As filed via EDGAR with the Securities and Exchange Commission on
November 25, 1998
File No. 333-58813
ICA No. 811-08871
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. 1 [X]
Post-Effective Amendment No. __ [ ]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 1
----------------------
THE SIMMS FUNDS
---------------
(Exact Name of Registrant as Specified in Charter)
55 Railroad Avenue Greenwich, CT 06830
--------------------------------------
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (203) 861-8500
Jay G. Baris, Esq.
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
------------------------
(Name and Address of Agent for Service)
Copy to:
The Simms Funds
55 Railroad Avenue
Greenwich, CT 06830
Approximate date of proposed public offering: As soon as practicable
after this registration statement becomes effective.
Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
CROSS-REFERENCE SHEET
(Pursuant to Rule 404 showing location in the Prospectus of
the responses to the Items in Part A and location in the Statement of Additional
Information of the responses to the Items in Part B of Form N-1A).
THE SIMMS FUNDS
Form N-1A,
Part A
Item Number Prospectus Caption
----------- ------------------
1(a) Front Cover Page
(b) Back Cover Page
2(a) Risk/Return Summary - Each Fund's Investment Objective
(b) Risk/Return Summary - Principal Strategies
(c) Risk/Return Summary - Principal Risks
3 Fees and Expenses of the Funds
4(a) Investments - Each Fund's Investment Objective
(b) Investments - Principal Investment Strategies; Other
Investment Strategies
(c) Risks
5 Performance
6(a) Management of the Funds
(b) Not Applicable
7(a) Shareholder Information - How we value Fund shares
(b) Investing with Simms - How to Purchase Shares
(c) Investing with Simms - How to Redeem Shares
(d) Dividends, Distributions and Taxes
(e) Taxes
(f) Not Applicable
8(a) Investing with Simms - General Information; How we
calculate Sales Charges on Class A Shares; Sales Charge
Reductions and Waivers
(b) Shareholder Servicing Fees
(c) Not Applicable
9 Not Applicable
<PAGE>
THE SIMMS FUNDS
Form N-1A,
Part B
Item Number Statement of Additional Information Caption
----------- -------------------------------------------
10(a) Front Cover Page
(b) Table of Contents
11(a) Additional Information - Description of Shares
(b) Not Applicable
12(a) Statement of Additional Information
(b) Additional Information
(c) Investment Objectives and Investment Policies and
Limitations
(d) Temporary Defensive Measures - Short-Term Obligations
(e) Not Applicable
13(a) Trustees and Officers - Board of Trustees
(b) Trustees and Officers - Board of Trustees; Officers
(c) Trustees and Officers - Board of Trustees
(d) Trustees and Officers - Board of Trustees
(e) Trustees and Officers - Officers
14(a) Miscellaneous
(b) Not Applicable
(c) Trustees and Officers - Officers
15(a) Advisory and Other Contracts - Investment Adviser
(b) Advisory and Other Contracts - Distributor
(c) Advisory and Other Contracts - Investment Adviser
(d) Transfer Agent; Shareholder Servicing Plan; Other Servicing
Plans; Distribution Plan, Fund Accountant; Legal Counsel
(e) Not Applicable
(f) Additional Purchase, Exchange, and Redemption Information -
Dealer Reallowances
(g) Distribution Plan
(h) Administrator; Transfer Agent; Custodian; Independent
Accountant; Legal Counsel
16(a) Portfolio Transactions
(b) Not Applicable
(c) Portfolio Transactions
(d) Not Applicable
(e) Not Applicable
<PAGE>
17(a) Additional Information - Description of Shares
(b) Not Applicable
18(a) Additional Purchase, Exchange, and Redemption Information;
Purchasing Shares
(b) Not Applicable
(c) Additional Purchase, Exchange, and Redemption Information;
Purchasing Shares
(d) Additional Purchase, Exchange, and Redemption Information
19(a) Taxes
(b) Taxes
20(a) Distributor
(b) Not Applicable
(c) Not Applicable
21(a) Not Applicable
(b) Performance of the Funds
22(a) Not Applicable
(b) Not Applicable
(c) Not Applicable
Part C
- - ------
Information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C to this Registration
Statement.
<PAGE>
Part A - Prospectus
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
SIMMS CAPITAL MANAGEMENT, INC.
55 RAILROAD AVENUE, GREENWICH, CONNECTICUT 06830 203-861-8500
The Simms Funds
>> U.S. Equity Fund
>> International Equity Fund
>> Global Equity Fund
This Prospectus describes the two classes of shares that
each Fund offers: Class A Shares, sold primarily to retail
investors, and Class Y Shares, sold
primarily to institutions.
PROSPECTUS
December, 1998
This Prospectus provides important information about each Fund that you should
know before investing. Please read it carefully and keep it for future
reference.
THE SECURITIES AND EXCHANGE COMMISSION
HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED WHETHER THIS
PROSPECTUS IS ACCURATE OR COMPLETE.
ANYONE WHO TELLS YOU OTHERWISE IS
COMMITTING A CRIME.
<PAGE>
TABLE OF CONTENTS
An Overview of the Funds
A presentation of each Fund's risk/return
summary, fees and expenses, and investments....................... 1
Other Investment Strategies............................................
Risks..................................................................
Performance............................................................
Management of the Funds................................................
Shareholder Information................................................
Investing with Simms...................................................
How to Purchase Shares........................................
How to Redeem Shares..........................................
Exchanges.....................................................
Shareholder Services...................................................
Retirement Plans.......................................................
Dividends, Distributions and Taxes.....................................
Additional Information.................................................
<PAGE>
RISK/RETURN SUMMARY
Each Fund's Investment Objective
Capital appreciation.
Principal Strategies
o *** The U.S. Equity Fund invests primarily in securities of large
capitalization U.S. companies ***
The U.S. Equity Fund invests at least 80% of its assets in the equity
securities of large capitalization U.S. companies, including
multinational companies.
o *** The International Equity Fund invests primarily in securities of
large capitalization foreign companies ***
The International Equity Fund invests at least 80% of its assets in the
equity securities of large capitalization foreign companies, including
multinational companies. The Fund primarily invests in American
Depositary Receipts (ADRs) and may also invest directly in non-U.S.
dollar-denominated equity securities of foreign companies.
o *** The Global Equity Fund invests primarily in securities of large
capitalization U.S. and foreign companies ***
The Global Equity Fund invests at least 80% of its assets in the equity
securities of large capitalization U.S. and foreign companies, including
multinational companies. The Fund's foreign equity investments will consist
primarily of ADRs and the Fund may also invest directly in non-U.S.
dollar-denominated equity securities of foreign companies.
We seek to invest in securities that we believe offer the best potential for
growth at a reasonable price. To that end, Simms Capital Management, Inc., the
Funds' investment adviser (Simms), uses a proprietary "bottom-up" quantitative
and qualitative stock selection process.
A "bottom-up" approach to investing emphasizes the evaluation of individual
stocks more than the consideration of broader market and economic trends. Some
of the factors for the quantitative stock selection process include current and
future earnings estimates prepared by various securities analysts as well as a
proprietary mathematical algorithm developed by Simms. See "Investments --
Principal Investment Strategies."
Principal Risks
Each Fund is subject to the risks common to all mutual funds that invest in
equity securities. The following risks could cause you to lose money by
investing in a Fund:
>> The stock market goes down
>> "Growth" stocks fail to meet future sales or future earnings
estimates
>> A company's earnings do not increase as expected
In addition, you should be aware that:
>> "Growth" stocks may suffer steeper losses than other investments
during market declines of economic downturns
>> Multinational companies are vulnerable to currency exchange and/or
political risks
>> Simms has not managed a mutual fund prior to the Funds'
commencement of operations
<PAGE>
The International Equity and Global Equity Funds are also subject to certain
risks that are not typical of investments in the securities of U.S. companies,
such as
>> Political or economic events overseas adversely affect securities
of foreign issuers
>> Non-U.S. dollar-denominated securities may experience adverse
foreign currency fluctuations
We summarize these and other risk factors in the "Risks" section later in this
Prospectus.
Who may want to invest in the Funds
Each Fund may be appropriate for investors who:
>> are long-term investors with a particular goal, like saving for
retirement
>> want potential growth over time
>> want a diversified portfolio that includes multinational companies
>> are willing to take more risk in the short-term for potentially
higher gains in the long-term
The U.S. Equity Fund may be appropriate for investors who want a portfolio
comprised primarily of the securities of U.S. issuers.
The International Equity Fund may be appropriate for investors who want a
portfolio comprised primarily of the securities of foreign issuers.
The Global Equity Fund may be appropriate for investors who want a portfolio
that includes securities of U.S. and foreign issuers.
The Funds may not be appropriate for investors who:
>> are investing for the short term or need current income
>> are not willing to take any risk that they may lose money on their
investment
>> want absolute stability of their investment principal
>> want to invest in a particular sector or in particular industries,
countries, or regions
Keep in mind that mutual fund shares:
>> are not deposits or obligations of, or guaranteed or endorsed by,
any bank
>> are not insured by the Federal Deposit Insurance Corporation, the
Federal Reserve Board, or any other government agency
>> are subject to investment risks, including possible loss of the
principal amount invested
2
<PAGE>
Fees and Expenses of the Funds
This table describes the fees and expenses that you may pay if you buy and hold
shares of a Fund
<TABLE>
<CAPTION>
International Global
U.S. Equity Fund Equity Fund Equity Fund
---------------- ----------- -----------
Class A Class Y Class A Class Y Class A Class Y
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Shareholder Fees
(fees paid directly from your investment)
Maximum sales charge (load) imposed
on purchases (as a percentage of 4.00% None 4.00% None 4.00% None
offering price) (1)
Maximum deferred sales charge (load)
None None None None None None
Maximum sales charge (load) imposed None None None None None None
on reinvested dividends
Redemption fee (2) None None None None None None
Annual Fund Operating Expenses
(expenses that are deducted from the
Fund's assets, as a percentage of net
assets)
Management fees .75% .75% 1.00% 1.00% 1.00% 1.00%
Rule 12b-1 distribution fees (3) .50% None .50% None .50% None
Other fees (4) 2.13% 1.88% 1.99% 1.74% 1.99% 1.74%
----- ----- ----- ----- ----- -----
Total annual Fund 3.38% 2.63% 3.49% 2.74% 3.49% 2.74%
operating expenses (5)
</TABLE>
Notes:
1. The initial sales charge imposed on Class A Shares declines for
purchases over $100,000 and the charge is eliminated entirely for
purchases of at least $1 million and for certain categories of
investors.
See "Investing With Simms" below.
2. You may pay fees in connection with certain redemption services, such
as a $12 wire transfer fee.
3. Class A Shares of each Fund pay distribution fees on an ongoing basis.
Over time, these fees will increase the cost of your investment and may
cost you more than paying other types of sales charges. T.O. Richardson
Securities, Inc., the Funds' Distributor, will waive its distribution
fees to the extent that the Fund would exceed the regulatory
limitations on asset-based sales charges.
4. Includes a shareholder servicing fee of .25% charged to Class A shares
only.
5. We expect that each Fund's total annual operating expenses will
decrease as the Fund's assets increase. Simms Capital Management, Inc.
(Simms or the Adviser) has agreed to defer its investment advisory fee
and absorb certain expenses to the extent that total annual Fund
operating expenses exceed the following limits: U.S. Equity Fund: 2.06%
(Class A) and 1.31% (Class Y); International Equity Fund: 2.38% (Class
A) and 1.63% (Class Y); and Global Equity Fund: 2.23% (Class A) and
1.48% (Class Y). Simms may
3
<PAGE>
terminate or modify these reductions at any time.
To the extent that Simms defers fees or absorbs expenses, it may seek
payment of such deferred fees or reimbursement of such absorbed
expenses for two years after the year in which fees were deferred or
expenses were absorbed. A Fund will make no such payment or
reimbursement, however, if the total annual Fund operating expenses
exceed the expense limits in effect at the time these payments or
reimbursements are proposed.
Example
This example is intended to help you compare the cost of investing in each Fund
with the cost of investing in other mutual funds. The figures shown below would
be the same whether or not you sold your shares at the end of a period.
This example assumes that:
>> you invest $10,000 in the Fund for the time periods indicated
>> your investment returns 5% each year
>> the Fund's operating expenses remain the same
Although your actual costs may be higher or lower, under these assumptions your
costs would be:
<TABLE>
<CAPTION>
International
U.S. Equity Fund Equity Fund Global Equity Fund
---------------- ----------- ------------------
Class A Class Y Class A Class Y Class A Class Y
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
One Year $727 $266 $738 $277 $738 $277
--------
Three Years $1,397 $817 $1,428 $850 $1,428 $850
-----------
</TABLE>
4
<PAGE>
INVESTMENTS
Each Fund's Investment Objective
Capital appreciation
Principal investment strategies
U.S. Equity Fund
- - ----------------
*** The U.S. Fund invests primarily in securities of large capitalization U.S.
companies ***
The U.S. Equity Fund invests primarily in the common stock of large
capitalization U.S. companies, including multinational companies. The Fund may
also invest in convertible securities and preferred stock of U.S.
companies.
International Equity Fund
- - -------------------------
*** The International Equity Fund invests primarily in securities of large
capitalization foreign companies ***
The International Equity Fund invests primarily in the securities of large
capitalization foreign companies, including multinational companies. The Fund
invests primarily in ADRs and may also invest directly in non-U.S.
dollar-denominated equity securities of foreign companies.
Global Equity Fund
- - ------------------
*** The Global Equity Fund invests primarily in securities of large
capitalization U.S. and foreign companies ***
The Global Equity Fund invests primarily in the securities of large
capitalization U.S. and foreign companies, including multinational companies.
The Fund's foreign equity investments will primarily consist of ADRs and the
Fund may also invest directly in non-U.S. dollar-denominated equity securities
of foreign companies.
*** The Funds will invest in the securities of large capitalization companies,
that is, securities of companies whose market capitalization is greater than $1
billion at the time of purchase ***
*** We seek growth at a reasonable price. ***
Simms looks for securities that offer the best potential for growth at a
reasonable price. That is, we look for stocks that we believe will increase in
value over time, based upon our analysis of a company's growth prospects.
We seek to invest in companies with relatively high return on equity and high
earnings growth rates, not companies or industries that have predominantly
cyclical characteristics. In choosing investments, we analyze the following
factors:
>> the present value of a company's future cash flows using a
proprietary Dividend Discount Model
>> This Model computes the present value of the estimated future
dividends of a company utilizing an assumed interest rate
that is based on the inherent risks that the company faces
>> the stock's price relative to similar companies
>> the company's financial condition and cash flow
>> the growth of the company's earnings
>> demand and supply for a company's shares, including insider
transactions
5
<PAGE>
>> industry momentum, that is, the rate at which the company's sector
is growing
>> the stock's liquidity
>> the company's exposure to economic conditions outside the U.S.
>> for foreign securities, diversification by country as compared with
the country weighting of the Morgan Stanley Capital International
Europe, Australasia, Far East (EAFE) Index
>> for foreign securities, a company's economic exposure to countries
outside its home base, including the U.S.
Investment policies
o U.S. Equity Fund: Under normal market conditions, we expect to invest at
least 80% of the U.S. Equity Fund's total assets in common stock. We expect
to invest no more than 20% of the Fund's total assets in convertible or
preferred securities, debt securities, or money market instruments, if at
all.
o International Equity Fund: Under normal market conditions, we expect to
invest at least 80% of the International Equity Fund's total assets
primarily in ADRs of foreign companies or directly in non-U.S.
dollar-denominated equity securities of foreign companies. We expect to
invest no more than 20% of the Fund's total assets in convertible or
preferred securities, debt securities, or money market instruments, if at
all.
o Global Equity Fund: Under normal market conditions, we expect to invest at
least 80% of the Global Equity Fund's total assets in (i) the common stock
of U.S. issuers, and (ii) equity securities of foreign companies, primarily
ADRs, or directly in non-U.S. dollar-denominated equity securities of
foreign companies. We expect to invest no more than 20% of the Fund's total
assets in convertible or preferred securities, debt securities, or money
market instruments, if at all.
When we determine that market conditions warrant temporary defensive measures or
for cash management purposes, each Fund may hold up to 100% of its assets in
cash and U.S. dollar denominated money market instruments, which may result in
performance that is inconsistent with its investment objective.
*** We use a bottom-up approach in selecting stocks. ***
Other investment strategies
>> Debt instruments. After implementing a Fund's principal investment
strategy, we may invest the balance of each Fund's assets in U.S.
dollar-denominated debt instruments (bonds) issued by U.S.
companies or by the U.S. Government, including short-term "money
market" instruments. In addition, the International Equity Fund and
the Global Equity Fund may also invest in non-U.S.
dollar-denominated bonds issued by foreign companies or governments
or supranational organizations.
*** We may invest defensively or hedge our investments to protect against a
downturn ***
>> Defensive investing. During unfavorable market conditions, we may
invest "defensively," that is, make temporary investments that are
not consistent with a Fund's investment objective and principal
strategies. For example, if there is a market downturn or if we
must raise cash to meet redemption requests, we may invest more
assets in bonds or money market instruments, or invest in
derivative instruments to protect our investments.
6
<PAGE>
>> Options. From time to time, we may write covered call options on
securities owned by a Fund in order to enhance the Fund's return.
>> Portfolio turnover. We may trade actively and frequently to achieve
a Fund's objective, which may result in higher capital gains
distributions and increase your tax liability. Frequent trading may
also increase the Fund's costs, affecting the Fund's performance
over time.
>> Lending. Each Fund may lend a portion of its securities to
financial institutions for a fee.
>> Borrowing. Each Fund may borrow from banks as a temporary defensive
measure, to meet redemption requests, or for other purposes that
are consistent with the Fund's investment objective and strategies.
International Equity Fund and Global Equity Fund
Closed-End Funds. Each of the International Equity and Global
Equity Funds may invest in closed-end funds that invest in foreign
companies.
*** The Statement of Additional Information (SAI) describes each Fund's
investment strategies in more detail. ***
Risks
*** Mutual fund investing involves risks ***
Each Fund is designed for long-term investors. The Funds are subject to risks
common to all mutual funds and risks common to mutual funds that invest in
equity securities and, to a lesser extent, debt securities. The International
Equity Fund and the Global Equity Fund are also subject to risks common to
mutual funds that invest in foreign securities.
You should only invest in a Fund if you are willing and able to take the risks
involved. Please read "Risks of Investing" carefully.
As with all mutual funds, investing in a Fund involves certain risks. There is
no guarantee that a Fund will meet its investment objective. You can lose money
by investing in a Fund, especially if you sell your shares during periods of
market volatility. There is never any assurance that a Fund will continue to
perform as it has in the past.
Each Fund may use various investment techniques, which involve varying amounts
of risk. We discuss these investment techniques in detail in the SAI. To reduce
risk, each Fund is subject to certain investment limitations and restrictions,
which we also describe in the SAI.
The following paragraphs describe some of the principal risks of investing in
the Funds that you should be aware of:
The following risks are common to all mutual funds
>> Market risk is the risk that the market value of a security may go
up or down, sometimes rapidly. These fluctuations may cause the
security to be worth less than it was at the time it was purchased.
Market risk may involve a single security, a particular sector,
country or region, or the global economy.
>> Manager risk is the risk that a portfolio manager's investment
strategy may not produce the intended results. Manager risk also
involves the possibility that a portfolio manager fails to execute
an investment strategy effectively.
7
<PAGE>
>> Year 2000 risk is the risk that a Fund or its service providers
could be disrupted by the possible failure of computer systems that
cannot accurately process date-related information after December
31, 1999. This failure, referred to as the "Year 2000 Issue," could
adversely affect the handling of securities trades, pricing and
account servicing for the Funds.
The Adviser has taken steps that it reasonably believes are
designed to adequately address the Year 2000 Issue. In addition,
the Adviser has been informed that the Funds' other major service
providers have taken similar steps. Neither the Adviser nor the
Funds' other major service providers can assure that these steps
will be sufficient to avoid any adverse affects from the Year 2000
Issue.
The following risk is common to mutual funds that invest in equity securities
>> Equity risk is the risk that a security's value will fluctuate in
response to events affecting an issuer's profitability or
viability. Unlike debt securities, which have a preference to a
company's earnings and cash flow, equity securities receive value
only after the company meets its other obligations. For example, in
the event of bankruptcy, a company's bondholders have preference
over stockholders to the company's assets.
The following risks are common to mutual funds that invest in debt securities
>> Interest rate risk is the risk that a security may lose value if
interest rates change. Generally, the value of a debt security
changes in the opposite direction from a change in interest rates.
That is, when interest rates rise, the value of a fixed-rate bond
typically will decrease. When interest rates decline, the value of
a fixed-rate bond typically will increase. In general, the bonds
with longer maturities are more sensitive to changes in interest
rates.
>> Credit risk is the risk that the issuer of a debt security will be
unable to make timely payments of principal or interest, or will
default.
>> Reinvestment risk is the risk that an investor may obtain a lower
rate or return when reinvesting interest income, maturing
principal, or the proceeds from selling debt securities.
The following risks are common to mutual funds that invest in foreign securities
>> Foreign investment risk is the risk that the value of securities of
foreign companies could be affected by factors not present in the
U.S., including expropriation, confiscation of property,
difficulties in enforcing contracts, adverse changes in currency
exchange rates, and political risks. The introduction on January 1,
1999 of a single currency, the euro, by the participating nations
in the European Economic and Monetary Union may present unique
uncertainties for securities denominated in (or whose value is
linked to) currencies that will become components of the euro.
The following risks are common to mutual funds that use hedging or leveraged
transactions
>> Correlation risk is the risk that changes in the value of a hedging
instrument will not correlate, or match, those of the underlying
security being hedged. Generally, a portfolio manager would enter
into a hedging transaction to protect the value of a portfolio
position without selling it.
8
<PAGE>
>> Leverage risk is the risk associated with certain techniques (like
borrowing) that multiply small price movements of an index or a
security into large price movements. A Fund's use of a derivative
to hedge a portfolio position may involve leverage. If the hedge
works properly, the gains produced will offset losses on the
securities hedged. Hedging may also reduce gains, or, if not
executed properly, may result in losses. A Fund's use of
derivatives for speculation or asset substitution may also involve
leverage, because gains or losses might be substantially greater
than the amount the Fund invests.
>> None of the Funds currently uses hedging or leveraged transactions,
but each Fund may do so in the future.
PERFORMANCE
The U.S. Equity Fund and the International Equity Fund are successors to Simms
Partners (U.S.), L.P. (the U.S. Partnership) and Simms Partners (International),
L.P. (the International Partnership), two private investment funds managed by
Simms.
The investment objective, policies, and strategies of the U.S. Equity Fund and
the International Fund are the same as those of the corresponding Partnerships.
Since each Fund will continue to operate in all material respects equivalent to
the management of the Partnerships, the past performance of these investment
vehicles may be considered relevant. However, past performance does not
necessarily indicate how the Fund will perform in the future.
As mutual funds, each Fund is subject to different rules and regulations than
those that govern private funds. In addition, the Partnerships did not incur the
same operating expenses that mutual funds incur. The Partnerships were not
subject to the Investment Company Act of 1940 or Subchapter M of the Internal
Revenue Code of 1986. If the Partnerships were subject to the diversification
requirements of these laws, their historical performance might have been
different.
While the historical information relating to each Fund's Class A Shares has been
adjusted to reflect the Fund's maximum sales charge of 4.00%, it has not been
adjusted for the estimated operating expenses of the Fund (reflecting the
voluntary expense limitations described in "Fees and Expenses of the Funds"),
and only reflects all expenses that were incurred by the corresponding
Partnership during the periods shown. The information relating to Class Y Shares
reflects only those expenses incurred by the Partnerships. Adjusting the
Partnerships' performance for estimated Fund operating expenses would result in
total return figures that are higher than those that would result from the use
of actual Partnership expenses.
<TABLE>
<CAPTION>
======================================================================================================================
Average Annual Total Returns of the Partnerships *
For the Periods Ended October 31, 1998
======================================================================================================================
Class A
======================================================================================================================
<S> <C> <C> <C>
One Year Two Years Since July 1, 1996**
- - ------------------------------ ------------------------ ---------------------------- ---------------------------------
U.S. Partnership 14.88% 22.06% 23.71%
- - ------------------------------ ------------------------ ---------------------------- ---------------------------------
International Partnership (4.70%) 9.40% 7.90%
- - ------------------------------ ------------------------ ---------------------------- ---------------------------------
======================================================================================================================
Class Y
======================================================================================================================
- - ------------------------------ ------------------------ ---------------------------- ---------------------------------
One Year Two Years Since July 1, 1996**
- - ------------------------------ ------------------------ ---------------------------- ---------------------------------
U.S. Partnership 15.50% 22.98% 24.70%
- - ------------------------------ ------------------------ ---------------------------- ---------------------------------
International Partnership (4.90%) 9.79% 8.23%
- - ------------------------------ ------------------------ ---------------------------- ---------------------------------
======================================================================================================================
</TABLE>
9
<PAGE>
- - --------------------------------------------------------------------------------
* This performance data has been calculated net of advisory fees and the
Funds' maximum front-end sales load of 4.00%. Simms has calculated
performance information in compliance with the Performance Presentation
Standards of the Association for Investment Management and Research, an
organization of investment managers and analysts. This method of
calculating performance differs from the method used by the Securities and
Exchange Commission.
** Inception date of each Partnership.
<TABLE>
<CAPTION>
======================================================================================================================
Total Returns of the Partnerships
For the Years Ended October 31
======================================================================================================================
Class A
======================================================================================================================
<S> <C> <C> <C>
1998 1997 1996+
U.S. Partnership 14.88% 49.20% 64.58%
- - ---------------------------------- ------------------------- ------------------------- -------------------------------
International Partnership (4.70%) 19.72% 19.44%
- - ---------------------------------- ------------------------- ------------------------- -------------------------------
======================================================================================================================
Class Y
======================================================================================================================
- - ---------------------------------- ------------------------- ------------------------- -------------------------------
1998 1997 1996+
- - ---------------------------------- ------------------------- ------------------------- -------------------------------
U.S. Partnership 15.50% 51.25% 67.27%
- - ---------------------------------- ------------------------- ------------------------- -------------------------------
International Partnership (4.90%) 20.54% 20.25%
================================== ========================= ========================= ===============================
</TABLE>
+ Not annualized
***Past performance is not a guarantee of future results. History does not
always repeat itself.***
MANAGEMENT OF THE FUNDS
Investment Adviser
Simms, the investment adviser of the Funds, is located at 55 Railroad Avenue,
Greenwich, Connecticut 06830. Simms is a registered investment adviser and
offers investment advisory services to open-end investment funds and other
managed pooled investment vehicles.
Simms supervises and assists in the overall management of the Funds' affairs,
subject to oversight by the Funds' Board of Trustees. The following table lists
the advisory fees paid to Simms based at the indicated annual rates of a Fund's
average daily net assets, computed daily and payable monthly. Simms may from
time to time defer receipt of all or part of its advisory fees and/or absorb
expenses in order to limit a Fund's expenses. Simms may terminate this practice
at any time.
U.S. Equity Fund -> .75%
International Equity Fund -> 1.00%
Global Equity Fund -> 1.00%
Portfolio Managers
Each Fund is managed by Robert A. Simms, Thomas L. Melly, Jennifer D. Miller,
and Robert Rosa, Jr.
Mr. Simms has been the President and CEO of Simms since 1984, prior to which he
was a General Partner of Bear, Stearns & Co. Mr. Melly, a Principal of Simms,
joined Simms in 1990, prior to which he specialized in product development and
evaluation at Lake Partners, Inc., an independent financial consulting firm. Ms.
Miller, a Principal of Simms, joined Simms in 1991, prior to which she served as
a quantitative and technical analyst with Salomon Brothers Inc. Mr. Rosa joined
Simms in March 1997.
10
<PAGE>
Distributor
T.O. Richardson Securities, Inc., 2 Bridgewater Road, Farmington, Connecticut
06032, serves as each Fund's principal underwriter and distributor. The
Distributor receives the sales load described under "How to Buy Shares" and
payments under each Fund's distribution plan.
Distribution Fees
Each Fund, on behalf of its Class A Shares, has adopted a distribution plan
according to Rule 12b-1 under the Investment Company Act of 1940. Under the
distribution plan, each Fund's Class A Shares pays the Distributor a fee of up
to 0.50% of its average daily net assets to reimburse expenses it may incur in
distributing shares.
Keep in mind that:
>> Each Fund pays distribution fees on an ongoing basis.
Over time, these fees will increase the cost of your
investment and may cost you more than paying other
types of sales charges.
>> The Distributor will waive its distribution fees to
the extent that a Fund would exceed the National
Association of Securities Dealers, Inc.'s limitations
on asset-based sales charges.
Shareholder Servicing Fees
Each Fund, on behalf of its Class A Shares, has adopted a shareholder servicing
plan. Under the shareholder servicing plan, Class A Shares may pay financial
institutions, including affiliates of the Adviser, a fee of up to .25% of its
average daily net assets for services relating to maintenance of investor
accounts, including liaison with investors. The shareholder servicing fee and
the distribution fee may be used to compensate "mutual fund supermarkets" or "no
transaction fee" programs that make available Fund shares.
SHAREHOLDER INFORMATION
How we value Fund shares
***The net asset value, multiplied by the number of Fund shares you own, gives
you the value of your investment.***
We calculate each Fund's net asset value (the NAV), each business day as of the
close of the New York Stock Exchange, Inc. (NYSE), normally 4:00 p.m. Eastern
Time. The purchase price of a Fund's Class A Shares is determined by adding the
applicable sales charge to the Fund's net asset value. The purchase price of a
Fund's Class Y Shares is equal to the Fund's net asset value. Any shares that
you purchase, redeem, or exchange are valued at the next share price calculated
after we receive and accept your investment instructions. A business day is a
day on which the NYSE is open for trading or any day in which enough trading has
occurred in the securities held by a Fund to affect the NAV materially.
Portfolio securities that are listed primarily on foreign exchanges may trade on
weekends or on other days on which the Funds do not price their shares.
The Funds value their investments based on market value. When market quotations
are not readily available, the Funds value their investments based on fair value
methods approved by the Funds' Board of Trustees. We calculate the NAV by adding
up the total value of a Fund's investments and other assets, subtracting its
liabilities and then dividing that figure by the number of the Fund's
outstanding shares. The value of an investment in a mutual fund is based upon
the NAV determined by that mutual fund.
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<PAGE>
NAV = Total Assets Less Liabilities
-----------------------------
Number of Shares Outstanding
You can find the NAV of most mutual funds every day in The Wall Street Journal
and other newspapers. Newspapers do not normally publish information about a
particular mutual fund until it has a minimum number of shareholders or minimum
level of assets.
INVESTING WITH SIMMS
This section provides information to assist you in purchasing shares of the
Funds. We describe the minimum investment requirements for each Fund. We also
describe the expenses and sales charges applied to each Class of shares and the
procedures to follow if you decide to buy shares of a Fund. Please read the
entire Prospectus carefully before buying shares of a Fund.
Investment Requirements
Minimum Initial Investment
<TABLE>
<CAPTION>
Non-Retirement Account Retirement Account
---------------------- ------------------
<S> <C> <C>
o Class A Shares $1,000 $500
--------------
o Class Y Shares $1,000,000 not applicable
--------------
Minimum Subsequent Investment
Non-Retirement Account Retirement Account
---------------------- ------------------
o Class A Shares $50 $25
--------------
o Class Y Shares $250,000 not applicable
--------------
General Information
</TABLE>
o Class A Shares are sold at NAV plus a front-end sales charge. The
Class A purchase minimums indicated above may be waived.
o Class Y Shares are sold primarily to institutions at NAV without a
front-end sales charge. Class Y Shares may be sold to individuals
who invest at least $1 million. In addition, the Class Y purchase
minimums indicated above may be waived.
Class A and Class Y Shares of the Funds may be purchased from the following:
o Authorized Securities Dealers
o Firstar Mutual Fund Services LLC, the Funds' Transfer Agent (Firstar or
the Transfer Agent)
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<PAGE>
How We Calculate Sales Charges on Class A Shares
The Class A Shares' sales load varies according to the size of the purchase.
<TABLE>
<CAPTION>
Amount of Purchase Initial Sales Charge: % of Offering Price % of Net Amount Invested
------------------ ----------------------------------------- ------------------------
<S> <C> <C>
Less than $100,000 4.00 4.17
$100,000 to $249,999 3.00 3.09
$250,000 to $499,999 2.00 2.04
$500,000 to $999,999 1.00 1.01
$1,000,000 and over* 0.00 0.00
</TABLE>
* Individuals investing at least $1 million in a Fund may purchase either
Class A Shares or Class Y Shares of the Fund. Although Class Y
Shares do not carry a Rule 12b-1 distribution fee, purchasers of
Class Y Shares do not receive the services provided to investors in
Class A Shares.
Certain purchases may be grouped in order to qualify for the reduced sales load:
o purchases by an individual, his or her spouse and minor children
o purchases by a fiduciary of a trust, estate or fiduciary account
Sales Charge Reductions and Waivers
Waiver of Class A Sales Charges
The following categories of investors may purchase Class A Shares without a
front-end sales charge:
o qualified retirement plans
o Simms, Firstar, their active or retired trustees, directors, officers,
partners or employees and certain family members of these individuals
o active or retired Trustees or officers of the Funds
o investors who purchase Class A Shares through fee-based investment accounts
o employees of Authorized Securities Dealers
o organizations providing professional services to the Funds
o registered investment advisers purchasing shares for their own accounts or
discretionary accounts
*** To take advantage of the sales charge waiver, you must indicate your
eligibility for a waiver on your application. If you think you may be eligible
for a sales charge waiver, please contact your Authorized Securities Dealer or
the Transfer Agent at 1-877-GET-SIMS (1-877-438-7467). ***
Reduction of Class A Sales Charges
You may reduce your Class A sales charge by taking advantage of the following
privileges:
>> Right of Accumulation: Allows you to add to the value of all
Class A Shares of Funds that you currently own for purposes of
calculating the sales charge on future purchases of Class A
Shares. You may count share purchases made by the following
people to calculate the reduced sales charge:
13
<PAGE>
>> you, your spouse, your children under the age of 21 (including
shares in certain retirement accounts) and a company that you,
your spouse or your children control;
>> a trustee or other fiduciary account (including an employee
benefit plan);
>> a trustee or other fiduciary that purchases shares at the same
time for two or more employee benefit plans of a single
employer or of affiliated employers.
>> Letter of Intent: Allows you to purchase Class A Shares of the Funds
over a 13-month period at the same sales charge as if all shares had
been purchased at once. You are not obligated to purchase the full
amount of the shares, but you must complete the intended purchase to
obtain the reduced sales load. At the time you purchase shares of
any Fund, check the "Letter of Intent" box on the Account
Information Form.
>> Group Purchases. If you are an individual member of a qualified
group, you may purchase Class A Shares at the reduced initial sales
charge applicable to the group taken as a whole. For example, if
members of the group had previously invested and still held $90,000
of Class A Shares and now were investing $15,000, the initial sales
charge would be 3.00%. To qualify, the group must have the following
characteristics:
>> in existence for more than six months
>> have a purpose other than purchasing Class A Shares at a
discount
>> consist of more than 10 individuals
>> be able to meet as a group with Fund representatives
>> distribute Fund sales materials to its members
>> arrange for payroll deduction or other bulk transmission of
Fund investments
*** When you purchase shares, you must specify the class of shares. Otherwise,
we will assume that you wish to purchase Class A Shares ***
How to Purchase Shares
You may purchase shares of the Funds through an Authorized Securities Dealer by
check or wire. If you purchase shares through the Transfer Agent, you must pay
by check or wire in U.S. dollars. Instructions for buying shares are described
below.
Opening An Account
Method of Payment Instructions
By Check
o complete application
o Make check or draft payable to "The Simms
Funds - [name of Fund]" or your Authorized
Securities Dealer. Be sure to specify the
Fund name and class of shares you wish to
purchase.
14
<PAGE>
o Mail your check and your completed account
application to:
Firstar Mutual Fund Services LLC
Attn: The Simms Funds
[name of Fund]
P.O. Box 701
Milwaukee, Wisconsin 53201-0701.
Overnight deliveries should be sent to:
Firstar Mutual Fund Services LLC
615 East Michigan Street
Milwaukee, Wisconsin 53202.
o The Funds do not consider the U.S. Postal
Service or other independent delivery
services to be their agents. Accordingly,
deposit in the mail or with such services,
or receipt at the Transfer Agent's post
office box, of purchase applications do not
constitute receipt by Firstar or the Funds.
o Authorized Securities Dealers must receive
your payment within 3 business days of
receipt of your purchase order.
o Neither cash nor third party checks will be
accepted.
o Firstar will charge a $20 fee for any
returned payment check. By Wire
By Wire o Deliver your completed account
application to your Authorized Securities
Dealer or to Firstar at the address listed
above.
o Instruct your bank to wire the amount of
your investment to:
Firstar Bank Milwaukee, N.A.
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
ABA # 075000022
Credit: Firstar Mutual Fund Services LLC
Account # 112-952-137
Further credit: Simms Fund [name of Fund]
Name of shareholder and account number
By Exchange o Call your Authorized Securities
Dealer or Firstar (1-877-GET-SIMS) to
request an exchange.
Adding To An Existing Account
Method of Payment Instructions
By Check o Make the check payable to "The Simms Funds
[name of Fund]".
o Fill out the additional investment form.
o Send your check and your[investment slip] to
Firstar at the address listed above.
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<PAGE>
By Wire o Instruct your bank to wire the amount of
your investment to Firstar, using the
instructions set out above.
o Wired funds must be received prior to 4:00
p.m. Eastern time to be eligible for same
day pricing.
o Be sure to specify the name of the Fund and
the class of shares you wish to purchase.
By Exchange o Call your Authorized Securities
Dealer or Firstar (1-877-GET-SIMS) to
request an exchange.
By Phone o Verify that your bank or credit union is a
member of the Automated Clearing House (ACH)
system.
o Complete the required information on your
account application.
o Subsequent investments (not initial
purchases) may be made by calling
1-877-GET-SIMS.
o Tell the Transfer Agent representative the
amount of your investment, the name of the
Fund, the Class of shares you wish to
purchase, your account number and the
name(s) in which the account is registered.
