,
identify such Securities as belonging to the Fund.
(d) If Securities purchased by the Fund are to be held in a Book-Entry
System or Securities Depository, the Custodian shall pay for such
Securities upon (i)
- 8 -
<PAGE>
receipt of advice from the Book-Entry System or Securities Depository
that such Securities have been transferred to the Depository Account,
and (ii) the making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of the Fund. If
Securities sold by the Fund are held in a Book-Entry System or
Securities Depository, the Custodian shall transfer such Securities
upon (i) receipt of advice from the Book-Entry System or Securities
Depository that payment for such Securities has been transferred to
the Depository Account, and (ii) the making of an entry on the records
of the Custodian to reflect such transfer and payment for the account
of the Fund.
(e) Upon request, the Custodian shall provide the Trust with copies of any
report (obtained by the Custodian from a Book-Entry System or
Securities Depository in which Securities of the Fund are kept) on the
internal accounting controls and procedures for safeguarding
Securities deposited in such Book-Entry System or Securities
Depository.
(f) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Trust for any loss or damage to the
Fund resulting (i) from the use of a Book-Entry System or Securities
- 9 -
<PAGE>
Depository by reason of any negligence or willful misconduct on the
part of Custodian or any sub-custodian appointed pursuant to Section
3.3 above or any of its or their employees, or (ii) from failure of
Custodian or any such sub-custodian to enforce effectively such rights
as it may have against a Book-Entry System or Securities Depository.
At its election, the Trust shall be subrogated to the rights of the
Custodian with respect to any claim against a Book-Entry System or
Securities Depository or any other person from any loss or damage to
the Fund arising from the use of such Book-Entry System or Securities
Depository, if and to the extent that the Fund have not been made
whole for any such loss or damage.
3.6 DISBURSEMENT OF MONEYS FROM FUND CUSTODY ACCOUNTS. Upon receipt of
Proper Instructions, the Custodian shall disburse moneys from a Fund Custody
Account but only in the following cases:
(a) For the purchase of Securities for the Fund but only upon compliance
with Section 4.1 of this Agreement and only (i) in the case of
Securities (other than options on Securities, futures contracts and
options on futures contracts), against the delivery to the Custodian
(or any sub-custodian appointed pursuant to Section 3.3 above) of such
Securities registered as provided in
- 10 -
<PAGE>
Section 3.9 below or in proper form for transfer, or if the purchase
of such Securities is effected through a Book-Entry System or
Securities Depository, in accordance with the conditions set forth in
Section 3.5 above; (ii) in the case of options on Securities, against
delivery to the Custodian (or such sub-custodian) of such receipts as
are required by the customs prevailing among dealers in such options;
(iii) in the case of futures contracts and options on futures
contracts, against delivery to the Custodian (or such sub-custodian)
of evidence of title thereto in favor of the Fund or any nominee
referred to in Section 3.9 below; and (iv) in the case of repurchase
or reverse repurchase agreements entered into between the Trust and a
bank which is a member of the Federal Reserve System or between the
Trust and a primary dealer in U.S. Government securities, against
delivery of the purchased Securities either in certificate form or
through an entry crediting the Custodian's account at a Book-Entry
System or Securities Depository with such Securities;
(b) In connection with the conversion, exchange or surrender, as set forth
in Section 3.7(f) below, of Securities owned by the Fund;
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<PAGE>
(c) For the payment of any dividends or capital gain distributions
declared by the Fund;
(d) In payment of the redemption price of Shares as provided in Section
5.1 below;
(e) For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the account of
the Fund: interest; taxes; administration, investment management,
investment advisory, accounting, auditing, transfer agent, custodian,
trustee and legal fees; and other operating expenses of the Fund; in
all cases, whether or not such expenses are to be in whole or in part
capitalized or treated as deferred expenses;
(f) For transfer in accordance with the provisions of any agreement among
the Trust, the Custodian and a broker-dealer registered under the 1934
Act and a member of the NASD, relating to compliance with rules of The
Options Clearing Corporation and of any registered national securities
exchange (or of any similar organization or organizations) regarding
escrow or other arrangements in connection with transactions by the
Fund;
(g) For transfer in accordance with the provision of any agreement among
the Trust, the Custodian, and a futures commission merchant registered
under the Commodity
- 12 -
<PAGE>
Exchange Act, relating to compliance with the rules of the Commodity
Futures Trading Commission and/or any contract market (or any similar
organization or organizations) regarding account deposits in
connection with transactions by the Fund;
(h) For the funding of any uncertificated time deposit or other
interest-bearing account with any banking institution (including the
Custodian), which deposit or account has a term of one year or less;
and
(i) For any other proper purpose, but only upon receipt, in addition to
Proper Instructions, of a copy of a resolution of the Board of
Trustees, certified by an Officer, specifying the amount and purposes
of such payment, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom such payment is to
be made.
3.7 DELIVERY OF SECURITIES FROM FUND CUSTODY ACCOUNTS. Upon receipt of
Proper Instructions, the Custodian shall release and deliver Securities from a
Fund Custody Account but only in the following cases:
(a) Upon the sale of Securities for the account of the Fund but only
against receipt of payment therefor in cash, by certified or cashiers
check or bank credit;
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<PAGE>
(b) In the case of a sale effected through a Book-Entry System or
Securities Depository, in accordance with the provisions of Section
3.5 above;
(c) To an offeror's depository agent in connection with tender or other
similar offers for Securities of the Fund; provided that, in any such
case, the cash or other consideration is to be delivered to the
Custodian;
(d) To the issuer thereof or its agent (i) for transfer into the name of
the Fund, the Custodian or any sub- custodian appointed pursuant to
Section 3.3 above, or of any nominee or nominees of any of the
foregoing, or (ii) for exchange for a different number of certificates
or other evidence representing the same aggregate face amount or
number of units; provided that, in any such case, the new Securities
are to be delivered to the Custodian;
(e) To the broker selling Securities, for examination in accordance with
the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
issuer of such Securities, or pursuant to provisions for conversion
contained in such Securities, or pursuant to any deposit agreement,
including surrender or receipt of underlying Securities
- 14 -
<PAGE>
in connection with the issuance or cancellation of depository
receipts; provided that, in any such case, the new Securities and
cash, if any, are to be delivered to the Custodian;
(g) Upon receipt of payment therefor pursuant to any repurchase or reverse
repurchase agreement entered into by the Fund;
(h) In the case of warrants, rights or similar Securities, upon the
exercise thereof, provided that, in any such case, the new Securities
and cash, if any, are to be delivered to the Custodian;
(i) For delivery in connection with any loans of Securities of the Fund,
but only against receipt of such collateral as the Trust shall have
specified to the Custodian in Proper Instructions;
(j) For delivery as security in connection with any borrowings by the Fund
requiring a pledge of assets by the Fund, but only against receipt by
the Custodian of the amounts borrowed;
(k) Pursuant to any authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of the Trust or the Fund;
(l) For delivery in accordance with the provisions of any agreement among
the Trust, the Custodian and a broker-dealer registered under the 1934
Act and a member of
- 15 -
<PAGE>
the NASD, relating to compliance with the rules of The Options
Clearing Corporation and of any registered national securities
exchange (or of any similar organization or organizations) regarding
escrow or other arrangements in connection with transactions by the
Fund;
(m) For delivery in accordance with the provisions of any agreement among
the Trust, the Custodian, and a futures commission merchant registered
under the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any contract
market (or any similar organization or organizations) regarding
account deposits in connection with transactions by the Fund; or
(n) For any other proper corporate purposes, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution of the
Board of Trustees, certified by an Officer, specifying the Securities
to be delivered, setting forth the purpose for which such delivery is
to be made, declaring such purpose to be a proper corporate purpose,
and naming the person or persons to whom delivery of such Securities
shall be made.
3.8 ACTIONS NOT REQUIRING PROPER INSTRUCTIONS. Unless otherwise instructed
by the Trust, the Custodian shall with respect to all Securities held for the
Fund:
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<PAGE>
(a) Subject to Section 7.4 below, collect on a timely basis all income and
other payments to which the Fund is entitled either by law or pursuant
to custom in the securities business;
(b) Present for payment and, subject to Section 7.4 below, collect on a
timely basis the amount payable upon all Securities which may mature
or be called, redeemed, or retired, or otherwise become payable;
(c) Endorse for collection, in the name of the Fund, checks, drafts and
other negotiable instruments;
(d) Surrender interim receipts or Securities in temporary form for
Securities in definitive form;
(e) Execute, as custodian, any necessary declarations or certificates of
ownership under the federal income tax laws or the laws or regulations
of any other taxing authority now or hereafter in effect, and prepare
and submit reports to the Internal Revenue Service ("IRS") and to the
Trust at such time, in such manner and containing such information as
is prescribed by the IRS;
(f) Hold for the Fund, either directly or, with respect to Securities held
therein, through a Book-Entry System or Securities Depository, all
rights and similar securities issued with respect to Securities of the
Fund; and
- 17 -
<PAGE>
(g) In general, and except as otherwise directed in Proper Instructions,
attend to all non-discretionary details in connection with the sale,
exchange, substitution, purchase, transfer and other dealings with
Securities and assets of the Fund.
3.9 REGISTRATION AND TRANSFER OF SECURITIES. All Securities held for the
Fund that are issued or issuable only in bearer form shall be held by the
Custodian in that form, provided that any such Securities shall be held in a
Book-Entry System for the account of the Fund if eligible therefor. All other
Securities held for the Fund may be registered in the name of the Fund, the
Custodian, or any sub-custodian appointed pursuant to Section 3.3 above, or in
the name of any nominee of any of them, or in the name of a Book-Entry System,
Securities Depository or any nominee of either thereof; provided, however, that
such Securities are held specifically for the account of the Fund. The Trust
shall furnish to the Custodian appropriate instruments to enable the Custodian
to hold or deliver in proper form for transfer, or to register in the name of
any of the nominees hereinabove referred to or in the name of a Book-Entry
System or Securities Depository, any Securities registered in the name of the
Fund.
3.10 RECORDS. (a) The Custodian shall maintain complete and accurate
records with respect to Securities, cash or other property held for the Fund,
including (i) journals or other
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<PAGE>
records of original entry containing an itemized daily record in detail of all
receipts and deliveries of Securities and all receipts and disbursements of
cash; (ii) ledgers (or other records) reflecting (A) Securities in transfer, (B)
Securities in physical possession, (C) monies and Securities borrowed and monies
and Securities loaned (together with a record of the collateral therefor and
substitutions of such collateral), (D) dividends and interest received, and (E)
dividends receivable and interest accrued; and (iii) canceled checks and bank
records related thereto. The Custodian shall keep such other books and records
of the Fund as the Trust shall reasonably request, or as may be required by the
1940 Act, including, but not limited to, Section 31 of the 1940 Act and Rule
31a-1 and 31a-2 promulgated thereunder.
(b) All such books and records maintained by the Custodian shall (i) be
maintained in a form acceptable to the Trust and in compliance with rules and
regulations of the Securities and Exchange Commission, (ii) be the property of
the Trust and at all times during the regular business hours of the Custodian be
made available upon request for inspection by duly authorized officers,
employees or agents of the Trust and employees or agents of the Securities and
Exchange Commission, and (iii) if required to be maintained by Rule 31a-1 under
the 1940 Act, be preserved for the periods prescribed in Rule 31a-2 under the
1940 Act.
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<PAGE>
3.11 FUND REPORTS BY CUSTODIAN. The Custodian shall furnish the Trust with
a daily activity statement and a summary of all transfers to or from each Fund
Custody Account on the day following such transfers. At least monthly and from
time to time, the Custodian shall furnish the Trust with a detailed statement of
the Securities and moneys held for the Fund under this Agreement.
3.12 OTHER REPORTS BY CUSTODIAN. The Custodian shall provide the Trust with
such reports, as the Trust may reasonably request from time to time, on the
internal accounting controls and procedures for safeguarding Securities, which
are employed by the Custodian or any sub-custodian appointed pursuant to Section
3.3 above.
3.13 PROXIES AND OTHER MATERIALS. The Custodian shall cause all proxies, if
any, relating to Securities which are not registered in the name of the Fund, to
be promptly executed by the registered holder of such Securities, without
indication of the manner in which such proxies are to be voted, and shall
include all other proxy materials, if any, and shall promptly deliver to the
Trust such proxies, all proxy soliciting materials, which should include all
other proxy materials, if any, and all notices relating to such Securities.
3.14 INFORMATION ON CORPORATE ACTIONS. The Custodian will promptly notify
the Trust of corporate actions, limited to those Securities registered in
nominee name and to those Securities
- 20 -
<PAGE>
held at a Securities Depository or sub-custodian acting as agent for the
Custodian. Custodian will be responsible only if the notice of such corporate
actions is published by the Financial Daily Card Service, J. J. Kenny Called
Bond Service or Depository Trust Company, or received by first class mail from
the agent. For market announcements not yet received and distributed by
Custodian's services, Trust will inform its custody representative with
appropriate instructions. Custodian will, upon receipt of Trust's response
within the required deadline, affect such action for receipt or payment for the
Trust. For those responses received after the deadline, Custodian will affect
such action for receipt or payment, subject to the limitations of the agent(s)
affecting such actions. Custodian will promptly notify Trust for put options
only if the notice is received by first class mail from the agent. The Trust
will provide or cause to be provided to the Custodian all relevant information
contained in the prospectus for any Security which has unique put/option
provisions and provide Custodian with specific tender instructions at least ten
Business Days prior to the beginning date of the tender period.
ARTICLE IV
----------
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
--------------------------------------------
4.1 PURCHASE OF SECURITIES. Promptly upon each purchase of Securities for
the Fund, Written Instructions shall be delivered to the Custodian, specifying
(a) the Fund for which the purchase was made, (b) the name of the issuer or
writer of such
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<PAGE>
Securities, and the title or other description thereof, (c) the number of
shares, principal amount (and accrued interest, if any) or other units
purchased, (d) the date of purchase and settlement, (e) the purchase price per
unit, (f) the total amount payable upon such purchase, and (g) the name of the
person to whom such amount is payable. The Custodian shall upon receipt of such
Securities purchased by the Fund pay out of the moneys held for the account of
the Fund the total amount specified in the Written Instructions to the person
named therein. The Custodian shall not be under any obligation to pay out moneys
to cover the cost of a purchase of Securities for the Fund, if in the Fund
Custody Account there is insufficient cash available to the Fund for which such
purchase was made.
4.2 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED. In
any and every case where payment for the purchase of Securities for the Fund is
made by the Custodian in advance of receipt of the Securities purchased but in
the absence of specified Written or Oral Instructions to so pay in advance, the
Custodian shall be liable to the Fund for such Securities to the same extent as
if the Securities had been received by the Custodian.
4.3 SALE OF SECURITIES. Promptly upon each sale of Securities by the Fund,
Written Instructions shall be delivered to the Custodian, specifying (a) the
Fund for which the sale was made, (b) the name of the issuer or writer of such
Securities,
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<PAGE>
and the title or other description thereof, (c) the number of shares, principal
amount (and accrued interest, if any), or other units sold, (d) the date of sale
and settlement, (e) the sale price per unit, (f) the total amount payable upon
such sale, and (g) the person to whom such Securities are to be delivered. Upon
receipt of the total amount payable to the Fund as specified in such Written
Instructions, the Custodian shall deliver such Securities to the person
specified in such Written Instructions. Subject to the foregoing, the Custodian
may accept payment in such form as shall be satisfactory to it, and may deliver
Securities and arrange for payment in accordance with the customs prevailing
among dealers in Securities.
4.4 DELIVERY OF SECURITIES SOLD. Notwithstanding Section 4.3 above or any
other provision of this Agreement, the Custodian, when instructed to deliver
Securities against payment, shall be entitled, if in accordance with generally
accepted market practice, to deliver such Securities prior to actual receipt of
final payment therefor. In any such case, the Fund shall bear the risk that
final payment for such Securities may not be made or that such Securities may be
returned or otherwise held or disposed of by or through the person to whom they
were delivered, and the Custodian shall have no liability for any for the
foregoing.
4.5 PAYMENT FOR SECURITIES SOLD, ETC. In its sole discretion and from time
to time, the Custodian may credit the Fund Custody Account, prior to actual
receipt of final payment thereof, with (i) proceeds from the sale of Securities
which it
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<PAGE>
has been instructed to deliver against payment, (ii) proceeds from the
redemption of Securities or other assets of the Fund, and (iii) income from
cash, Securities or other assets of the Fund. Any such credit shall be
conditional upon actual receipt by Custodian of final payment and may be
reversed if final payment is not actually received in full. The Custodian may,
in its sole discretion and from time to time, permit the Fund to use funds so
credited to its Fund Custody Account in anticipation of actual receipt of final
payment. Any such funds shall be repayable immediately upon demand made by the
Custodian at any time prior to the actual receipt of all final payments in
anticipation of which funds were credited to the Fund Custody Account.
4.6 ADVANCES BY CUSTODIAN FOR SETTLEMENT. The Custodian may, in its sole
discretion and from time to time, advance funds to the Trust to facilitate the
settlement of the Fund's transactions in its Fund Custody Account. Any such
advance shall be repayable immediately upon demand made by Custodian.
ARTICLE V
---------
REDEMPTION OF FUND SHARES
-------------------------
5.1 TRANSFER OF FUNDS. From such funds as may be available for the purpose
in the Fund Custody Account, and upon receipt of Proper Instructions specifying
that the funds are required to redeem Shares of the Fund, the Custodian shall
wire each amount
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<PAGE>
specified in such Proper Instructions to or through such bank as the Trust may
designate with respect to such amount in such Proper Instructions.
5.2 NO DUTY REGARDING PAYING BANKS. The Custodian shall not be under any
obligation to effect payment or distribution by any bank designated in Proper
Instructions given pursuant to Section 5.1 above of any amount paid by the
Custodian to such bank in accordance with such Proper Instructions.
ARTICLE VI
----------
SEGREGATED ACCOUNTS
-------------------
Upon receipt of Proper Instructions, the Custodian shall establish and
maintain a segregated account or accounts for and on behalf of the Fund, into
which account or accounts may be transferred cash and/or Securities, including
Securities maintained in a Depository Account,
(a) in accordance with the provisions of any agreement among the Trust,
the Custodian and a broker-dealer registered under the 1934 Act and a
member of the NASD (or any futures commission merchant registered
under the Commodity Exchange Act), relating to compliance with the
rules of The Options Clearing Corporation and of any registered
national securities exchange (or the Commodity Futures Trading
Commission or any registered contract market), or of any similar
organization or
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<PAGE>
organizations, regarding escrow or other arrangements in connection
with transactions by the Fund,
(b) for purposes of segregating cash or Securities in connection with
securities options purchased or written by the Fund or in connection
with financial futures contracts (or options thereon) purchased or
sold by the Fund,
(c) which constitute collateral for loans of Securities made by the Fund,
(d) for purposes of compliance by the Fund with requirements under the
1940 Act for the maintenance of segregated accounts by registered
investment companies in connection with reverse repurchase agreements
and when-issued, delayed delivery and firm commitment transactions,
and
(e) for other proper corporate purposes, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of
the Board of Trustees, certified by an Officer, setting forth the
purpose or purposes of such segregated account and declaring such
purposes to be proper corporate purposes.
Each segregated account established under this Article VI shall be
established and maintained for the Fund only.
- 26 -
<PAGE>
ARTICLE VII
-----------
CONCERNING THE CUSTODIAN
------------------------
7.1 STANDARD OF CARE. The Custodian shall be held to the exercise of
reasonable care in carrying out its obligations under this Agreement, and shall
be without liability to the Trust or the Fund for any loss, damage, cost,
expense (including attorneys' fees and disbursements), liability or claim unless
such loss, damage, cost, expense, liability or claim arises from negligence, bad
faith or willful misconduct on its part or on the part of any sub-custodian
appointed pursuant to Section 3.3 above. The Custodian shall be entitled to rely
on and may act upon advice of counsel on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to such advice.
The Custodian shall promptly notify the Trust of any action taken or omitted by
the Custodian pursuant to advice of counsel. The Custodian shall not be under
any obligation at any time to ascertain whether the Trust or the Fund is in
compliance with the 1940 Act, the regulations thereunder, the provisions of the
Trust's charter documents or by-laws, or its investment objectives and policies
as then in effect.
7.2 ACTUAL COLLECTION REQUIRED. The Custodian shall not be liable for, or
considered to be the custodian of, any cash belonging to the Fund or any money
represented by a check, draft or other instrument for the payment of money,
until the Custodian
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<PAGE>
or its agents actually receive such cash or collect on such instrument.
7.3 NO RESPONSIBILITY FOR TITLE, ETC. So long as and to the extent that it
is in the exercise of reasonable care, the Custodian shall not be responsible
for the title, validity or genuineness of any property or evidence of title
thereto received or delivered by it pursuant to this Agreement.
7.4 LIMITATION ON DUTY TO COLLECT. Custodian shall not be required to
enforce collection, by legal means or otherwise, of any money or property due
and payable with respect to Securities held for the Fund if such Securities are
in default or payment is not made after due demand or presentation.
7.5 RELIANCE UPON DOCUMENTS AND INSTRUCTIONS. The Custodian shall be
entitled to rely upon any certificate, notice or other instrument in writing
received by it and reasonably believed by it to be genuine. The Custodian shall
be entitled to rely upon any Oral Instructions and/or any Written Instructions
actually received by it pursuant to this Agreement.
7.6 EXPRESS DUTIES ONLY. The Custodian shall have no duties or obligations
whatsoever except such duties and obligations as are specifically set forth in
this Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
7.7 COOPERATION. The Custodian shall cooperate with and supply necessary
information to the entity or entities appointed
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<PAGE>
by the Trust to keep the books of account of the Fund and/or compute the value
of the assets of the Fund. The Custodian shall take all such reasonable actions
as the Trust may from time to time request to enable the Trust to obtain, from
year to year, favorable opinions from the Trust's independent accountants with
respect to the Custodian's activities hereunder in connection with (a) the
preparation of the Trust's reports on Form N-1A and Form N-SAR and any other
reports required by the Securities and Exchange Commission, and (b) the
fulfillment by the Trust of any other requirements of the Securities and
Exchange Commission.
7.8 MECHANICAL ISSUES. In the event of a mechanical breakdown or failure of
communication or power supplies beyond its control, Custodian shall take all
reasonable steps to minimize service interruptions for any period that such
interruption continues beyond Custodian's control. Custodian will make every
reasonable effort to restore any lost or damaged data and correct any errors
resulting from such a breakdown at the expense of Custodian. Custodian agrees
that it shall, at all times, have reasonable contingency plans with appropriate
parties, making reasonable provision for emergency use of electrical data
processing equipment to the extent appropriate equipment is available.
Representatives of the Trust shall be entitled to inspect Custodian's premises
and operating capabilities at any time during regular business hours of
Custodian, upon reasonable notice to Custodian.
- 29 -
<PAGE>
ARTICLE VIII
------------
INDEMNIFICATION
---------------
8.1 INDEMNIFICATION OF CUSTODIAN. The Trust shall indemnify and hold
harmless the Custodian and any sub-custodian appointed pursuant to Section 3.3
above, and any nominee of the Custodian or of such sub-custodian, from and
against any loss, damage, cost, expense (including attorneys' fees and
disbursements), liability (including, without limitation, liability arising
under the Securities Act of 1933, the 1934 Act, the 1940 Act, and any state or
foreign securities and/or banking laws) or claim arising directly or indirectly
(a) from the fact that Securities are registered in the name of any such
nominee, or (b) from any action or inaction by the Custodian or such
sub-custodian (i) at the request or direction of or in reliance on the advice of
the Trust, or (ii) upon Proper Instructions, or (c) generally, from the
performance of its obligations under this Agreement or any sub-custody agreement
with a sub-custodian appointed pursuant to Section 3.3 above, provided that
neither the Custodian nor any such sub-custodian shall be indemnified and held
harmless from and against any such loss, damage, cost, expense, liability or
claim arising from the Custodian's or such sub-custodian's negligence, bad faith
or willful misconduct.
8.2 INDEMNITY TO BE PROVIDED. If the Trust requests the Custodian to take
any action with respect to Securities, which
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<PAGE>
may, in the opinion of the Custodian, result in the Custodian or its nominee
becoming liable for the payment of money or incurring liability of some other
form, the Custodian shall not be required to take such action until the Trust
shall have provided indemnity therefor to the Custodian in an amount and form
satisfactory to the Custodian.
8.3 INDEMNITY OF TRUST. Custodian shall indemnify and hold the Trust
harmless from and against any and all claims, demands, losses, expenses and
liabilities (whether with or without basis in fact or law) of any and every
nature (including reasonable attorneys' fees) which the Trust may sustain or
incur or which may be asserted against the Trust by any person arising out of or
attributed to any action taken or omitted to be taken by Custodian or its agents
or any of their employees as a result of Custodian's or any such agent's refusal
or failure to comply with the terms of this Agreement, or as a result of the bad
faith, negligence, or willful misconduct of Custodian or its agents or any of
their employees.
ARTICLE IX
----------
FORCE MAJEURE
-------------
Neither the Custodian nor the Trust shall be liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control,
including, without
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<PAGE>
limitation, acts of God; earthquakes; fires; floods; wars; civil or military
disturbances; sabotage; strikes; epidemics; riots; power failures; computer
failure and any such circumstances beyond its reasonable control as may cause
interruption, loss or malfunction of utility, transportation, computer (hardware
or software) or telephone communication service; accidents; labor disputes; acts
of civil or military authority; governmental actions; or inability to obtain
labor, material, equipment or transportation; provided, however, that the
Custodian in the event of a failure or delay (i) shall not discriminate against
the Fund in favor of any other customer of the Custodian in making computer time
and personnel available to input or process the transactions contemplated by
this Agreement and (ii) shall use its best efforts to ameliorate the effects of
any such failure or delay.
ARTICLE X
---------
EFFECTIVE PERIOD; TERMINATION
-----------------------------
10.1 EFFECTIVE PERIOD. This Agreement shall become effective as of the date
first set forth above and shall continue in full force and effect until
terminated as hereinafter provided.
10.2 TERMINATION. Either party hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall be not less
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<PAGE>
than sixty (60) days after the date of the giving of such notice. If a successor
custodian shall have been appointed by the Board of Trustees, the Custodian
shall, upon receipt of a notice of acceptance by the successor custodian, on
such specified date of termination (a) deliver directly to the successor
custodian all Securities (other than Securities held in a Book-Entry System or
Securities Depository) and cash then owned by the Fund and held by the Custodian
as custodian, and (b) transfer any Securities held in a Book-Entry System or
Securities Depository to an account of or for the benefit of the Fund at the
successor custodian, provided that the Trust shall have paid to the Custodian
all fees, expenses and other amounts to the payment or reimbursement of which it
shall then be entitled. Upon such delivery and transfer, the Custodian shall be
relieved of all obligations under this Agreement. The Trust may at any time
immediately terminate this Agreement in the event of the appointment of a
conservator or receiver for the Custodian by regulatory authorities in the State
of Ohio or upon the happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction.