How to Redeem Shares
o You may redeem shares at any time.
o When we receive your redemption request in proper form (see below), we
will redeem your shares at the next determined NAV.
o We will normally mail your redemption proceeds the next business day
and, in any event, no later than seven business days after we receive
your redemption request.
Redemption Procedures
Redemption through Firstar or Authorized Securities Dealers:
Method of Redemption Instructions
In person o Contact your Authorized Securities Dealer or
Firstar (1-877-GET-SIMS).
o Specify the name of the Fund, Class of
shares and number of shares or the dollar
amount you wish to redeem.
By telephone o Call your Authorized Securities Dealer or
Firstar (1-877-GET-SIMS).
o Specify the name of the Fund, account
number, Class of shares and number of shares
or the dollar amount you wish to redeem.
16
<PAGE>
By mail o Mail your redemption request to your
Authorized Securities Dealer, or
o Mail your redemption request to:
Firstar Mutual Fund Services LLC
Attn: The Simms Funds
[name of Fund]
P.O. Box 701
Milwaukee, Wisconsin 53201-0701.
Overnight deliveries should be sent to:
Firstar Mutual Fund Services LLC
615 East Michigan Street
Milwaukee, Wisconsin 53202.
o Deposit of redemption requests in the mail
or with independent delivery services does
not constitute receipt of such requests by
Firstar or the Funds. See "Opening an
Account -- Method of Payment -- By Check"
above.
o Specify the name of the Fund, Class of
shares and number of shares or the dollar
amount you wish to redeem.
By wire o Submit wire instructions to:
Firstar Bank Milwaukee, N.A.
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
ABA # 075000022
Credit: Firstar Mutual Fund Services LLC
Account # 112-952-137
Further credit: The Simms Funds [name of
Fund]
Name of shareholder and account number
o Specify the name of the Fund, Class of
shares and number of shares or the dollar
amount you wish to redeem.
o Firstar charges a $12 wire fee for
redemption proceeds made by Fed wire.
Additional Information about Redemptions
>> Purchases by check. If you purchase shares by check, we will
wait up to 12 days for your check to clear before accepting
your redemption request.
>> Wiring redemption proceeds. Upon request, we will wire your
proceeds ($500 minimum) to your brokerage account or a
designated commercial bank account. Firstar charges a
transaction fee of $12 for this service. Please call your
Authorized Securities Dealer for information on how to wire
funds to your brokerage account. If you do not have a
brokerage account, call Firstar at 1-877-GET-SIMS to wire
funds to your bank account.
>> Firstar Money Market Fund. At your request, redemption
proceeds may be invested in a money market fund managed by
Firstar Investment Research and Management Company, LLP, an
affiliate of Firstar. Contact your Authorized Securities
Dealer or Firstar (1-877-GET-SIMS).
17
<PAGE>
>> Signature guarantees. If your redemption proceeds exceed
$25,000, if you instruct us to send the proceeds to someone
other than the record owner at the record address or if you
are a corporation, partnership, trust or fiduciary, your
signature must be guaranteed by any eligible guarantor
institution. Call Firstar at 1-877-GET-SIMS for information
about obtaining a signature guarantee.
>> Redemption by mail may cause a delay. During times of drastic
economic or market conditions, you may experience difficulty
telephoning Firstar or an Authorized Securities Dealer to
redeem shares. If this occurs, please consider using the other
redemption procedures described in this Prospectus. Redeeming
shares using these alternative procedures may take longer than
if you phoned your redemption request.
>> Automatic redemption; redemption in kind. If the value of your
account falls below $600 (for reasons other than changes in
market conditions), we may automatically redeem the shares in
your account and send you the proceeds. We will send you a
notice at least 60 days before we do this. We also reserve the
right to redeem your shares "in kind." For example, if you
redeem a large amount of shares and the Fund is unable to sell
securities to raise cash, we may send you a combination of
cash and a share of actual portfolio securities. Call the
Transfer Agent for details.
>> Telephone policies. You may authorize the Transfer Agent to
accept telephone instructions. If you do, the Transfer Agent
will accept instructions from people who it believes are
authorized to act on your behalf. The Transfer Agent will use
reasonable procedures (like requesting personal
identification) to ensure that the caller is properly
authorized. Neither the Fund nor the Transfer Agent will be
liable for losses for following instructions they reasonably
believe to be genuine.
>> Suspension of redemption. Under certain emergency
circumstances, we may suspend your right to redeem shares in a
Fund.
Exchanges
You may exchange shares of one Fund for shares of the same class of another Fund
or a Firstar money market fund, as described above, usually without paying any
additional sales charges. You may pay a sales charge if the Fund you are buying
has an initial sales charge that is higher than the one you are selling. The
Transfer Agent charges a $5 fee for each telephone exchange which will be
deducted from the account from which funds are being withdrawn prior to
effecting the exchange. There is no charge for exchange transactions that
are requested by mail.
Exchange procedures. To exchange your shares, you must give exchange
instructions to the Transfer Agent in writing or by telephone.
Exchange policies. When exchanging your shares, please keep in mind:
>> Any time you exchange your shares, it is a taxable event
to you. You may have a gain or loss on the transaction and
you may be liable for taxes resulting from the sale of
your shares.
>> When the market is very active, telephone exchanges may be
difficult to complete. You may have to submit exchange
requests to the Transfer Agent in writing, which will
cause a delay.
>> You must exchange shares having a value of at least $250
(except in the case of certain retirement plans). If you
are establishing a new account, you must exchange the
minimum dollar amount needed to open that account.
18
<PAGE>
>> We may reject your exchange request. We may modify or
terminate our exchange policy at any time, provided we
give you 60 days' notice.
>> Before you exchange your shares, you must review a copy of
the current prospectus of the Fund that you would like to
purchase.
>> You may qualify for a reduced sales charge. See the SAI
for details.
SHAREHOLDER SERVICES
The Fund offers several additional shareholder services. If you would like to
take advantage of any of these services, please call the Transfer Agent at
1-877-GET-SIMS to obtain the appropriate forms. We may terminate any of these
services at any time upon 60 days' notice.
>> Automatic investment plan. You may purchase shares of a
Fund at regular intervals by direct transfer of funds from
your bank. You determine the frequency and the amount of
the investments. You can terminate the program at any
time. The minimum investment under this plan is $100 ($250
for the initial purchase).
>> Directed distribution option. You may automatically
reinvest your dividends and capital gain distributions in
the same class of shares of another Fund. You may purchase
Class A Shares without a sales charge at the current NAV.
You may not use this service to establish a new account.
>> Systematic withdrawal. You may withdraw a set amount ($500
minimum) each month or quarter. You must have an account
balance worth at least $10,000 to qualify for this
privilege. You or the Transfer Agent may terminate the
arrangement at any time. If you plan to buy new shares
when you participate in a systematic withdrawal, you may
be paying an additional sales charge.
>> Reinstatement privilege. If you redeem your Class A
Shares, you may repurchase them (or purchase Class A
Shares of any other Fund) within 30 days without paying an
additional sales charge.
RETIREMENT PLANS
Individual Retirement Accounts
You may invest in the Funds through three types of tax-sheltered Individual
Retirement Accounts ("IRAs") available to individuals. The following briefly
highlights some of the significant features of each type of IRA. You can obtain
more detailed information regarding these IRAs by calling Firstar at
1-877-GET-SIMS. In addition, IRS Publication 590 contains detailed information
regarding IRAs. Different tax consequences may apply under state tax laws.
Before adopting any of these IRAs, you should consult your personal tax adviser.
o Traditional IRA. Amounts contributed to a Traditional IRA may
be tax deductible at the time of contribution, depending on
whether you are an active participant in an employer-sponsored
retirement plan and your income. Distributions from the IRA
(not representing a return of a non-deductible contribution)
will generally be taxed at the time of distribution.
Distribution of IRA assets prior to age 59-1/2 may be subject
to an additional 10% tax. In general, you must begin to take
distributions by April 1 of the year following the calendar
year in which you turn 70-1/2.
o Roth IRA. Amounts contributed to a Roth IRA are not deductible
(that is, they are contributed after tax), but distributions
are not subject to tax if you hold the IRA for certain minimum
periods of time (generally, until age 59-1/2). If your income
exceeds certain limits, the amount you can contribute to a
Roth IRA may be reduced or eliminated altogether. The minimum
distribution rules applicable to Traditional IRAs do not apply
during your lifetime. Following death, minimum distribution
rules apply.
For Traditional and Roth IRAs, depending on your circumstances, you may be able
to contribute up to a maximum of $2,000 annually. Also depending on your
circumstances, you may be able to contribute to a Traditional IRA or Roth IRA on
behalf of your spouse. Contributions to one type of IRA reduce the allowable
contribution to the other type of IRA.
o Education IRA. Contributions of up to $500 per year, in the
aggregate, may be made by any person or persons on behalf of a
beneficiary under age 18. Although these contributions are not
tax deductible, neither the person making the contribution nor
the beneficiary is taxed upon distribution if the amounts are
used for "qualified educational purposes." If an individual's
income exceeds certain limits, that individual would be
ineligible to contribute to an Education IRA.
In accordance with applicable IRS regulations, when you open an IRA, you will
receive a disclosure statement containing certain information about your IRA.
You generally have the right to cancel your account within seven days after
receiving this disclosure statement and obtain a full refund of your
contributions. The Funds' custodian may hold the initial contribution uninvested
until the seven-day period expires, although the custodian does not anticipate
that it will do so.
Simplified Employee Pension Plan
If you are an employer (or are self-employed), you may establish a Simplified
Employee Pension Plan ("SEP-IRA") in conjunction with a Traditional IRA.
Generally, a SEP-IRA allows you to purchase shares with annual tax deductible
contributions per participant of up to 15% of the first $160,000 in annual
compensation. Contributions to a SEP-IRA generally are not includable in a
participant's income. The $160,000 compensation limit is adjusted periodically,
in accordance with IRS regulations, for cost of living increases. SEP-IRAs are
subject to a number of special rules, including a requirement that all
<PAGE>
employees of the employer (including a sole proprietor or partnership) who
satisfy certain minimum requirements must participate in the SEP-IRA.
Simple IRA
An employer of fewer than 100 individuals (or a self-employed individual), may
establish a SIMPLE IRA, where employees may elect to have up to $6,000 per year
contributed to the IRA through salary reduction contributions. This limit is
also adjusted periodically, in accordance with IRS regulations, for cost of
living increases. In addition, the employer will contribute to the employee's
SIMPLE IRA, either as a matching contribution or as a non-elective contribution
to all eligible participants whether or not making salary reduction
contributions. SIMPLE IRAs are subject to a number of special rules, including a
requirement that contributions be made on behalf of all employees (other than
union employees) who satisfy certain minimum participation requirements. In
addition, an increased tax may apply to distributions made during the first two
years of participation.
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
***If you buy shares of a Fund shortly before it makes a distribution, some of
your investment may come back to you as a taxable distribution.***
Distributions
The Funds pass along your share of their investment earnings in the form of
dividends. Dividend distributions are the net dividends or interest earned on
investments after expenses. As with any investment, you should consider the tax
consequences of an investment in a Fund.
Ordinarily, each Fund declares and pays dividends from its net investment income
annually. The Funds pay any net capital gains realized as dividends at least
annually.
You can ask the Funds to send you distributions in one of the following ways:
>> Reinvestment. We automatically reinvest your distributions in
additional shares of your Fund. If you do not indicate another
choice on your application, you will receive your
distributions this way automatically.
>> Cash. We will send you a check no later than 7 days after the
payable date.
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<PAGE>
>> Partial reinvestment. We will automatically reinvest your
dividends in additional shares of your Fund and pay your
capital gain distributions in cash or we will automatically
reinvest your capital gain distributions and send you your
dividends in cash.
>> Directed dividends. We will automatically reinvest your
dividends in the same class of shares of another Fund. We
describe this option above in the Shareholder Services section
above.
>> Direct deposit. In most cases, you can automatically transfer
dividends to your bank checking or savings account. Under
normal circumstances, the Transfer Agent will transfer the
funds within 7 days of the dividend payment date. The name on
your bank account must be the same as the registration on your
Fund account.
You may choose your distribution method on your original application. If you
would like to change the option you selected, please call the Transfer Agent at
1-877-GET-SIMS.
Taxes
Each Fund intends to continue to qualify as a regulated investment company,
which means that it pays no federal income tax on the earnings or capital gains
it distributes to its shareholders.
>> Ordinary dividends from a Fund are taxable as ordinary income
and dividends from a Fund's long-term capital gains are
taxable as capital gain.
>> Dividends are treated in the same manner for federal income
tax purposes whether you receive them in the form of cash or
additional shares. They may also be subject to state and local
taxes.
>> Dividends from the Funds that are attributable to interest on
certain U.S. Government obligations may be exempt from certain
state and local income taxes. The extent to which ordinary
dividends are attributable to U.S. Government obligations will
be indicated on the tax statements you receive from your Fund.
>> Certain dividends paid to you in January will be taxable as if
they had been paid the previous December.
>> We will mail you tax statements every January showing the
amounts and tax status of the distributions you received.
>> When you sell (redeem) or exchange shares of a Fund, you must
recognize any gain or loss.
>> Because your tax treatment depends on your purchase price and
tax position, you should keep your regular account statements
for use in determining your tax.
>> Under certain circumstances, the International Equity Fund or
Global Equity Fund may be in a position to "pass through" to
you the right to a credit for foreign income taxes paid by the
Fund.
>> You should review the more detailed discussion of federal
income tax considerations in the SAI.
***We provide this tax information for your general information. You should
consult your own tax adviser about the tax consequences of investing in a
Fund.***
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<PAGE>
ADDITIONAL INFORMATION
Statement of Additional Information. The Statement of Additional Information
(SAI) provides a more complete discussion of certain matters contained in this
Prospectus and is incorporated by reference.
Annual and Semi-Annual Reports. The annual and semi-annual reports to
shareholders contain additional information about each Fund's investments,
including a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during the fiscal period covered
by the report.
>> To obtain a free copy of the SAI and the current
annual or semi-annual reports or to make any other
inquiries about the Fund, you may call or write:
Firstar Mutual Fund Services LLC
Attention: The Simms Funds
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
Telephone: 1-877-GET-SIMS
>> You may obtain copies of the SAI or financial reports
for free by calling or writing your Authorized
Securities Dealer
>> You may review the SAI or financial reports at the
Public Reference Room of the Securities Exchange
Commission, 450 Fifth Street, N.W., Washington, D.C.
(1-800-SEC-0330)
>> You may obtain copies of the SAI or the financial
reports for a fee by calling or writing the SEC's
Public Reference Room at the address or phone number
listed above or
>> for free by visiting the SEC's Worldwide Web site at
http://www.sec.gov.
>> You may obtain a copy of the Fund's prospectus by
calling Simms toll-free at 1-877-GET-SIMS.
Investment Company Act File No. 811-8871
<PAGE>
The Simms Funds
55 Railroad Avenue
Greenwich, Connecticut 06830
1-877-GET-SIMS
Distributor
- - -----------
T.O. Richardson Securities,
2 Bridgewater Road
Farmington, Connecticut 06032
Investment Adviser
- - ------------------
Simms Capital Management, Inc.
55 Railroad Avenue
Greenwich, Connecticut 06830
Administrator and
Transfer & Dividend Disbursement Agent
- - --------------------------------------
Firstar Mutual Fund Services LLC
P.O. Box 701
615 East Michigan Street
Milwaukee, Wisconsin 53202-5207
Custodian
- - ---------
Firstar Bank Milwaukee, N.A.
P.O. Box 701
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Counsel
- - -------
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
Independent Accountants
- - -----------------------
PricewaterhouseCoopers LLP
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
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PART B-STATEMENT OF ADDITIONAL INFORMATION
The information in this statement of additional information is not complete
and may be changed. We may not sell these securities until the
registration statement filed with the Securities and Exchange Commission
is effective. This statement of additional information is not an offer to
sell these securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
STATEMENT OF ADDITIONAL INFORMATION
THE SIMMS FUNDS
U.S. Equity Fund
International Equity Fund
Global Equity Fund
December ___, 1998
This Statement of Additional Information ("SAI") is not a prospectus, but should
be read in conjunction with the prospectus of The Simms Funds (the
"Prospectus"), which is dated December ____, 1998. This SAI is incorporated by
reference in its entirety into the Prospectus. Copies of the Prospectus may be
obtained by writing The Simms Funds at 55 Railroad Avenue, Greenwich,
Connecticut 06830, or by calling toll free 1-877-GET-SIMS (1-877-438-7467).
INVESTMENT ADVISER CUSTODIAN
Simms Capital Management, Inc. Firstar Bank Milwaukee, N.A.
DISTRIBUTOR INDEPENDENT ACCOUNTANTS
T.O. Richards Securities, Inc. PricewaterhouseCoopers LLP
ADMINISTRATOR and COUNSEL
TRANSFER & DIVIDEND DISBURSING Kramer Levin Naftalis & Frankel LLP
AGENT
First Mutual Fund Services, LLC
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<TABLE>
<CAPTION>
Table of Contents
<S> <C>
INVESTMENT OBJECTIVES AND INVESTMENT POLICIES AND LIMITATIONS......................................................
FUNDAMENTAL RESTRICTIONS OF THE FUNDS..............................................................................
NON-FUNDAMENTAL RESTRICTIONS OF THE FUNDS..........................................................................
INSTRUMENTS IN WHICH THE FUNDS CAN INVEST..........................................................................
Foreign Investments.......................................................................................
Securities of Other Investment Companies -- Closed-End Funds..............................................
Warrants..................................................................................................
Preferred Stock...........................................................................................
Convertible Securities....................................................................................
U.S. Government Obligations...............................................................................
Receipts..................................................................................................
Investment-Grade and High Quality Investments.............................................................
U.S. Corporate Debt Obligations...........................................................................
Zero-Coupon Bonds.........................................................................................
International Bonds.......................................................................................
Mortgage-Backed Securities................................................................................
In General.......................................................................................
U.S. Government Mortgage-Backed Securities.......................................................
Collateralized Mortgage Obligations..............................................................
Non-Government Mortgage-Backed Securities........................................................
Asset-Backed Securities...................................................................................
Temporary Defensive Measures -- Short-Term Obligations....................................................
Short-Term Corporate Obligations.................................................................
Bankers' Acceptances.............................................................................
Certificates of Deposit..........................................................................
Foreign Time Deposits............................................................................
Commercial Paper.................................................................................
Repurchase Agreements............................................................................
Futures and Options.......................................................................................
Futures Contracts................................................................................
Restrictions on the Use of Futures Contracts.....................................................
Risk Factors in Futures Transactions.............................................................
Options..........................................................................................
Illiquid Investments......................................................................................
Restricted Securities.....................................................................................
Securities Lending Transactions...........................................................................
Reverse Repurchase Agreements.............................................................................
VALUATION OF PORTFOLIOS SECURITIES.................................................................................
PERFORMANCE OF THE FUNDS...........................................................................................
ADDITIONAL PURCHASE, EXCHANGE, AND REDEMPTION INFORMATION..........................................................
DIVIDENDS AND DISTRIBUTIONS........................................................................................
TAXES..............................................................................................................
<PAGE>
TRUSTEES AND OFFICERS..............................................................................................
ADVISORY AND OTHER CONTRACTS.......................................................................................
ADDITIONAL INFORMATION.............................................................................................
APPENDIX A - Description of Security Ratings ......................................................................
APPENDIX B - Financial Statements .................................................................................
</TABLE>
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STATEMENT OF ADDITIONAL INFORMATION
The Simms Funds (the "Trust") is an open-end management investment company. The
Trust consists of three diversified series (each a "Fund," and collectively, the
"Funds") of units of beneficial interest ("shares"). The outstanding shares
represent interests in the three separate investment portfolios. This SAI
relates to the shares of the Funds listed below. Much of the information
contained in this SAI expands on subjects discussed in the Prospectus.
Capitalized terms not defined herein are used as defined in the Prospectus. No
investment in shares of a Fund should be made without first reading the
Prospectus.
The Simms Funds:
o U.S. Equity Fund
o International Equity Fund
o Global Equity Fund
INVESTMENT OBJECTIVES AND INVESTMENT POLICIES AND LIMITATIONS
Each Fund's investment objective is fundamental and may not be changed without a
vote of the holders of a majority of the Fund's outstanding voting securities.
There can be no assurance that a Fund will achieve its investment objective.
Additional Information Regarding Fund Investments.
The following policies and limitations supplement the Funds' investment policies
set forth in the Prospectus. The Funds' investments in the following securities
and other financial instruments are subject to the other investment policies and
limitations described in the Prospectus and this SAI.
Unless otherwise noted in the Prospectus or this SAI, a Fund may invest no more
than 5% of its total assets in any of the securities or financial instruments
described below (unless the context requires otherwise).
Unless otherwise noted, whenever an investment policy or limitation states a
maximum percentage of a Fund's assets that may be invested in any security or
other asset, or sets forth a policy regarding quality standards, such standard
or percentage limitation will be determined immediately after and as a result of
the Fund's acquisition of such security or other asset except in the case of
borrowing (or other activities that may be deemed to result in the issuance of a
"senior security" under the Investment Company Act of 1940, as amended (the
"1940 Act")). Accordingly, any subsequent change in values, net assets, or other
circumstances will not be considered when determining whether the investment
complies with a Fund's investment policies and limitations. If the value of a
Fund's holdings of illiquid securities at any time exceeds the percentage
limitation applicable at the time of acquisition due to subsequent fluctuations
in value or other reasons, the Trustees will consider what actions, if any, are
appropriate to maintain adequate liquidity.
The investment policies of a Fund may be changed without an affirmative vote of
the holders of a majority of that Fund's outstanding voting securities unless
(1) a policy expressly is deemed to be a fundamental policy of the Fund or (2) a
policy expressly is deemed to be changeable only by such majority vote. A Fund
may, following notice to its shareholders, take advantage of other investment
practices which presently are not contemplated for use by the Fund or which
currently are not available but which may be developed to the extent such
investment practices are both consistent with the Fund's investment objective
and legally permissible for the Fund. Such investment practices, if they arise,
may involve risks which exceed those involved in the activities described in the
Prospectus.
<PAGE>
The following sections list each Fund's investment policies, limitations, and
restrictions. The securities in which the Funds can invest and the risks
associated with these securities are discussed in the section "Instruments in
Which the Funds Can Invest."
FUNDAMENTAL RESTRICTIONS OF THE FUNDS
- - -------------------------------------
The following Fundamental Restrictions may not be changed with respect to a Fund
without the affirmative vote of the holders of a majority of the Fund's
outstanding shares. Such majority is defined as the lesser of (a) 67% or more of
the shares of the Fund present at a meeting at which the holders of more than
50% of the outstanding shares of the Fund are represented in person or by proxy,
or (b) more than 50% of the outstanding shares of the Fund.
1. Senior Securities
The Funds may not issue any senior security (as defined in the 1940 Act), except
that (a) each Fund may engage in transactions that may result in the issuance of
senior securities to the extent permitted under applicable regulations and
interpretations of the 1940 Act or an exemptive order; (b) each Fund may acquire
other securities, the acquisition of which may result in the issuance of a
senior security, to the extent permitted under applicable regulations or
interpretations of the 1940 Act; and (c) subject to the restrictions set forth
below, the Fund may borrow money as authorized by the 1940 Act.
2. Underwriting
The Funds may not underwrite securities issued by others, except to the extent
that the Fund may be considered an underwriter within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), in the disposition of
restricted securities.
3. Borrowing
The Funds may not borrow money, except that (a) each Fund may enter into
commitments to purchase securities and instruments in accordance with its
investment program, including delayed-delivery and when-issued securities and
reverse repurchase agreements, provided that the total amount of any such
borrowing does not exceed 33 1/3 % of the Fund's total assets; and (b) each Fund
may borrow money in an amount not exceeding 33 1/3% of the value of its total
assets at the time when the loan is made. Any borrowings representing more than
33 1/3% of a Fund's total assets must be repaid before the Fund may make
additional investments.
4. Real Estate
The Funds may not purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent each
Fund from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business). Investments by the
Funds in securities backed by mortgages on real estate or in marketable
securities of companies engaged in such activities are not hereby precluded.
5. Lending
Each Fund may not lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of publicly issued debt securities or to
repurchase agreements.
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6. Commodities
The Funds may not purchase or sell physical commodities unless acquired as a
result of ownership of securities or other instruments (but this shall not
prevent a Fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical commodities.)
7. Concentration
Each Fund may not purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities, or repurchase agreements secured thereby) if, as a result,
more than 25% of the Fund's total assets would be invested in the securities of
companies whose principal business activities are in the same industry. In the
utilities category, the industry shall be determined according to the service
provided. For example, gas, electric, water and telephone will be considered as
separate industries.
NON-FUNDAMENTAL RESTRICTIONS OF THE FUNDS
- - -----------------------------------------
Each Fund's Non-Fundamental Restrictions may be changed by a majority vote of
the Trust's Board of Trustees (the "Board") at any time.
1. Illiquid Securities
Each Fund will not invest more than 15% of its net assets in illiquid
securities. Illiquid securities are securities that are not readily marketable
or cannot be disposed of promptly within seven days and in the usual course of
business at approximately the price at which the Fund has valued them. Such
securities include, but are not limited to, time deposits and repurchase
agreements with maturities longer than seven days.
Securities that may be resold pursuant to Rule 144A under, securities offered
pursuant to Section 4(2) of, or securities otherwise subject to restrictions or
limitations on resale under the Securities Act ("Restricted Securities") shall
not be deemed illiquid solely by reason of being unregistered. Simms Capital
Management, Inc., each Fund's investment adviser ("Simms" or the "Adviser"),
determines whether a particular security is deemed to be liquid based on the
trading markets for the specific security and other factors, in accordance with
guidelines approved by the Board. The Board will retain oversight of these
determinations and continue to monitor a Fund's investments in these securities.
2. Short Sales and Purchases on Margin
Each Fund will not make short sales of securities or purchase securities on
margin except for short-term credits necessary for clearance of portfolio
transactions, provided that this restriction will not be applied to limit the
use of options, futures contracts and related options, in the manner otherwise
permitted by the investment restrictions, policies and investment program of the
Fund.
INSTRUMENTS IN WHICH THE FUNDS CAN INVEST
- - -----------------------------------------
The following paragraphs provide a brief description of some of the types of
securities in which the Funds may invest in accordance with their investment
objective, policies, and limitations, including certain transactions the Funds
may make and strategies they may adopt. The following also contains a brief
description of certain risk factors.
Foreign Investments (International Equity Fund and Global Equity Fund). These
Funds will invest in sponsored and unsponsored American Depositary Receipts
("ADRs"). Such investment may subject the Fund to significant investment risks
that are different from, and additional to, those related to investments in
obligations of U.S. domestic issuers or in U.S. securities markets. Unsponsored
ADRs may involve additional
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risks. These Funds may also invest directly in non-U.S. dollar denominated
equity and debt securities of foreign companies.
The value of securities denominated in or indexed to foreign currencies, and of
dividends and interest from such securities, can change significantly when
foreign currencies strengthen or weaken relative to the U.S. dollar. Foreign
securities markets generally have less trading volume and less liquidity than
U.S. markets, and prices on some foreign markets can be highly volatile. Many
foreign countries lack uniform accounting and disclosure standards comparable to
those applicable to U.S. companies, and it may be more difficult to obtain
reliable information regarding an issuer's financial condition and operations.
Settlement of transactions in some foreign markets may be delayed or may be less
frequent than in the U.S., which could affect the liquidity of a Fund's
investment. In addition, the costs of foreign investing, including withholding
taxes, brokerage commissions, and custodial costs, are generally higher than for
U.S. investments.
Foreign markets may offer less protection to investors than U.S. markets.
Foreign issuers, brokers, and securities markets may be subject to less
government supervision. Foreign security trading practices, including those
involving the release of assets in advance of payment, may involve increased
risks in the event of a failed trade or the insolvency of a broker-dealer, which
may result in substantial delays in settlement. It may also be difficult to
enforce legal rights in foreign countries.
Investing abroad also involves different political and economic risks. Foreign
investments may be affected by actions of foreign governments adverse to the
interests of U.S. investors, including the possibility of expropriation or
nationalization of assets, confiscatory taxation, restrictions on U.S.
investment or on the ability to repatriate assets or convert currency into U.S.
dollars, or other government intervention. There may be a greater possibility of
default by foreign governments or foreign government-sponsored enterprises.
Investments in foreign countries also involve a risk of local political,
economic, or social instability, military action or unrest, or adverse
diplomatic developments. There is no assurance that the Adviser will be able to
anticipate these potential events or counter their effects.
The considerations noted above generally are intensified for investments in
developing countries. Developing countries may have relatively unstable
governments, economies based on only a few industries, and securities markets
that trade a small number of securities.
The International Equity Fund and the Global Equity Fund may invest in foreign
securities that impose restrictions on transfer within the U.S. or to U.S.
persons. Although securities subject to transfer restrictions may be marketable
abroad, they may be less liquid than foreign securities of the same class that
are not subject to such restrictions.
The Adviser continuously evaluates issuers based in countries all over the
world. Accordingly, a Fund may invest in the securities of issuers based in any
country when such securities meet the investment criteria of the Adviser and are
consistent with the investment objectives and policies of the Fund.
Securities of Other Investment Companies -- Closed-End Funds (International
Equity and Global Equity Funds). These Funds may purchase closed-end funds that
invest in foreign securities. Unlike open-end investment companies, like the
Funds, closed-end funds issue a fixed number of shares that trade on major stock
exchanges or over-the-counter. Also unlike open-end funds, closed-end funds do
not stand ready to issue and redeem shares on a continuous basis. Closed-end
funds often sell at a discount from net asset value.
These Funds' investment in closed-end funds is subject to the 1940 Act's limits
on investment in other mutual funds. Under the 1940 Act, each Fund may invest up
to 5% of its total assets in any one mutual fund, but may not own more than 3%
of any one mutual fund or invest more than 10% of its total assets in mutual
funds as a group.
Warrants. Each Fund may invest in warrants. These are securities that give an
investor the right to purchase equity securities from the issuer at a specific
price (the strike price) for a limited period of time. The strike
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<PAGE>
price of warrants typically is much lower than the current market price of the
underlying securities, yet warrants are subject to greater price fluctuations.
As a result, warrants may be more volatile investments than the underlying
securities and may offer greater potential for capital appreciation as well as
capital loss.
Preferred Stock. Each Fund may invest in preferred stock issued by domestic and
foreign corporations. Preferred stocks are instruments that combine qualities
both of equity and debt securities. Individual issues of preferred stock will
have those rights and liabilities that are spelled out in the governing
document. Preferred stocks usually pay a fixed dividend per quarter (or annum)
and are senior to common stock in terms of liquidation and dividends rights.
Preferred stocks typically do not have voting rights.
Convertible Securities. Each Fund may invest in convertible debt and convertible
preferred stock. These securities may be converted at either a stated price or
rate into underlying shares of common stock. As a result, an investor in
convertible securities may benefit from increases in the underlying common
stock's market price. Convertible securities provide higher yields than the
underlying common stock, but typically offer lower yields than comparable
non-convertible securities. The value of convertible securities fluctuates in
relation to changes in interest rates like bonds and also fluctuates in relation
to the underlying stock's price.
U.S. Government Obligations. Each Fund may invest in U.S. Government
Obligations, that is, obligations issued or guaranteed by the U.S. Government,
its agencies, and instrumentalities. Obligations of certain agencies and
instrumentalities of the U.S. Government are supported by the full faith and
credit of the U.S. Treasury; others are supported by the right of the issuer to
borrow from the U.S. Treasury; others are supported by the discretionary
authority of the U.S. Government to purchase the agency's obligations; and still
others are supported only by the credit of the agency or instrumentality. No
assurance can be given that the U.S. Government will provide financial support
to U.S. Government-sponsored agencies or instrumentalities if it is not
obligated to do so by law.
Receipts. Receipts are separately traded interest and principal component parts
of bills, notes, and bonds issued by the U.S. Treasury that are transferable
through the Federal book entry system, known as Separately Traded Registered
Interest and Principal Securities ("STRIPS") and Coupon Under Book Entry
Safekeeping ("CUBES"). These instruments are issued by banks and brokerage firms
and are created by depositing Treasury notes and Treasury bonds into a special
account at a custodian bank; the custodian holds the interest and principal
payments for the benefit of the registered owners of the certificates or
receipts. The custodian arranges for the issuance of the certificates or
receipts evidencing ownership and maintains the register. Receipts include
Treasury Receipts ("TRs"), Treasury Investment Growth Receipts ("TIGRs"), and
Certificates of Accrual on Treasury Securities ("CATS").
Investment Grade and High Quality Securities. The Funds may invest in
"investment grade" obligations, which are those rated at the time of purchase
within the four highest rating categories assigned by a nationally recognized
statistical rating organization ("NRSRO") or, if unrated, are obligations that
the Adviser determines to be of comparable quality. The applicable securities
ratings are described in the Appendix. "High-quality" short-term obligations are
those obligations which, at the time of purchase, (1) possess a rating in one of
the two highest ratings categories from at least one NRSRO (for example,
commercial paper rated "A-1" or "A-2" by Standard & Poor's Ratings Services
("S&P") or "P-1" or "P-2" by Moody's Investors Service, Inc. ("Moody's")) or (2)
are unrated by an NRSRO but are determined by the Adviser to present minimal
credit risks and to be of comparable quality to rated instruments eligible for
purchase by the Funds under guidelines adopted by the Board.
U.S. Corporate Debt Obligations. The Funds may invest in U.S. corporate debt
obligations, including bonds, debentures, and notes. Debentures represent
unsecured promises to pay, while notes and bonds may be secured by mortgages on
real property or security interests in personal property. Bonds include, but are
not limited to, debt instruments with maturities of approximately one year or
more, debentures, mortgage-related securities, and zero coupon obligations.
Bonds, notes, and debentures in which the Funds may invest may differ in
interest rates, maturities, and times of issuance. The market value of a Fund's
fixed income investments will change in response to interest rate changes and
other factors. During periods of falling
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interest rates, the values of outstanding fixed income securities generally
rise. Conversely, during periods of rising interest rates, the values of such
securities generally decline. Moreover, while securities with longer maturities
tend to produce higher yields, the prices of longer maturity securities are also
subject to greater market fluctuations as a result of changes in interest rates.
Changes by NRSROs in the rating of any fixed income security and in the ability
of an issuer to make payments of interest and principal also affect the value of
these investments. Except under conditions of default, changes in the value of a
Fund's securities will not affect cash income derived from these securities but
will affect the Fund's net asset value.
Zero-Coupon Bonds. Each Fund may invest in zero-coupon bonds that are purchased
at a discount from the face amount because the buyer receives only the right to
a fixed payment on a certain date in the future and does not receive any
periodic interest payments. The effect of owning instruments that do not make
current interest payments is that a fixed yield is earned not only on the
original investment but also, in effect, on accretion during the life of the
obligations. This implicit reinvestment of earnings at the same rate eliminates
the risk of being unable to reinvest distributions at a rate as high as the
implicit yields on the zero-coupon bond, but at the same time eliminates the
holder's ability to reinvest at higher rates. For this reason, zero-coupon bonds
are subject to substantially greater price fluctuations during periods of
changing market interest rates than are comparable securities which pay interest
currently, which fluctuation increases in accordance with the length of the
period to maturity.
International Bonds. The International Equity Fund and the Global Equity Fund
may each invest in international bonds, including U.S. dollar-denominated
international bonds for which the primary trading market is in the United States
("Yankee Bonds"), or for which the primary trading market is abroad ("Eurodollar
Bonds"). International bonds also include Canadian and supranational agency
bonds (e.g., the International Monetary Fund). (See "Foreign Investments" for a
description of the risks associated with investments in foreign securities.)
Mortgage-Backed Securities--In General. The Funds may invest in mortgage-backed
securities that are backed by mortgage obligations including, among others,
conventional 30-year fixed rate mortgage obligations, graduated payment mortgage
obligations, 15-year mortgage obligations, and adjustable-rate mortgage
obligations. All of these mortgage obligations can be used to create
pass-through securities, created when mortgage obligations are pooled together
and undivided interests in the pool or pools are sold. The cash flow from the
mortgage obligations is passed through to the holders of the securities in the
form of periodic payments of interest, principal, and prepayments (net of a
service fee).
Prepayments occur when the holder of an individual mortgage obligation prepays
the remaining principal before the mortgage obligation's scheduled maturity
date. As a result of the pass-through of prepayments of principal on the
underlying securities, Mortgage-Backed Securities are often subject to more
rapid prepayment of principal than their stated maturity indicates. In addition,
during periods of falling interest rates, the rate of prepayment tends to
increase, thereby shortening the actual average life of the pool. Conversely, in
periods of rising interest rates, prepayment rates tend to decrease, lengthening
a pool's average life. Because the prepayment characteristics of the underlying
mortgage obligations vary, it is not possible to predict accurately the realized
yield or average life of a particular issue of pass-through certificates.
Reinvestment of prepayments may occur at higher or lower interest rates than the
original investment, thus affecting a Fund's yield.
A Fund may purchase Mortgage-Backed Securities at a premium or at a discount.
Accelerated prepayments have an adverse effect on yields for pass-throughs
purchased at a premium (i.e., a price in excess of principal amount) and may
involve additional risk of loss of principal because the premium may not have
been fully amortized at the time the obligation is repaid. The opposite is true
for pass-throughs purchased at a discount. Among the U.S. Government securities
in which a Fund may invest are Government Mortgage-Backed Securities (or
government guaranteed mortgage-related securities). Such guarantees do not
extend to the value of yield of the Mortgage-Backed Securities themselves or of
the Fund's shares.
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U.S. Government Mortgage-Backed Securities. Certain agencies and
instrumentalities of the U.S. Government issue Mortgage-Backed Securities. Some
such obligations, such as those issued by GNMA are supported by the full faith
and credit of the U.S. Treasury; others, such as those of FNMA, are supported by
the right of the issuer to borrow from the Treasury; others are supported by the
discretionary authority of the U.S. Government to purchase the agency's
obligations; still others, such as those of the Federal Farm Credit Banks or
FHLMC, are supported only by the credit of the instrumentality. No assurance can
be given that the U.S. Government would provide financial support to U.S.