10.3 FAILURE TO APPOINT SUCCESSOR CUSTODIAN. If a successor custodian is
not designated by the Trust on or before the date of termination specified
pursuant to Section 10.1 above, then the Custodian shall have the right to
deliver to a bank or trust company of its own selection, which is (a) a "Bank"
as
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<PAGE>
defined in the 1940 Act, (b) has aggregate capital, surplus and undivided
profits as shown on its then most recent published report of not less than $25
million, and (c) is doing business in New York, New York, all Securities, cash
and other property held by Custodian under this Agreement and to transfer to an
account of or for the Fund at such bank or trust company all Securities of the
Fund held in a Book-Entry System or Securities Depository. Upon such delivery
and transfer, such bank or trust company shall be the successor custodian under
this Agreement and the Custodian shall be relieved of all obligations under this
Agreement.
ARTICLE XI
----------
COMPENSATION OF CUSTODIAN
-------------------------
The Custodian shall be entitled to compensation as agreed upon from time to
time by the Trust and the Custodian. The fees and other charges in effect on the
date hereof and applicable to the Fund are set forth in Exhibit B attached
hereto.
ARTICLE XII
-----------
LIMITATION OF LIABILITY
-----------------------
It is expressly agreed that the obligations of the Trust hereunder shall
not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust personally, but shall bind only the trust
property of the Trust as provided in the Trust's Declaration of Trust, as from
time to time amended. The execution and delivery of this Agreement have been
authorized by the Trustees, and this
- 34 -
<PAGE>
Agreement has been signed and delivered by an authorized officer of the Trust,
acting as such, and neither such authorization by the Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, but
shall bind only the trust property of the Trust as provided in the
above-mentioned Declaration of Trust.
ARTICLE XIII
------------
NOTICES
-------
Unless otherwise specified herein, all demands, notices, instructions, and
other communications to be given hereunder shall be in writing and shall be sent
or delivered to the recipient at the address set forth after its name
hereinbelow:
To the Trust:
-------------
Clearbrook Investment Trust
8000 Towers Crescent Drive, Suite 1350
Vienna, Virginia 22182
Telephone: (703) 506-9400
Facsimile: (703) 573-8767
To Custodian:
-------------
---------------------------
Attention:
Telephone: (513) ___-____
Facsimile: (513) ___-____
or at such other address as either party shall have provided to the other by
notice given in accordance with this Article XIII.
- 35 -
<PAGE>
Writing shall include transmissions by or through teletype, facsimile, central
processing unit connection, on-line terminal and magnetic tape.
ARTICLE XIV
-----------
MISCELLANEOUS
-------------
14.1 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
14.2 REFERENCES TO CUSTODIAN. The Trust shall not circulate any printed
matter which contains any reference to Custodian without the prior written
approval of Custodian, excepting printed matter contained in the prospectus or
statement of additional information for the Fund and such other printed matter
as merely identifies Custodian as custodian for the Fund. The Trust shall submit
printed matter requiring approval to Custodian in draft form, allowing
sufficient time for review by Custodian and its counsel prior to any deadline
for printing.
14.3 CONFIDENTIALITY. Custodian agrees on behalf of itself and its
employees and agents to treat confidentially all information relating to the
Trust's business which is received by Custodian during the course of rendering
any service hereunder. Custodian agrees on behalf of itself and its employees
and agents to treat confidentially all records and other information relative to
the Trust and its shareholders and shall not disclose
- 36 -
<PAGE>
to any other party, except after prior notification to and approval in writing
by the Trust, which approval shall not be unreasonably withheld and may not be
withheld where Custodian may be exposed to civil or criminal contempt
proceedings for failure to comply after being requested to divulge such
information by duly constituted authorities.
14.4 NO WAIVER. No failure by either party hereto to exercise, and no delay
by such party in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by either party hereto of any right hereunder shall not
preclude the exercise of any other right, and the remedies provided herein are
cumulative and not exclusive of any remedies provided at law or in equity.
14.5 AMENDMENTS. This Agreement cannot be changed orally and no amendment
to this Agreement shall be effective unless evidenced by an instrument in
writing executed by the parties hereto.
14.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the parties hereto on separate counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and the same instrument.
14.7 SEVERABILITY. If any provision of this Agreement shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions shall not be affected or
impaired thereby.
- 37 -
<PAGE>
14.8 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that this Agreement shall not be assignable by
either party hereto without the written consent of the other party hereto.
14.9 HEADINGS. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed and delivered in its name and on its behalf by its representatives
thereunto duly authorized, all as of the day and year first above written.
ATTEST: CLEARBROOK INVESTMENT TRUST
______________________________ By:_____________________________
Its: President
ATTEST:
______________________________ By:____________________________
Its:
- 38 -
<PAGE>
EXHIBIT A
TO THE CUSTODY AGREEMENT BETWEEN
CLEARBROOK INVESTMENT TRUST AND THE _______________________
AUTHORIZED PERSONS
Set forth below are the names and specimen signatures of the persons
authorized by the Trust to administer the Fund Custody Account.
NAME SIGNATURE
David J. Ortiz _______________________________
Robert G. Dorsey _______________________________
John F. Splain _______________________________
M. Kathleen Leugers _______________________________
Mark J. Seger _______________________________
Christina H. Kelso _______________________________
Gary H. Goldschmidt _______________________________
Tina D. Hosking _______________________________
Theresa M. Samocki _______________________________
- 39 -
ADMINISTRATION AGREEMENT
------------------------
AGREEMENT dated as of , 1998 between Clearbrook Investment Trust, a
Delaware business trust (the "Trust"), and Countrywide Fund Services, Inc., an
Ohio corporation ("Countrywide").
WHEREAS, the Trust is an investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust wishes to employ the services of Countrywide to serve as
its administrative agent; and
WHEREAS, Countrywide wishes to provide such services under the conditions
set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Trust and Countrywide agree as follows:
1. APPOINTMENT.
------------
The Trust hereby appoints and employs Countrywide as agent to perform
those services described in this Agreement for the Trust. Countrywide shall act
under such appointment and perform the obligations thereof upon the terms and
conditions hereinafter set forth.
2. DOCUMENTATION.
--------------
The Trust will furnish from time to time the following documents:
A. Each resolution of the Board of Trustees of the Trust authorizing the
original issue of its shares;
B. Each Registration Statement filed with the Securities and Exchange
Commission (the "SEC") and amendments thereof;
C. A certified copy of each amendment to the Declaration of Trust and the
Bylaws of the Trust;
D. Certified copies of each resolution of the Board of Trustees
authorizing officers to give instructions to Countrywide;
E. Specimens of all new forms of share certificates accompanied by Board
of Trustees' resolutions approving such forms;
<PAGE>
F. Such other certificates, documents or opinions which Countrywide and
the Trust may jointly deem necessary or appropriate in the proper
performance of its duties;
G. Copies of all Underwriting and Dealer Agreements in effect;
H. Copies of all Investment Advisory Agreements in effect; and
I. Copies of all documents relating to special investment or withdrawal
plans which are offered or may be offered in the future by the Trust
and for which Countrywide is to act as plan agent.
3. TRUST ADMINISTRATION.
---------------------
Countrywide shall:
Maintain Records
o Maintain all books and records of the Trust as are required
by applicable federal or state law;
Coordinate Operational Activities
o Coordinate with and monitor services provided by the
independent public accountants, outside attorneys and other
third party providers;
o Coordinate with the Trust's Custodian and monitor the
custodial services provided to the Trust;
o Schedule the Board of Trustees' Meetings and prepare the
agenda and necessary materials;
Perform Compliance and Reporting
o Prepare and file post-effective amendments to the Trust's
registration statement and other documents with the SEC and
other federal and state regulatory authorities as may be
required by applicable law;
o Prepare, file and distribute proxy materials and periodic
reports to shareholders of the Trust as required by
applicable law;
- 2 -
<PAGE>
o Take such other administrative action with respect to the
Trust as may be required by applicable law, including the
rules and regulations of the Securities and Exchange
Commission, state securities commissions and other
regulatory authorities;
o Establish and maintain procedures and perform activities to
ensure compliance with applicable federal, state and IRS
rules and regulations;
o Prepare and file any and all new, and maintain all existing
state "blue sky" compliance;
Perform and Coordinate Audits
o Perform internal audits of the Trust's books and records;
o Coordinate, organize and prepare the Trust's responses to
SEC audits;
o Coordinate and support the external audits performed by the
Trust's independent public accountants;
o Provide office facilities and appropriate administrative
services to the SEC, independent public accountants, and if
necessary other groups to perform audit activities;
Support Other Activities
o Provide the Trust with trained personnel to perform
administrative and clerical functions and with necessary
office space, telephones and other communications
facilities;
o Supervise and coordinate the typesetting and printing of the
Trust's retirement plan documents;
o Coordinate and prepare industry and rating agency
questionnaires to include performance, distribution, and
corporate developments.
In addition, Countrywide shall provide personnel to serve as officers of
the Trust if so elected by the Board of Trustees. The Trust shall reimburse
Countrywide for the reasonable out-of-pocket expenses incurred by Countrywide
personnel in attending Board of Trustees' meetings and shareholders' meetings of
the Trust.
- 3 -
<PAGE>
4. RECORDKEEPING AND OTHER INFORMATION.
------------------------------------
Countrywide shall create and maintain all records required by
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act and the rules thereunder, as the same
may be amended from time to time, pertaining to the various functions performed
by it and not otherwise created and maintained by another party pursuant to
contract with the Trust. All such records shall be the property of the Trust at
all times and shall be available for inspection and use by the Trust. Where
applicable, such records shall be maintained by Countrywide for the periods and
in the places required by Rule 31a-2 under the 1940 Act. Countrywide shall make
available during regular business hours all records and other data created and
maintained pursuant to this Agreement for reasonable audit and inspection by the
Trust, any person retained by the Trust, or any regulatory agency having
authority over the Trust.
5. FURTHER ACTIONS.
----------------
Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof.
6. COMPENSATION.
-------------
For the performance of Countrywide's obligations under this Agreement,
each series of the Trust shall pay Countrywide, on the first business day
following the end of each month, a monthly fee at the annual rate of .15% of
such series' average daily net assets up to $25 million; .125% of such assets
from $25 to $50 million; and .10% of such assets in excess of $50 million;
provided, however, that the minimum fee shall be $1,500 per month for each
series.
7. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
---------------------------------------------------
The parties hereto acknowledge and agree that nothing contained herein
shall be construed to require Countrywide to perform any services for the Trust
which services could cause Countrywide to be deemed an "investment adviser" of
the Trust within the meaning of Section 2(a)(20) of the 1940 Act or to supersede
or contravene the Trust's prospectus or statement of additional information or
any provisions of the 1940 Act and the rules thereunder. Except as otherwise
provided in this Agreement and except for the accuracy of information furnished
to it by Countrywide, the Trust assumes full responsibility for complying with
all applicable requirements of the 1940 Act, the Securities Act of 1933, as
amended, and any other laws, rules and regulations of governmental authorities
having jurisdiction.
- 4 -
<PAGE>
8. CONFIDENTIALITY
---------------
Countrywide agrees on behalf of itself and its employees and agents to
treat confidentially all information relating to the Trust's business which is
received by Countrywide during the course of rendering any service hereunder.
Countrywide agrees on behalf of itself and its employees and agents to treat
confidentially all records and other information relative to the Trust and its
shareholders and shall not disclose to any other party, except after prior
notification to and approval in writing by the Trust, which approval shall not
be unreasonably withheld and may not be withheld where Countrywide may be
exposed to civil or criminal contempt proceedings for failure to comply after
being requested to divulge such information by duly constituted authorities.
9. REFERENCES TO COUNTRYWIDE.
--------------------------
The Trust shall not circulate any printed matter which contains any
reference to Countrywide without the prior written approval of Countrywide,
excepting solely such printed matter as merely identifies Countrywide as
Administrative Services Agent, Transfer, Shareholder Servicing and Dividend
Disbursing Agent and Accounting Services Agent. The Trust will submit printed
matter requiring approval to Countrywide in draft form, allowing sufficient time
for review by Countrywide and its counsel prior to any deadline for printing.
10. PERFORMANCE OF SERVICE: LIMITED LIABILITY AND INDEMNIFICATION.
--------------------------------------------------------------
A. Countrywide shall exercise reasonable care and act in good faith in
the performance of its duties under this Agreement. Countrywide may rely on
information, regarding the Trust, reasonably believed by it to be accurate and
reliable. Except as may otherwise be required by the 1940 Act and the rules
thereunder, neither Countrywide nor its shareholders, officers, directors,
employees, agents, control persons or the affiliates of any thereof shall be
subject to any liability for, or any damages, expenses or losses incurred by the
Trust in connection with, any error of judgment, mistake of law, any act or
omission connected with or arising out of any services rendered under or
payments made pursuant to this Agreement or any other matter to which this
Agreement relates, except for any refusal or failure to comply with the terms of
this Agreement or by reason of willful misfeasance, bad faith or gross
negligence on the part of any such persons in the performance of the duties of
Countrywide under this Agreement or by reason of reckless disregard by any of
such persons of the obligations and duties of Countrywide under this Agreement.
- 5 -
<PAGE>
B. Any person, even though also a director, officer, employee,
shareholder or agent of Countrywide, or any of its affiliates, who may be or
become an officer, trustee, employee or agent of the Trust, shall be deemed,
when rendering services to the Trust or acting on any business of the Trust, to
be rendering such services to or acting solely as an officer, trustee, employee
or agent of the Trust and not as a director, officer, employee, shareholder or
agent of or one under the control or direction of Countrywide or any of its
affiliates, even though paid by one of these entities.
C. Notwithstanding any other provision of this Agreement, the Trust
shall indemnify and hold harmless Countrywide, its directors, officers,
employees, shareholders, agents, control persons and affiliates from and against
any and all claims, demands, expenses and liabilities (whether with or without
basis in fact or law) of any and every nature which Countrywide may sustain or
incur or which may be asserted against Countrywide by any person by reason of,
or as a result of any action taken or omitted to be taken by Countrywide in good
faith in reliance upon any certificate, instrument, order or share certificate
reasonably believed by it to be genuine and to be signed, countersigned or
executed by any duly authorized person, upon the oral instructions or written
instructions of an authorized person of the Trust or upon the opinion of legal
counsel for the Trust. However, indemnification under this subparagraph shall
not apply to actions or omissions of Countrywide or its directors, officers,
employees, shareholders or agents in cases of its or their own gross negligence,
willful misconduct, bad faith, or reckless disregard of its or their own duties
hereunder. In the event of a mechanical breakdown or failure of communication or
power supplies beyond its control, Countrywide shall take all reasonable steps
to minimize service interruptions for any period that such interruption
continues beyond Countrywide's control. Countrywide will make every reasonable
effort to restore any lost or damaged data and correct any errors resulting from
such a breakdown at the expense of Countrywide. Countrywide agrees that it
shall, at all times, have reasonable contingency plans with appropriate parties,
making reasonable provision for emergency use of electrical data processing
equipment to the extent appropriate equipment is available. Representatives of
the Trust shall be entitled to inspect Countrywide's premises and operating
capabilities at any time during regular business hours of Countrywide, upon
reasonable notice to Countrywide.
D. In order that the indemnification provisions contained in this
section shall apply, it is understood that in any case in which the Trust may be
asked to indemnify or hold Countrywide harmless, the Trust shall be fully and
promptly advised of all pertinent facts concerning the situation in question,
and it is further understood that Countrywide will use
- 6 -
<PAGE>
all reasonable care to notify the Trust promptly concerning any situation which
presents or appears likely to present the probability of such a claim for
indemnification against the Trust.
E. Countrywide shall indemnify and hold the Trust harmless from and
against any and all claims, demands, losses, expenses, and liabilities (whether
with or without basis in fact or law) of any and every nature (including
reasonable attorneys' fees) which the Trust may sustain or incur or which may be
asserted against the Trust by any person arising out of or attributed to any
action taken or omitted to be taken by Countrywide as a result of Countrywide's
refusal or failure to comply with the terms of this Agreement, or from its bad
faith, gross negligence, or willful misconduct of Countrywide or any of its
employees and agents.
11. TERMINATION
-----------
A. The provisions of this Agreement shall be effective on the date
first above written, shall continue in effect for two years from that date and
shall continue in force from year to year thereafter, but only so long as such
continuance is approved a) by the Trust (1) by vote, cast in person at a meeting
called for the purpose, of a majority of the Trust's trustees who are not
parties to this Agreement or interested persons (as defined in the 1940 Act) of
any such party, and (2) by vote of a majority of the Trust's Board of Trustees
or a majority of the Trust's outstanding voting securities, and b) by
Countrywide.
B. Either party may terminate this Agreement on any date by giving the
other party at least sixty (60) days' prior written notice of such termination
specifying the date fixed therefor. Upon termination of this Agreement, the
Trust shall pay to Countrywide such compensation as may be due, prorated, as of
the date of such termination, and shall likewise reimburse Countrywide for any
out-of-pocket expenses and disbursements reasonably incurred by Countrywide to
such date, and otherwise subject to reimbursement hereunder. Termination of this
Agreement pursuant to this Section 11 shall be without the payment of any
penalty.
C. In the event that in connection with the termination of this
Agreement a successor to any of Countrywide's duties or responsibilities under
this Agreement is designated by the Trust by written notice to Countrywide,
Countrywide shall, promptly upon such termination and at the expense of the
Trust, transfer all records maintained by Countrywide under this Agreement and
shall cooperate in the transfer of such duties and responsibilities, including
provision for assistance from Countrywide's knowledgeable personnel in the
establishment of books, records and other data by such successor.
- 7 -
<PAGE>
12. SERVICES FOR OTHERS.
--------------------
Nothing in this Agreement shall prevent Countrywide or any affiliated
person (as defined in the 1940 Act) of Countrywide from providing services for
any other person, firm or corporation (including other investment companies);
provided, however, that Countrywide expressly represents that it will undertake
no activities which, in its judgment, will adversely affect the performance of
its obligations to the Trust under this Agreement.
13. LIMITATION OF LIABILITY.
------------------------
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust, personally, but bind only the trust property
of the Trust. The execution and delivery of this Agreement have been authorized
by the Trustees of the Trust and signed by an authorized officer of the Trust,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, but
shall bind only the trust property of the Trust.
14. SEVERABILITY.
-------------
In the event any provision of this Agreement is determined to be void
or unenforceable, such determination shall not affect the remainder of this
Agreement, which shall continue to be in force.
15. QUESTIONS OF INTERPRETATION.
----------------------------
This Agreement shall be governed by the laws of the State of Delaware.
Any question of interpretation of any term or provision of this Agreement having
a counterpart in or otherwise derived from a term or provision of the 1940 Act
shall be resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States Courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the SEC issued pursuant to said 1940 Act. In addition, where the effect of a
requirement of the 1940 Act, reflected in any provision of this Agreement, is
revised by rule, regulation or order of the SEC, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
16. NOTICES.
--------
All notices, requests, consents and other communications required or
permitted under this Agreement shall be in writing (including telex and
telegraphic communication) and
- 8 -
<PAGE>
shall be (as elected by the person giving such notice) hand delivered by
messenger or courier service, telecommunicated, or mailed (airmail if
international) by registered or certified mail (postage prepaid), return receipt
requested, addressed to:
To the Trust: Clearbrook Investment Trust
8000 Towers Crescent Drive, Suite 1350
Vienna, Virginia 22182
Attention: David J. Ortiz
To Countrywide: Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attention: Robert G. Dorsey
or to such other address as any party may designate by notice complying with the
terms of this Section 16. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery; (b) on the date telecommunicated if by
telegraph; (c) on the date of transmission with confirmed answer back if by
telex, telefax or other telegraphic method; and (d) on the date upon which the
return receipt is signed or delivery is refused or the notice is designated by
the postal authorities as not deliverable, as the case may be, if mailed.
17. AMENDMENT.
----------
This Agreement may not be amended or modified except by a written
agreement executed by both parties.
18. BINDING EFFECT.
---------------
Each of the undersigned expressly warrants and represents that he has
the full power and authority to sign this Agreement on behalf of the party
indicated, and that his signature will operate to bind the party indicated to
the foregoing terms.
19. COUNTERPARTS.
-------------
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
20. FORCE MAJEURE.
--------------
If Countrywide shall be delayed in its performance of services or
prevented entirely or in part from performing services due to causes or events
beyond its control, including and without limitation, acts of God, interruption
of power or other utility, transportation or communication services, acts of
civil or military authority, sabotages, national emergencies,
- 9 -
<PAGE>
explosion, flood, accident, earthquake or other catastrophe, fire, strike or
other labor problems, legal action, present or future law, governmental order,
rule or regulation, or shortages of suitable parts, materials, labor or
transportation, such delay or non-performance shall be excused and a reasonable
time for performance in connection with this Agreement shall be extended to
include the period of such delay or non-performance. Countrywide shall take all
reasonable steps to minimize service interruptions and have reasonable
contingency plans with appropriate parties to address any periods that such
interruptions continue beyond Countrywide's control.
21. MISCELLANEOUS.
--------------
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
CLEARBROOK INVESTMENT TRUST
By:
-------------------------------
Its: President
COUNTRYWIDE FUND SERVICES, INC.
By:
-------------------------------
Its: President
- 10 -
ACCOUNTING SERVICES AGREEMENT
-----------------------------
AGREEMENT dated as of ____________, 1998 between Clearbrook Investment
Trust, a Delaware business trust (the "Trust"), and Countrywide Fund Services,
Inc. ("Countrywide"), an Ohio corporation.
WHEREAS, the Trust is an investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust wishes to employ the services of Countrywide to provide
the Trust with certain accounting and pricing services; and
WHEREAS, Countrywide wishes to provide such services under the conditions
set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Trust and Countrywide agree as follows:
1. APPOINTMENT.
------------
The Trust hereby appoints and employs Countrywide as agent to perform
those services described in this Agreement for the Trust. Countrywide shall act
under such appointment and perform the obligations thereof upon the terms and
conditions hereinafter set forth.
2. ACCOUNTING SERVICES
-------------------
Countrywide shall provide the following accounting services to the
Fund:
Determine Fund Valuation
- ------------------------
- Calculate each day the net asset value of each series of the Trust,
per share net asset value, per share net earnings, and other per share
amounts as needed, in accordance with the Trust's current prospectus
and statement of additional information and as of the time selected by
the Trust's Board of Trustees;
- Prepare and maintain a daily valuation of all securities and other
assets of the Trust in accordance with instructions from a designated
officer of the Trust or its investment adviser and in the manner set
forth in the Trust's current prospectus and statement of additional
information. When valuing the assets in the Trust, obtain prices form
a pricing source approved by the Trust's Board of Trustees and apply
those prices to the portfolio positions. For those securities where
<PAGE>
market quotations are not readily available, the Board shall approve,
in good faith, the method for determining the fair value for such
securities in the manner specified in the Trust's current registration
statement. Countrywide may contract with and rely upon market
quotations provided by outside services when valuing securities of the
Trust;
- Account for each day's share purchases, sales, exchanges, transfers,
dividend reinvestments, and other share activity as reported by the
transfer agent by the next business day; and
- Communicate, at an agreed upon time, the daily per share price to the
investment adviser and other parties as agreed upon from time to time.
Maintain Books and Records
- --------------------------
- Maintain and keep current a general ledger, in a form agreed upon by
the Trust and Countrywide, for each series of the Trust, recording all
income and expenses, capital share activity, and security
transactions;
- Identify and record on a daily basis the interest and dividend accrual
balances and calculate gross earnings on investments for the
accounting period;
- Determine and record gain/loss on security sales and record their
short, mid, or long-term status, account for periodic distributions of
gains or losses to shareholders and maintain daily undistributed gain
or loss balances;
- Balance assets of the Trust with the Trust's custodian;
- Maintain such further books and records as are necessary to enable
Countrywide to perform its duties under this Agreement;
- Calculate daily cash figure for investment purposes;
- Prepare and provide periodic but not less than monthly reports to the
Trust and its authorized agents which include share purchases and
redemptions and which document accounting detail to a level that
supports month-end ledger balances;
- 2 -
<PAGE>
- Prepare and maintain complete, accurate, and current all records with
respect to the Trust required to be maintained by the Trust under the
Internal Revenue Code of 1986, as amended (the "Code"), and under the
rules and regulations of the 1940 Act, and will preserve said records
in the manner and for the periods prescribed in the Code and the 1940
Act;
- Prepare the necessary supporting computations on a book and tax basis
for the declaration and payment of dividends, including the updating
of carryforward schedules and the calculation of dividend payments to
ensure that each series of the Trust complies with the requirements of
Section 851 of the Code (Subchapter M) and to ensure that the Trust
avoids imposition of the excise tax under Section 4982 of the Code;
- Monitor all tax compliance calculations to ensure that each series of
the Trust continues to qualify as a regulated investment company
pursuant to Subchapter M of the Code;
- Maintain tax lot detail for each series of the Trust and calculate
taxable gain/loss on security sales using the tax lot relief method
designated by the Trust;
- Maintain portfolio records on a trade date +1 basis using security
trade information communicated from the investment adviser;
- Maintain records required to fulfill the requirements of Form N-SAR
and assist the Trust in completing Form N-SAR documentation;
- Prepare the financial statements and supporting statements, footnotes,
and per share information for the inclusion in the semiannual and
annual reports;
- Supervise and coordinate the typesetting, printing and distribution of
financial statements, including semiannual and annual reports; and
- Prepare and issue the fiscal year-end tax letters (60-day letters) to
shareholders which reflect the per share characterization of the
dividend distributions during the year.
- 3 -
<PAGE>
Provide Payment Services
- ------------------------
- Record authorized payment requests received from the Trust or its
agents;
- Prepare and send checks in the appropriate amounts and signed by an
authorized officer of Countrywide, upon receipt of written
instructions signed by an officer or authorized agent of the Trust;
- Account for Trust expenditures and maintain expense accrual balances
at the level of accounting detail agreed upon by the Trust and
Countrywide;
- Calculate the expense accrual amounts as directed by the Trust;
- Review expense account activity and monitor expense limitation
compliance; and
- Provide a minimum of monthly expense accrual and payment reporting.
Support Compliance Reporting
- ----------------------------
- Assist the Trust's independent accountants with the annual audit by
preparing a substantial amount of the annual audit workpapers;
- Provide accounting records, data files, information and support to the
Trust, the Securities and Exchange Commission, and the outside
auditors retained by the Trust for their compliance efforts; and
- Maintain accounting records according to the 1940 Act and regulations
thereunder.