Government-sponsored agencies and instrumentalities if it is not obligated to do
so by law.
Collateralized Mortgage Obligations. CMOs in which a Fund may invest
are securities backed by a pool of mortgages in which the principal and interest
cash flows of the pool are channeled on a prioritized basis into two or more
classes, or tranches, of bonds.
Non-Governmental Mortgage-Backed Securities. A Fund may invest in
mortgage-related securities issued by non-governmental entities. Commercial
banks, savings and loan institutions, private mortgage insurance companies,
mortgage bankers, and other secondary market issuers also create pass-through
pools of conventional residential mortgage loans. These issuers may be the
originators of the underlying mortgage loans as well as the guarantors of the
mortgage-related securities. Pools created by such non-governmental issuers
generally offer a higher rate of interest than government and government-related
pools because there are not direct or indirect government guarantees of payments
in the former pools. However, timely payment of interest and principal of these
pools is supported by various forms of insurance or guarantees, including
individual loan, title, pool, and hazard insurance. The insurance and guarantees
are issued by government entities, private insurers and the mortgage pools. Such
insurance and guarantees and the creditworthiness of the issuers, thereof will
be considered in determining whether a Non-Governmental Mortgage-Backed Security
meets a Fund's investment quality standards. There can be no assurance that the
private insurers can meet their obligations under the policies. A Fund may buy
Non-Governmental Mortgage-Backed Related Securities without insurance or
guarantees if, through an examination of the loan experience and practices of
the pools, the Adviser determines that the securities meet the Fund's quality
standards. Although the market for such securities is becoming increasingly
liquid, securities issued by certain private organizations may not be readily
marketable. A Fund will not purchase mortgage-related securities or any other
assets which in the opinion of the Adviser are illiquid if, as a result, more
than 15% of the value of the Fund's net assets will be invested in illiquid
securities.
Mortgage-related securities include CMOs and participation certificates in pools
of mortgages. The average life of mortgage-related securities varies with the
maturities of the underlying mortgage instruments, which have maximum maturities
of 40 years. The average life is likely to be substantially less than the
original maturity of the mortgage pools underlying the securities as the result
of mortgage prepayments. The rate of such prepayments, and hence the average
life of the certificates, will be a function of current market interest rates
and current conditions in the relevant housing markets. The impact of prepayment
of mortgages is described under "Government Mortgage-Backed Securities."
Estimated average life will be determined by the Adviser. Various independent
mortgage-related securities dealers publish estimated average life data using
proprietary models. In making such determinations, the Adviser will rely on such
data except to the extent such data are deemed unreliable by the Adviser. The
Adviser might deem data unreliable which appears to present a significantly
different estimated average life for a security than data relating to the
estimated average life of comparable securities as provided by other independent
mortgage-related securities dealers.
Asset-Backed Securities. Each Fund may invest in asset-backed securities, that
is, debt securities backed by pools of automobile or other commercial or
consumer finance loans. The collateral backing asset-backed securities cannot be
foreclosed upon. These issues are normally traded over-the-counter and typically
have a short to intermediate maturity structure, depending on the paydown
characteristics of the underlying financial assets which are passed through to
the security holder.
Temporary Defensive Measures -- Short-Term Obligations. These include high
quality, short-term obligations such as domestic and foreign commercial paper
(including variable-amount master demand notes),
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bankers' acceptances, certificates of deposit and demand and time deposits of
domestic and foreign branches of U.S. banks and foreign banks, and repurchase
agreements. (See "Foreign Securities" for a description of risks associated with
investments in foreign securities.) Each Fund may hold up to 100% of its assets
in these instruments, which may result in performance that is inconsistent with
its investment objective.
Short-Term Corporate Obligations. Corporate obligations are bonds
issued by corporations and other business organizations in order to finance
their long-term credit needs. Corporate bonds in which a Fund may invest
generally consist of those rated in the two highest rating categories of an
NRSRO that possess many favorable investment attributes. In the lower end of
this category, credit quality may be more susceptible to potential future
changes in circumstances.
Bankers' Acceptances. Bankers' Acceptances are negotiable drafts or
bills of exchange typically drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Bankers' Acceptances will be those guaranteed by domestic and foreign banks, if
at the time of purchase such banks have capital, surplus, and undivided profits
in excess of $100 million (as of the date of their most recently published
financial statements).
Certificates of Deposit. Certificates of Deposit ("CDs") are negotiable
certificates issued against funds deposited in a commercial bank or a savings
and loan association for a definite period of time and earning a specified
return. CDs and demand and time deposits invested in by a Fund will be those of
domestic and foreign banks and savings and loan associations, if (a) at the time
of purchase such financial institutions have capital, surplus, and undivided
profits in excess of $100 million (as of the date of their most recently
published financial statements) or (b) the principal amount of the instrument is
insured in full by the Federal Deposit Insurance Corporation (the "FDIC") or the
Savings Association Insurance Fund.
Eurodollar CDs are U.S. dollar-denominated CDs issued by branches of
foreign and domestic banks located outside the United States. Yankee CDs are CDs
issued by a U.S. branch of a foreign bank denominated in U.S. dollars and held
in the United States.
Foreign Time Deposits. Eurodollar Time Deposits are U.S.
dollar-denominated deposits in a foreign branch of a U.S. or foreign bank.
Canadian Time Deposits are U.S. dollar-denominated certificates of deposit
issued by Canadian offices of major Canadian Banks.
Commercial Paper. Commercial paper ("CP") consists of unsecured
promissory notes issued by corporations. CP issues normally mature in less than
nine months and have fixed rates of return. The Funds will purchase only CP
rated in one of the two highest categories at the time of purchase by an NRSRO
or, if not rated, found by the Adviser to present minimal credit risks and to be
of comparable quality to instruments that are rated high quality by an NRSRO
that is neither controlling, controlled by, or under common control with the
issuer of, or any issuer, guarantor, or provider of credit support for, the
instruments. For a description of the rating symbols of each NRSRO, see the
Appendix to this SAI.
Repurchase Agreements. Securities held by a Fund may be subject to
Repurchase Agreements, pursuant to which a Fund would acquire securities from
financial institutions or registered broker-dealers deemed creditworthy by the
Adviser pursuant to guidelines adopted by the Trustees, subject to the seller's
agreement to repurchase such securities at a mutually agreed upon date and
price. The seller is required to maintain the value of collateral held pursuant
to the agreement at not less than the repurchase price (including accrued
interest). If the seller were to default on its repurchase obligation or become
insolvent, a Fund would suffer a loss to the extent that the proceeds from a
sale of the underlying portfolio securities were less than the repurchase price,
or to the extent that the disposition of such securities by the Fund is delayed
pending court action.
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Futures and Options
Futures Contracts. The Funds may enter into futures contracts, options on
futures contracts, and stock index futures contracts and options thereon for the
purposes of remaining fully invested and reducing transaction costs. Futures
contracts provide for the future sale by one party and purchase by another party
of a specified amount of a specific security, class of securities, or an index
at a specified future time and at a specified price. A stock index futures
contract is a bilateral agreement pursuant to which two parties agree to take or
make delivery of an amount of cash equal to a specified dollar amount times the
difference between the stock index value at the close of trading of the
contracts and the price at which the futures contract is originally struck.
Futures contracts which are standardized as to maturity date and underlying
financial instrument are traded on national futures exchanges. Futures exchanges
and trading are regulated under the Commodity Exchange Act by the Commodity
Futures Trading Commission (the "CFTC"), a U.S. Government agency.
The Funds may enter into contracts for the future delivery of securities and
futures contracts based on a specific security, class of securities or an index,
purchase or sell options on any such futures contracts and engage in related
closing transactions. A futures contract on a securities index is an agreement
obligating either party to pay, and entitling the other party to receive, while
the contract is outstanding, cash payments based on the level of a specified
securities index.
Although futures contracts (other than those relating to indexes) by their terms
call for actual delivery and acceptance of the underlying securities, in most
cases the contracts are closed out before the settlement date without delivery.
Closing out an open futures position is done by taking an opposite position
(buying a contract which has previously been "sold," or "selling" a contract
previously purchased) in an identical contract to terminate the position. The
acquisition of put and call options on futures contracts will, respectively,
give a Fund the right (but not the obligation), for a specified price, to sell
or to purchase the underlying futures contract, upon exercise of the option, at
any time during the option period. Brokerage commissions are incurred when a
futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in cash or
government securities with a futures commission merchant or custodian to
initiate and maintain open positions in futures contracts. A margin deposit is
intended to assure completion of the contract (delivery or acceptance of the
underlying security) if it is not terminated prior to the specified delivery
date. Minimal initial margin requirements are established by the futures
exchange and may be changed. Futures commission merchants may establish deposit
requirements which are higher than the exchange minimums. Initial margin
deposits on futures contracts are customarily set at levels much lower than the
prices at which the underlying securities are purchased and sold, typically
ranging upward from less than 5% of the value of the contract being traded.
After a futures contract position is opened, the value of the contract is
marked-to-market daily. If the futures contract price changes to the extent that
the margin on deposit does not satisfy margin requirements, payment of
additional "variation" margin will be required. Conversely, change in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to and
from the futures broker for as long as the contract remains open. The Funds
expect to earn interest income on its margin deposits.
When interest rates are expected to rise or market values of portfolio
securities are expected to fall, a Fund can seek through the sale of futures
contracts to offset a decline in the value of its portfolio securities. When
interest rates are expected to fall or market values are expected to rise, a
Fund, through the purchase of such contracts, can attempt to secure better rates
or prices for a Fund than might later be available in the market when it effects
anticipated purchases.
The Funds may sell futures contracts to protect securities it owns against price
declines or purchase contracts to protect against an increase in the price of
securities it intends to purchase. A Fund may also enter into such transactions
in order to terminate existing positions.
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The Funds' ability to use futures trading effectively depends on several
factors. First, it is possible that there will not be a perfect price
correlation between a futures contract and its underlying stock index. Second,
it is possible that a lack of liquidity for futures contracts could exist in the
secondary market, resulting in an inability to close a futures position prior to
its maturity date. Third, the purchase of a futures contract involves the risk
that a Fund could lose more than the original margin deposit required to
initiate a futures transaction.
Futures transactions involve brokerage costs and require a Fund to segregate
assets to cover contracts that would require it to purchase securities or
currencies. A Fund may lose the expected benefit of futures transactions if
interest rates, exchange rates or securities prices move in an unanticipated
manner. Such unanticipated changes may also result in poorer overall performance
than if a Fund had not entered into any futures transactions. In addition, the
value of a Fund's futures positions may not prove to be perfectly or even highly
correlated with the value of its portfolio securities, limiting a Fund's ability
to hedge effectively against interest rate and/or market risk and giving rise to
additional risks. There is no assurance of liquidity in the secondary market for
purposes of closing out futures positions.
Restrictions on the Use of Futures Contracts. The Funds will not enter into
futures contract transactions for purposes other than bona fide hedging purposes
or as a substitute for the underlying securities to gain market exposure to the
extent that, immediately thereafter, the sum of its initial margin deposits on
open contracts exceeds 5% of the market value of a Fund's total assets. In
addition, a Fund will not enter into futures contracts to the extent that the
value of the futures contracts held would exceed 1/3 of the Fund's total assets.
The Trust need not register with the CFTC as a Commodities Pool Operator.
In addition to the margin restrictions discussed above, transactions in futures
contracts may involve the segregation of funds pursuant to Securities and
Exchange Commission ("SEC") requirements. Under those requirements, where a Fund
has a long position in a futures contract, it may be required to establish a
segregated account (not with a futures commission merchant or broker) containing
cash or liquid securities equal to the purchase price of the contract (less any
margin on deposit). For a short position in futures or forward contracts held by
the Fund, those requirements may mandate the establishment of a segregated
account (not with a futures commission merchant or broker) with cash or liquid
securities that, when added to the amounts deposited as margin, equal the market
value of the instruments underlying the futures contracts (but are not less than
the price at which the short positions were established). However, segregation
of assets is not required if a Fund "covers" a long position. For example,
instead of segregating assets, a Fund, when holding a long position in a futures
contract, could purchase a put option on the same futures contract with a strike
price as high or higher than the price of the contract held by a Fund. In
addition, where a Fund engages in sales of call options, it need not segregate
assets if it "covers" these positions. For example, where a Fund holds a short
position in a futures contract, it may cover by owning the instruments
underlying the contract. A Fund may also cover such a position by holding a call
option permitting it to purchase the same futures contract at a price no higher
than the price at which the short position was established. Where a Fund sells a
call option on a futures contract, it may cover either by entering into a long
position in the same contract at a price no higher than the strike price of the
call option or by owning the instruments underlying the futures contract. A Fund
could also cover this position by holding a separate call option permitting it
to purchase the same futures contract at a price no higher than the strike price
of the call option sold by a Fund.
In addition, the extent to which a Fund may enter into futures contracts may be
limited by requirements of the Internal Revenue Code of 1986, as amended (the
"Code"), for qualification as a registered investment company.
Risk Factors in Futures Transactions. Positions in futures contracts may be
closed out only on an exchange which provides a secondary market for such
futures. However, there can be no assurance that a liquid secondary market will
exist for any particular futures contract at any specific time. Thus, it may not
be possible to close a futures position. In the event of adverse price
movements, a Fund would continue to be required to make daily cash payments to
maintain the required margin. In such situations, if a Fund has insufficient
cash, it may have to sell portfolio securities to meet daily margin requirements
at a time when it may be disadvantageous to do so. In addition, a Fund may be
required to make delivery of the instruments
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underlying futures contracts it holds. The inability to close options and
futures positions also could have an adverse impact on the ability to
effectively hedge them. A Fund will minimize the risk that it will be unable to
close out a futures contract by only entering into futures contracts which are
traded on national futures exchanges and for which there appears to be a liquid
secondary market.
The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. Because the deposit
requirements in the futures markets are less onerous than margin requirements in
the securities market, there may be increased participation by speculators in
the futures market which may also cause temporary price distortions. A
relatively small price movement in a futures contract may result in immediate
and substantial loss (as well as gain) to the investor. For example, if at the
time of purchase, 10% of the value of the futures contract is deposited as
margin, a subsequent 10% decrease in the value of the futures contract would
result in a total loss of the margin deposit, before any deduction for the
transaction costs, if the account were then closed out. A 15% decrease would
result in a loss equal to 150% of the original margin deposit if the contract
were closed out. Thus, a purchaser or sale of a futures contract may result in
losses in excess of the amount invested in the contract. However, because the
futures strategies engaged in by the Funds are only for hedging purposes, the
Adviser does not believe that the Funds are subject to the risks of loss
frequently associated with futures transactions. The Funds would presumably have
sustained comparable losses if, instead of the futures contract, it had invested
in the underlying financial instrument and sold it after the decline.
Use of futures transactions by the Funds involve the risk of imperfect or no
correlation where the securities underlying futures contracts have different
maturities than the portfolio securities being hedged. It is also possible that
a Fund could both lose money on futures contracts and also experience a decline
in the value of its portfolio securities. There is also the risk of loss by the
Funds of margin deposits in the event of bankruptcy of a broker with whom the
Funds have open positions in a futures contract or related option.
Options. Each Fund may sell (write) call options that are traded on national
securities exchanges with respect to common stock in its portfolio. A Fund must
at all times have in its portfolio the securities which it may be obligated to
deliver if the option is exercised. A Fund may write call options in an attempt
to realize a greater level of current income than would be realized on the
securities alone. A Fund may also write call options as a partial hedge against
a possible stock market decline. In view of its investment objective, a Fund
generally would write call options only in circumstances where the Adviser does
not anticipate significant appreciation of the underlying security in the near
future or has otherwise determined to dispose of the security. As the writer of
a call option, a Fund receives a premium for undertaking the obligation to sell
the underlying security at a fixed price during the option period, if the option
is exercised. So long as a Fund remains obligated as a writer of a call option,
it forgoes the opportunity to profit from increases in the market price of the
underlying security above the exercise price of the option, except insofar as
the premium represents such a profit. A Fund retains the risk of loss should the
value of the underlying security decline. A Fund may also enter into "closing
purchase transactions" in order to terminate its obligation as a writer of a
call option prior to the expiration of the option. Although the writing of call
options only on national securities exchanges increases the likelihood of a
Fund's ability to make closing purchase transactions, there is no assurance that
a Fund will be able to effect such transactions at any particular time or at any
acceptable price. The writing of call options could result in increases in a
Fund's portfolio turnover rate, especially during periods when market prices of
the underlying securities appreciate.
Illiquid Investments. Illiquid investments are investments that cannot be sold
or disposed of, within seven business days, in the ordinary course of business
at approximately the prices at which they are valued.
Under the supervision of the Board, the Adviser determines the liquidity of each
Fund's investments and, through reports from the Adviser, the Trustees monitor
investments in illiquid instruments. In determining the liquidity of a Fund's
investments, the Adviser may consider various factors, including (1) the
frequency of trades and quotations, (2) the number of dealers and prospective
purchasers in the marketplace, (3) dealer undertakings to make a market, (4) the
nature of the security (including any demand or tender features), and
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(5) the nature of the marketplace for trades (including the ability to assign or
offset the Funds' rights and obligations relating to the investment).
Investments currently considered by a Fund to be illiquid include repurchase
agreements not entitling the holder to payment of principal and interest within
seven days, over the counter options, non-government stripped fixed-rate
mortgage-backed securities, and Restricted Securities (see discussion below).
Also, the Adviser may determine some securities to be illiquid.
However, with respect to over-the-counter options a Fund writes, all or a
portion of the value of the underlying instrument may be illiquid depending on
the assets held to cover the option and the nature and terms of any agreement a
Fund may have to close out the option before expiration.
In the absence of market quotations, illiquid investments are priced at fair
value as determined in good faith by a committee appointed by the Trustees. If
through a change in values, net assets, or other circumstances, more than 15% of
a Fund's net assets were invested in illiquid securities, the Fund would seek to
take appropriate steps to protect liquidity.
Restricted Securities. Restricted securities generally can be sold in privately
negotiated transactions, pursuant to an exemption from registration under the
Securities Act, or in a registered public offering.
Where registration is required, a Fund may be obligated to pay all or part of
the registration expense and a considerable period may elapse between the time
it decides to seek registration and the time the Fund may be permitted to sell a
security under an effective registration statement.
If, during such a period, adverse market conditions were to develop, a Fund
might obtain a less favorable price than prevailed when it decided to seek
registration of the shares.
Securities Lending Transactions. Each Fund may from time to time lend securities
from its portfolio to broker-dealers, banks, financial institutions and
institutional borrowers of securities and receive collateral in the form of cash
or U.S. Government Obligations. Generally, a Fund must receive initial
collateral equal to 102% of the market value of the loaned securities, plus any
interest due in the form of cash or U.S. Government Obligations. No Fund will
lend portfolio securities to: (a) any "affiliated person" (as that term is
defined in the 1940 Act) of the Trust; (b) any affiliated person of the Adviser;
or (c) any affiliated person of such an affiliated person. This collateral must
be valued daily and should the market value of the loaned securities increase,
the borrower must furnish additional collateral to the Fund sufficient to
maintain the value of the collateral equal to at least 100% of the value of the
loaned securities. During the time portfolio securities are on loan, the
borrower will pay the Fund any dividends or interest paid on such securities
plus any interest negotiated between the parties to the lending agreement. Loans
will be subject to termination by the Fund or the borrower at any time. While
the Fund will not have the right to vote securities on loan, they intend to
terminate loans and regain the right to vote if that is considered important
with respect to the investment. A Fund will only enter into loan arrangements
with broker-dealers, banks or other institutions which the Adviser has
determined are creditworthy under guidelines established by the Trustees. Each
Fund will limit its securities lending to 33 1/3% of total assets.
Reverse Repurchase Agreements. Each Fund may borrow funds for temporary purposes
by entering into reverse repurchase agreements. Reverse repurchase agreements
are considered to be borrowings under the 1940 Act. Pursuant to such agreement,
a Fund would sell a portfolio security to a financial institution such as a bank
or broker-dealer, and agree to repurchase such security at a mutually
agreed-upon date and price. At the time a Fund enters into a reverse repurchase
agreement, it will place in a segregated custodial account liquid assets
consistent with the Fund's investment restrictions having a value equal to the
repurchase price (including accrued interest). The collateral will be
marked-to-market on a daily basis, and will be monitored continuously to ensure
that such equivalent value is maintained. Reverse Repurchase Agreements involve
the
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risk that the market value of the securities sold by a Fund may decline below
the price at which the Fund is obligated to repurchase the securities.
VALUATION OF PORTFOLIO SECURITIES.
Each equity security held by a Fund is valued at its last sales price on the
exchange where the security is principally traded or, lacking any sales on a
particular day, the security is valued at the mean between the closing bid and
asked prices on that day. Exchange listed convertible debt securities are valued
at the mean between the last bid and asked prices obtained from broker-dealers
or a comparable alternative, such as Bloomberg or Telerate. Each security traded
in the over-the-counter market (but not including securities reported on the
Nasdaq National Market System) is valued at the mean between the last bid and
asked prices based upon quotes furnished by market makers for such securities.
Each security reported on the Nasdaq National Market System is valued at the
sales price on the valuation date or absent a last sales price, at the mean
between the closing bid and asked prices on that day. Non-convertible debt
securities are valued on the basis of prices provided by an independent pricing
service. Prices provided by the pricing service may be determined without
exclusive reliance on quoted prices, and may reflect appropriate factors such as
institution-size trading in similar groups of securities, developments related
to special securities, yield, quality, coupon rate, maturity, type of issue,
individual trading characteristics and other market data. Securities for which
market quotations are not readily available are valued at fair value as
determined in good faith by or under the supervision of the Trust's officers in
a manner specifically authorized by the Board. Short-term obligations maturing
in 60 days or less are valued on the basis of amortized cost. For purposes of
determining net asset value per share, futures and options contracts generally
will be valued 15 minutes after the close of trading of the New York Stock
Exchange, Inc. (the "NYSE"), currently 4:00 p.m. Eastern Time.
Generally, trading in foreign securities, corporate bonds, U.S. Government
securities and money market instruments is substantially completed each day at
various times prior to the close of the NYSE. The values of such securities used
in computing the net asset value of each Fund's shares are determined at such
times. Foreign currency exchange rates are also generally determined prior to
the close of the NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which such
values are determined and the close of the NYSE which will not be reflected in
the computation of a Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these securities will be
valued at their fair value as determined in good faith by or under the
supervision of the Board.
PERFORMANCE OF THE FUNDS
From time to time, the "average annual total return" and "total return" of an
investment in each of the Fund shares may be advertised. An explanation of how
yields and total returns are calculated for each class and the components of
those calculations are set forth below.
Total return information may be useful to investors in reviewing the Fund's
performance. A Fund's advertisement of its performance must, under applicable
SEC rules, include the average annual total returns for each class of shares of
a Fund for the 1, 5, and 10-year period (or the life of the class, if less) as
of the most recently ended calendar quarter. This enables an investor to compare
the Fund's performance to the performance of other funds for the same periods.
However, a number of factors should be considered before using such information
as a basis for comparison with other investments. Investments in a Fund are not
insured; its total return is not guaranteed and normally will fluctuate on a
daily basis. When redeemed, an investor's shares may be worth more or less than
their original cost. Total return for any given past period are not a prediction
or representation by the Trust of future rates of return on its shares. The
total returns of the shares of the Funds are affected by portfolio quality,
portfolio maturity, the type of investments the Fund holds, and operating
expenses.
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The U.S. Equity Fund and the International Equity Fund are successors to Simms
Partners (U.S.), L.P. and Simms Partners (International), L.P., two private
investment limited partnerships managed by Simms. These Funds' historical
performance reflects the historical performance of these limited partnerships.
Total Returns. The "average annual total return" of a Fund is an average annual
compounded rate of return for each year in a specified number of years. It is
the rate of return ("T" in the formula below) based on the change in value of a
hypothetical initial investment of $1,000 ("P") held for a number of years ("n")
to achieve an Ending Redeemable Value ("ERV"), according to the following
formula:
P(1+T)" = ERV
The cumulative "total return" calculation measures the change in value of a
hypothetical investment of $1,000 over an entire period of years. Its
calculation uses some of the same factors as average annual total return, but it
does not average the rate of return on an annual basis. Cumulative total return
is determined as follows:
ERV - P = Cumulative Total Return
-------
P
In calculating total returns for the Funds, the current maximum sales charge (as
a percentage of the offering price) is deducted from the initial investment
("P"). Total returns also assume that all dividends and net capital gains
distributions during the period are reinvested to buy additional shares at net
asset value per share, and that the investment is redeemed at the end of the
period.
Other Performance Comparisons.
From time to time a Fund may publish the ranking of its performance or the
performance of its shares by Lipper Analytical Services, Inc. ("Lipper"), a
widely-recognized independent mutual fund monitoring service. Lipper monitors
the performance of regulated investment companies, including the Funds, and
ranks the performance of the Funds and their classes against all other funds in
similar categories, for both equity and fixed income funds. The Lipper
performance rankings are based on total return that includes the reinvestment of
capital gains distributions and income dividends but does not take sales charges
or taxes into consideration.
A Fund also may publish the ranking of its performance or performance of its
shares by Morningstar, Inc., an independent mutual fund monitoring service that
ranks mutual funds, including the Funds, in broad investment categories
(domestic equity, international equity taxable bond, municipal bond or other)
monthly, based upon each fund's three, five, and ten-year average annual total
returns (when available) and a risk adjustment factor that reflects fund
performance relative to three-month U.S. Treasury bill monthly returns. Such
returns are adjusted for fees and sales loads. There are five ranking categories
with a corresponding number of stars: highest (5), above average (4), neutral
(3), below average (2), and lowest (1). Ten percent of the funds, series or
classes in an investment category receive five stars, 22.5% receive four stars,
35% receive three stars, 22.5% receive two stars, and the bottom 10% receive one
star.
The total return on an investment made in a Fund may be compared with the
performance for the same period of one or more of the following indices: the
Consumer Price Index, the Standard & Poor's 500 Index, and the Morgan Stanley
Capital International Europe, Australasia, Far East (EAFE) Index. Other indices
may be used from time to time. The Consumer Price Index generally is considered
to be a measure of inflation. The S&P 500 Index is a composite index of 500
common stocks generally regarded as an index of U.S. stock market performance.
The EAFE Index is a popular index of foreign stock prices, including more than
1,000 major foreign companies. The foregoing indices are unmanaged indices of
securities that do not reflect reinvestment of capital gains or take investment
costs into consideration, as these items are not applicable to indices.
From time to time, the total returns of the Funds may be quoted in and compared
to other mutual funds with similar investment objectives in advertisements,
shareholder reports or other communications to shareholders.
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A Fund also may include calculations in such communications that describe
hypothetical investment results. (Such performance examples are based on an
express set of assumptions and are not indicative of the performance of any
Fund.) Such calculations may from time to time include discussions or
illustrations of the effects of compounding in advertisements. "Compounding"
refers to the fact that, if dividends or other distributions on a Fund's
investment are reinvested by being paid in additional Fund shares, any future
income or capital appreciation of a Fund would increase the value, not only of
the original Fund investment, but also of the additional Fund shares received
through reinvestment. As a result, the value of a Fund investment would increase
more quickly than if dividends or other distributions had been paid in cash. A
Fund may also include discussions or illustrations of the potential investment
goals of a prospective investor (including but not limited to tax and/or
retirement planning), investment management techniques, policies or investment
suitability of a Fund, economic conditions, legislative developments (including
pending legislation), the effects of inflation and historical performance of
various asset classes, including but not limited to stocks, bonds and Treasury
bills.
From time to time advertisements or communications to shareholders may summarize
the substance of information contained in shareholder reports (including the
investment composition of a Fund, as well as the Adviser's views as to current
market, economic, trade and interest rate trends, legislative, regulatory and
monetary developments, investment strategies and related matters believed to be
of relevance to a Fund.) A Fund may also include in advertisements, charts,
graphs or drawings which illustrate the potential risks and rewards of
investment in various investment vehicles, including but not limited to stock,
bonds, and Treasury bills, as compared to an investment in shares of a Fund, as
well as charts or graphs that illustrate strategies such as dollar cost
averaging. In addition, advertisements or shareholder communications may include
a discussion of certain attributes or benefits to be derived by an investment in
a Fund. Such advertisements or communications may include symbols, headlines or
other material which highlight or summarize the information discussed in more
detail therein. With proper authorization, a Fund may reprint articles (or
excerpts) written regarding a Fund and provide them to prospective shareholders.
Performance information with respect to the Funds is generally available by
calling 1-877-GET-SIMS.
Investors may also judge, and a Fund may at times advertise, the performance of
a Fund by comparing it to the performance of other mutual funds or mutual fund
portfolios with comparable investment objectives and policies, which performance
may be contained in various unmanaged mutual fund or market indices or rankings
such as those prepared by Dow Jones & Co., Inc., Standard & Poor's, and Morgan
Stanley, and in publications issued by Lipper Analytical Services, Inc. and in
the following publications: Value Line Mutual Fund Survey, Morningstar,
CDA/Wiesenberger, Money Magazine, Forbes, Barron's, The Wall Street Journal, The
New York Times, Business Week, American Banker, Fortune, Institutional Investor,
Ibbotson Associates, and U.S.A. Today. In addition to performance information,
general information about a Fund that appears in a publication such as those
mentioned above may also be quoted or reproduced in advertisements or in reports
to shareholders.
Advertisements and sales literature may include discussions of specifics of a
portfolio manager's investment strategy and process, including, but not limited
to, descriptions of security selection and analysis. Advertisements may also
include descriptive information about the investment adviser, including, but not
limited to, its status within the industry, other services and products it makes
available, total assets under management, and its investment philosophy.
When comparing total return and investment risk of an investment in shares of a
Fund with other investments, investors should understand that certain other
investments have different risk characteristics than an investment in shares of
a Fund. For example, CDs may have fixed rates of return and may be insured as to
principal and interest by the FDIC, while a Fund's returns will fluctuate and
its share values and returns are not guaranteed. U.S. Treasury securities are
guaranteed as to principal and interest by the full faith and credit of the U.S.
Government.
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ADDITIONAL PURCHASE, EXCHANGE, AND REDEMPTION INFORMATION
The NYSE is currently scheduled to be closed on New Year's Day, Dr. Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day, or, when one of these
holidays fall on a Saturday or Sunday, the preceding Friday or subsequent
Monday. This closing schedule is subject to change.
When the NYSE is closed, or when trading is restricted for any reason other than
its customary weekend or holiday closings, or under emergency circumstances as
determined by the SEC to warrant such action, the Funds will determine their net
asset value at Valuation Time.
The Trust has elected, pursuant to Rule 18f-1 under the 1940 Act, to redeem
shares of a Fund 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. The
remaining portion of the redemption may be made in securities or other property,
valued for this purpose as they are valued in computing the net asset value of
each class of the Fund. Shareholders receiving securities or other property on
redemption may realize a gain or loss for tax purposes and may incur additional
costs as well as the associated inconveniences of holding and/or disposing of
such securities or other property.
Pursuant to Rule 11a-3 under the 1940 Act, the Funds are required to give
shareholders at least 60 days' notice prior to terminating or modifying a Fund's
exchange privilege. The 60-day notification requirement may, however, be waived
if (1) the only effect of a modification would be to reduce or eliminate an
administrative fee, redemption fee, or deferred sales charge ordinarily payable
at the time of exchange or (2) a Fund temporarily suspends the offering of
shares as permitted under the 1940 Act or by the SEC or because it is unable to
invest amounts effectively in accordance with its investment objective and
policies.
The Funds reserve the right at any time without prior notice to shareholders to
refuse exchange purchases by any person or group if, in the Adviser's judgment,
a Fund would be unable to invest effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely affected.
Purchasing Shares.
Dealer Reallowances. The following table shows the amount of the Funds' front
end sales load that is reallowed to dealers as a percentage of the offering
price of the Funds' Class A Shares.
<TABLE>
<CAPTION>
Initial Sales Charge: % of Net Amount Concession to Dealers:
Amount of Purchase % of Offering Price Invested % of Offering Price
------------------ ------------------- -------- -------------------
<S> <C> <C> <C>
Less than $100,000 4.00 4.17 3.75
$100,000 to $249,999 3.00 3.09 2.75
$250,000 to $499,999 2.00 2.04 1.75
$500,000 to $999,999 1.00 1.01 0.75
$1,000,000 and over 0.00 0.00 0.00
</TABLE>
Reduced Sales Charge. Reduced sales charges are available for purchases of
$100,000 or more of Class A Shares of a Fund alone or in combination with
purchases of other shares of the Trust. To obtain the reduction of the sales
charge, you or the broker-dealer through whom you are purchasing shares (an
"Authorized Securities Dealer") must notify Firstar Mutual Fund Services, LLC
("Firstar" or the "Transfer Agent") at the time of purchase whenever a quantity
discount is applicable to your purchase.
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In addition to investing at one time in any combination of shares of the Funds
in an amount entitling you to a reduced sales charge, you may qualify for a
reduction in the sales charge under the following programs:
Combined Purchases. When you invest in shares of the Funds for several accounts
at the same time, you may combine these investments into a single transaction if
purchased through one Authorized Securities Dealer, and if the total is $100,000
or more. The following may qualify for this privilege: an individual, or
"company" as defined in Section 2(a)(8) of the 1940 Act; an individual, spouse,
and their children under age 21 purchasing for his, her, or their own account; a
trustee, administrator or other fiduciary purchasing for a single trust estate
or single fiduciary account or for a single or a parent-subsidiary group of
"employee benefit plans" (as defined in Section 3(3) of ERISA); and tax-exempt
organizations under Section 501(c)(3) of the Code.
Rights of Accumulation. "Rights of Accumulation" permit reduced sales charges on
future purchases of shares after you have reached a new breakpoint. You can add
the value of existing Fund shares held by you, your spouse, and your children
under age 21, determined at the previous day's net asset value at the close of
business, to the amount of your new purchase valued at the current offering
price to determine your reduced sales charge.
Letter of Intent. If you anticipate purchasing $100,000 or more of shares of a
Fund alone or in combination with shares of certain other Funds within a
13-month period, you may obtain shares of the portfolios at the same reduced
sales charge as though the total quantity were invested in one lump sum, by
filing a non-binding Letter of Intent (the "Letter") within 90 days of the start
of the purchases. You must start with a minimum initial investment of 5% of the
projected purchase amount. Each investment you make after signing the Letter
will be entitled to the sales charge applicable to the total investment
indicated in the Letter. For example, a $2,500 purchase toward a $110,000 Letter
would receive the same reduced sales charge as if the $110,000 had been invested
at one time. To ensure that the reduced price will be received on future
purchases, you or your Authorized Securities Dealer must inform the Transfer
Agent that the Letter is in effect each time shares are purchased. Neither
income dividends nor capital gain distributions taken in additional shares will
apply toward the completion of the Letter.
You are not obligated to complete the additional purchases contemplated by a
Letter. If you do not complete your purchase under the Letter within the
13-month period, your sales charge will be adjusted upward, corresponding to the
amount actually purchased, and if after written notice, you do not pay the
increased sales charge, sufficient escrowed shares will be redeemed to pay such
charge.
If you purchase more than the amount specified in the Letter and qualify for a
further sales charge reduction, the sales charge will be adjusted to reflect
your total purchase at the end of 13 months. Surplus funds will be applied to
the purchase of additional shares at the then current offering price applicable
to the total purchase.
Exchanging Shares.
Shares of a Fund may be exchanged for the same class of shares of any other Fund
of the Trust. For example, an investor can exchange Class A shares of a Fund
only for Class A shares of another Fund.
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<PAGE>
Redeeming Shares.
Reinstatement Privilege. Within 90 days of a redemption, a shareholder may
reinvest all or part of the redemption proceeds in the same class of shares of
the same Fund or another Fund, at the net asset value next computed after
receipt by the Transfer Agent of the reinvestment order. No service charge is
currently made for reinvestment in shares of the Funds. The shareholder must ask
Firstar for such privilege at the time of reinvestment. Any capital gain that
was realized when the shares were redeemed is taxable, and reinvestment will not
alter any capital gains tax payable on that gain. If there has been a capital
loss on the redemption, some or all of the loss may not be tax deductible,
depending on the timing and amount of the reinvestment. Under the Code, if the
redemption proceeds of Fund shares on which a sales charge was paid are
reinvested in shares of a Fund within 90 days of payment of the sales charge,
the shareholder's basis in the shares of the Fund that were redeemed may not
include the amount of the sales charge paid. That would reduce the loss or
increase the gain recognized from redemption. The Funds may amend, suspend, or
cease offering this reinvestment privilege at any time as to shares redeemed
after the date of such amendment, suspension, or cessation. The reinstatement
must be into an account bearing the same registration.
DIVIDENDS AND DISTRIBUTIONS
The Funds distribute substantially all of their net investment income and net
capital gains, if any, to shareholders within each calendar year as well as on a
fiscal year basis to the extent required for the Funds to qualify for favorable
federal tax treatment. The Funds ordinarily declare and pay dividends from their
net investment income and make distibutions of net capital gains, if any,
annually.
The amount of a Fund's distributions may vary from time to time depending on
market conditions, the composition of a Fund's portfolio, and expenses borne by
a Fund.
The net income of a Fund, from the time of the immediately preceding
determination thereof, shall consist of all interest income accrued on the
portfolio assets of the Fund, dividend income, if any, income from securities
loans, if any, income from corporate actions such as reorganizations, if any,
and realized capital gains and losses on the Fund's assets, less all expenses
and liabilities of the Fund chargeable against income. Interest income shall
include discount earned, including both original issue and market discount, on
discount paper accrued ratably to the date of maturity. Expenses, including the
compensation payable to the Adviser, are accrued each day. The expenses and
liabilities of a Fund shall include those appropriately allocable to the Fund as
well as a share of the general expenses and liabilities of the Trust in
proportion to the Fund's share of the total net assets of the Trust.