3. FURTHER ACTIONS.
----------------
Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof.
4. FEES.
-----
For the performance of the services under this Agreement, each series
of the Trust shall pay Countrywide a monthly fee in accordance with the schedule
attached hereto as Schedule A. The fees with respect to any month shall be paid
to Countrywide on the last business day of such month. The Trust shall also
promptly reimburse Countrywide for the cost of external pricing services
utilized by Countrywide.
- 4 -
<PAGE>
5. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
---------------------------------------------------
The parties hereto acknowledge and agree that nothing contained herein
shall be construed to require Countrywide to perform any services for the Trust
which services could cause Countrywide to be deemed an "investment adviser" of
the Trust within the meaning of Section 2(a)(20) of the 1940 Act or to supersede
or contravene the Trust's prospectus or statement of additional information or
any provisions of the 1940 Act and the rules thereunder. Except as otherwise
provided in this Agreement and except for the accuracy of information furnished
to it by Countrywide, the Trust assumes full responsibility for complying with
all applicable requirements of the 1940 Act, the Securities Act of 1933, as
amended, and any other laws, rules and regulations of governmental authorities
having jurisdiction.
6. CONFIDENTIALITY
---------------
Countrywide agrees on behalf of itself and its employees and agents to
treat confidentially all information relating to the Trust's business which is
received by Countrywide during the course of rendering any service hereunder.
Countrywide agrees on behalf of itself and its employees and agents to treat
confidentially all records and other information relative to the Trust and its
shareholders and shall not disclose to any other party, except after prior
notification to and approval in writing by the Trust, which approval shall not
be unreasonably withheld and may not be withheld where Countrywide may be
exposed to civil or criminal contempt proceedings for failure to comply after
being requested to divulge such information by duly constituted authorities.
7. REFERENCES TO COUNTRYWIDE.
--------------------------
The Trust shall not circulate any printed matter which contains any
reference to Countrywide without the prior written approval of Countrywide,
excepting solely such printed matter as merely identifies Countrywide as
Administrative Services Agent, Transfer, Shareholder Servicing and Dividend
Disbursing Agent and Accounting Services Agent. The Trust will submit printed
matter requiring approval to Countrywide in draft form, allowing sufficient time
for review by Countrywide and its counsel prior to any deadline for printing.
8. EQUIPMENT FAILURES.
-------------------
Countrywide shall take all steps necessary to minimize or avoid
service interruptions, and has entered into one or more agreements making
provision for emergency use of electronic data processing equipment. Countrywide
shall have no liability with respect to equipment failures beyond its control.
- 5 -
<PAGE>
9. PERFORMANCE OF SERVICE: LIMITED LIABILITY AND INDEMNIFICATION.
--------------------------------------------------------------
A. Countrywide shall exercise reasonable care and act in good faith in
the performance of its duties under this Agreement. Countrywide may rely on
information, regarding the Trust, reasonably believed by it to be accurate and
reliable. Except as may otherwise be required by the 1940 Act and the rules
thereunder, neither Countrywide nor its shareholders, officers, directors,
employees, agents, control persons or the affiliates of any thereof shall be
subject to any liability for, or any damages, expenses or losses incurred by the
Trust in connection with, any error of judgment, mistake of law, any act or
omission connected with or arising out of any services rendered under or
payments made pursuant to this Agreement or any other matter to which this
Agreement relates, except for any refusal or failure to comply with the terms of
this Agreement or by reason of willful misfeasance, bad faith or gross
negligence on the part of any such persons in the performance of the duties of
Countrywide under this Agreement or by reason of reckless disregard by any of
such persons of the obligations and duties of Countrywide under this Agreement.
B. Any person, even though also a director, officer, employee,
shareholder, or agent of Countrywide, or any of its affiliates, who may be or
become an officer, trustee, employee or agent of the Trust, shall be deemed,
when rendering services to the Trust or acting on any business of the Trust, to
be rendering such services to or acting solely as an officer, trustee, employee
or agent of the Trust and not as a director, officer, employee, shareholder or
agent of or one under the control or direction of Countrywide or any of its
affiliates, even though paid by one of those entities.
C. Notwithstanding any other provision of this Agreement, the Trust
shall indemnify and hold harmless Countrywide, its directors, officers,
employees, shareholders, agents, control persons and affiliates from and against
any and all claims, demands, expenses and liabilities (whether with or without
basis in fact or law) of any and every nature which Countrywide may sustain or
incur or which may be asserted against Countrywide by any person by reason of,
or as a result of any action taken or omitted to be taken by Countrywide in good
faith in reliance upon any certificate, instrument, order or share certificate
reasonably believed by it to be genuine and to be signed, countersigned or
executed by any duly authorized person, upon the oral instructions or written
instructions of an authorized person of the Trust or upon the opinion of legal
counsel for the Trust. However, indemnification under this subparagraph shall
not apply to actions or omissions of
- 6 -
<PAGE>
Countrywide or its directors, officers, employees, shareholders or agents in
cases of its or their own gross negligence, willful misconduct, bad faith, or
reckless disregard of its or their own duties hereunder. In the event of a
mechanical breakdown or failure of communication or power supplies beyond its
control, Countrywide shall take all reasonable steps to minimize service
interruptions for any period that such interruption continues beyond
Countrywide's control. Countrywide will make every reasonable effort to restore
any lost or damaged data and correct any errors resulting from such a breakdown
at the expense of Countrywide. Countrywide agrees that it shall, at all times,
have reasonable contingency plans with appropriate parties, making reasonable
provision for emergency use of electrical data processing equipment to the
extent appropriate equipment is available. Representatives of the Trust shall be
entitled to inspect Countrywide's premises and operating capabilities at any
time during regular business hours of Countrywide, upon reasonable notice to
Countrywide.
D. In order that the indemnification provisions contained in this
section shall apply, it is understood that in any case in which the Trust may be
asked to indemnify or hold Countrywide harmless, the Trust shall be fully and
promptly advised of all pertinent facts concerning the situation in question,
and it is further understood that Countrywide will use all reasonable care to
notify the Trust promptly concerning any situation which presents or appears
likely to present the probability of such a claim for indemnification against
the Trust.
E. Countrywide shall indemnify and hold the Trust harmless from and
against any and all claims, demands, losses, expenses, and liabilities (whether
with or without basis in fact or law) of any and every nature (including
reasonable attorneys' fees) which the Trust may sustain or incur or which may be
asserted against the Trust by any person arising out of or attributed to any
action taken or omitted to be taken by Countrywide as a result of Countrywide's
refusal or failure to comply with the terms of this Agreement, or from its bad
faith, gross negligence, or willful misconduct of Countrywide or any of its
employees and agents.
10. TERMINATION.
------------
A. The provisions of this Agreement shall be effective on the date
first above written, shall continue in effect for two years from that date and
shall continue in force from year to year thereafter, but only so long as such
continuance is approved a) by the Trust (1) by vote, cast in person at a meeting
called for the purpose, of a majority of the
- 7 -
<PAGE>
Trust's trustees who are not parties to this Agreement or interested persons (as
defined in the 1940 Act) of any such party, and (2) by vote of a majority of the
Trust's Board of Trustees or a majority of the Trust's outstanding voting
securities, and b) by Countrywide.
B. Either party may terminate this Agreement on any date by giving the
other party at least sixty (60) days' prior written notice of such termination
specifying the date fixed therefor. Upon termination of this Agreement, the
Trust shall pay to Countrywide such compensation as may be due, prorated, as of
the date of such termination, and shall likewise reimburse Countrywide for any
out-of-pocket expenses and disbursements reasonably incurred by Countrywide to
such date, and otherwise subject to reimbursement hereunder. Termination of this
Agreement pursuant to this Section 10 shall be without the payment of any
penalty.
C. In the event that in connection with the termination of this
Agreement a successor to any of Countrywide's duties or responsibilities under
this Agreement is designated by the Trust by written notice to Countrywide,
Countrywide shall, promptly upon such termination and at the expense of the
Trust, transfer all records maintained by Countrywide under this Agreement and
shall cooperate in the transfer of such duties and responsibilities, including
provision for assistance from Countrywide's knowledgeable personnel in the
establishment of books, records and other data by such successor.
11. SERVICES FOR OTHERS.
--------------------
Nothing in this Agreement shall prevent Countrywide or any affiliated
person (as defined in the 1940 Act) of Countrywide from providing services for
any other person, firm or corporation (including other investment companies);
provided, however, that Countrywide expressly represents that it will undertake
no activities which, in its judgment, will adversely affect the performance of
its obligations to the Trust under this Agreement.
12. LIMITATION OF LIABILITY.
------------------------
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust, personally, but bind only the trust property
of the Trust. The execution and delivery of this Agreement have been authorized
by the Trustees of the Trust and signed by an authorized officer of the Trust,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, but
shall bind only the trust property of the Trust.
- 8 -
<PAGE>
13. SEVERABILITY.
-------------
In the event any provision of this Agreement is determined to be void
or unenforceable, such determination shall not affect the remainder of this
Agreement, which shall continue to be in force.
14. QUESTIONS OF INTERPRETATION.
----------------------------
This Agreement shall be governed by the laws of the State of Delaware.
Any question of interpretation of any term or provision of this Agreement having
a counterpart in or otherwise derived from a term or provision of the 1940 Act
shall be resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States Courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the Securities and Exchange Commission issued pursuant to said 1940 Act. In
addition, where the effect of a requirement of the 1940 Act, reflected in any
provision of this Agreement, is revised by rule, regulation or order of the
Securities and Exchange Commission, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
15. NOTICES.
--------
All notices, requests, consents and other communications required or
permitted under this Agreement shall be in writing (including telex and
telegraphic communication) and shall be (as elected by the person giving such
notice) hand delivered by messenger or courier service, telecommunicated, or
mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, addressed to:
To the Trust: Clearbrook Investment Trust
8000 Towers Crescent Drive, Suite 1350
Vienna, Virginia 22183
Attention: David J. Ortiz
To Countrywide: Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attention: Robert G. Dorsey
or to such other address as any party may designate by notice complying with the
terms of this Section 15. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery; (b) on the date telecommunicated if by
telegraph; (c) on the date of transmission with confirmed answer back if by
telex, telefax or other telegraphic method; and (d)
- 9 -
<PAGE>
on the date upon which the return receipt is signed or delivery is refused or
the notice is designated by the postal authorities as not deliverable, as the
case may be, if mailed.
16. AMENDMENT.
----------
This Agreement may not be amended or modified except by a written
agreement executed by both parties.
17. BINDING EFFECT.
---------------
Each of the undersigned expressly warrants and represents that he has
the full power and authority to sign this Agreement on behalf of the party
indicated, and that his signature will operate to bind the party indicated to
the foregoing terms.
18. COUNTERPARTS.
-------------
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
19. FORCE MAJEURE.
--------------
If Countrywide shall be delayed in its performance of services or
prevented entirely or in part from performing services due to causes or events
beyond its control, including and without limitation, acts of God, interruption
of power or other utility, transportation or communication services, acts of
civil or military authority, sabotages, national emergencies, explosion, flood,
accident, earthquake or other catastrophe, fire, strike or other labor problems,
legal action, present or future law, governmental order, rule or regulation, or
shortages of suitable parts, materials, labor or transportation, such delay or
non-performance shall be excused and a reasonable time for performance in
connection with this Agreement shall be extended to include the period of such
delay or non-performance. Countrywide shall take all reasonable steps to
minimize service interruptions and have reasonable contingency plans with
appropriate parties to address any periods that such interruptions continue
beyond Countrywide's control.
20. MISCELLANEOUS.
--------------
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
- 10 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
CLEARBROOK INVESTMENT TRUST
By:
-------------------------------
Its: President
COUNTRYWIDE FUND SERVICES, INC.
By:
-------------------------------
Its: President
- 11 -
<PAGE>
Schedule A
----------
COMPENSATION
------------
Each series of the Trust will pay Countrywide a monthly fee, according to
the average monthly net assets of such series during such month, as follows:
Monthly Fee Average Net Assets During Month
----------- -------------------------------
$2,000 $0 - $ 50,000,000
$2,500 $50,000,000 - $100,000,000
$3,000 $100,000,000 - $200,000,000
$4,000 $200,000,000 - $300,000,000
$5,000 + .001% of Over $300,000,000
average net assets
over $300,000,000
- 12 -
TRANSFER, DIVIDEND DISBURSING, SHAREHOLDER SERVICE
--------------------------------------------------
AND PLAN AGENCY AGREEMENT
-------------------------
AGREEMENT dated as of ___________, 1998 between Clearbrook Investment Trust
(the "Trust"), a Delaware business trust, and Countrywide Fund Services, Inc.
("Countrywide"), an Ohio corporation.
WHEREAS, the Trust is an investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust wishes to employ the services of Countrywide to serve as
its transfer, dividend disbursing, shareholder service and plan agent; and
WHEREAS, Countrywide wishes to provide such services under the conditions
set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Trust and Countrywide agree as follows:
1. APPOINTMENT.
------------
The Trust hereby appoints and employs Countrywide as agent to perform
those services described in this Agreement for the Trust. Countrywide shall act
under such appointment and perform the obligations thereof upon the terms and
conditions hereinafter set forth.