TAXES
The following is only a summary of certain additional federal income tax
considerations generally affecting each Fund and its shareholders that are not
described in the Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of each Fund or its shareholders, and the
discussions here and in the Prospectus are not intended as substitutes for
careful tax planning.
Qualification as a Regulated Investment Company
- - -----------------------------------------------
Each Fund has elected to be taxed as a regulated investment company under
Subchapter M of the Code. As a regulated investment company, a Fund is not
subject to federal income tax on the portion of its net investment income (i.e.,
taxable interest, dividends and other taxable ordinary income, net of expenses)
and capital gain net income (i.e., the excess of capital gains over capital
losses) that it distributes to shareholders, provided that it distributes at
least 90% of its investment company taxable income (i.e., net investment income
and the excess of net short-term capital gain over net long-term capital loss)
for the taxable year (the "Distribution Requirement"), and satisfies certain
other requirements of the Code that are described below. Distributions by a Fund
made during the taxable year or, under specified circumstances,
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<PAGE>
within twelve months after the close of the taxable year, will be considered
distributions of income and gains of the taxable year and will therefore count
towards the satisfaction of the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated investment
company must derive at least 90% of its gross income from dividends, interest,
certain payments with respect to securities loans, gains from the sale or other
disposition of stock or securities or foreign currencies (to the extent such
currency gains are directly related to the regulated investment company's
principal business of investing in stock or securities) and other income
(including, but not limited to, gains from options, futures or forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies (the "Income Requirement").
In general, gain or loss recognized by a Fund on the disposition of an asset
will be a capital gain or loss. In addition, gain will be recognized as a result
of certain constructive sales, including short sales "against the box". However,
gain recognized on the disposition of a debt obligation purchased by a Fund at a
market discount (generally, at a price less than its principal amount) will be
treated as ordinary income to the extent of the portion of the market discount
which accrued during the period of time the Fund held the debt obligation. In
addition, under the rules of Code section 988, gain or loss recognized on the
disposition of a debt obligation denominated in a foreign currency or an option
with respect thereto (but only to the extent attributable to changes in foreign
currency exchange rates), and gain or loss recognized on the disposition of a
foreign currency forward contract, futures contract, option or similar financial
instrument, or of foreign currency itself, except for regulated futures
contracts or non-equity options subject to Code section 1256 (unless a Fund
elects otherwise), will generally be treated as ordinary income or loss.
Further, the Code also treats as ordinary income a portion of the capital gain
attributable to a transaction where substantially all of the return realized is
attributable to the time value of a Fund's net investment in the transaction
and: (1) the transaction consists of the acquisition of property by the Fund and
a contemporaneous contract to sell substantially identical property in the
future; (2) the transaction is a straddle within the meaning of section 1092 of
the Code; (3) the transaction is one that was marketed or sold to the Fund on
the basis that it would have the economic characteristics of a loan but the
interest-like return would be taxed as capital gain; or (4) the transaction is
described as a conversion transaction in the Treasury Regulations. The amount of
the gain recharacterized generally will not exceed the amount of the interest
that would have accrued on the net investment for the relevant period at a yield
equal to 120% of the federal long-term, mid-term, or short-term rate, depending
upon the type of instrument at issue, reduced by an amount equal to: (1) prior
inclusions of ordinary income items from the conversion transaction and (2) the
capital interest on acquisition indebtedness under Code section 263(g). Built-in
losses will be preserved where the Fund has a built-in loss with respect to
property that becomes a part of a conversion transaction. No authority exists
that indicates that the converted character of the income will not be passed
through to the Fund's shareholders.
In general, for purposes of determining whether capital gain or loss recognized
by a Fund on the disposition of an asset is long-term or short-term, the holding
period of the asset may be affected if (1) the asset is used to close a "short
sale" (which includes for certain purposes the acquisition of a put option) or
is substantially identical to another asset so used, (2) the asset is otherwise
held by the Fund as part of a "straddle" (which term generally excludes a
situation where the asset is stock and the Fund grants a qualified covered call
option (which, among other things, must not be deep-in-the-money) with respect
thereto) or (3) the asset is stock and the Fund grants an in-the-money qualified
covered call option with respect thereto. In addition, a Fund may be required to
defer the recognition of a loss on the disposition of an asset held as part of a
straddle to the extent of any unrecognized gain on the offsetting position. Any
gain recognized by a Fund on the lapse of, or any gain or loss recognized by a
Fund from a closing transaction with respect to, an option written by the Fund
will be treated as a short-term capital gain or loss.
Certain transactions that may be engaged in by the Funds (such as regulated
futures contracts, certain foreign currency contracts, and options on stock
indexes and futures contracts) will be subject to special tax treatment as
"Section 1256 contracts." Section 1256 contracts are treated as if they are sold
for their fair
19
<PAGE>
market value on the last business day of the taxable year, even though a
taxpayer's obligations (or rights) under such contracts have not terminated (by
delivery, exercise, entering into a closing transaction or otherwise) as of such
date. Any gain or loss recognized as a consequence of the year-end deemed
disposition of Section 1256 contracts is taken into account for the taxable year
together with any other gain or loss that was previously recognized upon the
termination of Section 1256 contracts during that taxable year. Any capital gain
or loss for the taxable year with respect to Section 1256 contracts (including
any capital gain or loss arising as a consequence of the year-end deemed sale of
such contracts) is generally treated as 60% long-term capital gain or loss and
40% short-term capital gain or loss. A Fund, however, may elect not to have this
special tax treatment apply to Section 1256 contracts that are part of a "mixed
straddle" with other investments of the Fund that are not Section 1256
contracts.
A Fund may purchase securities of certain foreign investment funds or trusts
which constitute passive foreign investment companies ("PFICs") for federal
income tax purposes. If a Fund invests in a PFIC, it has three separate options.
First, it may elect to treat the PFIC as a qualifying electing fund (a "QEF"),
in which case it will each year have ordinary income equal to its pro rata share
of the PFIC's ordinary earnings for the year and long-term capital gain equal to
its pro rata share of the PFIC's net capital gain for the year, regardless of
whether the Fund receives distributions of any such ordinary earnings or capital
gains from the PFIC. Second, the Fund may make a mark-to-market election with
respect to its PFIC stock. Pursuant to such an election, the Fund will include
as ordinary income any excess of the fair market value of such stock at the
close of any taxable year over its adjusted tax basis in the stock. If the
adjusted tax basis of the PFIC stock exceeds the fair market value of such stock
at the end of a given taxable year, such excess will be deductible as ordinary
loss in the amount equal to the lesser of the amount of such excess or the net
mark-to-market gains on the stock that the Fund included in income in previous
years. The Fund's holding period with respect to its PFIC stock subject to the
election will commence on the first day of the following taxable year. If the
Fund makes the mark-to-market election in the first taxable year it holds PFIC
stock, it will not incur the tax described below under the third option.
Finally, if the Fund does not elect to treat the PFIC as a QEF and does not make
a mark-to-market election, then, in general, (1) any gain recognized by the Fund
upon a sale or other disposition of its interest in the PFIC or any "excess
distribution" received by the Fund from the PFIC will be allocated ratably over
the Fund's holding period in the PFIC stock, (2) the portion of such gain or
excess distribution so allocated to the year in which the gain is recognized or
the excess distribution is received shall be included in the Fund's gross income
for such year as ordinary income (and the distribution of such portion by the
Fund to shareholders will be taxable as an ordinary income dividend, but such
portion will not be subject to tax at the Fund level), (3) the Fund shall be
liable for tax on the portions of such gain or excess distribution so allocated
to prior years in an amount equal to, for each such prior year, (i) the amount
of gain or excess distribution allocated to such prior year multiplied by the
highest tax rate (individual or corporate, as the case may be) in effect for
such prior year, plus (ii) interest on the amount determined under clause (i)
for the period from the due date for filing a return for such prior year until
the date for filing a return for the year in which the gain is recognized or the
excess distribution is received, at the rates and methods applicable to
underpayments of tax for such period, and (4) the distribution by the Fund to
shareholders of the portions of such gain or excess distribution so allocated to
prior years (net of the tax payable by the Fund thereon) will again be taxable
to the shareholders as an ordinary income dividend.
Treasury Regulations permit a regulated investment company, in determining its
investment company taxable income and net capital gain (i.e., the excess of net
long-term capital gain over net short-term capital loss) for any taxable year,
to elect (unless it has made a taxable year election for excise tax purposes as
discussed below) to treat all or any part of any net capital loss, any net
long-term capital loss or any net foreign currency loss (including, to the
extent provided in Treasury Regulations, losses recognized pursuant to the PFIC
mark-to-market election) incurred after October 31 as if it had been incurred in
the succeeding year.
In addition to satisfying the requirements described above, each Fund must
satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of a
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<PAGE>
Fund's taxable year, at least 50% of the value of the Fund's assets must consist
of cash and cash items, U.S. Government securities, securities of other
regulated investment companies, and securities of other issuers (as to which the
Fund has not invested more than 5% of the value of the Fund's total assets in
securities of such issuer and does not hold more than 10% of the outstanding
voting securities of such issuer), and no more than 25% of the value of its
total assets may be invested in the securities of any one issuer (other than
U.S. Government securities and securities of other regulated investment
companies), or in two or more issuers which the Fund controls and which are
engaged in the same or similar trades or businesses. Generally, an option (call
or put) with respect to a security is treated as issued by the issuer of the
security not the issuer of the option. For purposes of asset diversification
testing, obligations issued or guaranteed by agencies or instrumentalities of
the U.S. Government such as the Federal Agricultural Mortgage Corporation, the
Farm Credit System Financial Assistance Corporation, a Federal Home Loan Bank,
the Federal Home Loan Mortgage Corporation, the Federal National Mortgage
Association, the Government National Mortgage Corporation, and the Student Loan
Marketing Association are treated as U.S. Government securities.
If for any taxable year a Fund does not qualify as a regulated investment
company, all of its taxable income (including its net capital gain) will be
subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable to the
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. Such distributions generally will be eligible
for the dividends-received deduction in the case of corporate shareholders.
Excise Tax on Regulated Investment Companies
- - --------------------------------------------
A 4% non-deductible excise tax is imposed on a regulated investment company that
fails to distribute in each calendar year an amount equal to 98% of its ordinary
income for such calendar year and 98% of capital gain net income for the
one-year period ended on October 31 of such calendar year (or, at the election
of a regulated investment company having a taxable year ending November 30 or
December 31, for its taxable year (a "taxable year election")). The balance of
such income must be distributed during the next calendar year. For the foregoing
purposes, a regulated investment company is treated as having distributed any
amount on which it is subject to income tax for any taxable year ending in such
calendar year.
For purposes of the excise tax, a regulated investment company shall: (1) reduce
its capital gain net income (but not below its net capital gain) by the amount
of any net ordinary loss for the calendar year; and (2) exclude foreign currency
gains and losses and ordinary gains or losses arising as a result of a PFIC
mark-to-market election (or upon an actual disposition of the PFIC stock subject
to such election) incurred after October 31 of any year (or after the end of its
taxable year if it has made a taxable year election) in determining the amount
of ordinary taxable income for the current calendar year (and, instead, include
such gains and losses in determining ordinary taxable income for the succeeding
calendar year).
Each Fund intends to make sufficient distributions or deemed distributions of
its ordinary taxable income and capital gain net income prior to the end of each
calendar year to avoid liability for the excise tax. However, investors should
note that a Fund may in certain circumstances be required to liquidate portfolio
investments to make sufficient distributions to avoid excise tax liability.
Fund Distributions
- - ------------------
Each Fund anticipates distributing substantially all of its investment company
taxable income for each taxable year. Such distributions will be taxable to
shareholders as ordinary income and treated as dividends for federal income tax
purposes. Such dividends paid by a Fund will qualify for the 70%
dividends-received deduction for corporate shareholders only to the extent
discussed below.
A Fund may either retain or distribute to shareholders its net capital gain for
each taxable year. Each Fund currently intends to distribute any such amounts.
Net capital gain that is distributed and designated as a
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<PAGE>
capital gain dividend will be taxable to shareholders as long-term capital gain,
regardless of the length of time the shareholder has held his shares or whether
such gain was recognized by the Fund prior to the date on which the shareholder
acquired his shares. The Code provides, however, that under certain conditions
only 50% (58% for alternative minimum tax purposes) of the capital gain
recognized upon a Fund's disposition of domestic "small business" stock will be
subject to tax.
Conversely, if a Fund elects to retain its net capital gain, the Fund will be
taxed thereon (except to the extent of any available capital loss carryovers) at
the 35% corporate tax rate. If a Fund elects to retain its net capital gain, it
is expected that the Fund also will elect to have shareholders of record on the
last day of its taxable year treated as if each received a distribution of his
pro rata share of such gain, with the result that each shareholder will be
required to report his pro rata share of such gain on his tax return as
long-term capital gain, will receive a refundable tax credit for his pro rata
share of tax paid by the Fund on the gain, and will increase the tax basis for
his shares by an amount equal to the deemed distribution less the tax credit.
Ordinary income dividends paid by a Fund with respect to a taxable year will
qualify for the 70% dividends-received deduction generally available to
corporations (other than corporations, such as S corporations, which are not
eligible for the deduction because of their special characteristics and other
than for purposes of special taxes such as the accumulated earnings tax and the
personal holding company tax) to the extent of the amount of qualifying
dividends received by the Fund from domestic corporations for the taxable year.
Generally, a dividend received by the Fund will not be treated as a qualifying
dividend (1) if it has been received with respect to any share of stock that the
Fund has held for less than 46 days (91 days in the case of certain preferred
stock), excluding for this purpose under the rules of Code section 246(c)(3) and
(4) any period during which the Fund has an option to sell, is under a
contractual obligation to sell, has made and not closed a short sale of, is the
grantor of a deep-in-the-money or otherwise nonqualified option to buy, or has
otherwise diminished its risk of loss by holding other positions with respect
to, such (or substantially identical) stock; (2) to the extent that the Fund is
under an obligation (pursuant to a short sale or otherwise) to make related
payments with respect to positions in substantially similar or related property;
or (3) to the extent that the stock on which the dividend is paid is treated as
debt-financed under the rules of Code Section 246A. The 46-day holding period
must be satisfied during the 90-day period beginning 45 days prior to each
applicable ex-dividend date; the 91-day holding period must be satisfied during
the 180-day period beginning 90 days before each applicable ex-dividend date.
Moreover, the dividends-received deduction for a corporate shareholder may be
disallowed or reduced (1) if the corporate shareholder fails to satisfy the
foregoing requirements with respect to its shares of the Fund or (2) by
application of Code section 246(b) which in general limits the
dividends-received deduction to 70% of the shareholder's taxable income
(determined without regard to the dividends-received deduction and certain other
items). Since an insignificant portion of the International Equity Fund will be
invested in stock of domestic corporations, the ordinary dividends distributed
by the Fund generally will not qualify for the dividends-received deduction for
corporate shareholders.
Alternative minimum tax ("AMT") is imposed in addition to, but only to the
extent it exceeds, the regular tax and is computed at a maximum marginal rate of
28% for noncorporate taxpayers and 20% for corporate taxpayers on the excess of
the taxpayer's alternative minimum taxable income ("AMTI") over an exemption
amount. For purposes of the corporate AMT, the corporate dividends-received
deduction is not itself an item of tax preference that must be added back to
taxable income or is otherwise disallowed in determining a corporation's AMTI.
However, a corporate shareholder will generally be required to take the full
amount of any dividend received from the Fund into account (without a
dividends-received deduction) in determining its adjusted current earnings,
which are used in computing an additional corporate preference item (i.e., 75%
of the excess of a corporate taxpayer's adjusted current earnings over its AMTI
(determined without regard to this item and the AMT net operating loss
deduction)) includable in AMTI.
Investment income that may be received by a Fund from sources within foreign
countries may be subject to foreign taxes withheld at the source. The United
States has entered into tax treaties with many foreign countries which entitle a
Fund to a reduced rate of, or exemption from, taxes on such income. It is
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impossible to determine the effective rate of foreign tax in advance since the
amount of a Fund's assets to be invested in various countries is not known. If
more than 50% of the value of a Fund's total assets at the close of its taxable
year consist of the stock or securities of foreign corporations, the Fund may
elect to "pass through" to the Fund's shareholders the amount of foreign taxes
paid by the Fund. If a Fund so elects, each shareholder would be required to
include in gross income, even though not actually received, his pro rata share
of the foreign taxes paid by the Fund, but would be treated as having paid his
pro rata share of such foreign taxes and would therefore be allowed to either
deduct such amount in computing taxable income or use such amount (subject to
various Code limitations) as a foreign tax credit against federal income tax
(but not both). For purposes of the foreign tax credit limitation rules of the
Code, each shareholder would treat as foreign source income his pro rata share
of such foreign taxes plus the portion of dividends received from the Fund
representing income derived from foreign sources. No deduction for foreign taxes
could be claimed by an individual shareholder who does not itemize deductions.
Each shareholder should consult his own tax adviser regarding the potential
application of foreign tax credits.
Distributions by a Fund that do not constitute ordinary income dividends or
capital gain dividends will be treated as a return of capital to the extent of
(and in reduction of) the shareholder's tax basis in his shares; any excess will
be treated as gain from the sale of his shares, as discussed below.
Distributions by a Fund will be treated in the manner described above regardless
of whether such distributions are paid in cash or reinvested in additional
shares of the Fund (or of another fund). Shareholders receiving a distribution
in the form of additional shares will be treated as receiving a distribution in
an amount equal to the fair market value of the shares received, determined as
of the reinvestment date. In addition, if the net asset value at the time a
shareholder purchases shares of a Fund reflects undistributed net investment
income or recognized capital gain net income, or unrealized appreciation in the
value of the assets of the Fund, distributions of such amounts will be taxable
to the shareholder in the manner described above, although such distributions
economically constitute a return of capital to the shareholder.
Ordinarily, shareholders are required to take distributions by a Fund into
account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.
Each Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of ordinary income dividends and capital gain dividends, and the
proceeds of redemption of shares, paid to any shareholder (1) who has failed to
provide a correct taxpayer identification number, (2) who is subject to backup
withholding for failure to properly report the receipt of interest or dividend
income properly, or (3) who has failed to certify to the Fund that it is not
subject to backup withholding or that it is a corporation or other "exempt
recipient."
Sale or Redemption of Shares
- - ----------------------------
A shareholder will recognize gain or loss on the sale or redemption of shares of
a Fund in an amount equal to the difference between the proceeds of the sale or
redemption and the shareholder's adjusted tax basis in the shares. All or a
portion of any loss so recognized may be disallowed if the shareholder purchases
other shares of a Fund within 30 days before or after the sale or redemption. In
general, any gain or loss arising from (or treated as arising from) the sale or
redemption of shares of a Fund will be considered capital gain or loss and will
be long-term capital gain, which is taxed at a lower rate for individuals, or
loss if the shares were held for longer than one year. Any capital loss arising
from the sale or redemption of shares held for six months or less will be
treated as a long-term capital loss to the extent of the amount of capital gain
dividends received on such shares. For this purpose, the special holding period
rules of Code Section 246(c)(3) and (4) (discussed above in connection with the
dividends-received deduction for corporations)
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<PAGE>
generally will apply in determining the holding period of shares. Capital losses
in any year are deductible only to the extent of capital gains plus, in the case
of a noncorporate taxpayer, $3,000 of ordinary income.
If a shareholder (1) incurs a sales load in acquiring shares of a Fund, (2)
disposes of such shares less than 91 days after they are acquired and (3)
subsequently acquires shares of the Fund or another fund at a reduced sales load
pursuant to a right to reinvest at such reduced sales load acquired in
connection with the acquisition of the shares disposed of, then the sales load
on the shares disposed of (to the extent of the reduction in the sales load on
the shares subsequently acquired) shall not be taken into account in determining
gain or loss on the shares disposed of but shall be treated as incurred on the
acquisition of the shares subsequently acquired.
Foreign Shareholders
- - --------------------
Taxation of a shareholder who, as to the United States, is a nonresident alien
individual, foreign trust or estate, foreign corporation, or foreign partnership
("foreign shareholder"), depends on whether the income from a Fund is
"effectively connected" with a U.S. trade or business carried on by such
shareholder.
If the income from a Fund is not effectively connected with a U.S. trade or
business carried on by a foreign shareholder, ordinary income dividends paid to
a foreign shareholder will be subject to U.S. withholding tax at the rate of 30%
(or lower applicable treaty rate) upon the gross amount of the dividend.
Furthermore, such foreign shareholder may be subject to U.S. withholding tax at
the rate of 30% (or lower applicable treaty rate) on the gross income resulting
from a Fund's election to treat any foreign taxes paid by it as paid by its
shareholders, but may not be allowed a deduction against this gross income or a
credit against this U.S. withholding tax for the foreign shareholder's pro rata
share of such foreign taxes which it is treated as having paid. Such a foreign
shareholder would generally be exempt from U.S. federal income tax on gains
realized on the sale of shares of a Fund, capital gain dividends and amounts
retained by the Fund that are designated as undistributed capital gains.
If the income from a Fund is effectively connected with a U.S. trade or business
carried on by a foreign shareholder, then ordinary income dividends, capital
gain dividends, and any gains realized upon the sale of shares of the Fund will
be subject to U.S. federal income tax at the rates applicable to U.S. citizens
or domestic corporations.
In the case of a foreign shareholder other than a corporation, a Fund may be
required to withhold U.S. federal income tax at a rate of 31% on distributions
that are otherwise exempt from withholding tax (or taxable at a reduced treaty
rate) unless such shareholder furnishes the Fund with proper notification of his
foreign status.
The tax consequences to a foreign shareholder entitled to claim the benefits of
an applicable tax treaty may be different from those described herein. Foreign
shareholders are urged to consult their own tax advisers with respect to the
particular tax consequences to them of an investment in a Fund, including the
applicability of foreign taxes.
Effect of Future Legislation; State and Local Tax Considerations
- - ----------------------------------------------------------------
The foregoing general discussion of U.S. federal income tax consequences is
based on the Code and the Treasury Regulations issued thereunder as in effect on
the date of this SAI. Future legislative or administrative changes or court
decisions may significantly change the conclusions expressed herein, and any
such changes or decisions may have a retroactive effect.
24
<PAGE>
Rules of state and local taxation of ordinary income dividends and capital gain
dividends from regulated investment companies may differ from the rules for U.S.
federal income taxation described above. Shareholders are urged to consult their
tax advisers as to the consequences of these and other state and local tax rules
affecting investment in a Fund.
TRUSTEES AND OFFICERS
Board of Trustees.
Overall responsibility for management of the Trust rests with the Trustees, who
are elected by the shareholders of the Funds. The Funds are managed by the
Trustees in accordance with the laws of the State of Delaware. There are
currently eight Trustees, five of whom are not "interested persons" of the Trust
within the meaning of that term under the 1940 Act ("disinterested Trustees").
The Trustees, in turn, elect the officers of the Trust to supervise actively its
day-to-day operations.
The Trustees of the Trust, their ages, addresses, and their principal
occupations during the past five years are as follows:
<TABLE>
<CAPTION>
Position(s) Held
Name, Age and Address with the Trust Principal Occupation During Past 5 Years
--------------------- -------------- ----------------------------------------
<S> <C> <C>
Robert A. Simms, Sr. (60)* President, President and CEO of Simms.
55 Railroad Avenue Chairman of the
Greenwich, CT 06830 Board
Beverly W. Aisenbrey (54) Trustee Managing Director, Frederic W. Cook & Co., Inc.
90 Park Avenue (executive compensation consultants).
New York, NY 10016
Arthur S. Bahr (67) Trustee Director, Renaissance Re Holdings (reinsurance)
11 Guardhouse Drive since June 1993; Director, Board of Partner
West Redding, CT 06896 Representatives, Trump Castle Associates since
1995; Consultant, GE Investment Corp. from
January 1994 to December 1995, prior to
which he served as Executive Vice President;
Trustee, GE Pension Fund until January 1994.
Robert G. Blount (59) Trustee American Home Products: Director since 1990,
American Home Products Senior Executive Vice President since October
Five Giralda Farms 1995 and Executive Vice President from 1987 to
Madison, NJ 07940 October 1995.
Gen. Robert E. Kelley (64) Trustee President, Kelley & Associates (aerospace,
2550 E. Missouri Avenue defense management) since 1986; Secretary and
Phoenix, AZ 85016 Treasurer, Wright Stuff Press since 1996;
Chairman of the Board, Voting USA since
November 1997; Director, Air Force Academy
Foundation since October 1996.
</TABLE>
- - ---------------------------------
* Indicates an "interested person" of the Trust, as defined in the 1940 Act.
25
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Michael A. McManus, Jr. (55) Trustee Bank consultant since March 1998; President and
100 White Plains Road Chief Executive Officer, New York Bancorp Inc.
Bronxville, NY 10708 from November 1991 to March 1998; Director,
Misonix Inc. (scientific and industrial
ultrasonic devices) since September 1998,
National Wireless Inc. since 1993, Document
Imaging Systems Inc. since 1994, and the United
States Olympic Committee since 1997; Advisory
Board Member, Barrington Capital (broker dealer,
investment bank).
Thomas L. Melly (40)* Trustee Principal of Simms.
55 Railroad Avenue
Greenwich, CT 06830
Arthur O. Poltrack (40)* Trustee Chief Financial Officer ("CFO"), Simms since June
55 Railroad Avenue 1998; CFO, CBA Mortgage Partners LP from August
Greenwich, CT 06830 1994 to June 1998; Director of Taxation, Olympia
& York Cos. (USA) from January 1987 to August
1994.
</TABLE>
The Board presently has an Investment Policy Committee, an Audit Committee, and
a Nominating Committee. The members of the Investment Policy Committee are
Messrs. Simms, Melly and Bahr, who will serve until October 1999. The function
of the Investment Policy Committee is to review the existing investment policies
of the Funds, including the levels of risk and types of funds available to
shareholders, and make recommendations to the Trustees regarding the revision of
such policies or, if necessary, the submission of such revisions to the Funds'
shareholders for their consideration. The members of the Audit Committee are Mr.
Blount (Chairman), Gen. Kelley and Mr. McManus, who will serve until September
1999. The function of the Audit Committee is to recommend independent auditors
and monitor accounting and financial matters. Mr. McManus is the Chairman of the
Nominating Committee which nominates persons to serve as disinterested Trustees.
Remuneration of Trustees.
Each Trustee (other than Messrs. Simms, Melly and Poltrack) receives a per
meeting fee of $250. The Adviser pays the fees and expenses of Messrs. Simms,
Melly and Poltrack.
The following table indicates the compensation each Trustee is expected to
receive from the Trust for the period ending June 30, 1999.
<TABLE>
<CAPTION>
Pension or Retirement Estimated Annual Aggregate
Benefits Accrued as Benefits Upon Compensation from
Name, Position Fund Expenses Retirement the Trust
-------------- -------------- ---------- ---------
<S> <C> <C> <C>
Robert A. Simms, Chairman of the Board -0- -0- -0-
Beverly W. Aisenbrey, Trustee -0- -0- $500
Arthur S. Bahr, Trustee -0- -0- $750
Robert G. Blount, Trustee -0- -0- $750
Gen. Robert E. Kelley, Trustee -0- -0- $750
Michael A. McManus, Jr., Trustee -0- -0- $750
Thomas L. Melly, Trustee -0- -0- -0-
Arthur O. Poltrack, Trustee -0- -0- -0-
</TABLE>
26
<PAGE>
Officers.
The officers of the Trust, their ages, addresses and principal occupations
during the past five years, are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Position(s)
Name, Age and Address with the Trust Principal Occupation During Past 5 Years
--------------------- -------------- ----------------------------------------
Robert A. Simms (60) President and President and CEO of Simms.
55 Railroad Avenue Chairman of the
Greenwich, CT 06830 Board
Peter M. Gorman (35) Vice President Principal and Director of Client Services of
55 Railroad Avenue and Secretary Simms since May 1995; independent consultant for
Greenwich, CT 06830 Merrill Lynch from March 1994 to August 1994;
Associate with JMB Realty
until January 1994.
Arthur O. Poltrack (40) Vice President, See biography under "Board of Trustees."
55 Railroad Avenue Treasurer,
Greenwich, CT 06830 Chief
Accounting
Officer and CFO
Joseph C. Neuberger (36) Assistant Vice President, Firstar since August 1994; Tax
615 East Michigan Street, Secretary Manager, Arthur Andersen, LLP, from July 1984 to
Milwaukee, WI 53202-5207 August 1994.
Jeffrey T. Rauman (29) Assistant Compliance Administration Officer, Firstar since
615 East Michigan Street, Secretary February 1996; Senior Auditor, Ernst & Young
Milwaukee, WI 53202-5207 since January 1993.
</TABLE>
The officers of the Trust receive no compensation directly from the Trust for
performing the duties of their offices.
Current and retired Trustees and officers of the Trust may purchase Class A
Shares of the Funds without paying a sales load.
As of October 31, 1998, the Trustees and officers as a group owned beneficially
less than 1% of all classes of outstanding shares of the Funds.
ADVISORY AND OTHER CONTRACTS
Investment Adviser.
Simms, a Delaware corporation registered as an investment adviser with the SEC,
serves as the Funds' investment adviser. Simms is located at 55 Railroad Avenue,
Greenwich, Connecticut 06830. As of June 30, 1998, the Adviser managed
approximately $700 million for numerous clients including large corporate and
public retirement plans, Taft-Hartley plans, foundations and endowments, high
net worth individuals, and mutual funds. Mr. Simms, President and CEO of Simms,
and Mr. Melly, Ms. Miller, Mr. Thomas S. Kingsley and Mr. Gorman, Principals of
Simms, may be deemed to control the Adviser.
27
<PAGE>
The following schedule lists the advisory fees for Funds that are advised by
Simms.
.75 of 1% of average daily net assets
U.S. Equity Fund
1.00% of average daily net assets
International Equity Fund
Global Equity Fund
Portfolio Managers
Robert A. Simms. President and CEO of Simms since 1984, prior to which he was
with Bear, Stearns & Co., Inc. investment bankers, from 1972 to 1984, becoming a
General Partner in 1977. His responsibilities included Manager of the
Institutional Department, Manager of the Options and Futures Department, and
Director of Asset Management Services. He was Executive Vice President of Black
& Co. from 1968 to 1972, a member of the Institutional Sales Department of
Paine, Webber, Jackson & Curtis from 1965 to 1968 and a research analyst for
Dominick & Dominick from 1961 to 1965. He received a B.A. from Rutgers
University in 1960.
Thomas L. Melly. Principal of the Adviser, joined Simms in 1990, prior to which
he was with Lake Partners, Inc., an independent investment consulting firm that
advises high net worth investors and private and institutional investment
partnerships. His responsibilities included the design and implementation of
custom-tailored investment programs and the evaluation of hedge funds and
investment managers in the specialized areas of short-selling, risk and
convertible arbitrage and high yield securities. He was an institutional fixed
income specialist at Autranet, Inc. and Tucker, Anthony & R.L. Day, Inc. from
1985 to 1988. From 1981 to 1983 he was an account officer and credit analyst at
Chemical Bank. Mr. Melly received his M.B.A. from the Amos Tuck School at
Dartmouth in 1985 and his B.A. from Trinity College in 1980.
Jennifer D. Miller. Principal of the Adviser, joined Simms in 1991, prior to
which she spent six years in the Investment Strategy Group at Salomon Brothers
Inc. Her responsibilities included the quantitative and technical analysis of
the firm's proprietary positions. She also served as a liaison between the
research staff, the firm's proprietary traders and clients to establish and
manage portfolios using optimization, immunization, and index techniques. Ms.
Miller received her M.B.A. from the Stern Graduate School of Business at New
York University in 1990 and her B.S. in Finance from Lehigh University in 1982.
Robert Rosa, Jr. Mr. Rosa joined Simms in March 1997, prior to which he served
as an intern at Simms from June 1996 to February 1997. Mr. Rosa received his
M.B.A. from Sacred Heart University in 1997 and his B.S. from Worcester
Polytechnic Institute in 1989.
The Investment Advisory Agreement.
Unless sooner terminated, the Investment Advisory Agreement between the Adviser
and the Trust, on behalf of the Funds (the "Investment Advisory Agreement"),
provides that it will continue in effect for an initial two-year term and for
consecutive one-year terms thereafter, provided that such renewal is approved at
least annually by the Trustees or by vote of a majority of the outstanding
shares of each Fund (as defined under "Additional Information - Miscellaneous"),
and, in either case, by a majority of the Trustees who are not parties to the
Investment Advisory Agreement or interested persons (as defined in the 1940 Act)
of any party to the Investment Advisory Agreement, by votes cast in person at a
meeting called for such purpose.
The Investment Advisory Agreement is terminable as to any particular Fund at any
time on 60 days' written notice without penalty by the Trustees, by vote of a
majority of the outstanding shares of the Fund, by vote of the Board, or by the
Adviser. The Investment Advisory Agreement also terminates automatically in the
event of any assignment, as defined in the 1940 Act.
28
<PAGE>
The Investment Advisory Agreement provides that the Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Funds in connection with the performance of services pursuant to the Investment
Advisory Agreement, except a loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services or a loss resulting from
willful misfeasance, bad faith, or gross negligence on the part of the Adviser
in the performance of its duties, or from reckless disregard by it of its duties
and obligations thereunder.
Code of Ethics.
The Funds and the Adviser have each adopted a Code of Ethics to which all
investment personnel and all other access persons to the Fund must conform.
Investment personnel must refrain from certain trading practices and are
required to report certain personal investment activities. Violations of the
Code of Ethics can result in penalties, suspension, or termination of
employment.
Portfolio Transactions.
Pursuant to the Investment Advisory Agreement, the Adviser determines, subject
to the general supervision of the Board, and in accordance with each Fund's
investment objective and restrictions, which securities are to be purchased and
sold by the Funds, and which brokers are to be eligible to execute its portfolio
transactions. Purchases from underwriters and/or broker-dealers of portfolio
securities include a commission or concession paid by the issuer to the
underwriter and/or broker-dealer and purchases from dealers serving as market
makers may include the spread between the bid and asked price. While the Adviser
generally seeks competitive spreads or commissions, each Fund may not
necessarily pay the lowest spread or commission available on each transaction,
for reasons discussed below.
Allocation of transactions to dealers is determined by the Adviser in its best
judgment and in a manner deemed fair and reasonable to shareholders. The primary
consideration is prompt execution of orders in an effective manner at the most
favorable price. Subject to this consideration, dealers who provide supplemental
investment research to the Adviser may receive orders for transactions by the
Trust. Information so received is in addition to and not in lieu of services
required to be performed by the Adviser and does not reduce the investment
advisory fees payable to the Adviser by the Funds. Such information may be
useful to the Adviser in serving both the Trust and other clients and,
conversely, such supplemental research information obtained by the placement of
orders on behalf of other clients may be useful to the Adviser in carrying out
its obligations to the Trust. At times, the Funds may also purchase portfolio
securities directly from dealers acting as principals, underwriters or market
makers. As these transactions are usually conducted on a net basis, no brokerage
commissions are paid by the Funds.
Investment decisions for each Fund are made independently from those made for
the other Funds of the Trust or any other investment company or account managed
by the Adviser. Such other investment companies or accounts may also invest in
the securities in which the Funds invest, and the Funds may invest in similar
securities. When a purchase or sale of the same security is made at
substantially the same time on behalf of a Fund and any other Fund, investment
company or account, the transaction will be averaged as to price, and available
investments allocated as to amount, in a manner which the Adviser believes to be
equitable to such Funds, investment company or account. In some instances, this
investment procedure may affect the price paid or received by a Fund or the size
of the position obtained by the Fund in an adverse manner relative to the result
that would have been obtained if only that particular Fund had participated in
or been allocated such trades. To the extent permitted by law, the Adviser may
aggregate the securities to be sold or purchased for a Fund with those to be
sold or purchased for the other funds of the Trust or for other investment
companies or accounts in order to obtain best execution. In making investment
recommendations for the Trust, the Adviser will not inquire or take into
consideration whether an issuer of securities proposed for purchase or sale by a
Fund is a customer of the Adviser, its parents or subsidiaries or affiliates
and, in dealing with their commercial customers, the Adviser, their parents,
subsidiaries, and affiliates will not inquire or take into consideration whether
securities of such customers are held by the Trust.
29
<PAGE>
Administrator.
Firstar (the "Administrator"), 615 East Michigan Street, Milwaukee, Wisconsin
53202-5207, serves as administrator to the Funds pursuant to an administration
agreement dated October 5, 1998 (the "Administration Agreement"). The
Administrator assists in supervising all operations of the Funds (other than
those performed by the Adviser under the Investment Advisory Agreement), subject
to the supervision of the Board. Firstar also provides a current security
position report, a summary report of transactions and pending maturities, a
current cash position report, calculates the dividend and capital gain
distribution, if any, and the yield, and maintains the general ledger accounting
records for the Funds.
For the services rendered to the Funds and related expenses borne by Firstar as
Administrator, the Trust pays Firstar a minimum annual fee of $30,000 for each
Fund and $15,000 for each class of shares. In addition, each Fund pays Firstar
an annual fee, computed daily and paid monthly, at the following annual rates
based on the Fund's average daily net assets: 0.06% of the first $400 million of
assets; 0.05% of the next $1 billion of assets; and 0.03% of assets over $1.4
billion.
Firstar may periodically waive all or a portion of its fee with respect to any
Fund in order to increase the net income of one or more of the Funds available
for distribution to shareholders.
Unless sooner terminated, the Administration Agreement will continue in effect
as to each Fund for a period of two years, and for consecutive one-year terms
thereafter, provided that such renewal is ratified at least annually by the
Trustees or by vote of a majority of the outstanding shares of each Fund, and in
either case by a majority of the Trustees who are not parties to the
Administration Agreement or interested persons (as defined in the 1940 Act) of
any party to the Administration Agreement, by votes cast in person at a meeting
called for such purpose.
The Administration Agreement provides that Firstar shall not be liable for any
error of judgment or mistake of law or any loss suffered by the Trust in
connection with the matters to which the Administration Agreement relates,
except a loss resulting from willful misfeasance, bad faith, or gross negligence
in the performance of its duties, or from the reckless disregard by it of its
obligations and duties thereunder.