2. DOCUMENTATION.
--------------
The Trust will furnish from time to time the following documents:
A. Each resolution of the Board of Trustees of the Trust authorizing the
original issue of its shares;
B. Each Registration Statement filed with the Securities and Exchange
Commission (the "SEC") and amendments thereof;
C. A certified copy of each amendment to the Agreement and Declaration of
Trust and the Bylaws of the Trust;
D. Certified copies of each resolution of the Board of Trustees
authorizing officers to give instructions to Countrywide;
E. Specimens of all new forms of share certificates accompanied by Board
of Trustees' resolutions approving such forms;
<PAGE>
F. Such other certificates, documents or opinions which Countrywide and
the Trust may jointly deem necessary or appropriate in the proper
performance of its duties;
G. Copies of all Underwriting and Dealer Agreements in effect;
H. Copies of all Investment Advisory Agreements in effect; and
I. Copies of all documents relating to special investment or withdrawal
plans which are offered or may be offered in the future by the Trust
and for which Countrywide is to act as plan agent.
3. COUNTRYWIDE TO RECORD SHARES.
-----------------------------
Countrywide shall record the issuance of shares of the Trust and
maintain pursuant to applicable rules of the SEC a record of the total number of
shares of the Trust which are authorized, issued and outstanding, based upon
data provided to it by the Trust. Countrywide shall also provide the Trust on a
regular basis or upon reasonable request the total number of shares which are
authorized, issued and outstanding, but shall have no obligation when recording
the issuance of the Trust's shares, except as otherwise set forth herein, to
monitor the issuance of such shares or to take cognizance of any laws relating
to the issue or sale of such shares, which functions shall be the sole
responsibility of the Trust.
4. COUNTRYWIDE TO VALIDATE TRANSFERS.
----------------------------------
Upon receipt of a proper request for transfer and upon surrender to
Countrywide of certificates, if any, in proper form for transfer, Countrywide
shall approve such transfer and shall take all necessary steps to effectuate the
transfer as indicated in the transfer request. Upon approval of the transfer,
Countrywide shall notify the Trust in writing of each such transaction and shall
make appropriate entries on the shareholder records maintained by Countrywide.
5. SHARE CERTIFICATES.
-------------------
If the Trust authorizes the issuance of share certificates and an
investor requests a share certificate, Countrywide will countersign and mail, by
insured first class mail, a share certificate to the investor at his address as
set forth on the transfer books of the Trust, subject to any other instructions
for delivery of certificates representing newly purchased shares and subject to
the limitation that no certificates representing newly purchased shares shall be
mailed to the investor until the cash purchase price of such shares has
- 2 -
<PAGE>
been collected and credited to the account of the Trust maintained by the
Custodian. The Trust shall supply Countrywide with a sufficient supply of blank
share certificates and from time to time shall renew such supply upon request of
Countrywide. Such blank share certificates shall be properly signed, manually
or, if authorized by the Trust, by facsimile; and notwithstanding the death,
resignation or removal of any officers of the Trust authorized to sign share
certificates, Countrywide may continue to countersign certificates which bear
the manual or facsimile signature of such officer until otherwise directed by
the Trust. In case of the alleged loss or destruction of any share certificate,
no new certificates shall be issued in lieu thereof, unless there shall first be
furnished an appropriate bond satisfactory to Countrywide and the Trust, and
issued by a surety company satisfactory to Countrywide and the Trust.
6. RECEIPT OF FUNDS.
-----------------
Upon receipt of any check or other instrument drawn or endorsed to it
as agent for, or identified as being for the account of, the Trust, Countrywide
shall stamp the check or instrument with the date of receipt, determine the
amount thereof due the Trust and shall forthwith process the same for
collection. Upon receipt of notification of receipt of funds eligible for share
purchases in accordance with the Trust's then current prospectus and statement
of additional information, Countrywide shall notify the Trust, at the close of
each business day, in writing of the amount of said funds credited to the Trust
and deposited in its account with the Custodian.
7. PURCHASE ORDERS.
----------------
Upon receipt of an order for the purchase of shares of the Trust,
accompanied by sufficient information to enable Countrywide to establish a
shareholder account, Countrywide shall, as of the next determination of net
asset value after receipt of such order in accordance with the Trust's then
current prospectus and statement of additional information, compute the number
of shares due to the shareholder, credit the share account of the shareholder,
subject to collection of the funds, with the number of shares so purchased,
shall notify the Trust in writing or by computer report at the close of each
business day of such transactions and shall mail to the shareholder and/or
dealer of record a notice of such credit when requested to do so by the Trust.
8. RETURNED CHECKS.
----------------
In the event that Countrywide is notified by the Trust's Custodian
that any check or other order for the payment of money is returned unpaid for
any reason, Countrywide will:
- 3 -
<PAGE>
A. Give prompt notification to the Trust of the non-payment of said check;
B. In the absence of other instructions from the Trust, take such steps as
may be necessary to redeem any shares purchased on the basis of such returned
check and cause the proceeds of such redemption plus any dividends declared with
respect to such shares to be credited to the account of the Trust and to request
the Trust's Custodian to forward such returned check to the person who
originally submitted the check; and
C. Notify the Trust of such actions and correct the Trust's records
maintained by Countrywide pursuant to this Agreement.
9. DIVIDENDS AND DISTRIBUTIONS.
----------------------------
The Trust shall furnish Countrywide with appropriate evidence of
Trustee action authorizing the declaration of dividends and other distributions.
Countrywide shall establish procedures in accordance with the Trust's then
current prospectus and statement of additional information and with other
authorized actions of the Trust's Board of Trustees under which it will have
available from the Custodian or the Trust any required information for each
dividend and other distribution. After deducting any amount required to be
withheld by any applicable laws, Countrywide shall, as agent for each
shareholder who so requests, invest the dividends and other distributions in
full and fractional shares in accordance with the Trust's then current
prospectus and statement of additional information. If a shareholder has elected
to receive dividends or other distributions in cash, then Countrywide shall
disburse dividends to shareholders of record in accordance with the Trust's then
current prospectus and statement of additional information. Countrywide shall,
on or before the mailing date of such checks, notify the Trust and the Custodian
of the estimated amount of cash required to pay such dividend or distribution,
and the Trust shall instruct the Custodian to make available sufficient funds
therefor in the appropriate account of the Trust. Countrywide shall mail to the
shareholders periodic statements, as requested by the Trust, showing the number
of full and fractional shares and the net asset value per share of shares so
credited. When requested by the Trust, Countrywide shall prepare and file with
the Internal Revenue Service, and when required, shall address and mail to
shareholders, such returns and information relating to dividends and
distributions paid by the Trust as are required to be so prepared, filed and
mailed by applicable laws, rules and regulations.
- 4 -
<PAGE>
10. UNCLAIMED DIVIDENDS AND UNCLAIMED REDEMPTION PROCEEDS.
------------------------------------------------------
Countrywide shall, at least annually, furnish in writing to the Trust
the names and addresses, as shown in the shareholder accounts maintained by
Countrywide, of all shareholders for which there are, as of the end of the
calendar year, dividends, distributions or redemption proceeds for which checks
or share certificates mailed in payment of distributions have been returned.
Countrywide shall use its best efforts to contact the shareholders affected and
to follow any other written instructions received from the Trust concerning the
disposition of any such unclaimed dividends, distributions or redemption
proceeds.
11. REDEMPTIONS AND EXCHANGES.
--------------------------
A. Countrywide shall process, in accordance with the Trust's then current
prospectus and statement of additional information, each order for the
redemption of shares accepted by Countrywide. Upon its approval of such
redemption transactions, Countrywide, if requested by the Trust, shall mail to
the shareholder and/or dealer of record a confirmation showing trade date,
number of full and fractional shares redeemed, the price per share and the total
redemption proceeds. For each such redemption, Countrywide shall either: (a)
prepare checks in the appropriate amounts for approval and verification by the
Trust and signature by an authorized officer of Countrywide and mail the checks
to the appropriate person, or (b) in the event redemption proceeds are to be
wired through the Federal Reserve Wire System or by bank wire, cause such
proceeds to be wired in federal funds to the bank account designated by the
shareholder, or (c) effectuate such other redemption procedures which are
authorized by the Trust's Board of Trustees or its then current prospectus and
statement of additional information. The requirements as to instruments of
transfer and other documentation, the applicable redemption price and the time
of payment shall be as provided in the then current prospectus and statement of
additional information, subject to such supplemental instructions as may be
furnished by the Trust and accepted by Countrywide. If Countrywide or the Trust
determines that a request for redemption does not comply with the requirements
for redemptions, Countrywide shall promptly notify the shareholder indicating
the reason therefor.
B. If shares of the Trust are eligible for exchange with shares of any
other investment company, Countrywide, in accordance with the then current
prospectus and statement of additional information and exchange rules of the
Trust and such other investment company, or such other investment company's
transfer agent, shall review and approve all exchange requests and shall, on
behalf of the Trust's shareholders, process such approved exchange requests.
- 5 -
<PAGE>
C. Countrywide shall notify the Trust and the Custodian on each business
day of the amount of cash required to meet payments made pursuant to the
provisions of this Paragraph 11, and, on the basis of such notice, the Trust
shall instruct the Custodian to make available from time to time sufficient
funds therefor in the appropriate account of the Trust. Procedures for effecting
redemption orders accepted from shareholders or dealers of record by telephone
or other methods shall be established by mutual agreement between Countrywide
and the Trust consistent with the Trust's then current prospectus and statement
of additional information.
D. The authority of Countrywide to perform its responsibilities under
Paragraph 7, Paragraph 9, and this Paragraph 11 shall be suspended with respect
to any series of the Trust upon receipt of notification by it of the suspension
of the determination of such series' net asset value.
12. AUTOMATIC WITHDRAWAL PLANS.
---------------------------
Countrywide will process automatic withdrawal orders pursuant to the
provisions of the withdrawal plans duly executed by shareholders and the current
prospectus and statement of additional information of the Trust. Payments upon
such withdrawal order shall be made by Countrywide from the appropriate account
maintained by the Trust with the Custodian on approximately the last business
day of each month in which a payment has been requested, and Countrywide will
withdraw from a shareholder's account and present for repurchase or redemption
as many shares as shall be sufficient to make such withdrawal payment pursuant
to the provisions of the shareholder's withdrawal plan and the current
prospectus and statement of additional information of the Trust. From time to
time on new automatic withdrawal plans a check for a payment date already past
may be issued upon request by the shareholder.
13. WIRE-ORDER PURCHASES.
---------------------
Countrywide will send written confirmations to the dealers of record
containing all details of the wire-order purchases placed by each such dealer by
the close of business on the business day following receipt of such orders by
Countrywide. Upon receipt of any check drawn or endorsed to the Trust (or
Countrywide, as agent) or otherwise identified as being payment of an
outstanding wire-order, Countrywide will stamp said check with the date of its
receipt and deposit the amount represented by such check to Countrywide's
deposit accounts maintained with the Custodian. Countrywide will cause the
Custodian to transfer federal funds in an amount equal to the net asset value of
the shares so purchased to the Trust's account with the Custodian and will
notify the Trust before noon of each business day of the
- 6 -
<PAGE>
total amount deposited in the Trust's deposit accounts, and in the event that
payment for a purchase order is not received by Countrywide or the Custodian on
the tenth business day following receipt of the order, prepare an NASD "notice
of failure of dealer to make payment."
14. OTHER PLANS.
------------
Countrywide will process such accumulation plans, group programs and
other plans or programs for investing in shares of the Trust as are now provided
for in the Trust's current prospectus and statement of additional information
and will act as plan agent for shareholders pursuant to the terms of such plans
and programs duly executed by such shareholders.
15. RECORDKEEPING AND OTHER INFORMATION.
------------------------------------
Countrywide shall create and maintain all records required by
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act and the rules thereunder, as the same
may be amended from time to time, pertaining to the various functions performed
by it and not otherwise created and maintained by another party pursuant to
contract with the Trust. All such records shall be the property of the Trust at
all times and shall be available for inspection and use by the Trust. Where
applicable, such records shall be maintained by Countrywide for the periods and
in the places required by Rule 31a-2 under the 1940 Act. Countrywide shall make
available during regular business hours all records and other data created and
maintained pursuant to this Agreement for reasonable audit and inspection by the
Trust, any person retained by the Trust, or any regulatory agency having
authority over the Trust.
16. SHAREHOLDER RECORDS.
--------------------
Countrywide shall maintain records for each shareholder account
showing the following:
A. Names, addresses and tax identifying numbers;
B. Name of the dealer of record, if any;
C. Number of shares held of each series;
D. Historical information regarding the account of each shareholder,
including dividends and distributions in cash or invested in shares;
E. Information with respect to the source of all dividends and
distributions allocated among income, realized short-term gains and
realized long-term gains;
- 7 -
<PAGE>
F. Any instructions from a shareholder including all forms furnished by
the Trust and executed by a shareholder with respect to (i) dividend
or distribution elections and (ii) elections with respect to payment
options in connection with the redemption of shares;
G. Any correspondence relating to the current maintenance of a
shareholder's account;
H. Certificate numbers and denominations for any shareholder holding
certificates;
I. Any stop or restraining order placed against a shareholder's account;
J. Information with respect to withholding in the case of a foreign
account or any other account for which withholding is required by the
Internal Revenue Code of 1986, as amended; and
K. Any information required in order for Countrywide to perform the
calculations contemplated under this Agreement.
17. TAX RETURNS AND REPORTS.
------------------------
Countrywide will prepare in the appropriate form, file with the
Internal Revenue Service and appropriate state agencies and, if required, mail
to shareholders of the Trust such returns for reporting dividends and
distributions paid by the Trust as are required to be so prepared, filed and
mailed and shall withhold such sums as are required to be withheld under
applicable federal and state income tax laws, rules and regulations.
18. OTHER INFORMATION TO THE TRUST.
-------------------------------
Subject to such instructions, verification and approval of the
Custodian and the Trust as shall be required by any agreement or applicable law,
Countrywide will also maintain such records as shall be necessary to furnish to
the Trust the following: annual shareholder meeting lists, proxy lists and
mailing materials, shareholder reports and confirmations and checks for
disbursing redemption proceeds, dividends and other distributions or expense
disbursements.
19. ACCESS TO SHAREHOLDER INFORMATION.
----------------------------------
Upon request, Countrywide shall arrange for the Trust's investment
adviser to have direct access by means of a telecommunications system to
shareholder information contained in Countrywide's computer system, including
account balances, performance information and such other information which is
available to Countrywide with respect to shareholder accounts.
- 8 -
<PAGE>
20. COOPERATION WITH ACCOUNTANTS.
-----------------------------
Countrywide shall cooperate with the Trust's independent public
accountants and shall take all reasonable action in the performance of its
obligations under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their unqualified
opinion where required for any document for the Trust.
21. SHAREHOLDER SERVICE AND CORRESPONDENCE.
---------------------------------------
Countrywide will provide and maintain adequate personnel, records and
equipment to receive and answer all shareholder and dealer inquiries relating to
account status, share purchases, redemptions and exchanges and other investment
plans available to Trust shareholders. Countrywide will answer written
correspondence from shareholders relating to their share accounts and such other
written or oral inquiries as may from time to time be mutually agreed upon, and
Countrywide will notify the Trust of any correspondence or inquiries which may
require an answer from the Trust.
22. PROXIES.
--------
Countrywide shall assist the Trust in the mailing of proxy cards and
other material in connection with shareholder meetings of the Trust, shall
receive, examine and tabulate returned proxies and shall, if requested by the
Trust, provide at least one inspector of election to attend and participate as
required by law in shareholder meetings of the Trust.
23. OTHER MAILINGS TO SHAREHOLDERS.
-------------------------------
Countrywide shall mail financial and other reports concerning the
Trust and its Funds to shareholders.
24. FURTHER ACTIONS.
----------------
Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof.
25. COMPENSATION.
-------------
For the performance of Countrywide's obligations under this Agreement,
each series of the Trust shall pay Countrywide, on the first business day
following the end of each month, a monthly prorated fee in accordance with the
schedule attached hereto as Schedule A. The Trust shall promptly reimburse
Countrywide for any out-of-pocket expenses and advances which are to be paid by
the Trust in accordance with Paragraph 26.
- 9 -
<PAGE>
26. EXPENSES.
---------
Countrywide shall furnish, at its expense and without cost to the
Trust (i) the services of its personnel to the extent that such services are
required to carry out its obligations under this Agreement and (ii) use of data
processing equipment. All costs and expenses not expressly assumed by
Countrywide under this Paragraph 26 shall be paid by the Trust, including, but
not limited to, costs and expenses of officers and employees of Countrywide in
attending meetings of the Board of Trustees and shareholders of the Trust, as
well as costs and expenses for postage, envelopes, checks, drafts, continuous
forms, reports, communications, statements and other materials, telephone,
telegraph and remote transmission lines, use of outside pricing services, use of
outside mailing firms, necessary outside record storage, media for storage of
records (e.g., microfilm, microfiche, computer tapes), printing, confirmations
and any other shareholder correspondence and any and all assessments, taxes or
levies assessed on Countrywide for services provided under this Agreement.
Postage for mailings of dividends, proxies, reports and other mailings to all
shareholders shall be advanced to Countrywide three business days prior to the
mailing date of such materials.
27. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
---------------------------------------------------
The parties hereto acknowledge and agree that nothing contained herein
shall be construed to require Countrywide to perform any services for the Trust
which services could cause Countrywide to be deemed an "investment adviser" of
the Trust within the meaning of Section 2(a)(20) of the 1940 Act or to supersede
or contravene the Trust's prospectus or statement of additional information or
any provisions of the 1940 Act and the rules thereunder. Except as otherwise
provided in this Agreement and except for the accuracy of information furnished
to it by Countrywide, the Trust assumes full responsibility for complying with
all applicable requirements of the 1940 Act, the Securities Act of 1933, as
amended, and any other laws, rules and regulations of governmental authorities
having jurisdiction.
28. CONFIDENTIALITY
---------------
Countrywide agrees on behalf of itself and its employees and agents to
treat confidentially all information relating to the Trust's business which is
received by Countrywide during the course of rendering any service hereunder.
Countrywide agrees on behalf of itself and its employees and agents to treat
confidentially all records and other information relative to the Trust and its
shareholders and shall not disclose to any other party, except after prior
notification to and approval in writing by the Trust, which approval shall not
be unreasonably withheld and may not be withheld where Countrywide may be
exposed to civil or criminal contempt proceedings for failure to comply after
being requested to divulge such information by duly constituted authorities.
- 10 -
<PAGE>
29. REFERENCES TO COUNTRYWIDE.
--------------------------
The Trust shall not circulate any printed matter which contains any
reference to Countrywide without the prior written approval of Countrywide,
excepting solely such printed matter as merely identifies Countrywide as
Transfer, Shareholder Servicing and Dividend Disbursing Agent. The Trust will
submit printed matter requiring approval to Countrywide in draft form, allowing
sufficient time for review by Countrywide and its counsel prior to any deadline
for printing.
30. EQUIPMENT FAILURES.
-------------------
Countrywide shall take all steps necessary to minimize or avoid
service interruptions, and has entered into one or more agreements making
provision for emergency use of electronic data processing equipment. Countrywide
shall have no liability with respect to equipment failures beyond its control.
31. PERFORMANCE OF SERVICE: LIMITED LIABILITY AND INDEMNIFICATION.
--------------------------------------------------------------
A. Countrywide shall exercise reasonable care and act in good faith in the
performance of its duties under this Agreement. Countrywide may rely on
information, regarding the Trust, reasonably believed by it to be accurate and
reliable. Except as may otherwise be required by the 1940 Act and the rules
thereunder, neither Countrywide nor its shareholders, officers, directors,
employees, agents, control persons or the affiliates of any thereof shall be
subject to any liability for, or any damages, expenses or losses incurred by the
Trust in connection with any error of judgment, mistake of law, any act or
omission connected with or arising out of any services rendered under or
payments made pursuant to this Agreement or any other matter to which this
Agreement relates, except for any refusal or failure to comply with the terms of
this Agreement or by reason of willful misfeasance, bad faith or gross
negligence on the part of any such persons in the performance of the duties of
Countrywide under this Agreement or by reason of reckless disregard by any of
such persons of the obligations and duties of Countrywide under this Agreement.
B. Any person, even though also a director, officer, employee, shareholder
or agent of Countrywide, or any of its affiliates, who may be or become an
officer, trustee, employee or agent of the Trust, shall be deemed, when
rendering services to the Trust or acting on any business of the Trust, to be
rendering such services to or acting solely as an officer, trustee, employee or
agent of the Trust and not as a director, officer, employee, shareholder or
agent of or one under the control or direction of Countrywide or any of its
affiliates, even though paid by one of these entities.
- 11 -
<PAGE>
C. The Trust shall indemnify and hold harmless Countrywide, its directors,
officers, employees, shareholders, agents, control persons and affiliates from
and against any and all claims, demands, expenses and liabilities (whether with
or without basis in fact or law) of any and every nature which Countrywide may
sustain or incur or which may be asserted against Countrywide by any person by
reason of, or as a result of any action taken or omitted to be taken by
Countrywide in good faith in reliance upon any certificate, instrument, order or
share certificate reasonably believed by it to be genuine and to be signed,
countersigned or executed by any duly authorized person, upon the oral
instructions or written instructions of an authorized person of the Trust or
upon the opinion of legal counsel for the Trust. However, indemnification under
this subparagraph shall not apply to actions or omissions of Countrywide or its
directors, officers, employees, shareholders or agents in cases of its or their
own gross negligence, willful misconduct, bad faith, or reckless disregard of
its or their own duties hereunder. In the event of a mechanical breakdown or
failure of communication or power supplies beyond its control, Countrywide shall
take all reasonable steps to minimize service interruptions for any period that
such interruption continues beyond Countrywide's control. Countrywide will make
every reasonable effort to restore any lost or damaged data and correct any
errors resulting from such a breakdown at the expense of Countrywide.
Countrywide agrees that it shall, at all times, have reasonable contingency
plans with appropriate parties, making reasonable provision for emergency use of
electrical data processing equipment to the extent appropriate equipment is
available. Representatives of the Trust shall be entitled to inspect
Countrywide's premises and operating capabilities at any time during regular
business hours of Countrywide, upon reasonable notice to Countrywide.
D. In order that the indemnification provisions contained in this section
shall apply, it is understood that in any case in which the Trust may be asked
to indemnify or hold Countrywide harmless, the Trust shall be fully and promptly
advised of all pertinent facts concerning the situation in question, and it is
further understood that Countrywide will use all reasonable care to notify the
Trust promptly concerning any situation which presents or appears likely to
present the probability of such a claim for indemnification against the Trust.
E. Countrywide shall indemnify and hold the Trust harmless from and against
any and all claims, demands, losses, expenses, and liabilities (whether with or
without basis in fact or law) of any and every nature (including reasonable
attorneys' fees) which the Trust may sustain or incur or which may be asserted
against the Trust by any person arising out of or attributed to any action taken
or omitted to be taken by Countrywide as a result of Countrywide's refusal or
failure to comply with the terms of this Agreement, or from its bad faith, gross
negligence, or willful misconduct of Countrywide or any of its employees and
agents.
- 12 -
<PAGE>
32. TERMINATION
-----------
A. The provisions of this Agreement shall be effective on the date first
above written, shall continue in effect for two years from that date and shall
continue in force from year to year thereafter, but only so long as such
continuance is approved a) by the Trust (1) by vote, cast in person at a meeting
called for the purpose, of a majority of the Trust's trustees who are not
parties to this Agreement or interested persons (as defined in the 1940 Act) of
any such party, and (2) by vote of a majority of the Trust's Board of Trustees
or a majority of the Trust's outstanding voting securities, and b) by
Countrywide.
B. Either party may terminate this Agreement on any date by giving the
other party at least sixty (60) days' prior written notice of such termination
specifying the date fixed therefore. Upon termination of this Agreement, the
Trust shall pay to Countrywide such compensation as may be due, prorated, as of
the date of such termination, and shall likewise reimburse Countrywide for any
out-of-pocket expenses and disbursements reasonably incurred by Countrywide to
such date, and otherwise subject to reimbursement hereunder. Termination of this
Agreement pursuant to this Section 32 shall be without the payment of any
penalty.
C. In the event that in connection with the termination of this Agreement a
successor to any of Countrywide's duties or responsibilities under this
Agreement is designated by the Trust by written notice to Countrywide,
Countrywide shall, promptly upon such termination and at the expense of the
Trust, transfer all records maintained by Countrywide under this Agreement and
shall cooperate in the transfer of such duties and responsibilities, including
providing for assistance from Countrywide's knowledgeable personnel in the
establishment of books, records and other data by such successor.
33. SERVICES FOR OTHERS.
--------------------
Nothing in this Agreement shall prevent Countrywide or any affiliated
person (as defined in the 1940 Act) of Countrywide from providing services for
any other person, firm or corporation (including other investment companies);
provided, however, that Countrywide expressly represents that it will undertake
no activities which, in its judgment, will adversely affect the performance of
its obligations to the Trust under this Agreement.
34. LIMITATION OF LIABILITY.
------------------------
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust, personally, but bind only the trust property
of the Trust.
- 13 -
<PAGE>
The execution and delivery of this Agreement have been authorized by the
Trustees of the Trust and signed by an authorized officer of the Trust, acting
as such, and neither such authorization by such Trustees nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but shall
bind only the trust property of the Trust.
35. SEVERABILITY.
-------------
In the event any provision of this Agreement is determined to be void
or unenforceable, such determination shall not affect the remainder of this
Agreement, which shall continue to be in force.
36. QUESTIONS OF INTERPRETATION.
----------------------------
This Agreement shall be governed by the laws of the State of Delaware.
Any question of interpretation of any term or provision of this Agreement having
a counterpart in or otherwise derived from a term or provision of the 1940 Act
shall be resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States Courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the SEC issued pursuant to said 1940 Act. In addition, where the effect of a
requirement of the 1940 Act, reflected in any provision of this Agreement, is
revised by rule, regulation or order of the SEC, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
37. NOTICES.
--------
All notices, requests, consents and other communications required or
permitted under this Agreement shall be in writing (including telex and
telegraphic communication) and shall be (as elected by the person giving such
notice) hand delivered by messenger or courier service, telecommunicated, or
mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, addressed to:
To the Trust: Clearbrook Investment Trust
8000 Towers Crescent Drive, Suite 1350
Vienna, Virginia 22182
Attention: David J. Ortiz
To Countrywide: Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attention: Robert G. Dorsey
- 14 -
<PAGE>
or to such other address as any party may designate by notice complying with the
terms of this Section 37. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery; (b) on the date telecommunicated if by
telegraph; (c) on the date of transmission with confirmed answer back if by
telex, telefax or other telegraphic method; and (d) on the date upon which the
return receipt is signed or delivery is refused or the notice is designated by
the postal authorities as not deliverable, as the case may be, if mailed.
38. AMENDMENT.
----------
This Agreement may not be amended or modified except by a written
agreement executed by both parties.