Under the Administration Agreement, Firstar assists in each Fund's
administration and operation, including providing statistical and research data,
clerical services, internal compliance and various other administrative
services, including among other responsibilities, forwarding certain purchase
and redemption requests to the Transfer Agent, participation in the updating of
the prospectus, coordinating the preparation, filing, printing and dissemination
of reports to shareholders, coordinating the preparation of income tax returns,
arranging for the maintenance of books and records and providing the office
facilities necessary to carry out the duties thereunder. Under the
Administration Agreement, Firstar may delegate all or any part of its
responsibilities thereunder.
Distributor.
T.O. Richardson Securities, Inc., 2 Bridgeport Road, Farmington, Connecticut
06032, serves as distributor for the continuous offering of the shares of the
Funds pursuant to a Distribution Agreement between the Distributor and the
Trust. Unless otherwise terminated, the Distribution Agreement will remain in
effect with respect to each Fund for two years, and will continue thereafter for
consecutive one-year terms, provided that the renewal is approved at least
annually (1) by the Trustees or by the vote of a majority of the outstanding
shares of each Fund, and (2) by the vote of a majority of the Trustees of the
Trust who are not parties to the Distribution Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval. The Distribution Agreement will terminate in the event of its
assignment, as defined under the 1940 Act.
As compensation for services performed under the Distribution Agreement, the
Trust will pay to the Distributor any fees that may become payable to the
Distributor pursuant to the Distribution Plan and any
30
<PAGE>
dealer retention of sales loads. The Adviser has agreed to pay the Distributor
from its own resources certain amounts above the amount that the Distributor
would earn from dealer retention and Rule 12b-1 payments.
Transfer Agent.
Firstar serves as transfer and dividend disbursing agent for the Funds pursuant
to a Transfer Agency and Service Agreement. Under its agreement with the Trust,
Firstar has agreed (1) to issue and redeem shares of the Funds; (2) to address
and mail all communications by the Trust to its shareholders, including reports
to shareholders, dividend and distribution notices, and proxy material for its
meetings of shareholders; (3) to respond to correspondence or inquiries by
shareholders and others relating to its duties; (4) to maintain shareholder
accounts and certain sub-accounts; and (5) to make periodic reports to the
Trustees concerning the Funds' operations.
Shareholder Servicing Plan.
Payments made under the Shareholder Servicing Plan to Shareholder Servicing
Agents (which may include affiliates of the Adviser) are for administrative
support services to customers who may from time to time beneficially own shares,
which services may include: (1) aggregating and processing purchase and
redemption requests for shares from customers and transmitting promptly net
purchase and redemption orders to our distributor or transfer agent; (2)
providing customers with a service that invests the assets of their accounts in
shares pursuant to specific or pre-authorized instructions; (3) processing
dividend and distribution payments on behalf of customers; (4) providing
information periodically to customers showing their positions in shares; (5)
arranging for bank wires; (6) responding to customer inquiries; (7) providing
subaccounting with respect to shares beneficially owned by customers or
providing the information to the Funds as necessary for subaccounting; (8) if
required by law, forwarding shareholder communications from us (such as proxies,
shareholder reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to customers; (9) forwarding to customers proxy
statements and proxies containing any proposals which require a shareholder
vote; and (10) providing such other similar services as the Trust may reasonably
request to the extent permitted under applicable statutes, rules or regulations.
Other Servicing Plans.
In connection with certain servicing plans, the Funds have made certain
commitments that: (i) provide for one or more brokers to accept on the Funds'
behalf, purchase and redemption orders; (ii) authorize such brokers to designate
other intermediaries to accept purchase and redemption orders on the Funds'
behalf; (iii) provide that the Funds will be deemed to have received a purchase
or redemption order when an authorized broker or, if applicable, a broker's
authorized designee, accepts the order; and (iv) provide that customer orders
will be priced at the Funds' Net Asset Value next computed after they are
accepted by an authorized broker or the broker's authorized designee.
Distribution Plan.
The Trust, on behalf of the Funds, has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act (the "Rule 12b-1"). Rule 12b-1
provides in substance that a mutual fund may not engage directly or indirectly
in financing any activity that is primarily intended to result in the sale of
shares of such mutual fund except pursuant to a plan adopted by the fund under
Rule 12b-1. The Plan provides that a Fund may incur distribution expenses
related to the sale of shares of up to 0.50% per annum of the Fund's average
daily net assets.
The Plan provides that a Fund may finance activities which are primarily
intended to result in the sale of the Fund's shares, including, but not limited
to, advertising, printing of prospectuses and reports for other than existing
shareholders, preparation and distribution of advertising material and sales
literature and payments to dealers and shareholder servicing agents who enter
into agreements with the Fund or its Distributor.
31
<PAGE>
In approving the Plan in accordance with the requirements of Rule 12b-1 under
the 1940 Act, the Trustees (including the "disinterested" Trustees, as defined
in the 1940 Act) considered various factors and determined that there is a
reasonable likelihood that the Plan will benefit each Fund and its shareholders.
The Plan will continue in effect from year to year if specifically approved
annually (a) by the majority of such Fund's outstanding voting shares or by the
Board and (b) by the vote of a majority of the disinterested Trustees. While the
Plan remains in effect, each Fund will furnish to the Board a written report of
the amounts spent by the Fund under the Plan and the purposes for these
expenditures. The Plan may not be amended to increase materially the amount to
be spent for distribution without shareholder approval and all material
amendments to the Plan must be approved by a majority of the Board and by the
disinterested Trustees in a vote cast in person at a meeting called specifically
for that purpose. While the Plan is in effect, the selection and nomination of
the disinterested Trustees shall be made by those disinterested Trustees then in
office.
Fund Accountant.
Firstar serves as fund accountant for the all of the Funds pursuant to a fund
accounting agreement with the Trust dated October 5, 1998. As fund accountant
for the Trust, Firstar calculates each Fund's net asset value and provides other
services to the Funds. Under the fund accounting agreement, in addition to
reimbursement of certain out-of-pocket expenses, Firstar is entitled to receive
the following annual fees: U.S. Equity Fund: $22,000 for the first $40 million
in assets, 0.01% of the next $200 million, and 0.005% of assets above $240
million; International and Global Equity Funds: $23,500 for the first $40
million in assets, 0.015% of the next $200 million, and 0.01% of assets above
$240 million.
Custodian.
Cash and securities owned by each of the Funds are held by Firstar Bank
Milwaukee, N.A., as custodian pursuant to a Custodian Agreement dated October 5,
1998. Under this Agreement, Firstar Bank Milwaukee , N.A., (1) maintains a
separate account or accounts in the name of each Fund; (2) makes receipts and
disbursements of money on behalf of each Fund; (3) collects and receives all
income and other payments and distributions on account of portfolio securities;
and (4) responds to correspondence from security brokers and others relating to
its duties. Firstar Bank Milwaukee, N.A., may, with the approval of a Fund and
at the custodian's own expense, open and maintain a sub-custody account or
accounts on behalf of a Fund, provided that Firstar Bank Milwaukee, N.A., shall
remain liable for the performance of all of its duties under the Custodian
Agreement.
Independent Accountants.
The audited financial statements of the Trust, with respect to all the Funds,
for the period from July 1, 1998 (inception) through November 23, 1998, are
included herein. The financial statements for the period from July 1, 1998
(inception) through November 23, 1998 for all share Classes of each Fund of the
Trust, have been audited by PricewaterhouseCoopers LLP as set forth in their
report included herein, and are included in reliance upon such report and on the
authority of such firm as experts in auditing and accounting.
PricewaterhouseCoopers LLP, located at 100 East Wisconsin Avenue, Milwaukee,
Wisconsin 53202, serves as the Trust's independent accountants.
Legal Counsel.
Kramer Levin Naftalis & Frankel LLP, 919 Third Avenue, New York, New York 10022
serves as counsel to the Trust.
Expenses.
The Funds bear the following expenses relating to its operations: taxes,
interest, brokerage fees and commissions, fees of the Trustees, SEC fees, state
securities qualification fees, costs of preparing and printing prospectuses for
regulatory purposes and for distribution to current shareholders, outside
auditing and legal expenses, advisory and administration fees, fees and
out-of-pocket expenses of the custodian and transfer agent, certain insurance
premiums, costs of maintenance of the fund's existence, costs of shareholders'
reports and meetings, and any extraordinary expenses incurred in the Funds'
operation.
32
<PAGE>
ADDITIONAL INFORMATION
Description of Shares.
The Trust is a Delaware business trust that was formed on July 1, 1998. The
Trust Instrument authorizes the Board to issue an unlimited number of shares,
which are units of beneficial interest, with a par value of $.001 per share.
The Trust currently has three series of shares, which represent interests in the
U.S. Equity Fund, the International Equity Fund, the Global Equity Fund, and
their respective Classes.
The Trust's Trust Instrument authorizes the Board to divide or redivide any
unissued shares of the Trust into one or more additional series by setting or
changing in any one or more aspects their respective preferences, conversion or
other rights, voting power, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption. Each Fund currently
offers two share classes: (1) Class A, sold primarily to individuals and other
purchasers investing less than $1 million, and (2) Class Y, sold primarily to
institutions investing at least $1 million. The Distributor, in its discretion,
may (i) sell Class Y Shares to individuals who invest at least $1 million;
and/or (ii) waive the minimum investment in Class Y Shares for certain
investors, including investors who acquired their shares through the
reorganization of two limited partnerships managed by Simms: Simms Partners
(U.S.), L.P. and Simms Partners (International), L.P.
Shares have no subscription or preemptive rights and only such conversion or
exchange rights as the Board may grant in its discretion. When issued for
payment as described in the Prospectus and this SAI, the Trust's shares will be
fully paid and non-assessable. In the event of a liquidation or dissolution of
the Trust, shares of a Fund are entitled to receive the assets available for
distribution belonging to the fund, and a proportionate distribution, based upon
the relative asset values of the respective funds, of any general assets not
belonging to any particular Fund that are available for distribution.
Shares of the Trust are entitled to one vote per share (with proportional voting
for fractional shares) on such matters as shareholders are entitled to vote.
Shareholders vote as a single class on all matters except (1) when required by
the 1940 Act, shares shall be voted by individual series, and (2) when the
Trustees have determined that the matter affects only the interests of one or
more series, then only shareholders of such series shall be entitled to vote
thereon. There will normally be no meetings of shareholders for the purpose of
electing Trustees unless and until such time as less than a majority of the
Trustees have been elected by the shareholders, at which time the Trustees then
in office will call a shareholders' meeting for the election of Trustees. A
meeting shall be held for such purpose upon the written request of the holders
of not less than 10% of the outstanding shares. Upon written request by ten or
more shareholders meeting the qualifications of Section 16(c) of the 1940 Act
(i.e., persons who have been shareholders for at least six months, and who hold
shares having a net asset value of at least $25,000 or constituting 1% of the
outstanding shares) stating that such shareholders wish to communicate with the
other shareholders for the purpose of obtaining the signatures necessary to
demand a meeting to consider removal of a Trustee, the Trust will provide a list
of shareholders or disseminate appropriate materials (at the expense of the
requesting shareholders). Except as set forth above, the Trustees shall continue
to hold office and may appoint their successors.
Rule 18f-2 under the 1940 Act provides that any matter required to be submitted
to the holders of the outstanding voting securities of an investment company
such as the Trust shall not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding shares of each Fund
affected by the matter. For purposes of determining whether the approval of a
majority of the outstanding shares of a Fund will be required in connection with
a matter, the Fund will be deemed to be affected by a matter unless it is clear
that the interests of each Fund in the matter are identical, or that the matter
does not affect any interest of the Fund. Under Rule 18f-2, the approval of an
investment advisory agreement or any change in investment policy would be
effectively acted upon with respect to a Fund only if approved by a majority of
the outstanding shares of such Fund. However, Rule 18f-2 also provides that the
ratification of independent accountants, the approval of principal underwriting
contracts, and the election of Trustees may be effectively acted upon by
shareholders of the Trust voting without regard to series.
33
<PAGE>
Shareholder and Trustee Liability.
The Trust is organized as a Delaware business trust. The Delaware Business Trust
Act provides that a shareholder of a Delaware business trust shall be entitled
to the same limitation of personal liability extended to shareholders of
Delaware corporations, and the Trust Instrument provides that shareholders of
the Trust shall not be liable for the obligations of the Trust. The Trust
Instrument also provides for indemnification out of Trust property of any
shareholder held personally liable solely by reason of his or her being or
having been a shareholder. The Trust Instrument also provides that the Trust
shall, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the Trust, and shall satisfy any
judgment thereon. Thus, the risk of a shareholder incurring financial loss
because of shareholder liability is considered to be extremely remote.
The Trust Instrument states further that no Trustee, officer, or agent of the
Trust shall be personally liable in connection with the administration or
preservation of the assets of the Funds or the conduct of the Trust's business;
nor shall any Trustee, officer, or agent be personally liable to any person for
any action or failure to act except for his own bad faith, willful misfeasance,
gross negligence, or reckless disregard of his duties. The Trust Instrument also
provides that all persons having any claim against the Trustees or the Trust
shall look solely to the assets of the Trust for payment.
The Trust Instrument provides the Trustees with broad powers to amend the Trust
Instrument or approve the reorganization of any Fund, without the approval of
shareholders, unless such approval is otherwise required by law. The Trust
Instrument allows the Trustees to take actions upon the authority of a majority
of Trustees by written consent in lieu of a meeting.
Bylaws
The Trust's Bylaws define the rights and obligations of the Trust's officers and
provide rules for routine matters such as calling meetings. The Bylaws govern
the use of proxies at shareholder meetings. According to the Bylaws, proxies may
be given by telephone, computer, other electronic means or otherwise pursuant to
procedures reasonably designed, as determined by the Trustees, to verify that
the shareholder has authorized the instructions contained therein. The Bylaws
also govern the conduct of Trustees' meetings and state that any action by the
Trustees may be taken without a meeting if a written consent to the action is
signed by a majority of the Trustees. Telephone meetings where each Trustee are
able to hear each other are also permitted, except in situations where the 1940
Act requires in-person meetings, such as consideration of Rule 12b-1 plans and
investment advisory contracts. The Bylaws provide that the Trust's fiscal year
will end on June 30 of each year.
Miscellaneous.
As used in the Prospectus and in this SAI, "assets belonging to a Fund" means
the consideration received by the Trust upon the issuance or sale of shares of a
Fund, together with all income, earnings, profits, and proceeds derived from the
investment thereof, including any proceeds from the sale, exchange, or
liquidation of such investments, and any funds or payments derived from any
reinvestment of such proceeds and any general assets of the Trust, which general
liabilities and expenses are not readily identified as belonging to a particular
Fund that are allocated to that Fund by the Trustees. The Trustees may allocate
such general assets in any manner they deem fair and equitable. It is
anticipated that the factor that will be used by the Trustees in making
allocations of general assets to a particular fund of the Trust will be the
relative net asset value of each respective fund at the time of allocation.
Assets belonging to a particular Fund are charged with the direct liabilities
and expenses in respect of that Fund, and with a share of the general
liabilities and expenses of each of the Funds not readily identified as
belonging to a particular Fund, which are allocated to each Fund in accordance
with its proportionate share of the net asset values of the Funds at the time of
allocation. The timing of allocations of general assets and general liabilities
and expenses of the Trust to a particular fund will be determined by the
Trustees and will be in accordance with generally accepted accounting
principles. Determinations by the Trustees as to
34
<PAGE>
the timing of the allocation of general liabilities and expenses and as to the
timing and allocable portion of any general assets with respect to a particular
fund are conclusive.
The Trust is registered with the SEC as an open-end management investment
company. Such registration does not involve supervision by the SEC of the
management or policies of the Trust.
The Prospectus and this SAI do not include certain information contained in the
registration statement filed with the SEC. Copies of such information may be
obtained from the SEC upon payment of the prescribed fee.
Simms Capital Management, Inc. may be deemed to control the Funds.
The Prospectus and this SAI do not constitute an offering of the securities
described in these documents in any state in which such offering may not
lawfully be made. No salesman, dealer, or other person is authorized to give any
information or make any representation other than those contained in the
Prospectus and this SAI.
35
<PAGE>
APPENDIX
Description of Security Ratings.
The NRSROs that may be utilized by the Adviser with regard to portfolio
investments for the Funds include Moody's and S&P. Set forth below is a
description of the relevant ratings of each such NRSRO. The NRSROs that may be
utilized by the Adviser and the description of each NRSRO's ratings is as of the
date of this SAI, and may subsequently change.
Long-Term Debt Ratings (assigned to corporate bonds).
Description of the five highest long-term debt ratings by Moody's (Moody's
applies numerical modifiers (e.g., 1, 2, and 3) in each rating category to
indicate the security's ranking within the category):
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
edged." 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 risk 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 some time 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 in the future. Uncertainty of position
characterizes bonds in this class.
Description of the five highest long-term debt ratings by S&P (S&P may apply a
plus (+) or minus (-) to a particular rating classification to show relative
standing within that classification):
AAA. Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA. Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
<PAGE>
A. Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB. Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB. Debt rated BB is regarded, on balance, as predominately speculative with
respect to capacity to pay interest and repay principal in accordance with the
terms of the obligation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposure to adverse conditions.
Short-Term Debt Ratings (may be assigned, for example, to CP, bank instruments,
and letters of credit).
Moody's description of its three highest short-term debt ratings:
Prime-1. Issuers rated Prime-1 (or supporting institutions) have a superior
capacity for repayment of senior short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by many of the following
characteristics:
- - - Leading market positions in well-established industries.
- - - High rates of return on funds employed.
- - - Conservative capitalization structures with moderate reliance on debt
and ample asset protection.
- - - Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- - - Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Prime-2. Issuers rated Prime-2 (or supporting institutions) have a strong
capacity for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Prime-3. Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.
S&P's description of its three highest short-term debt ratings:
A-1. This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to have extremely strong safety
characteristics are denoted with a plus sign (+).
A-2. Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."
A-3. Issues carrying this designation have adequate capacity for timely payment.
They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
2
<PAGE>
APPENDIX B
The Simms Funds
Statement of Assets and Liabilities
November 23, 1998
<TABLE>
<CAPTION>
U.S. International Global
Equity Fund Equity Fund Equity Fund
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Cash $ 50,000 $ 50,000 $ 10
Receivable from adviser 38,231 38,232 -
Prepaid blue sky expenses 21,137 21,137 21,136
Prepaid insurance 5,163 5,162 -
----- ----- -------
Total Assets 114,531 114,531 21,146
------- ------- ------
LIABILITIES
Payable to adviser 64,531 64,531 21,136
------ ------ ------
Total Liabilities 64,531 64,531 21,136
------ ------ ------
NET ASSETS $50,000 $50,000 $ 10
======= ======= =======
Capital shares outstanding (par value $.001 per 5,000 5,000 1
======= ======= =======
share; indefinite shares authorized)
CLASS A
Net Assets $ - $ - $ -
======= ======= =======
Shares issued and outstanding - - -
======= ======= =======
- - -
Net asset value and redemption price per share $ - $ - $ -
======= ======= =======
Maximum offering price per share $ 10.42 $ 10.42 $ 10.42
======= ======= =======
CLASS Y
Net Assets $50,000 $50,000 $ 10
Shares issued and outstanding 5,000 5,000 1
Net asset value, redemption price and offering price $ 10.00 $ 10.00 $ 10.00
======= ======= =======
per share
</TABLE>
See accompanying notes to the financial statements.
<PAGE>
The Simms Funds
Statement of Operations
For the Period July 1, 1998 (inception) through November 23, 1998
<TABLE>
<CAPTION>
U.S International Global
Equity Fund Equity Fund Equity Fund
----------- ----------- -----------
<S> <C> <C> <C>
EXPENSES
Organization expenses $38,231 $38,232 $ -
Less: Expenses paid by adviser (38,231) (38,232)
------- ------- ------
-
Net income/(loss) $ 0 $ 0 $ -
======= ======= ======
</TABLE>
See accompanying notes to the financial statements.
<PAGE>
The Simms Funds
Notes to the Financial Statements
For the Period July 1, 1998 (inception) through November 23, 1998
1. Organization
------------
The Simms Funds (the "Trust") was organized as a Delaware business trust on July
1, 1998 and is registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end management investment company issuing its
shares in series, each series representing a distinct portfolio with its own
investment objectives and policies. The series presently authorized are the U.S.
Equity Fund, the International Equity Fund and the Global Equity Fund
(collectively referred to as the "Funds"). Pursuant to the 1940 Act, the Funds
are "diversified" series of the Trust. The Trust has had no operations other
than those relating to organizational matters, including the sale of 5,000 Class
Y shares for cash in the amount of $50,000 of the U.S. Equity Fund, 5,000 Class
Y shares for cash in the amount of $50,000 of the International Equity Fund and
1 Class Y share for cash in the amount of $10 of the Global Equity Fund to
capitalize the Funds, which were sold to Simms Capital Management, Inc. (the
"Adviser"), on November 23, 1998. There are currently no immediate plans to
offer Global Equity Fund shares for sale to the public. Each Fund offers two
classes of shares: Class A shares with an initial sales charge up to 4.00% and
Class Y shares with no sales charges.
2. Significant Accounting Policies
-------------------------------
(a) Organization and Prepaid Initial Registration Expenses
Expenses incurred by the Trust in connection with the organization and
the initial public offering of shares are expensed as incurred. These
expenses were advanced by the Adviser, and the Adviser has agreed to
voluntarily absorb or defer expenses of the Funds (see Note 3). Prepaid
blue sky and insurance expenses are deferred and amortized over the
period of benefit.
(b) Federal Income Taxes
Each Fund intends to comply with the requirements of the Internal
Revenue Code necessary to qualify as a regulated investment company and
to make the requisite distributions of income and capital gains to
their shareholders sufficient to relieve them from all or substantially
all Federal income taxes.
3. Investment Adviser
------------------
The Trust has an Investment Advisory Agreement (the "Agreement") with the
Adviser, with whom certain officers and Trustees of the Trust are
affiliated, to furnish investment advisory services to the Funds. Under the
terms of the Agreement, the Trust, on behalf of the Funds, compensates the
Adviser for its management services based on an annual rate of 0.75% of the
U.S. Equity Fund and 1.00% of the International Equity Fund and Global
Equity Fund's average daily net assets.
The Adviser has agreed to voluntarily defer receipt of all or part of its
advisory fee and/or absorb the Funds' other expenses, including organization
expenses, to the extent necessary to ensure that each of the Fund's operating
expenses, do not exceed the following amounts:
Fund Class A Class Y
---- ------- -------
U.S. Equity Fund 2.06% 1.31%
International Equity Fund 2.38% 1.63%
Global Equity Fund 2.23% 1.48%
To the extent that Simms defers or absorbs expenses, it may seek payment of such
deferred fees or reimbursement
<PAGE>
of such absorbed expenses for two years after the year in which fees were
deferred or expenses were absorbed. A Fund will make no such payment or
reimbursement, however, if the total annual Fund operating expenses exceed the
expense limits in effect at the time these payments or reimbursements are
proposed.
4. Distribution Plan
-----------------
The Trust, on behalf of the Funds, has adopted a distribution plan pursuant to
Rule 12b-1 under the 1940 Act (the "12b-1 Plan"), which provides that each
Fund's Class A Shares will pay distribution fees of up to 0.50% of the average
daily net assets to the distributor. Payments under the distribution plan shall
be used to compensate or reimburse the Funds' distributor for services provided
and expenses incurred in connection with the sale of shares, and are not tied to
the amount of actual expenses incurred.
5. Shareholder Servicing Fees
--------------------------
The Trust, on behalf of the Funds, has adopted a shareholder servicing plan.
Under the shareholder servicing plan, Class A Shares may pay financial
institutions, including affiliates of the Adviser, a fee up to 0.25% of its
average daily net assets for services relating to maintenance of investor
accounts, including liaison with investors.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Shareholder and Board of Trustees of
The Simms Funds
In our opinion, the accompanying statement of assets and liabilities and the
related statement of operations present fairly, in all material respects, the
financial position of each of the portfolios of The Simms Funds (the "Trust") at
November 23, 1998 and the results of each of their operations for the period
from July 1, 1998 (inception) through November 23, 1998, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
November 24, 1998
<PAGE>
PART C. OTHER INFORMATION
ITEM 23. Exhibits
(a)(1) Amended and Restated Certificate of Trust as of October
5, 1998.
(a)(2) Amended and Restated Trust Instrument as of October 5,
1998.
(b) Amended and Restated Bylaws as of October 5, 1998.
(c) Not Applicable.
(d) Form of Investment Advisory Agreement between Registrant
and Simms Capital Management, Inc.
(e) Form of Distribution Agreement between Registrant and
T.O. Richardson Securities, Inc.
(f) Not Applicable.
(g) Form of Custodian Servicing Agreement between Registrant
and Firstar.
(h)(1) Form of Fund Accounting Servicing Agreement between
Registrant and Firstar.
(2) Form of Fund Administration Servicing Agreement between
Registrant and Firstar.
(3) Form of Transfer Agent Servicing Agreement between
Registrant and Firstar.
(4) Form of Fulfillment Servicing Agreement between
Registrant and Firstar.
(i)(1) Opinion and Consent of Kramer Levin Naftalis & Frankel
LLP as to legality of securities being registered.
(2) Opinion of Morris, Nichols, Arsht & Tunnell, Delaware
Counsel to Registrant.
(j)(1) Consent of Pricewaterhouse Coopers LLP.
(k) Not Applicable.
(l) Not Applicable.
(m)(1) Rule 12b-1 Distribution Plan.
(2) Shareholder Servicing Plan.
(o) Rule 18f-3 Plan.
Powers of Attorney of Beverly W. Aisenberg, Arthur S.
Bahr, Robert G. Blount, Robert E. Kelley, Michael A.
McManus, Thomas L. Melly, Arthur O. Poltrack and Robert
A. Simms.
ITEM 24. Persons Controlled By or Under Common Control with Registrant
-------------------------------------------------------------
None.
ITEM 25. Indemnification
---------------
Article X, Section 10.02 of Registrant's Delaware Trust
Instrument, attached hereto as Exhibit (a)(2), provides for
the indemnification of Registrant's Trustees and officers, as
follows:
C-1
<PAGE>
"Section 10.02 Indemnification.
(a) Subject to the exceptions and limitations contained
in Subsection 10.02(b):
(i) every person who is, or has been, a Trustee
or officer of the Trust (hereinafter
referred to as a "Covered Person") shall be
indemnified by the Trust to the fullest
extent permitted by law against liability
and against all expenses reasonably incurred
or paid by him in connection with any claim,
action, suit or proceeding in which he
becomes involved as a party or otherwise by
virtue of his being or having been a Trustee
or officer and against amounts paid or
incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or
"proceeding" shall apply to all claims,
actions, suits or proceedings (civil,
criminal or other, including appeals),
actual or threatened while in office or
thereafter, and the words "liability" and
"expenses" shall include, without
limitation, attorneys' fees, costs,
judgments, amounts paid in settlement,
fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a
Covered Person:
(i) who shall have been adjudicated by a court
or body before which the proceeding was
brought (A) to be 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 his office or (B) not to have
acted in good faith in the reasonable belief
that his action was in the best interest of
the Trust; or
(ii) in the event of a settlement, unless there
has been a determination that such Trustee
or officer did not engage in willful
misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in
the conduct of his office, (A) by the court
or other body approving the settlement; (B)
by at least a majority of those Trustees who
are neither Interested Persons of the Trust
nor are parties to the matter based upon a
review of readily available facts (as
opposed to a full trial-type inquiry); or
(C) by written opinion of independent legal
counsel based upon a review of readily
available facts (as opposed to a full
trial-type inquiry).
(c) The rights of indemnification herein provided may be
insured against by policies maintained by the Trust,
shall be severable, shall not be exclusive of or affect
any other rights to which any Covered Person may now or
hereafter be entitled, shall continue as to a person who
has ceased to be a Covered Person and shall inure to the
benefit of the heirs, executors and administrators of
such a person. Nothing contained herein shall affect any
rights to indemnification to which Trust personnel,
other than Covered Persons, and other persons may be
entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and
presentation of a defense to any claim, action, suit or
proceeding of the character described in Subsection (a)
of
C-2
<PAGE>
this Section 10.02 may be paid by the Trust or Series
from time to time prior to final disposition thereof
upon receipt of an undertaking by or on behalf of such
Covered Person that such amount will be paid over by him
to the Trust or Series if it is ultimately determined
that he is not entitled to indemnification under this
Section 10.02; provided, however, that either (i) such
Covered Person shall have provided appropriate security
for such undertaking, (ii) the Trust is insured against
losses arising out of any such advance payments or (iii)
either a majority of the Trustees who are neither
Interested Persons of the Trust nor parties to the
matter, or independent legal counsel in a written
opinion, shall have determined, based upon a review of
readily available facts (as opposed to a trial-type
inquiry or full investigation), that there is reason to
believe that such Covered Person will be found entitled
to indemnification under this Section 10.02."
Insofar as indemnification for liability arising under the
Securities Act of 1933, as amended (the "Securities Act"), may
be permitted to trustees, officers, and controlling persons or
Registrant pursuant to the foregoing provisions, or otherwise,
Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Investment Company
Act of 1940, as amended (the "1940 Act"), and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Registrant
of expenses incurred or paid by a trustee, officer, or
controlling person of Registrant in the successful defense of
any action, suit, or proceeding) is asserted by such trustee,
officer, or controlling person in connection with the
securities being registered, 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 of 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.
ITEM 26. Business and Other Connections of Investment Adviser
----------------------------------------------------
Simms Capital Management, Inc. provides management services to
Registrant and its series. To the best of Registrant's
knowledge, the directors and officers of the investment
adviser have not held at any time during the past two fiscal
years or been engaged for their own account or in the capacity
of director, officer, employee, partner or trustee in any
other business, profession, vocation or employment of a
substantial nature.
ITEM 27. Principal Underwriters
----------------------
(a) T.O. Richardson Securities, Inc., Registrant's
principal underwriter, 2 Bridgewater Road,
Farmington, Connecticut 06032, also acts as the
distributor for the following investment companies as
of November 23, 1998: T.O. Richardson Sector Rotation
Fund and Barrett Growth Fund.
(b) Directors and officers of T.O. Richardson Securities,
Inc., as of November 23, 1998, were as follows:
Samuel Bailey, Jr. - President, Lloyd P. Griffiths -
Executive Vice President, and Austine Crowne -
Executive Vice President/Portfolio Manager.
(c) Not applicable.
C-3
<PAGE>
ITEM 28. Location of Accounts and Records
--------------------------------
1. Simms Capital Management, Inc., 55 Railroad Avenue,
Greenwich, Connecticut 06830 (records relating to its
function as investment adviser).
2. Firstar Mutual Fund Services LLC, 615 East Michigan
Street, Milwaukee, Wisconsin 53202-5207 (records relating
to its functions as administrator, transfer and dividend
disbursing agent, and fund accountant).
3. Firstar Bank Milwaukee, N.A., 777 East Wisconsin Avenue,
Milwaukee, Wisconsin 53202 (records relating to its
function as custodian).
4. T.O. Richardson Securities, Inc., 2 Bridgewater Road,
Farmington, Connecticut 06032 (records relating to its
function as distributor).
ITEM 29. Management Services
-------------------
Not applicable.
ITEM 30. Undertaking
-----------
Registrant undertakes to call a meeting of shareholders for
the purpose of voting upon the question of removal of a
trustee or trustees if requested to do so by the holders of at
least 10% of Registrant's outstanding voting securities, and
to assist in communications with other shareholders, as
required by Section 16(c) of the 1940 Act.
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act,
Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, duly authorized, in the City of New York, and the
State of New York on this 25th day of November, 1998.
THE SIMMS FUNDS
By: /s/ Robert A. Simms
-------------------
Robert A. Simms
President
Pursuant to the requirements of the Securities Act, this
registration statement has been signed below by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Robert A. Simms President and Chairman of the Board November 25, 1998
- - ------------------- of Trustees
Robert A. Simms
/s/ Arthur O. Poltrack Vice President, Treasurer, Chief November 25, 1998
- - ---------------------- Accounting Officer, Chief Financial
Arthur O. Poltrack Officer, Trustee
/s/ Beverely W. Aisenberg Trustee November 25, 1998
- - -------------------------
Beverely W. Aisenberg
/s/ Arthur S. Bahr* Trustee November 25, 1998
- - ------------------
Arthur S. Bahr
/s/ Robert G. Blount* Trustee November 25, 1998
- - ---------------------
Robert G. Blount
/s/ Robert E. Kelly* Trustee November 25, 1998
- - --------------------
Robert E. Kelly
/s/ Michael A. McManus* Trustee November 25, 1998
- - -----------------------
Michael A. McManus
/s/ Thomas L. Melly* Trustee November 25, 1998
- - --------------------
Thomas L. Melly
</TABLE>
- - --------------------------------
*
By: /s/ Arthur O. Poltrack
Arthur O. Poltrack
Attorney-in-fact
C-5
<PAGE>
EXHIBIT INDEX
-------------
Ex 99.B1(1) Amended and Restated Certificate of Trust, as of
October 5, 1998.
Ex 99.B1(2) Amended and Restated Trust Instrument, as of
October 5, 1998.
Ex 99.B2 Amended and Restated Bylaws, as of October 5, 1998.
Ex 99.B5 Form of Investment Advisory Agreement.
Ex 99.B6 Form of Distribution Agreement.
Ex 99.B8 Form of Custodian Servicing Agreement.
Ex 99.B9(a) Form of Fund Accounting Servicing Agreement.
Ex 99.B9(b) Form of Fund Administration Servicing Agreement.
Ex 99.B9(c) Form of Transfer Agency Agreement.
Ex 99.B9(d) Form of Fulfillment Servicing Agreement.
Ex 99.B10(a) Opinion and Consent of Kramer Levin Naftalis &
Frankel LLP.
Ex 99.B10(b) Opinion of Morris, Nichols, Arsht & Tunnell,
Delaware Counsel.
Ex 99.B11 Consent of PricewaterhouseCoopers LLP.
Ex 99.B15(a) Rule 12b-1 Distribution Plan.
Ex 99.B15(b) Shareholder Servicing Plan.
Ex 99.B18f-3 Rule 18f-3 Plan.
Ex 99. Powers of Attorney Powers of Attorney of Beverely W. Aisenbrey, Arthur
S. Bahr, Robert G. Blount, Robert E. Kelley,
Michael A. McManus, Thomas L. Melly, Arthur O.
Poltrack and Robert A. Simms.
AMENDED AND RESTATED CERTIFICATE OF TRUST
OF
SIMMS FUNDS
This Certificate of Trust is being executed as of September 30, 1998
for the purpose of amending and restating the Certificate of Trust filed with
the Secretary of State of the State of Delaware on July 1, 1998 pursuant to the
Delaware Business Trust Act, 12 Del. C. ss.ss. 3801 et seq. (the "Act").
The undersigned hereby certifies as follows:
1. Name. The name of the business trust is The Simms Funds
(the "Trust").
2. Registered Office. The address of the Trust's registered office in
the State of Delaware is 1201 North Market Street, P.O. Box 1347, Wilmington,
Delaware 19899-1347.
3. Registered Agent. The name of the Trust's registered agent at the
above listed address is Delaware Corporation Organizers, Inc.
4. Effective. This Amended and Restated Certificate of Trust shall be
effective immediately upon filing in the office of the Secretary of State of the
State of Delaware.
5. Series Trust. Notice is hereby given that pursuant to Section 3804
of the Act, the debts, liabilities, obligations and expenses incurred,
contracted for or otherwise existing with respect to a particular series of the
Trust shall be enforceable against the assets of such series only and not
against the assets of the Trust generally. The Trust is, or will become prior to
or within 180 days following the first issuance of shares of beneficial
interests therein, a registered investment company under the Investment Company
Act of 1940, as amended.
<PAGE>
IN WITNESS WHEREOF, the undersigned, being a trustee of the Trust, has
duly executed this Amended and Restated Certificate of Trust as of the day and
year first above written.