39. BINDING EFFECT.
---------------
Each of the undersigned expressly warrants and represents that he has
the full power and authority to sign this Agreement on behalf of the party
indicated, and that his signature will operate to bind the party indicated to
the foregoing terms.
40. COUNTERPARTS.
-------------
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
41. FORCE MAJEURE.
--------------
If Countrywide shall be delayed in its performance of services or
prevented entirely or in part from performing services due to causes or events
beyond its control, including and without limitation, acts of God, interruption
of power or other utility, transportation or communication services, acts of
civil or military authority, sabotages, national emergencies, explosion, flood,
accident, earthquake or other catastrophe, fire, strike or other labor problems,
legal action, present or future law, governmental order, rule or regulation, or
shortages of suitable parts, materials, labor or transportation, such delay or
non-performance shall be excused and a reasonable time for performance in
connection with this Agreement shall be extended to include the period of such
delay or non-performance. Countrywide shall take al reasonable steps to minimize
service interruptions and have reasonable contingency plans with appropriate
parties to address any periods that such interruptions continue beyond
Countrywide's control.
- 15 -
<PAGE>
42. MISCELLANEOUS.
--------------
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
CLEARBROOK INVESTMENT TRUST
By:
-------------------------------
Its: President
COUNTRYWIDE FUND SERVICES, INC.
By:
-------------------------------
Its: President
- 16 -
<PAGE>
Schedule A
----------
COMPENSATION
------------
Services Fee
- -------- ---
(Per Account)
As Transfer, Dividend Disbursing,
Shareholder Service and Plan Agent:
Clearbrook Technology Fund Payable monthly at
rate of $20.00/year;
subject to a minimum
charge of $1,500 per
month.
- 17 -
LICENSE AGREEMENT
-----------------
THIS LICENSE AGREEMENT made as of this day of ________, 1998, by and
between CLEARBROOK INVESTMENTS, LLC, a Virginia limited liability company
("Licensor"), and CLEARBROOK INVESTMENT TRUST (the "Trust"), a business trust
organized under the laws of the State of Delaware, acting with respect to the
Clearbrook Technology Fund (the "Fund"), a series of the Trust, which is
operated and administered by the Trust (the "Licensee").
WHEREAS, Licensor has a proprietary interest in the name "Clearbrook" which
interest is recognized by Licensee; and
WHEREAS, Licensor wishes to permit use of the name Clearbrook by Licensee,
subject to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and of other good and
valuable consideration, it is hereby understood and agreed as follows:
1. Licensee acknowledges that it adopted its name and the name of the Fund
through the permission of Licensor which consents to the non-exclusive use by
the Licensee of the name Clearbrook only as long as Licensor serves as the
Licensee's investment adviser.
2. Licensee recognizes that its right to use the name Clearbrook is
non-exclusive and that Licensor may from time to time permit other entities,
including entities engaged in the same or similar business as the Licensee, to
use the name Clearbrook.
3. Licensee covenants and agrees to protect, exonerate, defend, indemnify
and hold harmless Licensor, its directors, principals, members, agents, officers
and employees from and against any and all costs, losses, claims, damages or
liabilities, joint or several, including all legal expenses, which may arise or
have arisen out of Licensee's use or misuse of the name Clearbrook or out of any
breach of or failure to comply with this agreement.
4. Licensee shall not distribute or circulate any prospectus, proxy
statement, sales literature, promotional material and other printed matter
required to be filed with the Securities and Exchange Commission under Section
24(b) of the Investment Company Act of 1940, as amended, which contains any
references to or uses of the name Clearbrook without the prior approval of
Licensor and shall submit all such materials in draft form, allowing sufficient
time for review by Licensor and its counsel prior to any deadline for printing.
<PAGE>
5. If Licensor or any successor to its business shall cease to serve as
Licensee's investment adviser, Licensee:
(a) As promptly as practicable, will take all necessary trustee or
shareholder action to cause its Declaration of Trust to be
amended to accomplish a change of the Fund's name and the name of
the Trust; and
(b) Within 90 days after the termination of this agreement or such
similar contractual arrangement, shall cease to use in any other
manner, including but not limited to use in any prospectus, sales
literature or promotional material, the name Clearbrook or
logotype derived from such name or similar to such name or
indicating that the Fund or the Trust is advised by or otherwise
associated with Licensor.
6. This Agreement shall be binding upon the parties hereto and their
respective successors and assigns, including any successors to the business now
or thereafter conducted by them.
IN WITNESS WHEREOF, each of the Licensor and the Licensee has caused this
Agreement to be executed as of the day and year first herein written.
ATTEST: CLEARBROOK INVESTMENTS, LLC
By:
- ---------------------------- -------------------------------
Its: Officer
ATTEST: CLEARBROOK INVESTMENT TRUST
By:
- ---------------------------- -------------------------------
Its: President
- 2 -
COUNTRYWIDE
FUND SERVICES, INC.
June 29, 1998
Clearbrook Investment Trust
8000 Towers Crescent Drive, Suite 1350
Vienna, VA 22182
Ladies and Gentlemen:
You have requested my opinion in connection with the registration by Clearbrook
Investment Trust, a Delaware business trust (the "Trust"), of an indefinite
number of shares of beneficial interest of the Clearbrook Technology Fund series
of the Trust (the "Shares") authorized by the Trust's Declaration of Trust,
which has been filed with the Securities and Exchange Commission as an exhibit
to the Trust's registration statement on Form N-1A, as amended (the
"Registration Statement"), under the Securities Act of 1933 and the Investment
Company Act of 1940.
I have examined and relied upon originals or copies, certified or otherwise
identified to my satisfaction, of such records, agreements, documents and other
instruments and certificates or comparable documents of public officials and of
officers and representatives of the Trust, and I have made such inquiries of the
officers and representatives of the Trust, as I have deemed relevant and
necessary as the basis for the opinion hereinafter set forth.
In such examination, I have assumed, without independent verification, the
genuineness of all signatures (whether original or photostatic) and the
authenticity of all documents submitted to me as originals and the conformity to
authentic original documents of all documents submitted to me as certified or
photostatic copies. As to all questions of fact material to such opinion, I have
relied upon the certificates referred to hereinabove. I have assumed, without
independent verification, the accuracy of the relevant facts stated therein.
This letter expresses my opinion as to the provisions of the Trust's Declaration
of Trust and the laws of the State of Delaware applying to business trusts
generally, but does not extend to the Delaware Securities Act or to federal
securities or other laws.
312 Walnut Street o Cincinnati, Ohio 45202 o 513.629.2000 o 800.543.8721
<PAGE>
Clearbrook Investment Trust
June 29, 1998
Page Two
Based on the foregoing, and subject to the qualifications set forth herein, I am
of the opinion that the Shares have been duly and validly authorized, and, when
issued and delivered as described in the Registration Statement, will be fully
paid and nonassessable by the Trust.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement. In giving such consent, I do not thereby admit that I come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933 or under the rules and regulations of the Securities and Exchange
Commission promulgated thereunder.
Very truly yours,
/s/ John F. Splain
John F. Splain
General Counsel
AGREEMENT RELATING TO INITIAL CAPITAL
-------------------------------------
________________, 1998
Clearbrook Investment Trust
8000 Towers Crescent Drive, Suite 1350
Vienna, Virginia 22182
Dear Sir/Madam:
In conjunction with the purchase by ____________________ (the "Purchaser")
of 10,000 shares of beneficial interest of the Clearbrook Technology Fund, a
series of the Clearbrook Investment Trust (the "Shares"), the Purchaser hereby
represents that it is acquiring the Shares for investment with no intention of
reselling or otherwise distributing the Shares. The Purchaser hereby further
agrees that any transfer of any of the Shares or any interest therein shall be
subject to the following conditions:
1. The Purchaser shall furnish you and counsel satisfactory to you prior
to the time of transfer, a written description of the proposed
transfer specifying its nature and consequence and giving the name of
the proposed transferee.
2. You shall have obtained from your counsel a written opinion stating
whether in the opinion of such counsel the proposed transfer may be
effected without registration under the Securities Act of 1933. If
such opinion states that such transfer may be so effected, the
Purchaser shall then be entitled to transfer the Shares in accordance
with the terms specified in its description of the transaction to you.
If such opinion states that the proposed transfer may not be so
effected, the Purchaser will not be entitled to transfer the Shares
unless the Shares are registered.
<PAGE>
The Purchaser hereby authorizes you to take such action as you shall
reasonably deem appropriate to prevent any violation of the Securities Act of
1933 in connection with the transfer of the Shares, including the imposition of
a requirement that any transferee of the Shares sign a letter agreement similar
to this one.
Very truly yours,
By:____________________
Its:___________________
- 2 -
PLAN OF DISTRIBUTION
PURSUANT TO RULE 12B-1
----------------------
WHEREAS, Clearbrook Investment Trust (the "Trust"), a business trust
organized under the laws of the State of Delaware, engages in business as an
open-end management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue an unlimited number of shares of
beneficial interest without par value (the "Shares"), which may be divided into
Series of Shares, pursuant to which authority the Trust has created a Series of
Shares known as the Clearbrook Technology Fund (the "Fund"); and
WHEREAS, the Trustees of the Trust as a whole, and the Trustees who are not
interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "Rule 12b-1 Trustees"), having determined, in the
exercise of reasonable business judgment and in light of their fiduciary duties
under state law and under Section 36(a) and (b) of the 1940 Act, that there is a
reasonable likelihood that this Plan will benefit the Fund and its shareholders,
have approved this Plan by votes cast in person at a meeting called for the
purpose of voting hereon and on any agreements related hereto;
NOW, THEREFORE, the Trust hereby adopts this Plan in accordance with Rule
12b-1 under the 1940 Act, on the following terms and conditions:
1. DISTRIBUTION ACTIVITIES. Subject to the supervision of the Trustees of
the Trust, the Trust may, directly or indirectly, engage in any activities
related to the distribution of Shares of the Fund, which activities may include,
but are not limited to, the following: (a) payments to the Fund's distributor
and to securities dealers and others who are engaged in the sale of Fund Shares
and who may be advising shareholders of the Fund regarding the purchase, sale or
retention of Shares; (b) expenses of maintaining personnel (including personnel
of organizations with which the Trust has entered into agreements related to
this Plan) who engage in or support distribution of Fund Shares or who render
shareholder support services not otherwise provided by the Fund's transfer
agent, including, but not limited to, office space and equipment, telephone
facilities and expenses, answering routine inquiries regarding the Fund,
processing shareholder transactions, and providing such other shareholder
services as the Trust may reasonably request; (c) formulating and implementing
of marketing and promotional activities, including, but not limited to, direct
mail promotions and television, radio,
<PAGE>
newspaper, magazine and other mass media advertising; (d) preparing, printing
and distributing sales literature; (e) preparing, printing and distributing
prospectuses and statements of additional information and reports of the Fund
for recipients other than existing shareholders of the Fund; and (f) obtaining
such information, analyses and reports with respect to marketing and promotional
activities as the Trust may, from time to time, deem advisable. The Trust is
authorized to engage in the activities listed above, and in any other activities
related to the distribution of Shares, either directly or through other persons
with which the Trust has entered into agreements related to this Plan.
2. MAXIMUM EXPENDITURES. The expenditures to be made by the Fund pursuant
to this Plan and the basis upon which payment of such expenditures will be made
shall be determined by the Trustees of the Trust, but in no event may such
expenditures exceed in any fiscal year an amount calculated at the rate of .25%
of the average daily net asset value of the Fund. Such payments for distribution
activities may be made directly by the Fund or the Fund's investment adviser or
distributor may incur such expenses and obtain reimbursement from the Fund.
3. TERM AND TERMINATION. (a) This Plan shall become effective on the date
hereof. Unless terminated as herein provided, this Plan shall continue in effect
for one year from the date hereof and shall continue in effect for successive
periods of one year thereafter, but only so long as each such continuance is
specifically approved by votes of a majority of both (i) the Trustees of the
Trust and (ii) the Rule 12b-1 Trustees, cast in person at a meeting called for
the purpose of voting on such approval.
(b) This Plan may be terminated at any time by vote of a majority of
the Rule 12b-1 Trustees or by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Fund.
4. AMENDMENTS. This Plan may not be amended to increase materially the
amount of expenditures provided for in Section 2 hereof unless such amendment is
approved by a vote of the majority of the outstanding voting securities of the
Fund (as defined in the 1940 Act), and no material amendment to this Plan shall
be made unless approved in the manner provided for annual renewal of this Plan
in Section 3(a) hereof.
5. SELECTION AND NOMINATION OF TRUSTEES. While this Plan is in effect, the
selection and nomination of Trustees who are not interested persons (as defined
in the 1940 Act) of the Trust shall be committed to the discretion of the
Trustees who are not interested persons of the Trust.
- 2 -
<PAGE>
6. QUARTERLY REPORTS. The Treasurer of the Trust shall provide to the
Trustees and the Trustees shall review, at least quarterly, a written report of
the amounts expended pursuant to this Plan and any related agreement and the
purposes for which such expenditures were made.
7. RECORDKEEPING. The Trust shall preserve copies of this Plan and any
related agreement and all reports made pursuant to Section 6 hereof, for a
period of not less than six years from the date of this Plan, the agreements or
such reports, as the case may be, the first two years in an easily accessible
place.
IN WITNESS WHEREOF, the Trust has caused this Plan to be executed as of the
date set forth below.
Dated: ___________, 1998
Attest:
_______________________________ By: _______________________________
Secretary President
- 3 -