TRUSTEE:
/s/ Arthur O. Poltrack
----------------------
Arthur O. Poltrack
THE SIMMS FUNDS
TRUST INSTRUMENT
DATED JUNE 30, 1998
AMENDED AND RESTATED AS OF
OCTOBER 5, 1998
<PAGE>
THE SIMMS FUNDS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I - NAME AND DEFINITIONS..................................................................................1
Section 1.01 Name..............................................................................................1
Section 1.02 Definitions.......................................................................................1
ARTICLE II - BENEFICIAL INTEREST..................................................................................2
Section 2.01 Shares Of Beneficial Interest.....................................................................2
Section 2.02 Issuance of Shares................................................................................2
Section 2.03 Register of Shares and Share Certificates.........................................................3
Section 2.04 Transfer of Shares................................................................................3
Section 2.05 Treasury Shares...................................................................................3
Section 2.06 Establishment of Series...........................................................................3
Section 2.07 Investment in the Trust...........................................................................4
Section 2.08 Assets and Liabilities of Series..................................................................4
Section 2.09 No Preemptive Rights..............................................................................5
Section 2.10 No Personal Liability of Shareholder..............................................................5
ARTICLE III - THE TRUSTEES........................................................................................6
Section 3.01 Management of the Trust..........................................................................6
Section 3.02 Initial Trustees.................................................................................6
Section 3.03 Term of Office...................................................................................6
Section 3.04 Vacancies and Appointments.......................................................................6
Section 3.05 Temporary Absence................................................................................7
Section 3.06 Number of Trustees...............................................................................7
Section 3.07 Effect of Ending of a Trustee's Service..........................................................7
Section 3.08 Ownership of Assets of the Trust.................................................................7
ARTICLE IV - POWERS OF THE TRUSTEES...............................................................................8
Section 4.01 Powers...........................................................................................8
Section 4.02 Issuance and Repurchase of Shares...............................................................11
Section 4.03 Trustees and Officers as Shareholders...........................................................11
Section 4.04 Action by the Trustees..........................................................................11
Section 4.05 Chairman of the Board of Trustees...............................................................11
Section 4.06 Principal Transactions..........................................................................11
ARTICLE V - EXPENSES OF THE TRUST................................................................................12
ARTICLE VI - INVESTMENT ADVISER, PRINCIPAL UNDERWRITER,
ADMINISTRATOR AND TRANSFER AGENT.................................................................................12
Section 6.01 Investment Adviser..............................................................................12
Section 6.02 Principal Underwriter...........................................................................13
i
<PAGE>
Section 6.03 Administration..................................................................................13
Section 6.04 Transfer Agent..................................................................................13
Section 6.05 Parties to Contract.............................................................................13
Section 6.06 Provisions and Amendments.......................................................................14
ARTICLE VII - SHAREHOLDERS' VOTING POWERS AND MEETINGS...........................................................14
Section 7.01 Voting Powers...................................................................................14
Section 7.02 Meetings........................................................................................15
Section 7.03 Quorum and Required Vote........................................................................15
ARTICLE VIII - CUSTODIAN.........................................................................................16
Section 8.01 Appointment and Duties..........................................................................16
Section 8.02 Central Certificate System......................................................................16
ARTICLE IX - DISTRIBUTIONS AND REDEMPTIONS.......................................................................17
Section 9.01 Distributions...................................................................................17
Section 9.02 Redemptions.....................................................................................17
Section 9.03 Determination of Net Asset Value and Valuation of Portfolio Assets..............................18
Section 9.04 Suspension of the Right of Redemption...........................................................18
Section 9.05 Required Redemption of Shares...................................................................19
ARTICLE X - LIMITATION OF LIABILITY AND INDEMNIFICATION..........................................................19
Section 10.01 Limitation of Liability........................................................................19
Section 10.02 Indemnification................................................................................19
Section 10.03 Shareholders...................................................................................20
ARTICLE XI - MISCELLANEOUS.......................................................................................21
Section 11.01 Trust Not a Partnership........................................................................21
Section 11.02 Trustee's Good Faith Action, Expert Advice, No Bond or Surety..................................21
Section 11.03 Establishment of Record Dates..................................................................21
Section 11.04 Dissolution and Termination of Trust...........................................................22
Section 11.05 Reorganization and Master/Feeder...............................................................22
Section 11.06 Filing of Copies, References, Headings.........................................................23
Section 11.07 Applicable Law.................................................................................24
Section 11.08 Derivative Actions.............................................................................24
Section 11.09 Amendments.....................................................................................25
Section 11.10 Fiscal Year....................................................................................25
Section 11.11 Name Reservation...............................................................................25
Section 11.12 Provisions in Conflict With Law................................................................26
</TABLE>
ii
<PAGE>
THE SIMMS FUNDS
June 30, 1998
Amended and Restated as of October 5, 1998
TRUST INSTRUMENT of The Simms Funds, a Delaware business trust (the
"Trust"), amended and restated by Robert A. Simms, Arthur S. Bahr, Robert G.
Blount, Robert E. Kelley, Michael A. McManus, Thomas L. Melly and Arthur O.
Poltrack (the "Trustees").
WHEREAS Jay G. Baris and George P. Attisano, as the initial Trustees of
the Trust, established the Trust pursuant to a Trust Instrument dated June 30,
1998 (the "Original Trust Instrument"); and
WHEREAS, the Trustees declare that all money and property contributed
to the Trust hereunder shall be held and managed in trust under this Trust
Instrument as set forth herein; and
WHEREAS, the Trustees consider it necessary and appropriate to amend
and restate the Original Trust Instrument;
NOW THEREFORE, the Original Trust Instrument is hereby amended and
restated in its entirety as follows.
ARTICLE I
NAME AND DEFINITIONS
Section 1.01 Name. The name of the trust created under the Original
Trust Instrument and continued hereby is "The Simms Funds."
Section 1.02 Definitions. Wherever used herein, unless otherwise
required by the context or specifically provided:
(a) The "1940 Act" means the Investment Company Act of 1940, as amended
from time to time. Whenever reference is made hereunder to the 1940 Act, such
references shall be interpreted as including any applicable order or orders of
the Commission or any rules or regulations adopted by the Commission thereunder
or interpretive releases of the Commission staff;
(b) "Bylaws" means the Bylaws of the Trust as adopted by the Trustees,
as amended from time to time;
(c) "Commission" has the meaning given it in the 1940 Act. In addition,
"Affiliated Person," "Assignment," "Interested Person" and "Principal
Underwriter" shall have the respective meanings given them in the 1940 Act.
"Majority Shareholder Vote" shall have the same meaning as the term "vote of a
majority of the outstanding voting securities" under the 1940 Act;
(d) "Delaware Act" refers to Chapter 38 of Title 12 of the Delaware
Code entitled
<PAGE>
"Treatment of Delaware Business Trusts," as amended from time to time;
(e) "Net Asset Value" means the net asset value of each Series of the
Trust determined in the manner provided in Article IX, Section 9.03 hereof;
(f) "Outstanding Shares" means those Shares shown from time to time in
the books of the Trust or its transfer agent as then issued and outstanding, but
shall not include Shares which have been redeemed or repurchased by the Trust
and which are at the time held in the treasury of the Trust;
(g) "Series" means a series of Shares of the Trust established in
accordance with the provisions of Article II, Section 2.06 hereof;
(h) "Shareholder" means a record owner of Outstanding Shares of the
Trust;
(i) "Shares" means the equal proportionate transferable units of
beneficial interest into which the beneficial interest of each Series of the
Trust or class thereof shall be divided and may include fractions of Shares as
well as whole Shares;
(j) The "Trust" means The Simms Funds, a Delaware business trust, and
reference to the Trust when applicable to one or more Series of the Trust, shall
refer to any such Series;
(k) The "Trustees" means the person or persons who has or have signed
this Trust Instrument so long as he or they shall continue in office in
accordance with the terms hereof and all other persons who may from time to time
be duly qualified and serving as Trustees in accordance with the provisions of
Article III hereof, and reference herein to a Trustee or to the Trustees shall
refer to the individual Trustees in their respective capacity as Trustees
hereunder;
(l) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of one or
more of the Trust or any Series, or the Trustees on behalf of the Trust or any
Series.
ARTICLE II
BENEFICIAL INTEREST
Section 2.01 Shares Of Beneficial Interest. The beneficial interest in
the Trust shall be divided into such Shares of one or more separate and distinct
Series or classes of a Series as set forth in Section 2.06 or as the Trustees
shall otherwise from time to time create and establish as provided in Section
2.06. The number of Shares of each Series and class thereof authorized hereunder
is unlimited. Each Share shall have a par value of $0.001. All Shares issued
hereunder, including without limitation, Shares issued in connection with a
dividend paid in Shares or a split of Shares, shall be fully paid and
non-assessable.
Section 2.02 Issuance of Shares. The Trustees in their discretion may,
from time to time, without a vote of the Shareholders, issue Shares, in addition
to the then issued and outstanding Shares and Shares held in the treasury, to
such party or parties and for such amount and type of
2
<PAGE>
consideration, subject to applicable law, including cash or securities, at such
time or times and on such terms as the Trustees may deem appropriate, and may in
such manner acquire other assets (including the acquisition of assets subject
to, and in connection with, the assumption of liabilities) and businesses. In
connection with any issuance of Shares, the Trustees may issue fractional Shares
and Shares held in the treasury. The Trustees may from time to time divide or
combine the Shares into a greater or lesser number without thereby changing the
proportionate beneficial interests in the Trust. Contributions to the Trust may
be accepted for, and Shares shall be redeemed as, whole Shares and/or 1/1000th
of a Share or integral multiples thereof. The Trustees or any person the
Trustees may authorize for the purpose may, in their discretion, reject any
application for the issuance of shares.
Section 2.03 Register of Shares and Share Certificates. A register
shall be kept at the principal office of the Trust or an office of the Trust's
transfer agent which shall contain the names and addresses of the Shareholders
of each Series, the number of Shares of that Series (or any class or classes
thereof) held by them respectively and a record of all transfers thereof. No
share certificates shall be issued by the Trust except as the Trustees may
otherwise authorize, and the persons indicated as shareholders in such register
shall be entitled to receive dividends or other distributions or otherwise to
exercise or enjoy the rights of Shareholders. No Shareholder shall be entitled
to receive payment of any dividend or other distribution, nor to have notice
given to him as herein or in the Bylaws provided, until he has given his address
to the transfer agent or such officer or other agent of the Trustees as shall
keep the said register for entry thereon.
Section 2.04 Transfer of Shares. Except as otherwise provided by the
Trustees, Shares shall be transferable on the records of the Trust only by the
record holder thereof or by his agent thereunto duly authorized in writing, upon
delivery to the Trustees or the Trust's transfer agent of a duly executed
instrument of transfer and such evidence of the genuineness of such execution
and authorization and of such other matters as may be required by the Trustees.
Upon such delivery the transfer shall be recorded on the register of the Trust.
Until such record is made, the Shareholder of record shall be deemed to be the
holder of such Shares for all purposes hereunder and neither the Trustees nor
the Trust, nor any transfer agent or registrar nor any officer, employee or
agent of the Trust shall be affected by any notice of the proposed transfer.
Section 2.05 Treasury Shares. Shares held in the treasury shall, until
reissued pursuant to Section 2.02 hereof, not confer any voting rights on the
Trustees, nor shall such Shares be entitled to any dividends or other
distributions declared with respect to the Shares.
Section 2.06 Establishment of Series. Subject to the provisions of this
Section 2.06, the Trust shall consist of the Series indicated on Schedule A
attached hereto, as such Schedule may be amended from time to time. The
preferences, voting powers, rights and privileges of the Series and any classes
thereof existing as of the date hereof shall be as set forth in the Trust's
registration statement or statements as filed with the Commission, as from time
to time in effect. Distinct records shall be maintained by the Trust for each
Series and the assets associated with each Series shall be held and accounted
for separately from the assets of the Trust or any other Series. The Trustees
shall have full power and authority, in their sole discretion and without
obtaining any prior authorization or vote of the Shareholders of any Series, to
establish and designate and to change in
3
<PAGE>
any manner any Series or any classes of initial or additional Series and to fix
such preferences, voting powers, rights and privileges of such Series or classes
thereof as the Trustees may from time to time determine, to divide or combine
the Shares or any Series or classes thereof into a greater or lesser number, to
classify or reclassify any issued Shares or any Series or classes thereof into
one or more Series or classes of Shares, and to take such other action with
respect to the Shares as the Trustees may deem desirable. The establishment and
designation of any Series thereof (other than those existing as of the date
hereof) shall be effective upon the adoption of a resolution by a majority of
the Trustees setting forth such establishment and designation and the relative
rights and preferences of the Shares of such Series (or classes), whether
directly in such resolution or by reference to, or approval of, another document
that sets forth such relative rights and preferences of such Series (or class)
including, without limitation, any registration statement of the Trust, or as
otherwise provided in such resolution. Upon the establishment of any such Series
(or class), Schedule A shall be amended to reflect the addition of such Series
(or class) thereto; provided that amendment of Schedule A shall not be a
condition precedent to the establishment of any Series (or class) in accordance
with this Trust Instrument. A Series may issue any number of Shares, but need
not issue Shares. At any time that there are no Shares outstanding of any
particular Series (or class) previously established and designated, the Trustees
may by a majority vote abolish that Series (or class) and the establishment and
designation thereof, and, in connection with such abolishment, Schedule A shall
be amended to reflect the removal of such Series (or class) therefrom; provided
that amendment of Schedule A shall not be a condition precedent to the
abolishment of any Series (or class) in accordance with this Trust Instrument.
All references to Shares in this Trust Instrument shall be deemed to be
Shares of any or all Series, or classes thereof as the context may require. All
provisions herein relating to the Trust shall apply equally to each Series of
the Trust, and each class thereof, except as the context otherwise requires.
Each Share of a Series of the Trust shall represent an equal beneficial
interest in the net assets of such Series. Each holder of Shares of a Series
shall be entitled to receive his proportionate share of all distributions made
with respect to such Series, based upon the number of full and fractional Shares
of the Series held. Upon redemption of his Shares, such Shareholder shall be
paid solely out of the funds and property of such Series of the Trust.
Section 2.07 Investment in the Trust. The Trustees shall accept
investments in any Series from such persons and on such terms as they may from
time to time authorize. At the Trustees' discretion, such investments, subject
to applicable law, may be in the form of cash or securities in which the
affected Series is authorized to invest, valued as provided in Article IX
Section 9.03 hereof. Investments in a Series shall be credited to each
Shareholder's account in the form of full and fractional Shares at the net asset
value per Share next determined after the investment is received or accepted as
may be determined by the Trustees; provided, however, that the Trustees may, in
their sole discretion, (a) fix minimum amounts for initial and subsequent
investments or (b) impose a sales charge upon investments in such manner and at
such time determined by the Trustees.
Section 2.08 Assets and Liabilities of Series. All consideration
received by the Trust for
4
<PAGE>
the issue or sale of Shares of a particular Series, together with all assets in
which such consideration is invested or reinvested, all income, earnings,
profits, and proceeds thereof including any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or payments derived from
any reinvestment of such proceeds in whatever form the same may be, shall be
held and accounted for separately from the other assets of the Trust and of
every other Series and may be referred to herein as "assets belonging to" that
Series. The assets belonging to a particular Series shall belong to that Series
for all purposes, and to no other Series, and shall be subject only to the
rights of creditors of that Series. In addition, any assets, income, earnings,
profits or funds, or payments and proceeds with respect thereto, which are not
readily identifiable as belonging to any particular Series shall be allocated by
the Trustees between and among one or more of the Series in such manner as the
Trustees, in their sole discretion, deem fair and equitable. Each such
allocation shall be conclusive and binding upon the Shareholders of all Series
for all purposes, and such assets, income, earnings, profits or funds, or
payments and proceeds with respect thereto shall be assets belonging to that
Series. The assets belonging to a particular Series shall be so recorded upon
the books of the Trust, and shall be held by the Trustees in trust for the
benefit of the holders of Shares of that Series, and separate and distinct
records shall be maintained for each Series. The assets belonging to each
particular Series shall be charged with the liabilities of that Series and all
expenses, costs, charges and reserves attributable to that Series. Any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular Series shall be allocated
and charged by the Trustees between or among any one or more of the Series in
such manner as the Trustees in their sole discretion deem fair and equitable.
Each such allocation shall be conclusive and binding upon the Shareholders of
all Series for all purposes. Without limitation of the foregoing provisions of
this Section 2.08, but subject to the right of the Trustees in their discretion
to allocate general liabilities, expenses, costs, changes or reserves as herein
provided, the debts, liabilities, obligations and expenses incurred, contracted
for or otherwise existing with respect to a particular Series shall be
enforceable against the assets of such Series only, and not against the assets
of the Trust generally or of any other Series. Notice of this contractual
limitation on inter-Series liabilities may, in the Trustee's sole discretion, be
set forth in the certificate of trust of the Trust (whether originally or by
amendment) as filed or to be filed in the Office of the Secretary of State of
the State of Delaware pursuant to the Delaware Act, 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 inter-Series liabilities (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.
Section 2.09 No Preemptive Rights. Shareholders shall have no
preemptive or other right to subscribe to any additional Shares or other
securities issued by the Trust or the Trustees, whether of the same or other
Series.
Section 2.10 No Personal Liability of Shareholder. 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
by or on behalf of any Series. The Trustees shall have no
5
<PAGE>
power to bind any Shareholder personally or to call upon any Shareholder for the
payment of any sum of money or assessment whatsoever other than such as the
Shareholder may at any time personally agree to pay by way of subscription for
any Shares or otherwise.
ARTICLE III
THE TRUSTEES
Section 3.01 Management of the Trust. The Trustees shall have exclusive
and absolute control over the Trust Property and over the business of the Trust
to the same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right, but with such powers of delegation as may be
permitted by this Trust Instrument. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without the State of Delaware, in any and
all states of the United States of America, in the District of Columbia, in any
and all commonwealths, territories, dependencies, colonies, or possessions of
the United States of America, and in any foreign jurisdiction and to do all such
other things and execute all such instruments as they deem necessary, proper or
desirable in order to promote the interests of the Trust although such things
are not herein specifically mentioned. Any determination as to what is in the
interests of the Trust made by the Trustees in good faith shall be conclusive.
In construing the provisions of this Trust Instrument, the presumption shall be
in favor of a grant of power to the Trustees.
The enumeration of any specific power in this Trust Instrument shall
not be construed as limiting the aforesaid power. The powers of the Trustees may
be exercised without order of or resort to any court.
Except for the Trustees named herein or appointed to fill vacancies
pursuant to Section 3.04 of this Article III, the Trustees shall be elected by
the Shareholders owning of record a plurality of the Shares voting at a meeting
of Shareholders. Any Shareholder meeting held for such purpose shall be held on
a date fixed by the Trustees. In the event that less than a majority of the
Trustees holding office have been elected by Shareholders, the Trustees then in
office will call a Shareholders' meeting for the election of Trustees in
accordance with the provisions of the 1940 Act.
Section 3.02 Initial Trustees. The initial Trustees shall be the
persons named in the Original Trust Instrument.
Section 3.03 Term of Office. The Trustees shall hold office during the
lifetime of this Trust, and until its termination as herein provided; except (a)
that any Trustee may resign his trust by written instrument signed by him and
delivered to the other Trustees, which shall take effect upon such delivery or
upon such later date as is specified therein; (b) that any Trustee may be
removed at any time by written instrument, signed by at least two-thirds of the
number of Trustees prior to such removal specifying the date when such removal
shall become effective; (c) that any Trustee who requests in writing to be
retired or who has died, becomes physically or mentally incapacitated by reason
of illness or otherwise, or is otherwise unable to serve, may be retired by
written instrument signed by a majority of the other Trustees, specifying the
date of his retirement; and (d) that a Trustee may be removed at any meeting of
the Shareholders of the Trust by a vote of
6
<PAGE>
Shareholders owning at least two-thirds of the Outstanding Shares of the Trust.
Section 3.04 Vacancies and Appointments . In case of a Trustee's
declination to serve, death, resignation, retirement, removal, physical or
mental incapacity by reason of illness, disease or otherwise, or if a Trustee is
otherwise unable to serve, or if there is an increase in the number of Trustees,
a vacancy shall occur. Whenever a vacancy in the Board of Trustees shall occur,
until such vacancy is filled, the other Trustees shall have all the powers
hereunder and the certificate of the other Trustees of such vacancy shall be
conclusive. In the case of a vacancy, the remaining Trustees shall fill such
vacancy by appointing such other person as they in their discretion see fit, to
the extent consistent with the limitations provided under the 1940 Act. Such
appointment shall be evidenced by a written instrument signed by a majority of
the Trustees in office or by resolution of the Trustees, duly adopted, which
shall be recorded in the minutes of a meeting of the Trustees, whereupon the
appointment shall take effect.
An appointment of a Trustee may be made by the Trustees then in office
in anticipation of a vacancy to occur by reason of retirement, resignation or
increase in number of Trustees effective at a later date, provided that said
appointment shall become effective only at or after the effective date of said
retirement, resignation or increase in number of Trustees. As soon as any person
appointed as a Trustee pursuant to this Section 3.04 shall have accepted this
Trust, the trust estate shall vest in the new Trustee or Trustees, together with
the continuing Trustees, without any further act or conveyance, and such person
shall be deemed a Trustee.
Section 3.05 Temporary Absence . Any Trustee may, by power of attorney,
delegate his power for a period not exceeding six months at any time to any
other Trustee or Trustees, provided that in no case shall fewer than two
Trustees personally exercise the other powers hereunder except as herein
otherwise expressly provided.
Section 3.06 Number of Trustees . The number of Trustees shall be at
least two (2), and thereafter shall be such number as shall be fixed from time
to time by a majority of the Trustees, provided, however, that the number of
Trustees shall in no event be more than twelve (12).
Section 3.07 Effect of Ending of a Trustee's Service. The declination
to serve, death, resignation, retirement, removal, incapacity, or inability of
the Trustees, or any one of them, shall not operate to terminate the Trust or to
revoke any existing agency created pursuant to the terms of this Trust
Instrument.
Section 3.08 Ownership of Assets of the Trust . The assets of the Trust
and of each Series shall be held separate and apart from any assets now or
hereafter held in any capacity other than as Trustee hereunder by the Trustees
or any successor Trustees. Legal title in all of the assets of the Trust and the
right to conduct any business shall at all times be considered as vested in the
Trustees on behalf of the Trust, except that the Trustees may cause legal title
to any Trust Property to be held by, or in the name of, the Trust or in the name
of any person as nominee. No Shareholder shall be deemed to have a severable
ownership in any individual asset of the Trust or of any Series or any right of
partition or possession thereof but each Shareholder shall have, except as
otherwise provided for herein, a proportionate undivided beneficial interest in
the Trust or Series based upon
7
<PAGE>
the number of Shares owned. The Shares shall be personal property giving only
the rights specifically set forth in this Trust Instrument.
ARTICLE IV
POWERS OF THE TRUSTEES
Section 4.01 Powers. The Trustees in all instances shall act as
principals, and are and shall be free from the control of the Shareholders. The
Trustees shall have full power and authority to do any and all acts and to make
and execute any and all contracts and instruments that they may consider
necessary or appropriate in connection with the management of the Trust. The
Trustees shall not in any way be bound or limited by present or future laws or
customs in regard to trust investments, but shall have full authority and power
to make any and all investments which they, in their sole discretion, shall deem
proper to accomplish the purpose of this Trust without recourse to any court or
other authority. Subject to any applicable limitation in this Trust Instrument
or the Bylaws of the Trust, the Trustees shall have the power and authority:
(a) To invest and reinvest cash and other property (including
investment, notwithstanding any other provision hereof, of all of the assets of
any Series in a single open-end investment company, including investment by
means of transfer of such assets in exchange for an interest or interests in
such investment company), and to hold cash or other property of the Trust
uninvested, without in any event being bound or limited by any present or future
law or custom in regard to investments by trustees, and to sell, exchange, lend,
pledge, mortgage, hypothecate, write options on and lease any or all of the
assets of the Trust:
(b) To operate as and carry on the business of an investment company,
and exercise all the powers necessary and appropriate to the conduct of such
operations;
(c) To borrow money and in this connection issue notes or other
evidence of indebtedness; to secure borrowings by mortgaging, pledging or
otherwise subjecting as security the Trust Property; to endorse, guarantee, or
undertake the performance of an obligation or engagement of any other person and
to lend Trust Property;
(d) To provide for the distribution of interests of the Trust either
through a principal underwriter in the manner hereinafter provided for or by the
Trust itself, or both, or otherwise pursuant to a plan of distribution of any
kind;
(e) To adopt Bylaws not inconsistent with this Trust Instrument
providing for the conduct of the business of the Trust and to amend and repeal
them to the extent that they do not reserve that right to the Shareholders; such
Bylaws shall be deemed incorporated and included in this Trust Instrument;
(f) To elect and remove such officers and appoint and terminate such
agents as they consider appropriate;
(g) To employ 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
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any assets of the Trust subject to any conditions set forth in this Trust
Instrument or in the Bylaws;
(h) To retain one or more transfer agents and shareholder servicing
agents, or both;
(i) To set record dates in the manner provided herein or in the Bylaws;
(j) To delegate such authority as they consider desirable to any
officers of the Trust and to any investment adviser, manager, custodian,
underwriter or other agent or independent contractor;
(k) To sell or exchange any or all of the assets of the Trust, subject
to the provisions of Article XI, subsection 11.04(b) hereof;
(l) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property, and to execute and deliver
powers of attorney to such person or persons as the Trustees shall deem proper,
granting to such person or persons such power and discretion with relation to
securities or property as the Trustees shall deem proper;
(m) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities;
(n) To hold any security or property in a form not indicating any
trust, whether in bearer, book entry, unregistered or other negotiable form; or
either in the name of the Trust or in the name of a custodian or a nominee or
nominees, subject in either case to proper safeguards according to the usual
practice of Delaware business trusts or investment companies;
(o) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes in
accordance with the provisions of Article II hereof and to establish classes of
such Series having relative rights, powers and duties as they may provide
consistent with applicable law;
(p) Subject to the provisions of Section 3804 of the Delaware Act, to
allocate assets, liabilities and expenses of the Trust to a particular Series or
to apportion the same between or among two or more Series, provided that any
liabilities or expenses incurred by a particular Series shall be payable solely
out of the assets belonging to that Series as provided for in Article II hereof;
(q) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of which is
held in the Trust; to consent to any contract, lease, mortgage, purchase, or
sale of property by such corporation or concern, and to pay calls or
subscriptions with respect to any security held in the Trust;
(r) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any matter in controversy including, but not limited to,
claims for taxes;
(s) To make distributions of income and of capital gains to
Shareholders in the manner provided herein;
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(t) To establish, from time to time, a minimum investment for
Shareholders in the Trust or in one or more Series or class, and to require the
redemption of the Shares of any Shareholders whose investment is less than such
minimum upon giving notice to such Shareholder;
(u) To establish one or more committees, to delegate any of the powers
of the Trustees to said committees and to adopt a committee charter providing
for such responsibilities, membership (including Trustees, officers or other
agents of the Trust therein) and any other characteristics of said committees as
the Trustees may deem proper. Notwithstanding the provisions of this Article IV,
and in addition to such provisions or any other provision of this Trust
Instrument or of the Bylaws, the Trustees may by resolution appoint a committee
consisting of less than the whole number of Trustees then in office, which
committee may be empowered to act for and bind the Trustees and the Trust, as if
the acts of such committee were the acts of all the Trustees then in office,
with respect to the institution, prosecution, dismissal, settlement, review or
investigation of any action, suit or proceeding which shall be pending or
threatened to be brought before any court, administrative agency or other
adjudicatory body;
(v) To interpret the investment policies, practices or limitations of
any Series;
(w) To establish a registered office and have a registered agent in the
state of Delaware;
(x) To invest part or all of the Trust Property (or part or all of the
assets of any Series), or to dispose of part or all of the Trust Property (or
part or all of the assets of any Series) and invest the proceeds of such
disposition, in securities issued by one or more other investment companies
registered under the 1940 Act (including investment by means of transfer of part
or all of the Trust Property in exchange for an interest or interests in such
one or more investment companies) all without any requirement of approval by
Shareholders unless required by the 1940 Act. Any such other investment company
may (but need not) be a trust (formed under the laws of the State of Delaware or
of any other state) which is classified as a partnership for federal income tax
purposes; and
(y) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary, suitable
or proper for the accomplishment of any purpose or the attainment of any object
or the furtherance of any power hereinbefore set forth, either alone or in
association with others, and to do every other act or thing incidental or
appurtenant to or growing out of or connected with the aforesaid business or
purposes, objects or powers.
The foregoing clauses shall be construed as objects and powers, and the
foregoing enumeration of specific powers shall not be held to limit or restrict
in any manner the general powers of the Trustees. Any action by one or more of
the Trustees in their capacity as such hereunder shall be deemed an action on
behalf of the Trust or the applicable Series, and not an action in an individual
capacity.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust.
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No one dealing with the Trustees shall be under any obligation to make
any inquiry concerning the authority of the Trustees, or to see the application
of any payments made or property transferred to the Trustees or upon their
order.
Section 4.02 Issuance and Repurchase of Shares . The Trustees shall
have the power to issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of and otherwise deal in Shares and, subject to
the provisions set forth in Article II and Article IX, to apply to any such
repurchase, redemption, retirement, cancellation or acquisition of Shares any
funds or property of the Trust, or the particular Series of the Trust, with
respect to which such Shares are issued.
Section 4.03 Trustees and Officers as Shareholders. Any Trustee,
officer or other agent of the Trust may acquire, own and dispose of Shares to
the same extent as if he were not a Trustee, officer or agent; and the Trustees
may issue and sell or cause to be issued and sold Shares to and buy such Shares
from any such person or any firm or company in which he is interested, subject
only to the general limitations herein contained as to the sale and purchase of
such Shares; and all subject to any restrictions which may be contained in the
Bylaws.
Section 4.04 Action by the Trustees. In any action taken by the
Trustees hereunder, unless otherwise specified, the Trustees shall act by
majority vote at a meeting (including a telephone meeting) duly called, provided
a quorum of Trustees participate, or by written consent of a majority of the
Trustees 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.
At any meeting of the Trustees, a majority of the Trustees shall constitute a
quorum. Meetings of the Trustees may be called orally or in writing by the
Chairman of the Board of Trustees or by any two other Trustees. Notice of the
time, date and place of all meetings of the Trustees shall be given by the
person calling the meeting to each Trustee by telephone, facsimile or other
electronic mechanism sent to his home or business address at least twenty-four
hours in advance of the meeting or by written notice mailed to his home or
business address at least seventy-two hours in advance of the meeting. Notice
need not be given to any Trustee who attends the meeting without objecting to
the lack of notice or who executes a written waiver of notice with respect to
the meeting. Any meeting conducted by telephone shall be deemed to take place at
the principal office of the Trust, as determined by the Bylaws or by the
Trustees. Subject to the requirements of the 1940 Act, the Trustees by majority
vote may delegate to any one or more of their number their authority to approve
particular matters or take particular actions on behalf of the Trust. Written
consents or waivers of the Trustees may be executed in one or more counterparts.
Execution of a written consent or waiver and delivery thereof to the Trust may
be accomplished by facsimile or other similar electronic mechanism.
Section 4.05 Chairman of the Board of Trustees. The Trustees shall
appoint one of their number to be Chairman of the Board of Trustees. The
Chairman shall preside at all meetings of the Trustees, shall be responsible for
the execution of policies established by the Trustees and the administration of
the Trust, and may be (but is not required to be) the chief executive, financial
and/or accounting officer of the Trust.
Section 4.06 Principal Transactions. Except to the extent prohibited by
applicable law, the Trustees may, on behalf of the Trust, buy any securities
from or sell any securities to, or lend any
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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, administrator, distributor or transfer
agent for the Trust or with any interested person of such person; and the Trust
may employ any such person, or firm or company in which such person is an
interested person, as broker, legal counsel, registrar, investment adviser,
administrator, distributor, transfer agent, dividend disbursing agent, custodian
or in any other capacity upon customary terms.
ARTICLE V
EXPENSES OF THE TRUST
Subject to the provisions of Article II, Section 2.08 hereof, the
Trustees shall be reimbursed from the Trust estate or the assets belonging to
the appropriate Series for their expenses and disbursements, including, without
limitation, interest charges, taxes, brokerage fees and commissions; expenses of
issue, repurchase and redemption of Shares; certain insurance premiums;
applicable fees, interest charges and expenses of third parties, including the
Trust's investment advisers, managers, administrators, distributors, custodians,
transfer agent and fund accountant; fees of pricing, interest, dividend, credit
and other reporting services; costs of membership in trade associations;
telecommunications expenses; funds transmission expenses; auditing, legal and
compliance expenses; costs of forming the Trust and maintaining its existence;
costs of preparing and printing the Trust's prospectuses, statements of
additional information and shareholder reports and delivering them to existing
Shareholders; expenses of meetings of Shareholders and proxy solicitations
therefor; costs of maintaining books and accounts; costs of reproduction,
stationery and supplies; fees and expenses of the Trustees; compensation of the
Trust's officers and employees and costs of other personnel performing services
for the Trust; costs of Trustee meetings; Commission registration fees and
related expenses; state or foreign securities laws registration fees and related
expenses and for such non-recurring items as may arise, including litigation to
which the Trust (or a Trustee acting as such) is a party, and for all losses and
liabilities by them incurred in administering the Trust, and for the payment of
such expenses, disbursements, losses and liabilities the Trustees shall have a
lien on the assets belonging to the appropriate Series, or in the case of an
expense allocable to more than one Series, on the assets of each such Series,
prior to any rights or interests of the Shareholders thereto. This section shall
not preclude the Trust from directly paying any of the aforementioned fees and
expenses.
ARTICLE VI
INVESTMENT ADVISER, PRINCIPAL UNDERWRITER,
ADMINISTRATOR AND TRANSFER AGENT
Section 6.01 Investment Adviser.
(a) The Trustees may in their discretion, from time to time, enter into
an investment advisory contract or contracts with respect to the Trust or any
Series whereby the other party or parties to such contract or contracts shall
undertake to furnish the Trustees with such investment advisory, statistical and
research facilities and services and such other facilities and services, if any,
all upon such terms and conditions (including any Shareholder vote) that may be
required under the 1940 Act, as may be prescribed in the Bylaws, or as the
Trustees may in their discretion determine
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(such terms and conditions not to be inconsistent with the provisions of this
Trust Instrument or of the Bylaws). Notwithstanding any other provision of this
Trust Instrument, the Trustees may authorize any investment adviser (subject to
such general or specific instructions as the Trustees may from time to time
adopt) to effect purchases, sales or exchanges of portfolio securities, other
investment instruments of the Trust, or other Trust Property on behalf of the
Trustees, or may authorize any officer, agent, or Trustee to effect such
purchases, sales or exchanges pursuant to recommendations of the investment
adviser (and all without further action by the Trustees). Any such purchases,
sales and exchanges shall be deemed to have been authorized by all of the
Trustees.
(b) The Trustees may authorize the investment adviser to employ, from
time to time, one or more sub-advisers to perform such of the acts and services
of the investment adviser, and upon such terms and conditions, as may be agreed
upon between the investment adviser and subadviser (such terms and conditions
not to be inconsistent with the provisions of this Trust Instrument or of the
Bylaws). Any reference in this Trust Instrument to the investment adviser shall
be deemed to include such sub-advisers, unless the context otherwise requires;
provided that no Shareholder approval shall be required with respect to any
sub-adviser unless required under the 1940 Act or other law, contract or order
applicable to the Trust.
Section 6.02 Principal Underwriter. The Trustees may in their
discretion from time to time enter into an exclusive or non-exclusive
underwriting contract or contracts providing for the sale of Shares, whereby the
Trust may either agree to sell Shares to the other party to the contract or
appoint such other party its sales agent for such Shares. In either case, the
contract shall be on such terms and conditions as may be prescribed in the
Bylaws and as the Trustees may in their discretion determine (such terms and
conditions not to be inconsistent with the provisions of this Trust Instrument
or of the Bylaws); and such contract may also provide for the repurchase or sale
of Shares by such other party as principal or as agent of the Trust.
Section 6.03 Administration. The Trustees may in their discretion from
time to time enter into one or more management or administrative contracts
whereby the other party or parties shall undertake to furnish the Trustees with
management or administrative services. The contract or contracts shall be on
such terms and conditions as may be prescribed in the Bylaws and as the Trustees
may in their discretion determine (such terms and conditions not to be
inconsistent with the provisions of this Trust Instrument or of the Bylaws).
Section 6.04 Transfer Agent. The Trustees may in their discretion from
time to time enter into one or more transfer agency and shareholder service
contracts whereby the other party or parties shall undertake to furnish the
Trustees with transfer agency and shareholder services. The contract or
contracts shall be on such terms and conditions as may be prescribed in the
Bylaws and as the Trustees may in their discretion determine (such terms and
conditions not to be inconsistent with the provisions of this Trust Instrument
or of the Bylaws).
Section 6.05 Parties to Contract. Any contract of the character
described in Sections 6.01, 6.02, 6.03 and 6.04 of this Article VI or any
contract of the character described in Article VIII hereof may be entered into
with any corporation, firm, partnership, trust or association, although one or
more of the Trustees or officers of the Trust may be an officer, director,
trustee, shareholder, or
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member of such other party to the contract, and no such contract shall be
invalidated or rendered void or voidable by reason of the existence of any
relationship, nor shall any person holding such relationship be disqualified
from voting on or executing the same in his capacity as Shareholder and/or
Trustee, nor shall any person holding such relationship be liable merely by
reason of such relationship for any loss or expense to the Trust under or by
reason of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was not
inconsistent with the provisions of this Article VI or Article VIII hereof or of
the Bylaws. The same person (including a corporation, firm, partnership, trust,
or association) may be the other party to contracts entered into pursuant to
Sections 6.01, 6.02, 6.03 and 6.04 of this Article VI or pursuant to Article
VIII hereof and any individual may be financially interested or otherwise
affiliated with persons who are parties to any or all of the contracts mentioned
in this Section 6.05.
Section 6.06 Provisions and Amendments. Any contract entered into
pursuant to Section 6.01 or 6.02 of this Article VI shall be consistent with and
subject to the requirements of Section 15 of the 1940 Act, if applicable, or
other applicable Act of Congress hereafter enacted with respect to its
continuance in effect, its termination, and the method of authorization and
approval of such contract or renewal thereof, and no amendment to any contract
entered into pursuant to Section 6.01 or 6.02 of this Article VI shall be
effective unless assented to in a manner consistent with the requirements of
said Section 15, as modified by any applicable rule, regulation or order of the
Commission.
ARTICLE VII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 7.01 Voting Powers.
(a) The Shareholders shall have power to vote only (a) for the election
of Trustees to the extent provided in Article III, Section 3.01 hereof, (b) for
the removal of Trustees to the extent provided in Article III, Section 3.03(d)
hereof, (c) with respect to any investment advisory contract to the extent
provided in Article VI, Section 6.01 hereof, (d) with respect to an amendment of
this Trust Instrument, to the extent provided in Article XI, Section 11.08, and
(e) with respect to such additional matters relating to the Trust as may be
required by law, by this Trust Instrument, or any registration of the Trust with
the Commission or any State, or as the Trustees may consider desirable.
(b) Notwithstanding paragraph (a) of this Section 7.01 or any other
provision of this Trust Instrument (including the Bylaws) which would by its
terms provide for or require a vote of Shareholders, the Trustees may take
action without a Shareholder vote if (i) the Trustees shall have obtained an
opinion of counsel that a vote or approval of such action by Shareholders is not
required under (A) the 1940 Act or any other applicable laws, or (B) any
registrations, undertakings or agreements of the Trust known to such counsel,
and if the Trustees determine that the taking of such action without a
Shareholder vote would be consistent with the best interests of the Shareholders
(considered as a group).
(c) On any matter submitted to a vote of the Shareholders, all Shares
shall be voted separately by individual Series, and whenever the Trustees
determine that the matter affects only
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certain Series, may be submitted for a vote by only such Series, except (i) when
required by the 1940 Act, Shares shall be voted in the aggregate and not by
individual Series; and (ii) when the Trustees have determined that the matter
affects the interests of more than one Series and that voting by shareholders of
all Series would be consistent with the 1940 Act, then the Shareholders of all
such Series shall be entitled to vote thereon (either by individual Series or by
Shares voted in the aggregate, as the Trustees in their discretion may
determine). The Trustees may also determine that a matter affects only the
interests of one or more classes of a Series, in which case (or if required
under the 1940 Act) such matter shall be voted on by such class or classes. As
determined by the Trustees without the vote or consent of Shareholders (except
as required by the 1940 Act), on any matter submitted to a vote of Shareholders,
either (i) each whole Share shall be entitled to one vote as to any matter on
which it is entitled to vote and each fractional Share shall be entitled to a
proportionate fractional vote or (ii) each dollar of Net Asset Value (number of
Shares owned times Net Asset Value per share of such Series or class thereof, as
applicable) shall be entitled to one vote on any matter on which such Shares are
entitled to vote and each fractional dollar amount shall be entitled to a
proportionate fractional vote. Without limiting the power of the Trustees in any
way to designate otherwise in accordance with the preceding sentence, the
Trustees hereby establish that each whole Share shall be entitled to one vote as
to any matter on which it is entitled to vote and each fractional Share shall be
entitled to a proportionate fractional vote. There shall be no cumulative voting
in the election of Trustees. Shares may be voted in person or by proxy or in any
manner provided for in the Bylaws. A proxy may be given in writing. The Bylaws
may provide that proxies may also, or may instead, be given by any electronic or
telecommunications device or in any other manner. Notwithstanding anything else
herein or in the Bylaws, in the event a proposal by anyone other than the
officers or Trustees of the Trust is submitted to a vote of the Shareholders, or
in the event of any proxy contest or proxy solicitation or proposal in
opposition to any proposal by the officers or Trustees of the Trust, Shares may
be voted only in person or by written proxy. Until Shares are issued, the
Trustees may exercise all rights of Shareholders and may take any action
required or permitted by law, this Trust Instrument or any of the Bylaws of the
Trust to be taken by Shareholders.
Section 7.02 Meetings. Meetings may be held within or without the State
of Delaware. Special meetings of the Shareholders of any Series may be called by
the Trustees and shall be called by the Trustees upon the written request of
Shareholders owning at least one tenth of the Outstanding Shares of the Trust
entitled to vote. Whenever ten or more Shareholders meeting the qualifications
set forth in Section 16(c) of the 1940 Act, as the same may be amended from time
to time, seek the opportunity of furnishing materials to the other Shareholders
with a view to obtaining signatures on such a request for a meeting, the
Trustees shall comply with the provisions of said Section 16(c) with respect to
providing such Shareholders access to the list of the Shareholders of record of
the Trust or the mailing of such materials to such Shareholders of record,
subject to any rights provided to the Trust or any Trustees provided by said
Section 16(c). Notice shall be sent, by First Class Mail or such other means
determined by the Trustees, at least 10 days prior to any such meeting.
Notwithstanding anything to the contrary in this Section 7.02, the Trustees
shall not be required to call a special meeting of the Shareholders of any
Series or to provide Shareholders seeking the opportunity of furnishing the
materials to other Shareholders with a view to obtaining signatures on a request
for a meeting except to the extent required under the 1940 Act.
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Section 7.03 Quorum and Required Vote. One-third of Shares outstanding
and entitled to vote in person or by proxy as of the record date for a
Shareholders' meeting shall be a quorum for the transaction of business at such
Shareholders' meeting, except that where any provision of law or of this Trust
Instrument permits or requires that holders of any Series shall vote as a Series
(or that holders of a class shall vote as a class), then one-third of the
aggregate number of Shares of that Series (or that class) entitled to vote shall
be necessary to constitute a quorum for the transaction of business by that
Series (or that class). Any meeting of Shareholders may be adjourned from time
to time by a majority of the votes properly cast upon the question of adjourning
a meeting to another date and time, whether or not a quorum is present. Any
adjourned session or sessions may be held, within a reasonable time after the
date set for the original meeting, without the necessity of further notice.
Except when a larger vote is required by law or by any provision of this Trust
Instrument or the Bylaws, a majority of the Shares voted in person or by proxy
shall decide any questions and a plurality shall elect a Trustee, provided that
where any provision of law or of this Trust Instrument permits or requires that
the holders of any Series shall vote as a Series (or that the holders of any
class shall vote as a class), then a majority of the Shares present in person or
by proxy of that Series (or class), voted on the matter in person or by proxy
shall decide that matter insofar as that Series (or class) is concerned.
Shareholders may act by unanimous written consent, to the extent not
inconsistent with the 1940 Act, and any such actions taken by a Series (or
class) may be consented to unanimously in writing by Shareholders of that Series
(or class).
ARTICLE VIII CUSTODIAN
Section 8.01 Appointment and Duties. The Trustees shall employ a bank,
a company that is a member of a national securities exchange, or a trust
company, that in each case shall have capital, surplus and undivided profits of
at least twenty million dollars ($20,000,000) and that is a member of the
Depository Trust Company (or such other person or entity as may be permitted to
act as custodian of the Trust's assets under the 1940 Act) as custodian with
authority as its agent, but subject to such restrictions, limitations and other
requirements, if any, as may be contained in the Bylaws of the Trust: (a) to
hold the securities owned by the Trust and deliver the same upon written order
or oral order confirmed in writing; (b) to receive and receipt for any moneys
due to the Trust and deposit the same in its own banking department or elsewhere
as the Trustees may direct; and (c) to disburse such funds upon orders or
vouchers.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian, and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, provided that in
every case such sub-custodian shall be a bank, a company that is a member of a
national securities exchange, or a trust company organized under the laws of the
United States or one of the states thereof and having capital, surplus and
undivided profits of at least twenty million dollars ($20,000,000) and that is a
member of the Depository Trust Company or such other person or entity as may be
permitted by the Commission or is otherwise able to act as custodian of the
Trust's assets in accordance with the 1940 Act.
Section 8.02 Central Certificate System. Subject to the 1940 Act and
such other rules,
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regulations and orders as the Commission may adopt, the Trustees may direct the
custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, as amended, or such other
person as may be permitted by the Commission, or otherwise in accordance with
the 1940 Act, pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and may
be transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust or its custodians, sub-custodians or other agents.
ARTICLE IX
DISTRIBUTIONS AND REDEMPTIONS
Section 9.01 Distributions.
(a) The Trustees may from time to time declare and pay dividends or
other distributions with respect to any Series and/or class of a Series. The
amount of such dividends or distributions and the payment of them and whether
they are in cash or any other Trust Property shall be wholly in the discretion
of the Trustees.
(b) Dividends and other distributions may be paid or made to the
Shareholders of record at the time of declaring a dividend or other distribution
or among the Shareholders of record at such other date or time or dates or times
as the Trustees shall determine, which dividends or distributions, at the
election of the Trustees, may be paid pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees may
determine. The Trustees may adopt and offer to Shareholders such dividend
reinvestment plans, cash dividend payout plans or related plans as the Trustees
shall deem appropriate.
(c) Anything in this Trust Instrument to the contrary notwithstanding,
the Trustees may at any time declare and distribute a stock dividend to the
Shareholders of a particular Series, or class thereof, as of the record date of
that Series fixed as provided in Subsection 9.01(b) hereof.
Section 9.02 Redemptions. In case any holder of record of Shares of a
particular Series desires to dispose of his Shares or any portion thereof he may
deposit at the office of the transfer agent or other authorized agent of that
Series a written request or such other form of request as the Trustees may from
time to time authorize, requesting that the Series purchase the Shares in
accordance with this Section 9.02; and, subject to Section 9.04 hereof, the
Shareholder so requesting shall be entitled to require the Series to purchase,
and the Series or the principal underwriter of the Series shall purchase his
said Shares, but only at the Net Asset Value thereof (as described in Section
9.03 of this Article IX). The Series shall make payment for any such Shares to
be redeemed, as aforesaid, in cash or property from the assets of that Series
and, subject to Section 9.04 hereof, payment for such Shares shall be made by
the Series or the principal underwriter of the Series to the Shareholder of
record within seven (7) days after the date upon which the request is effective.
Upon redemption, shares shall become Treasury shares and may be re-issued from
time to time.
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Section 9.03 Determination of Net Asset Value and Valuation of
Portfolio Assets. The term "Net Asset Value" of any Series shall mean that
amount by which the assets of that Series exceed its liabilities, all as
determined by or under the direction of the Trustees. The Trustees may delegate
any of their powers and duties under this Section 9.03 with respect to valuation
of assets and liabilities. Such value shall be determined separately for each
Series and shall be determined on such days and at such times as the Trustees
may determine. Such determination shall be made with respect to securities for
which market quotations are readily available, at the market value of such
securities; and with respect to other securities and assets, at the fair value
as determined in good faith by the Trustees; provided, however, that the
Trustees, without Shareholder approval, may alter the method of valuing
portfolio securities insofar as permitted under the 1940 Act. The resulting
amount, which shall represent the total Net Asset Value of the particular
Series, shall be divided by the total number of shares of that Series
outstanding at the time and the quotient so obtained shall be the Net Asset
Value per Share of that Series. At any time the Trustees may cause the Net Asset
Value per Share last determined to be determined again in similar manner and may
fix the time when such redetermined value shall become effective.
The Trustees shall not be required to adopt, but may at any time adopt,
discontinue or amend a practice of seeking to maintain the Net Asset Value per
Share of the Series at a constant amount. If, for any reason, the net income of
any Series, determined at any time, is a negative amount, the Trustees shall
have the power with respect to that Series (a) to offset each Shareholder's pro
rata share of such negative amount from the accrued dividend account of such
Shareholder, (b) to reduce the number of Outstanding Shares of such Series by
reducing the number of Shares in the account of each Shareholder by a pro rata
portion of that number of full and fractional Shares which represents the amount
of such excess negative net income, (c) to cause to be recorded on the books of
such Series an asset account in the amount of such negative net income (provided
that the same shall thereupon become the property of such Series with respect to
such Series and shall not be paid to any Shareholder), which account may be
reduced by the amount of dividends declared thereafter upon the Outstanding
Shares of such Series on the day such negative net income is experienced, until
such asset account is reduced to zero; (d) to combine the methods described in
clauses (a) and (b) and (c) of this sentence; or (e) to take any other action
they deem appropriate, in order to cause (or in order to assist in causing) the
Net Asset Value per Share of such Series to remain at a constant amount per
Outstanding Share immediately after each such determination and declaration. The
Trustees shall also have the power not to declare a dividend out of net income
for the purpose of causing the Net Asset Value per Share to be increased.
In the event that any Series is divided into classes, the provisions of
this Section 9.03, to the extent applicable as determined in the discretion of
the Trustees and consistent with the 1940 Act and other applicable law, may be
equally applied to each such class.
Section 9.04 Suspension of the Right of Redemption. The Trustees may
declare a suspension of the right of redemption or postpone the date of payment
if permitted under the 1940 Act. Such suspension shall take effect at such time
as the Trustees shall specify but not later than the close of business on the
business day next following the declaration of suspension, and thereafter there
shall be no right of redemption or payment until the Trustees shall declare the
suspension at an end. In the case of a suspension of the right of redemption, a
Shareholder may either withdraw his
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request for redemption or receive payment based on the Net Asset Value per Share
next determined after the termination of the suspension.
Section 9.05 Required Redemption of Shares. The Trustees may require
Shareholders to redeem Shares for any reason under terms set by the Trustees,
including, but not limited to, (i) the determination of the Trustees that direct
or indirect ownership of Shares of any Series has or may become concentrated in
such Shareholder to an extent that would disqualify any Series as a regulated
investment company under the Internal Revenue Code of 1986, as amended (or any
successor statute thereto), (ii) the failure of a Shareholder to supply a tax
identification number if required to do so, or to have the minimum investment
required (which may vary by Series), (iii) the failure of a Shareholder to pay
when due for the purchase of Shares issued to him or (iv) the Shares owned by
such Shareholder being below the minimum investment set by the Trustees, from
time to time, for investments in the Trust or in such Series or classes thereof,
as applicable.
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 requirements of any taxing
authority or for the Trustees to make any determination contemplated by this
Section 9.05.
ARTICLE X
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 10.01 Limitation of Liability. Neither a Trustee nor an officer
of the Trust, when acting in such capacity, shall be personally liable to any
person other than the Trust or the Shareholders for any act, omission or
obligation of the Trust, any Trustee or any officer of the Trust. Neither a
Trustee nor an officer of the Trust shall be liable for any act or omission or
any conduct whatsoever in his capacity as Trustee or as an officer of the Trust,
provided that nothing contained herein or in the Delaware Act shall protect any
Trustee or any officer of the Trust against any liability to the Trust or to
Shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee or officer of the Trust
hereunder.
Section 10.02 Indemnification.
(a) Subject to the exceptions and limitations contained in Subsection
10.02(b):
(i) every person who is, or has been, a Trustee or officer of the
Trust (hereinafter referred to as a "Covered Person") shall be
indemnified by the Trust to the fullest extent permitted by law
against liability and against all expenses reasonably incurred or paid
by him in connection with any claim, action, suit or proceeding in
which he becomes involved as a party or otherwise by virtue of his
being or having been a Trustee or officer and against amounts paid or
incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil, criminal or
other, including appeals), actual or threatened while in office or
thereafter, and the words "liability" and "expenses" shall include,
without
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limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before
which the proceeding was brought (A) to be 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 his office or (B) not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office, (A) by the court or
other body approving the settlement; (B) by at least a majority of
those Trustees who are neither interested persons of the Trust nor are
parties to the matter based upon a review of readily available facts
(as opposed to a full trial-type inquiry); or (C) by written opinion
of independent legal counsel based upon a review of readily available
facts (as opposed to a full trial-type inquiry).
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now or
hereafter be entitled, shall continue as to a person who has ceased to be a
Covered Person and shall inure to the benefit of the heirs, executors and
administrators of such a person. Nothing contained herein shall affect any
rights to indemnification to which Trust personnel, other than Covered Persons,
and other persons may be entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character described in
Subsection (a) of this Section 10.02 may be paid by the Trust or Series from
time to time prior to final disposition thereof upon receipt of an undertaking
by or on behalf of such Covered Person that such amount will be paid over by him
to the Trust or Series if it is ultimately determined that he is not entitled to
indemnification under this Section 10.02; provided, however, that either (i)
such Covered Person shall have provided appropriate security for such
undertaking, (ii) the Trust is insured against losses arising out of any such
advance payments or (iii) either a majority of the Trustees who are neither
interested persons of the Trust nor parties to the matter, or independent legal
counsel in a written opinion, shall have determined, based upon a review of
readily available facts (as opposed to a trial-type inquiry or full
investigation), that there is reason to believe that such Covered Person will be
found entitled to indemnification under this Section 10.02.
Section 10.03 Shareholders. In case any Shareholder of any Series shall
be held to be personally liable solely by reason of his being or having been a
Shareholder of such Series and not because of his acts or omissions or for some
other reason, the Shareholder or former Shareholder (or his heirs, executors,
administrators or other legal representatives, or, in the case of a corporation
or other entity, its corporate or other general successor) shall be entitled out
of the assets belonging to
20
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the applicable Series to be held harmless from and indemnified against all loss
and expense arising from such liability. The Trust, on behalf of the affected
Series, shall, upon request by the Shareholder, assume the defense of any claim
made against the Shareholder for any act or obligation of the Series and satisfy
any judgment thereon from the assets of the Series.
ARTICLE XI
MISCELLANEOUS
Section 11.01 Trust Not A Partnership. It is hereby expressly declared
that a trust and not a partnership is created hereby. No Trustee hereunder shall
have any power to bind personally either the Trust officers or any Shareholder.
All persons extending credit to, contracting with or having any claim against
the Trust or the Trustees shall look only to the assets of the appropriate
Series or (if the Trustees shall have yet to have established Series) of the
Trust for payment under such credit, contract or claim; and neither the
Shareholders nor the Trustees, nor any of their agents, whether past, present or
future, shall be personally liable therefor. Nothing in this Trust Instrument
shall protect a Trustee against any liability to which the Trustee would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee hereunder.
Section 11.02 Trustee's Good Faith Action, Expert Advice, No Bond or
Surety. The exercise by the Trustees or the officers of the Trust of their
powers and discretion hereunder in good faith and with reasonable care under the
circumstances then prevailing shall be binding upon everyone interested. Subject
to the provisions of Article X hereof and to Section 11.01 of this Article XI,
the Trustees and the officers of the Trust shall not be liable for errors of
judgment or mistakes of fact or law. The Trustees and the officers of the Trust
may take advice of counsel or other experts with respect to the meaning and
operation of this Trust Instrument, and subject to the provisions of Article X
hereof and Section 11.01 of this Article XI, shall be under no liability for any
act or omission in accordance with such advice or for failing to follow such
advice. The Trustees and the officers of the Trust shall not be required to give
any bond as such, nor any surety if a bond is obtained.
Section 11.03 Establishment of Record Dates. The Trustees may close the
Share transfer books of the Trust for a period not exceeding ninety (90) days
preceding the date of any meeting of Shareholders, or the date for the payment
of any dividends or other distributions, or the date for the allotment of
rights, or the date when any change or conversion or exchange of Shares shall go
into effect; or in lieu of closing the stock transfer books as aforesaid, the
Trustees may fix in advance a date, not exceeding ninety (90) days preceding the
date of any meeting of Shareholders, or the date for payment of any dividend or
other distribution, or the date for the allotment of rights, or the date when
any change or conversion or exchange of Shares shall go into effect, as a record
date for the determination of the Shareholders entitled to notice of, and to
vote at, any such meeting, or entitled to receive payment of any such dividend
or other distribution, or to any such allotment of rights, or to exercise the
rights in respect of any such change, conversion or exchange of Shares, and in
such case such Shareholders and only such Shareholders as shall be Shareholders
of record on the date so fixed shall be entitled to such notice of, and to vote
at, such meeting, or to receive payment of such dividend or other distribution,
or to receive such allotment or rights, or to exercise such rights, as the
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case may be, notwithstanding any transfer of any Shares on the books of the
Trust after any such record date fixed as aforesaid.
Section 11.04 Dissolution and Termination of Trust.
(a) This Trust shall continue without limitation of time but subject to
the provisions of Subsection 11.04(b).
(b) The Trustees may, subject to any necessary Shareholder, Trustee,
and regulatory approvals:
(i) sell and convey all or substantially all of the assets of the
Trust or any affected Series to another trust, partnership,
association or corporation, or to a separate series of shares thereof,
organized under the laws of any state which trust, partnership,
association or corporation is an open-end management investment
company as defined in the 1940 Act, or is a series thereof, for
adequate consideration which may include the assumption of all
outstanding obligations, taxes and other liabilities, accrued or
contingent, of the Trust or any affected Series, and which may include
shares of beneficial interest, stock or other ownership interests of
such trust, partnership, association or corporation or of a series
thereof;
(ii) enter into a plan of liquidation in order to dissolve and
liquidate any Series (or class) of the Trust, or the Trust; or
(iii) at any time sell and convert into money all of the assets
of the Trust or any affected Series.
Upon making reasonable provision, in the determination of the Trustees, for the
payment of all liabilities by assumption or otherwise, the Trustees shall
distribute the remaining proceeds or assets (as the case may be) of each Series
(or class) ratably among the holders of Shares of the affected Series, based
upon the ratio that each Shareholder's Shares bears to the number of Shares of
such Series (or class) then outstanding.
(c) Upon completion of the distribution of the remaining proceeds or
the remaining assets as provided in Subsection 11.04(b), the Trustees and the
Trust or any affected Series shall be discharged of any and all further
liabilities and duties hereunder and the right, title and interest of all
parties with respect to the Trust or Series shall be canceled and discharged and
any such Series shall terminate.
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. Upon filing of the certificate of cancellation for
the Trust, the Trust shall terminate.
Section 11.05 Reorganization and Master/Feeder.
(a) Notwithstanding anything else herein, the Trustees, in order to
change the form or
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jurisdiction of organization of the Trust, may (i) cause the Trust to merge or
consolidate with or into one or more trusts, partnerships (general or limited),
associations or corporations so long as the surviving or resulting entity is an
open-end management investment company under the 1940 Act, or is a series
thereof, that will succeed to or assume the Trust's registration under that Act
and which is formed, organized or existing under the laws of a state,
commonwealth, possession or colony of the United States or (ii) cause the Trust
to incorporate under the laws of Delaware.
(b) The Trustees may, subject to a vote of a majority of the Trustees
and any shareholder vote required under the 1940 Act, if any, cause the Trust to
merge or consolidate with or into one or more trusts, partnerships (general or
limited), associations, limited liability companies or corporations formed,
organized or existing under the laws of a state, commonwealth, possession or
colony of the United States.
(c) Any agreement of merger or consolidation or certificate of merger
or consolidation may be signed by a majority of Trustees and facsimile
signatures conveyed by electronic or telecommunication means shall be valid.
(d) 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 Trust Instrument, an agreement of merger or consolidation
approved by the Trustees in accordance with paragraph (a) or (b) of this Section
11.05 may effect any amendment to the Trust Instrument or effect the adoption of
a new trust instrument of the Trust if it is the surviving or resulting trust in
the merger or consolidation.
(e) Notwithstanding anything else herein, the Trustees may, without
Shareholder approval (unless required by the 1940 Act), invest all or a portion
of the Trust Property of any Series, or dispose of all or a portion of the Trust
Property of any Series, and invest the proceeds of such disposition in interests
issued by one or more other investment companies registered under the 1940 Act.
Any such other investment company may (but need not) be a trust (formed under
the laws of the State of Delaware or any other state or jurisdiction) (or series
thereof) which is classified as a partnership for federal income tax purposes.
Notwithstanding anything else herein, the Trustees may, without Shareholder
approval unless such approval is required by the 1940 Act, cause a Series that
is organized in the master/feeder fund structure to withdraw or redeem its Trust
Property from the master fund and cause such series to invest its Trust Property
directly in securities and other financial instruments or in another master
fund.
Section 11.06 Filing of Copies, References, Headings. The original or a
copy of this Trust Instrument and of each amendment hereof or Trust Instrument
supplemental hereto shall be kept at the office of the Trust where it may be
inspected by any Shareholder. Anyone dealing with the Trust may rely on a
certificate by an officer or Trustee of the Trust as to whether or not any such
amendments or supplements have been made and as to any matters in connection
with the Trust hereunder, and with the same effect as if it were the original,
may rely on a copy certified by an officer or Trustee of the Trust to be a copy
of this Trust Instrument or of any such amendment or supplemental Trust
Instrument. In this Trust Instrument or in any such amendment or supplemental
Trust Instrument, references to this Trust Instrument, and all expressions such
as "herein," "hereof" and "hereunder," shall be deemed to refer to this Trust
Instrument as amended or affected by any
23
<PAGE>
such supplemental Trust Instrument. All expressions like "his," "he" and "him,"
shall be deemed to include the feminine and neuter, as well as masculine,
genders. Headings are placed herein for convenience of reference only and in
case of any conflict, the text of this Trust Instrument, rather than the
headings, shall control. This Trust Instrument may be executed in any number of
counterparts each of which shall be deemed an original.
Section 11.07 Applicable Law. The trust set forth in this instrument is
made in the State of Delaware, and the Trust and this Trust Instrument, and the
rights and obligations of the Trustees and Shareholders hereunder, are to be
governed by and construed and administered according to the Delaware Act and the
laws of said State; provided, however, that there shall not be applicable to the
Trust, the Trustees or this Trust Instrument (a) the provisions of Section 3540
of Title 12 of the Delaware Code or (b) any provisions of the laws (statutory or
common) of the State of Delaware (other than the Delaware Act) pertaining to
trusts which relate to or regulate (i) the filing with any court or governmental
body or agency of trustee accounts or schedules of trustee fees and charges,
(ii) affirmative requirements to post bonds for trustees, officers, agents or
employees of a trust, (iii) the necessity for obtaining court or other
governmental approval concerning the acquisition, holding or disposition of real
or personal property, (iv) fees or other sums payable to trustees, officers,
agents or employees of a trust, (v) the allocation of receipts and expenditures
to income or principal, (vi) restrictions or limitations on the permissible
nature, amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding of trust assets, or (vii) the
establishment of fiduciary or other standards of responsibilities or limitations
on the acts or powers of trustees, which are inconsistent with the limitations
or liabilities or authorities and powers of the Trustees set forth or referenced
in this Trust Instrument. The Trust shall be of the type commonly called a
"business trust," and without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a trust under
Delaware law. The Trust specifically reserves the right to exercise any of the
powers or privileges afforded to trusts or actions that may be engaged in by
trusts under the Delaware Act, and the absence of a specific reference herein to
any such power, privilege or action shall not imply that the Trust may not
exercise such power or privilege or take such actions.
Section 11.08 Derivative Actions. In addition to the requirements set
forth in Section 3816 of the Delaware Act, a Shareholder may bring a derivative
action on behalf of the Trust only if the following conditions are met:
(a) The Shareholder or Shareholders must make a pre-suit demand upon
the Trustees to bring the subject action unless an effort to cause the Trustees
to bring such an action is not likely to succeed. For purposes of this Section
11.08(a), a demand on the Trustees shall only be deemed not likely to succeed
and therefore excused if a majority of the Board of Trustees, or a majority of
any committee established to consider the merits of such action, has a personal
financial interest in the transaction at issue, and a Trustee shall not be
deemed interested in a transaction or otherwise disqualified from ruling on the
merits of a Shareholder demand by virtue of the fact that such Trustee receives
remuneration for his service on the Board of Trustees of the Trust or on the
boards of one or more investment companies that are under common management with
or otherwise affiliated with the Trust.
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(b) Unless a demand is not required under paragraph (a) of this Section
11.08, Shareholders eligible to bring such derivative action under the Delaware
Act who hold at least 10% of the Outstanding Shares of the Trust, or 10% of the
Outstanding Shares of the Series or Class to which such action relates, shall
join in the request for the Trustees to commence such action; and
(c) Unless a demand is not required under paragraph (a) of this Section
11.08, the Trustees must be afforded a reasonable amount of time to consider
such Shareholder request and to investigate the basis of such claim. The
Trustees shall be entitled to retain counsel or other advisors in considering
the merits of the request and shall require an undertaking by the Shareholders
making such request to reimburse the Trust for the expense of any such advisors
in the event that the Trustees determine not to bring such action.
For purposes of this Section 11.08, the Board of Trustees may designate
a committee of one Trustee to consider a Shareholder demand if necessary to
create a committee with a majority of Trustees who do not have a personal
financial interest in the transaction at issue.
Section 11.09 Amendments. Except as specifically provided herein, the
Trustees may, without shareholder vote, amend or otherwise supplement this Trust
Instrument by making an amendment, a Trust Instrument supplemental hereto or an
amended and restated trust instrument. Shareholders shall have the right to vote
(a) on any amendment as may be required by law or by the Trust's registration
statement filed with the Commission and (b) on any amendment submitted to them
by the Trustees. Any amendment required or permitted to be submitted to
Shareholders which, as the Trustees determine, shall affect the Shareholders of
one or more Series shall be authorized by vote of the Shareholders of each
Series affected and no vote of shareholders of a Series not affected shall be
required. Notwithstanding any other provision of this Trust Instrument, any
amendment to Article X hereof shall not limit the rights to indemnification or
insurance provided therein with respect to action or omission of Covered Persons
prior to such amendment.
Section 11.10 Fiscal Year. The fiscal year of the Trust shall end on a
specified date as set forth in the Bylaws, provided, however, that the Trustees
may change the fiscal year of the Trust.
Section 11.11 Name Reservation. The Trustees on behalf of the Trust
acknowledge that Simms Capital Management, Inc. ("Simms") has licensed to the
Trust the non-exclusive right to use the name "The Simms Funds" as part of the
name of the Trust, and has reserved the right to grant the non-exclusive use of
the name "The Simms Funds" or any derivative thereof to any other party. In
addition, Simms reserves the right to grant the non-exclusive use of the name
"The Simms Funds" to, and to withdraw such right from, any other business or
other enterprise. Simms reserves the right to withdraw from the Trust the right
to use said name "The Simms Funds" and will withdraw such right if the Trust
ceases to employ, for any reason, Simms, an affiliate or any successor as
adviser of the Trust.
Section 11.12 Provisions in Conflict With Law. The provisions of this
Trust Instrument are severable, and if the Trustees shall determine, with the
advice of counsel, that any of such provision is in conflict with the 1940 Act,
the regulated investment company provisions of the Internal Revenue Code or with
other applicable laws and regulations, the conflicting provision shall be deemed
never to have constituted a part of this Trust Instrument; provided, however,
that such
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determination shall not affect any of the remaining provisions of this Trust
Instrument or render invalid or improper any action taken or omitted prior to
such determination. If any provision of this Trust Instrument shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction and
shall not in any matter affect such provision in any other jurisdiction or any
other provision of this Trust Instrument in any jurisdiction.
IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the
Trust, have executed this instrument as of date first written above.
- - -------------------------- --------------------------
Robert A. Simms, as Trustee Robert E. Kelley, as Trustee
and not individually and not individually
- - -------------------------- --------------------------
Arthur S. Bahr, as Trustee Michael A. McManus, as Trustee
and not individually and not individually
- - -------------------------- --------------------------
Robert G. Blount, as Trustee Thomas L. Melly, as Trustee
and not individually and not individually
- - --------------------------
Arthur O. Poltrack, as Trustee
and not individually
<PAGE>
Schedule A
Establishment of Series of the Trust and Classes thereof
Established June 30, 1998:
- - --------------------------
o U.S. Equity Fund; Class A and Class Y
o International Equity Fund; Class A and Class Y
o Global Equity Fund; Class A and Class Y
THE SIMMS FUNDS
BYLAWS
AMENDED AND RESTATED
OCTOBER 5, 1998
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
PRINCIPAL OFFICE.............................................................1
ARTICLE II
OFFICERS AND THEIR ELECTION..................................................1
Section 2.01 Officers....................................................1
Section 2.02 Election of Officers.......................................1
Section 2.03 Resignations................................................1
ARTICLE III
POWERS AND DUTIES OF OFFICERS AND TRUSTEES...................................1
Section 3.01 Management of the Trust.....................................1
Section 3.02 Executive And Other Committees..............................2
Section 3.03 Compensation................................................2
Section 3.04 Chairman of the Board of Trustees...........................2
Section 3.05 President...................................................2
Section 3.06 Treasurer...................................................2
Section 3.07 Secretary...................................................2
Section 3.08 Vice President..............................................3
Section 3.09 Assistant Treasurer.........................................3
Section 3.10 Assistant Secretary.........................................3
Section 3.11 Subordinate Officers........................................3
Section 3.12 Surety Bonds................................................3
Section 3.13 Removal.....................................................3
Section 3.14 Remuneration................................................3
ARTICLE IV
SHAREHOLDERS' MEETINGS.......................................................4
Section 4.01 Special Meetings............................................4
Section 4.02 Notices.....................................................4
Section 4.03 Voting-Proxies..............................................4
Section 4.04 Place of Meeting............................................5
Section 4.05 Action Without a Meeting....................................5
ARTICLE V
TRUSTEES' MEETINGS...........................................................5
Section 5.01 Special Meetings............................................5
Section 5.02 Regular Meetings............................................5
Section 5.03 Quorum......................................................5
<PAGE>
Section 5.04 Notice......................................................5
Section 5.05 Place of Meeting............................................6
Section 5.06 Special Action..............................................6
Section 5.07 Action by Consent...........................................6
Section 5.08 Participation in Meetings By Conference Telephone...........6
ARTICLE VI
FISCAL YEAR; REGISTERED OFFICE AND REGISTERED AGENT..........................6
Section 6.01 Fiscal Year.................................................6
Section 6.02 Registered Office and Registered Agent......................6
ARTICLE VII
INSPECTION OF BOOKS..........................................................7
ARTICLE VIII
INSURANCE OF OFFICERS, TRUSTEES, AND EMPLOYEES...............................7
ARTICLE IX
SEAL.........................................................................7
ii
<PAGE>
THE SIMMS FUNDS
BYLAWS
These Bylaws of The Simms Funds (the "Trust"), a Delaware business
trust, are subject to the Trust Instrument of the Trust, dated June 30, 1998 as
from time to time amended, supplemented or restated (the "Trust Instrument").
Capitalized terms used herein which are defined in the Trust Instrument are used
as therein defined.
ARTICLE I
PRINCIPAL OFFICE
The principal office of the Trust shall be located in Greenwich,
Connecticut or such other location as the Trustees may, from time to time,
determine. The Trust may establish and maintain such other offices and places of
business as the Trustees may, from time to time, determine.
ARTICLE II
OFFICERS AND THEIR ELECTION
Section 2.01 Officers. The officers of the Trust shall be a President,
a Treasurer, a Secretary, and such other officers as the Trustees may from time
to time elect. The Trustees may delegate to any officer or committee the power
to appoint any subordinate officers or agents. It shall not be necessary for any
Trustee or other officer to be a holder of Shares in the Trust.
Section 2.02 Election of Officers. The Treasurer and Secretary shall be
chosen by the Trustees. The President shall be chosen by and from the Trustees.
Two or more offices may be held by a single person except the offices of
President and Secretary. Subject to the provisions of Section 3.13 hereof the
President, the Treasurer and the Secretary shall each hold office until their
successors are chosen and qualified and all other officers shall hold office at
the pleasure of the Trustees.
Section 2.03 Resignations. Any officer of the Trust may resign,
notwithstanding Section 2.02 hereof, by filing a written resignation with the
President, the Trustees or the Secretary, which resignation shall take effect on
being so filed or at such time as may be therein specified.
ARTICLE III
POWERS AND DUTIES OF OFFICERS AND TRUSTEES
Section 3.01 Management of the Trust. The business and affairs of the
Trust shall be managed by, or under the direction of the Trustees, and they
shall have all powers necessary and desirable to carry out their
responsibilities, so far as such powers are not inconsistent with the laws of
the State of Delaware, the Trust Instrument or with these Bylaws.
<PAGE>
Section 3.02 Executive And Other Committees. The Trustees may elect
from their own number an executive committee, which shall have any or all of the
powers of the Board of Trustees while the Board of Trustees is not in session.
The Trustees may also elect from their own number other committees from time to
time. The number composing such committees and the powers conferred upon the
same are to be determined by vote of a majority of the Trustees. All members of
such committees shall hold such offices at the pleasure of the Trustees, and the
Trustees may abolish any of the committees at any time. Any committee to which
the Trustees delegate any of their powers or duties shall keep records of its
meetings and shall report its actions to the Trustees. The Trustees shall have
power to rescind any action of any committee, but no such rescission shall have
retroactive effect.
Section 3.03 Compensation. Each Trustee and each committee member may
receive such compensation for his services and reimbursement for his expenses as
may be fixed from time to time by resolution of the Trustees.
Section 3.04 Chairman of the Board of Trustees. The Trustees may
appoint from among their number a Chairman who shall serve as such at the
pleasure of the Trustees. When present, he shall preside at all meetings of the
Shareholders and the Trustees, and he may, subject to the approval of the
Trustees, appoint a Trustee to preside at such meetings in his absence. He shall
perform such other duties as the Trustees may from time to time designate.
Section 3.05 President. The President shall be the chief
executive officer of the Trust and, subject to the direction of the Trustees,
shall have general administration of the business and policies of the Trust.
Except as the Trustees may otherwise order, the President shall have the power
to grant, issue, execute or sign such powers of attorney, process, agreements or
other documents as may be deemed advisable or necessary in the furtherance of
the interests of the Trust or any Series thereof. He shall also have the power
to employ attorneys, accountants and other advisors and agents and counsel for
the Trust. The President shall perform such duties additional to all of the
foregoing as the Trustees may from time to time designate.
Section 3.06 Treasurer. The Treasurer shall be the principal financial
and accounting officer of the Trust. He shall deliver all funds and securities
of the Trust which may come into his hands to such company as the Trustees shall
employ as Custodian in accordance with the Trust Instrument and applicable
provisions of law. He shall make annual reports regarding the business and
condition of the Trust, which reports shall be preserved in Trust records, and
he shall furnish such other reports regarding the business and condition of the
Trust as the Trustees may from time to time require. The Treasurer shall perform
such additional duties as the Trustees may from time to time designate.
Section 3.07 Secretary. The Secretary shall record in books kept for
the purpose all votes and proceedings of the Trustees and the Shareholders at
their respective meetings. He shall have the custody of the seal of the Trust.
The Secretary shall perform such additional duties as the Trustees may from time
to time designate.
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Section 3.08 Vice President. Any Vice President of the Trust shall
perform such duties as the Trustees or the President may from time to time
designate. At the request or in the absence or disability of the President, the
Vice President (or, if there are two or more Vice Presidents, then the senior of
the Vice Presidents) present and able to act may perform all the duties of the
President and, when so acting, shall have all the powers of and be subject to
all the restrictions upon the President.
Section 3.09 Assistant Treasurer. Any Assistant Treasurer of the Trust
shall perform such duties as the Trustees or the Treasurer may from time to time
designate, and, in the absence of the Treasurer, the senior Assistant Treasurer,
present and able to act, may perform all the duties of the Treasurer and, when
so acting, shall have all the powers of and be subject to all the restrictions
upon the Treasurer.
Section 3.10 Assistant Secretary. Any Assistant Secretary of the Trust
shall perform such duties as the Trustees or the Secretary may from time to time
designate, and, in the absence of the Secretary, the senior Assistant Secretary,
present and able to act, may perform all the duties of the Secretary and, when
so acting, shall have all the powers of and be subject to all the restrictions
upon the Secretary.
Section 3.11 Subordinate Officers. The Trustees from time to time may
appoint such other officers or agents as they may deem advisable, each of whom
shall have such title, hold office for such period, have such authority and
perform such duties as the Trustees may determine. The Trustees from time to
time may delegate to one or more officers or committees of Trustees the power to
appoint any such subordinate officers or agents and to prescribe their
respective terms of office, authorities and duties.
Section 3.12 Surety Bonds. The Trustees may require any officer or
agent of the Trust to execute a bond (including without limitation, any bond
required by the Investment Company Act of 1940 (the "1940 Act") and the rules
and regulations of the Commission) to the Trust in such sum and with such surety
or sureties as the Trustees may determine, conditioned upon the faithful
performance of his duties to the Trust including responsibility for negligence
and for the accounting of any of the Trust's property, funds or securities that
may come into his hands.
Section 3.13 Removal. Any officer may be removed from office, with or
without cause, whenever in the judgment of the Trustees the best interest of the
Trust will be served thereby, by the vote of a majority of the Trustees given at
any regular meeting or any special meeting of the Trustees. In addition, any
officer or agent appointed in accordance with the provisions of Section 3.11
hereof may be removed, either with or without cause, by any officer upon whom
such power of removal shall have been conferred by the Trustees.
Section 3.14 Remuneration. The salaries or other compensation, if any,
of the officers of the Trust shall be fixed from time to time by resolution of
the Trustees.
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ARTICLE IV
SHAREHOLDERS' MEETINGS
Section 4.01 Special Meetings. A special meeting of the shareholders
shall be called by the Secretary as provided in the Trust Instrument. If the
Secretary, when so ordered or requested, refuses or neglects for more than 30
days to call such special meeting, the Trustees or the Shareholders so
requesting may, in the name of the Secretary, call the meeting by giving notice
thereof in the manner required when notice is given by the Secretary. If the
meeting is a meeting of the Shareholders of one or more Series or classes of
Shares, but not a meeting of all Shareholders of the Trust, then only special
meetings of the Shareholders of such one or more Series or classes shall be
called and only the shareholders of such one or more Series or classes shall be
entitled to notice of and to vote at such meeting.
Section 4.02 Notices. Except as provided in Section 4.01, notices of
any meeting of the Shareholders shall be given by the Secretary by delivering or
mailing, postage prepaid, to each Shareholder entitled to vote at said meeting,
written or printed notification of such meeting at least ten (10) days before
the meeting, to such address as may be registered with the Trust by the
Shareholder. Notice of any Shareholder meeting need not be given to any
Shareholder if a written waiver of notice, executed before or after such
meeting, is filed with the records of such meeting, or to any Shareholder who
shall attend such meeting in person or by proxy. Notice of adjournment of a
Shareholder's meeting to another time or place need not be given, if such time
and place are announced at the meeting or reasonable notice is given to persons
present at the meeting and the adjourned meeting is held within a reasonable
time after the date set for the original meeting.
Section 4.03 Voting-Proxies. Subject to the provisions of the Trust
Instrument, shareholders entitled to vote may vote either in person or by proxy.
A proxy shall be deemed signed if the Shareholder's name is placed on the proxy
(by manual signature, typewriting, telegraphic transmission, facsimile, other
electronic or computerized means or otherwise) by the Shareholder or the
Shareholder's attorney-in-fact. Proxies may be given by any electronic or
computerized or telecommunication device except as otherwise provided in the
Trust Instrument or determined by the Trustees. The placing of a Shareholder's
name on a proxy instruction transmitted by telephone, computer, other electronic
means or otherwise pursuant to procedures reasonably designed, as determined by
the Trustees, to verify that such instructions have been authorized by the
Shareholder shall constitute execution of the proxy by or on behalf of the
Shareholder. Proxies shall be delivered to the Secretary of the Trust or other
person responsible for recording the proceedings before being voted. A proxy
with respect to shares held in the name of two or more persons shall be valid if
executed by one of them unless at or prior to exercise of such proxy the Trust
receives a specific written notice from any one of them. Unless otherwise
specifically limited by their terms, proxies shall entitle the holder thereof to
vote at any adjournment of a meeting. A proxy purporting to be exercised by or
on behalf of a Shareholder shall be deemed valid unless challenged at or prior
to its exercise and the burden or proving invalidity shall rest on the
challenger. At all meetings of the Shareholders, unless the voting is conducted
by inspectors, all questions relating to the qualifications of voters, the
validity of proxies, and the acceptance or rejection of votes shall
4
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be decided by the Chairman of the meeting. Except as otherwise provided herein
or in the Trust Instrument, as these Bylaws or such Trust Instrument may be
amended or supplemented from time to time, all matters relating to the giving,
voting or validity of proxies shall be governed by the General Corporation Law
of the State of Delaware relating to proxies, and judicial interpretations
thereunder, as if the Trust were a Delaware corporation and the Shareholders
were shareholders of a Delaware corporation.
Section 4.04 Place of Meeting. All special meetings of the Shareholders
shall be held at the principal place of business of the Trust or at such other
place in the United States as the Trustees may designate.
Section 4.05 Action Without a Meeting. Any action to be taken by
Shareholders may be taken without a meeting if all Shareholders entitled to vote
on the matter consent to the action in writing and the written consents are
filed with the records of meetings of Shareholders of the Trust. Such consent
shall be treated for all purposes as a vote at a meeting of the Shareholders
held at the principal place of business of the Trust.
Section 4.06 Abstentions and Broker Non-Votes. (A) Shares that abstain
or do not vote with respect to one or more of any proposals presented for
Shareholder approval and (B) Shares held in "street name" as to which the broker
or nominee with respect thereto indicates on the proxy that it does not have
discretionary authority to vote with respect to a particular proposal will be
counted as outstanding and entitled to vote for purposes of determining whether
a quorum is present at a meeting, but will not be counted as Shares voted with
respect to such proposal or proposals.
ARTICLE V
TRUSTEES' MEETINGS
Section 5.01 Special Meetings. Special meetings of the Trustees may be
called orally or in writing by the Chairman of the Board of Trustees or any two
other Trustees.
Section 5.02 Regular Meetings. Regular meetings of the Trustees may be
held at such places and at such times as the Trustees may from time to time
determine; each Trustee present at such determination shall be deemed a party
calling the meeting and no call or notice will be required to such Trustee
provided that any Trustee who is absent when such determination is made shall be
given notice of the determination by the Chairman or any two other Trustees, as
provided for in Section 4.04 of the Trust Instrument.
Section 5.03 Quorum. A majority of the Trustees shall constitute a
quorum for the transaction of business at any meeting and an action of a
majority of the Trustees in attendance constituting a quorum shall constitute
action of the Trustees.
Section 5.04 Notice. Except as otherwise provided, notice of any
special meeting of the Trustees shall be given by the party calling the meeting
to each of the Trustees, as provided for in Section 4.04 of the Trust
Instrument. A written notice may be mailed,
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postage prepaid, addressed to him at his address as registered on the books of
the Trust or, if not so registered, at his last known address.
Section 5.05 Place of Meeting. All special meetings of the Trustees
shall be held at the principal place of business of the Trust or such other
place as the Trustees may designate. Any meeting may adjourn to any place.
Section 5.06 Special Action. When all the Trustees shall be present at
any meeting however called or wherever held, or shall assent to the holding of
the meeting without notice, or shall sign a written assent thereto filed with
the records of such meeting, the acts of such meeting shall be valid as if such
meeting had been regularly held.
Section 5.07 Action by Consent. Any action by the Trustees may be taken
without a meeting if a written consent thereto is signed by a majority of the
Trustees and filed with the records of the Trustees' meeting. Such consent shall
be treated, for all purposes, as a vote at a meeting of the Trustees held at the
principal place of business of the Trustees.
Section 5.08 Participation in Meetings By Conference Telephone. Except
when presence in person is required at a meeting under the 1940 Act or other
applicable laws, Trustees may participate in a meeting of Trustees by conference
telephone or similar communications equipment by means of which all persons
participating in the meeting are able to hear each other, and such participation
shall constitute presence in person at such meeting. Any meeting conducted by
telephone shall be deemed to take place at and from the principal office of the
Trust.
ARTICLE VI
FISCAL YEAR; REGISTERED OFFICE AND REGISTERED AGENT
Section 6.01 Fiscal Year. The fiscal year of the Trust and of each
Series of the Trust shall end on June 30 of each year; provided that the last
fiscal year of the Trust and each Series shall end on the date on which the
Trust or each such Series is terminated, as applicable; and further provided
that the Trustees by resolution and without a Shareholder vote may at any time
change the fiscal year of the Trust and of any or all Series (and the Trust and
each Series may have different fiscal years as determined by the Trustees).
Section 6.02 Registered Office and Registered Agent. The initial
registered office of the Trust in the State of Delaware shall be located at 1201
North Market Street, Wilmington, Delaware 19801. The registered agent of the
Trust at such location shall be Delaware Corporation Organizers, Inc.; provided
that the Trustees by resolution and without a Shareholder vote may at any time
change the Trust's registered office or its registered agent, or both.
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ARTICLE VII
INSPECTION OF BOOKS
The Trustees shall from time to time determine whether and to what
extent, and at what times and places, and under what conditions and regulations
the accounts and books of the Trust or any of them shall be open to the
inspection of the Shareholders; and no Shareholder shall have any right to
inspect any account or book or document of the Trust except as conferred by law
or otherwise by the Trustees or by resolution of the Shareholders.
ARTICLE VIII
INSURANCE OF OFFICERS, TRUSTEES, AND EMPLOYEES
The Trust may purchase and maintain insurance on behalf of any Covered
Person (as defined in Section 10.02 of the Trust Instrument) or employee of the
Trust, including any Covered Person or employee of the Trust who is or was
serving at the request of the Trust as a Trustee, officer or employee of a
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and claimed by him in any such capacity or
arising out of his status as such, whether or not the Trustees would have the
power to indemnify him against such liability.
The Trust may not acquire or obtain a contract for insurance that
protects or purports to protect any Trustee or officer of the Trust against any
liability to the Trust or its Shareholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office.
ARTICLE IX
SEAL
The seal of the Trust shall be circular in form bearing the inscription:
"THE SIMMS FUNDS, JUNE 30, 1998
THE STATE OF DELAWARE"
7
FORM OF INVESTMENT ADVISORY AGREEMENT
between
THE SIMMS FUNDS
and
SIMMS CAPITAL MANAGEMENT INC.
AGREEMENT made as of the 5th day of October, 1998, by and between The
Simms Funds, a Delaware business trust which may issue one or more series of
shares of beneficial interest (the "Trust"), and Simms Capital Management, Inc.,
a Connecticut corporation (the "Adviser").
WHEREAS, the Trust is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Trust desires to retain the Adviser to furnish investment
advisory services to the funds listed on Schedule A (each, a "Fund" and
collectively, the "Funds"), and the Adviser represents that it is willing and
possesses legal authority to so furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment.
(a) General. The Trust hereby appoints the Adviser to act as
investment adviser to the Funds for the period and on the
terms set forth in this Agreement. The Adviser accepts such
appointment and agrees to furnish the services herein set
forth for the compensation herein provided.
(b) Employees of Affiliates. The Adviser may, in its discretion,
provide such services through its own employees or the
employees of one or more affiliated companies that are
qualified to act as an investment adviser to the Trust under
applicable laws; provided that (i) all persons, when providing
services hereunder, are functioning as part of an organized
group of persons, and (ii) such organized group of persons is
managed at all times by authorized officers of the Adviser.
(c) Sub-Advisers. It is understood and agreed that the Adviser
may from time to time employ or associate with such other
entities or persons as the Adviser believes appropriate to
assist in the performance of this Agreement with respect to a
particular Fund or Funds (each a "Sub-Adviser"), and that any
such Sub-Adviser shall have all of the rights and powers of
the Adviser set forth in this Agreement; provided that a Fund
shall not pay any additional compensation for any Sub-Adviser
<PAGE>
and the Adviser shall be as fully responsible to the Trust
for the acts and omissions of the Sub-Adviser as it is for
its own acts and omissions; and provided further that the
retention of any Sub-Adviser shall be approved in advance by
(i) the Board of Trustees of the Trust (the "Board") and (ii)
the shareholders of the relevant Fund if required under any
applicable provisions of the 1940 Act or any exemptive relief
granted thereunder. The Adviser will review, monitor and
report to the Trust's Board regarding the performance and
investment procedures of any Sub-Adviser. In the event that
the services of any Sub-Adviser are terminated, the Adviser
may provide investment advisory services pursuant to this
Agreement to the Fund without a Sub-Adviser or employ another
Sub-Adviser without further shareholder approval, to the
extent consistent with the 1940 Act or any exemptive relief
granted thereunder. A Sub-Adviser may be an affiliate of the
Adviser.
2. Delivery of Documents. The Trust has delivered to the Adviser copies
of each of the following documents, and will promptly deliver to it all future
amendments and supplements thereto, if any:
(a) the Trust's Trust Instrument;
(b) the Bylaws of the Trust;
(c) resolutions of the Board of the Trust authorizing the
execution and delivery of this Agreement;
(d) the Trust's Registration Statement under the Securities Act of
1933, as amended (the "1933 Act"), and the 1940 Act, on Form
N-1A as filed with the Securities and Exchange Commission (the
"Commission");
(e) Notification of Registration of the Trust under the 1940 Act
on Form N-8A as filed with the Commission; and
(f) the currently effective Prospectus and Statement of Additional
Information of the Funds.
3. Investment Advisory Services.
(a) Management of the Funds. The Adviser hereby undertakes to act
as investment adviser to the Funds. The Adviser shall
regularly provide investment advice to the Funds and
continuously supervise the investment and reinvestment of
cash, securities and other property composing the assets of
the Funds and, in furtherance thereof, shall:
(i) supervise all aspects of the operations of the Trust
and each Fund;
(ii) obtain and evaluate pertinent economic, statistical
and financial data, as well as other significant
events and developments, which affect the
<PAGE>
economy generally, the Funds' investment programs, and
the issuers of securities included in the Funds'
portfolios and the industries in which they engage, or
which may relate to securities or other investments
which the Adviser may deem desirable for inclusion in
a Fund's portfolio;
(iii) determine which issuers and securities shall be
included in the portfolio of each Fund;
(iv) furnish a continuous investment program for each Fund;
(v) in its discretion and without prior consultation with
the Trust, buy, sell, lend and otherwise trade any
stocks, bonds and other securities and investment
instruments on behalf of each Fund; and
(vi) take, on behalf of each Fund, all actions the Adviser
may deem necessary in order to carry into effect such
investment program and the Adviser's functions as
provided above, including the making of appropriate
periodic reports to the Trust's Board of Trustees.
(b) Covenants. The Adviser shall carry out its investment advisory
and supervisory responsibilities in a manner consistent with
the investment objectives, policies, and restrictions provided
in: (i) the Funds' Prospectus and Statement of Additional
Information as revised and in effect from time to time; (ii)
the Trust's Trust Instrument, Bylaws or other governing
instruments, as amended from time to time; (iii) the 1940 Act;
(iv) other applicable laws; and (v) such other investment
policies, procedures and/or limitations as may be adopted by
the Trust with respect to a Fund and provided to the Adviser
in writing. The Adviser agrees to use reasonable efforts to
manage each Fund so that it will qualify, and continue to
qualify, as a regulated investment company under Subchapter M
of the Internal Revenue Code of 1986, as amended, and
regulations issued thereunder (the "Code"), except as may be
authorized to the contrary by the Trust's Board. The
management of the Funds by the Adviser shall at all times be
subject to the review of the Trust's Board.
(c) Books and Records. Pursuant to applicable law, the Adviser
shall keep each Fund's books and records required to be
maintained by, or on behalf of, the Funds with respect to
advisory services rendered hereunder. The Adviser agrees that
all records which it maintains for a Fund are the property of
the Fund and it will promptly surrender any of such records to
the Fund upon the Fund's request. The Adviser further agrees
to preserve for the periods prescribed by Rule 31a-2 under the
1940 Act any such records of the Fund required to be preserved
by such Rule.
(d) Reports, Evaluations and other Services. The Adviser shall
furnish reports, evaluations, information or analyses to the
Trust with respect to the Funds and in connection with the
Adviser's services hereunder as the Trust's Board may request
from time to time or as the Adviser may otherwise deem to be
desirable. The
<PAGE>
Adviser shall make recommendations to the Trust's Board with
respect to Trust policies, and shall carry out such policies
as are adopted by the Board. The Adviser shall, subject to
review by the Board, furnish such other services as the
Adviser shall from time to time determine to be necessary or
useful to perform its obligations under this Agreement.
(e) Purchase and Sale of Securities. The Adviser shall place all
orders for the purchase and sale of portfolio securities for
each Fund with brokers or dealers selected by the Adviser,
which may include brokers or dealers affiliated with the
Adviser to the extent permitted by the 1940 Act and the
Trust's policies and procedures applicable to the Funds. The
Adviser shall use its best efforts to seek to execute
portfolio transactions at prices which, under the
circumstances, result in total costs or proceeds being the
most favorable to the Funds. In assessing the best overall
terms available for any transaction, the Adviser shall
consider all factors it deems relevant, including the breadth
of the market in the security, the price of the security, the
financial condition and execution capability of the broker or
dealer, research services provided to the Adviser, and the
reasonableness of the commission, if any, both for the
specific transaction and on a continuing basis. In no event
shall the Adviser be under any duty to obtain the lowest
commission or the best net price for any Fund on any
particular transaction, nor shall the Adviser be under any
duty to execute any order in a fashion either preferential to
any Fund relative to other accounts managed by the Adviser or
otherwise materially adverse to such other accounts.
(f) Selection of Brokers or Dealers. Selection of Brokers or
Dealers. In selecting brokers or dealers qualified to execute
a particular transaction, brokers or dealers may be selected
who also provide brokerage and research services (as those
terms are defined in Section 28(e) of the Securities Exchange
Act of 1934, as amended (the "1934 Act")) to the Adviser
and/or the other accounts over which the Adviser exercises
investment discretion. The Adviser is authorized to pay a
broker or dealer who provides such brokerage and research
services a commission for executing a portfolio transaction
for the Fund which is in excess of the amount of commission
another broker or dealer would have charged for effecting that
transaction if the Adviser determines in good faith that the
total commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or
dealer, viewed in terms of either that particular transaction
or the overall responsibilities of the Adviser with respect to
accounts over which it exercises investment discretion. The
Adviser shall report to the Board of the Trust regarding
overall commissions paid by the Fund and their reasonableness
in relation to their benefits to the Fund. Any transactions
for the Fund that are effected through an affiliated
broker-dealer on a national securities exchange of which such
broker-dealer is a member will be effected in accordance with
Section 11(a) of the 1934 Act, and the regulations promulgated
thereunder, including Rule 11a2-2(T). The Fund hereby
authorizes any such broker or dealer to retain commissions for
effecting such transactions and to pay out of such retained
<PAGE>
commissions any compensation due to others in connection with
effectuating those transactions.
(g) Aggregation of Securities Transactions. In executing portfolio
transactions for a Fund, the Adviser may, to the extent
permitted by applicable laws and regulations, but shall not be
obligated to, aggregate the securities to be sold or purchased
with those of other Funds or its other clients if, in the
Adviser's reasonable judgment, such aggregation (i) will
result in an overall economic benefit to the Fund, taking into
consideration the advantageous selling or purchase price,
brokerage commission and other expenses, and trading
requirements, and (ii) is not inconsistent with the policies
set forth in the Trust's registration statement and the Fund's
Prospectus and Statement of Additional Information. In such
event, the Adviser will allocate the securities so purchased
or sold, and the expenses incurred in the transaction, in an
equitable manner, consistent with its fiduciary obligations to
the Fund and such other clients.
4. Representations and Warranties.
(a) The Adviser hereby represents and warrants to the Trust as
follows:
(i) The Adviser is a corporation duly organized and in
good standing under the laws of the State of
Connecticut and is fully authorized to enter into
this Agreement and carry out its duties and
obligations hereunder.
(ii) The Adviser is registered as an investment adviser
with the Commission under the Investment Advisers Act
of 1940, as amended (the "Advisers Act"), and is
registered or licensed as an investment adviser under
the laws of all applicable jurisdictions. The Adviser
shall maintain such registrations or licenses in
effect at all times during the term of this
Agreement.
(iii) The Adviser at all times shall provide its best
judgment and effort to the Trust in carrying out the
Adviser's obligations hereunder.
(b) The Trust hereby represents and warrants to the Adviser as
follows:
(i) The Trust has been duly organized as a business trust
under the laws of the State of Delaware and is
authorized to enter into this Agreement and carry out
its terms.
(ii) The Trust is registered as an investment company with
the Commission under the 1940 Act and shares of each
Fund are registered for offer and sale to the public
under the 1933 Act and all applicable state
securities laws where currently sold. Such
registrations will be kept in effect during the term
of this Agreement.
<PAGE>
5. Compensation. As compensation for the services which the Adviser is
to provide or cause to be provided pursuant to Paragraph 3, each Fund shall pay
to the Adviser out of Fund assets an annual fee, computed and accrued daily and
paid in arrears on the first business day of every month, at the rate set forth
opposite each Fund's name on Schedule A, which shall be a percentage of the
average daily net assets of the Fund (computed in the manner set forth in the
Fund's most recent Prospectus and Statement of Additional Information)
determined as of the close of business on each business day throughout the
month. At the request of the Adviser, some or all of such fee shall be paid
directly to a Sub-Adviser. The fee for any partial month under this Agreement
shall be calculated on a proportionate basis.
In the event that the total expenses of a Fund exceed the limits on
investment company expenses imposed by any statute or any regulatory authority
of any jurisdiction in which shares of such Fund are qualified for offer and
sale, the Adviser will bear the amount of such excess, except: (i) the Adviser
shall not be required to bear such excess to an extent greater than the
compensation due to the Adviser for the period for which such expense limitation
is required to be calculated unless such statute or regulatory authority shall
so require, and (ii) the Adviser shall not be required to bear the expenses of
the Fund to an extent which would result in the Fund's or Trust's inability to
qualify as a regulated investment company under the provisions of Subchapter M
of the Code.
The Adviser shall have the right, but not the obligation, to
voluntarily defer any portion of the advisory fee or absorb any portion of the
expenses described in Section 7 below. To the extent that the Adviser defers
advisory fees or absorbs operating expenses, it may seek payment of such
deferred fees or reimbursement of such absorbed expenses within two (2) fiscal
years after the fiscal year in which fees were deferred or expenses were
absorbed. A Fund will make no such payment or reimbursement, however, if the
Fund's total annual operating expenses exceed the expense limits disclosed in
the Fund's Prospectus in effect at the time of the proposed payment or
reimbursement.
6. Interested Persons. It is understood that, to the extent consistent
with applicable laws, the Trustees, officers and shareholders of the Trust are
or may be or become interested in the Adviser as directors, officers or
otherwise and that directors, officers and shareholders of the Adviser are or
may be or become similarly interested in the Trust.
7. Expenses. As between the Adviser and the Funds, the Funds will pay
for all their expenses other than those expressly stated to be payable by the
Adviser hereunder, which expenses payable by the Funds shall include, without
limitation, (i) interest and taxes; (ii) brokerage commissions and other costs
in connection with the purchase or sale of securities and other investment
instruments, which the parties acknowledge might be higher than other brokers
would charge when a Fund utilizes a broker which provides brokerage and research
services to the Adviser as contemplated under Paragraph 3 above; (iii) fees and
expenses of the Trust's Trustees that are not employees of the Adviser; (iv)
legal and audit expenses; (v) administrator, custodian, pricing and bookkeeping,
registrar and transfer agent fees and expenses; (vi) fees and expenses related
to the registration and qualification of the Funds' shares for distribution
under state and federal securities laws; (vii) expenses of printing and mailing
reports and notices and
<PAGE>
proxy material to shareholders, unless otherwise required; (viii) all other
expenses incidental to holding meetings of shareholders, including proxy
solicitations therefor, unless otherwise required; (ix) expenses of typesetting
for printing Prospectuses and Statements of Additional Information and
supplements thereto; (x) expenses of printing and mailing Prospectuses and
Statements of Additional Information and supplements thereto sent to existing
shareholders; (xi) insurance premiums for fidelity bonds and other coverage to
the extent approved by the Trust's Board; (xii) association membership dues
authorized by the Trust's Board; and (xiii) such non-recurring or extraordinary
expenses as may arise, including those relating to actions, suits or proceedings
to which the Trust is a party (or to which the Funds' assets are subject) and
any legal obligation for which the Trust may have to provide indemnification to
the Trust's Trustees and officers.
8. Non-Exclusive Services; Limitation of Adviser's Liability. The
services of the Adviser to the Funds are not to be deemed exclusive and the
Adviser may render similar services to others and engage in other activities.
The Adviser and its affiliates may enter into other agreements with the Funds
and the Trust for providing additional services to the Funds and the Trust which
are not covered by this Agreement, and to receive additional compensation for
such services. In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder on the part
of the Adviser, or a breach of fiduciary duty with respect to receipt of
compensation, neither the Adviser nor any of its directors, officers,
shareholders, agents, or employees shall be liable or responsible to the Trust,
the Funds or to any shareholder of the Funds for any error of judgment or
mistake of law or for any act or omission in the course of, or connected with,
rendering services hereunder or for any loss suffered by the Trust, a Fund or
any shareholder of a Fund in connection with the performance of this Agreement.
9. Effective Date; Modifications; Termination. This Agreement shall
become effective as of the date first written above, provided that it shall have
been approved by a majority of the outstanding voting securities of each Fund,
in accordance with the requirements of the 1940 Act, or such later date as may
be agreed by the parties following such shareholder approval.
(a) This Agreement shall continue in force for a period of two
years from the date of this Agreement. Thereafter, this
Agreement shall continue in effect as to each Fund for
successive annual periods, provided such continuance is
specifically approved at least annually (i) by a vote of the
majority of the Trustees of the Trust who are not parties to
this Agreement or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on
such approval and (ii) by a vote of the Board of the Trust or
a majority of the outstanding voting shares of the Fund.
(b) The modification of any of the non-material terms of this
Agreement may be approved by a vote of a majority of those
Trustees of the Trust who are not interested persons of any
party to this Agreement, cast in person at a meeting called
for the purpose of voting on such approval.
<PAGE>
(c) Notwithstanding the foregoing provisions of this Paragraph 9,
either party hereto may terminate this Agreement at any time
on sixty (60) days' prior written notice to the other, without
payment of any penalty. Such a termination by the Trust may be
effected severally as to any particular Fund, and shall be
effected as to any Fund by vote of the Trust's Board or by
vote of a majority of the outstanding voting securities of the
Fund. This Agreement shall terminate automatically in the
event of its assignment.
10. Limitation of Liability of Trustees and Shareholders. The Adviser
acknowledges the following limitation of liability:
The terms "The Simms Funds" and "Trustees" refer, respectively, to the
trust created and the Trustees, as trustees but not individually or personally,
acting from time to time under the Trust Instrument, to which reference is
hereby made and a copy of which is on file at the office of the Secretary of
State of the State of Delaware, such reference being inclusive of any and all
amendments thereto so filed or hereafter filed. The obligations of "The Simms
Funds" entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities and
are not binding upon any of the Trustees, shareholders or representatives of the
Trust personally, but bind only the assets of the Trust, and all persons dealing
with the Trust or a Fund must look solely to the assets of the Trust or Fund for
the enforcement of any claims against the Trust or Fund.
11. Service Mark. The service mark of the Trust and the name "Simms"
(and derivatives thereof) have been licensed to the Trust by the Adviser,
pursuant to a License Agreement dated _________________, and their continued use
is subject to the right of ______ to withdraw this permission under the License
Agreement in the event the Adviser of _________ is not the investment adviser to
the Trust.
12. Certain Definitions. The terms "vote of a majority of the
outstanding voting securities," "assignment," "control," and "interested
persons," when used herein, shall have the respective meanings specified in the
1940 Act. References in this Agreement to the 1940 Act and the Advisers Act
shall be construed as references to such laws as now in effect or as hereafter
amended, and shall be understood as inclusive of any applicable rules,
interpretations and/or orders adopted or issued thereunder by the Commission.
13. Independent Contractor. The Adviser shall for all purposes herein
be deemed to be an independent contractor and shall, unless otherwise expressly
provided herein or authorized by the Board of the Trust from time to time, have
no authority to act for or represent a Fund in any way or otherwise be deemed an
agent of a Fund.
14. Structure of Agreement. The Trust is entering into this Agreement
on behalf of the respective Funds severally and not jointly. The
responsibilities and benefits set forth in this Agreement shall refer to each
Fund severally and not jointly. No Fund shall have any responsibility for any
obligation of any other Fund arising out of this Agreement. Without otherwise
limiting the generality of the foregoing:
<PAGE>
(a) any breach of any term of this Agreement regarding the Trust
with respect to any one Fund shall not create a right or
obligation with respect to any other Fund;
(b) under no circumstances shall the Adviser have the right to set
off claims relating to a Fund by applying property of any
other Fund; and
(c) the business and contractual relationships created by this
Agreement, consideration for entering into this Agreement, and
the consequences of such relationship and consideration relate
solely to the Trust and the particular Fund to which such
relationship and consideration applies.
This Agreement is intended to govern only the relationships between the
Adviser, on the one hand, and the Trust and the Funds, on the other hand, and
(except as specifically provided above in this Paragraph 14) is not intended to
and shall not govern (i) the relationship between the Trust and any Fund or (ii)
the relationships among the respective Funds.
15. Governing Law. This Agreement shall be governed by the laws of the
State of Delaware, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act or the Advisers Act.
16. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby and, to this extent, the provisions
of this Agreement shall be deemed to be severable.
17. Notices. Notices of any kind to be given to the Trust hereunder by
the Adviser shall be in writing and shall be duly given if mailed or delivered
to The Simms Funds, 55 Railroad Avenue, Greenwich, Connecticut 06830, Attention:
Peter M. Gorman, Secretary; with a copy to Kramer, Levin, Naftalis & Frankel,
919 Third Avenue, New York, New York, 10022, Attention: Jay G. Baris, Esq., or
at such other address or to such individual as shall be so specified by the
Trust to the Adviser. Notices of any kind to be given to the Adviser hereunder
by the Trust shall be in writing and shall be duly given if mailed or delivered
to the Adviser at 55 Railroad Avenue, Greenwich, Connecticut 06830, Attention:
Robert A. Simms, with a copy to Arthur O. Poltrack, or at such other address or
to such individual as shall be so specified by the Adviser to the Trust. Notices
shall be effective upon delivery.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
written above.
THE SIMMS FUNDS SIMMS CAPITAL MANAGEMENT, INC.
By: By:
Name: Name:
Title: Title:
<PAGE>
Schedule A to the Investment Advisory Agreement
between The Simms Funds and Simms Capital Management, Inc.
<TABLE>
<CAPTION>
Name of Fund Fee (as a percentage of average daily net assets)
- - ------------ -------------------------------------------------
<S> <C>
1. U.S. Equity Fund o 0.75%
2. International Equity Fund o 1.00%
3. Global Equity Fund o 1.00%
</TABLE>
Dated: October 5, 1998
FORM OF DISTRIBUTION AGREEMENT
between
The Simms Funds
and
T.O. Richardson Securities, Inc.
THIS AGREEMENT is made as of December 1, 1998 between The Simms Funds
(the "Trust"), a Delaware business trust, and T.O. Richardson Securities, Inc.
("T.O.R.") a corporation organized and existing under the laws of the State of
Connecticut.
WHEREAS the Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company,
and has registered one or more distinct series of shares of beneficial interest
("Shares") for sale to the public under the Securities Act of 1933, as amended
(the "Securities Act"), and has qualified its shares for sale to the public
under various state securities laws; and
WHEREAS the Trust desires to retain T.O.R. as principal underwriter in
connection with the offering and sale of the Shares of each series listed on
Schedule A (as amended from time to time) to this Agreement; and
WHEREAS this Agreement has been approved by a vote of the Trust's board
of trustees ("Board") and its disinterested trustees in conformity with Section
15(c) of the 1940 Act; and
WHEREAS T.O.R. is willing to act as principal underwriter for the Trust
on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints T.O.R. as its agent to be the
principal underwriter so as to hold itself out as available to receive and
accept orders for the purchase and redemption of the Shares and redemption of
Shares on behalf of the Trust, subject to the terms and for the period set forth
in this Agreement. T.O.R. hereby accepts such appointment and agrees to act
hereunder. The Trust understands that any solicitation activities conducted on
behalf of the Trust will be conducted primarily, if not exclusively, by
employees of the Trust's sponsor who shall become registered representatives of
T.O.R.
2. Services and Duties of T.O.R.
(a) T.O.R. agrees to sell Shares on a best efforts basis from
time to time during the term of this Agreement as agent for the Trust and upon
the terms described in the Registration Statement. As used in this Agreement,
the term "Registration Statement" shall mean the currently effective
registration statement of the Trust, and any supplements thereto, under the
Securities Act and the 1940 Act.
<PAGE>
(b) T.O.R. will hold itself available to receive purchase and
redemption orders satisfactory to T.O.R. for shares and will accept such orders
on behalf of the Trust. Such purchase orders shall be deemed effective at the
time and in the manner set forth in the Registration Statement.
(c) T.O.R. with the operational assistance of the Trust's
transfer agent, shall make Shares available through the National Securities
Clearing Corporation's Fund/SERV System.
(d) T.O.R. shall provide to investors and potential investors
only such information regarding the Trust as the Trust shall provide or approve.
T.O.R. shall review and file all proposed advertisements and sales literature
with appropriate regulators and consult with the Trust regarding any comments
provided by regulators with respect to such materials.
(e) The offering price of the Shares shall be the price
determined in accordance with, and in the manner set forth in, the most-current
Prospectus. The Trust shall make available to T.O.R. a statement of each
computation of net asset value and the details of entering into such
computation.
(f) T.O.R. at its sole discretion may repurchase Shares
offered for sale by the shareholders. Repurchase of Shares by T.O.R. shall be at
the price determined in accordance with, and in the manner set forth in, the
most current Prospectus. At the end of each business day, T.O.R. shall notify,
by any appropriate means, the Trust and its transfer agent of the orders for
repurchase of Shares received by T.O.R. since the last such report, the amount
to be paid for such Shares, and the identity of the shareholders offering Shares
for repurchase. The Trust reserves the right to suspend such repurchase right
upon written notice to T.O.R. T.O.R. further agrees to act as agent for the
Trust to receive and transmit promptly to the Trust's transfer agent shareholder
requests for redemption of shares.
(g) T.O.R. shall not be obligated to sell any certain number
of Shares.
(h) T.O.R. shall prepare reports for the Board regarding its
activities under this Agreement as from time to time shall be reasonably
requested by the Board.
3. Duties of the Trust.
(a) The Trust shall keep T.O.R. fully informed of its affairs
and shall provide to T.O.R. from time to time copies of all information,
financial statements, and other papers that T.O.R. may reasonably request for
use in connection with the distribution of Shares, including, without
limitation, certified copies of any financial statements prepared for the Trust
by its independent public accountant and such reasonable number of copies of the
most current Prospectus, Statement of Additional Information ("SAI"), and annual
and interim reports as T.O.R. may request, and the Trust shall fully cooperate
in the efforts of T.O.R. to sell and arrange for the sale of Shares.
(b) The Trust shall maintain a currently effective
Registration Statement on Form N-1A with the Securities and Exchange Commission
(the "SEC"), maintain qualification
2
<PAGE>
with applicable states and file such reports and other documents as may be
required under applicable federal and state laws. The Trust shall notify T.O.R.
in writing of the states in which the Shares may be sold and shall notify T.O.R.
in writing of any changes to such information. The Trust shall bear all expenses
related to preparing and typesetting such Prospectuses, SAI and other materials
required by law and such other expenses, including printing and mailing
expenses, related to the Trust's communication with persons who are
shareholders.
(c) The Trust shall not use any advertisements or other sales
materials that have not been (i) submitted to T.O.R. for its review and
approval, and (ii) filed with the appropriate regulators.
(d) The Trust represents and warrants that its Registration
Statement and any advertisements and sales literature (excluding statements
relating to T.O.R. and the services it provides that are based upon written
information furnished by T.O.R. expressly for inclusion therein) of the Trust
shall not contain any untrue statement of material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that all statements or information furnished to
T.O.R. pursuant to Section 3(a) hereof, shall be true and correct in all
material respects.
4. Other Broker-Dealers. T.O.R. in its discretion may enter into
agreements to sell Shares to such registered and qualified retail dealers, as
reasonably requested by the Trust. In making agreements with such dealers,
T.O.R. shall act only as principal and not as agent for the Trust. The form of
any such dealer agreement shall be mutually agreed upon and approved by the
Trust and T.O.R.
5. Withdrawal of Offering. The Trust reserves the right at any time to
withdraw all offerings of any or all Shares by written notice to T.O.R. at its
principal office. No Shares shall be offered by either T.O.R. or the Trust under
any provisions of this agreement and no orders for the purchase of Shares
hereunder shall be accepted by the Trust if and so long as effectiveness of the
Registration Statement then in effect or any necessary amendments thereto shall
be suspended under any of the provisions of the Securities Act, or if and so
long as a current prospectus as required by Section 5(b)(2) of the Securities
Act is not on file with the SEC.
6. Services Not Exclusive. The services furnished by T.O.R. hereunder
are not to be deemed exclusive. T.O.R. shall be free to furnish similar services
to others so long as its services under this Agreement are not impaired thereby.
The Trust reserves the right to (i) sell Shares to investors on applications
received and accepted by the Trust; (ii) issue Shares in connection with a
merger, consolidation, or recapitalization of the Trust; or (iii) issue
additional Shares to holders of Shares.
7. Expenses of the Trust. The Trust shall bear all costs and expenses
of registering the Shares with the SEC and state and other regulatory bodies,
and shall assume expenses related to communications with shareholders of the
Trust including, but not limited to, (i) fees and disbursements of its counsel
and independent public accountant; (ii) the preparation, filing, and printing of
Registration Statements and/or Prospectuses or SAIs; (iii) the preparation and
mailing of annual and interim reports, Prospectuses, SAIs, and proxy materials
to shareholders; (iv) such
3
<PAGE>
other expenses related to the communications with persons who are shareholders
of the Trust; and (v) the qualifications of Shares for sale under the securities
laws of such jurisdictions as shall be selected by the Trust pursuant to the
Paragraph 3(b) hereof, and the costs and expenses payable to each jurisdiction
for continuing qualification therein. In addition, the Trust shall bear all
costs of preparing, printing, mailing, and filing any advertisements and sales
literature. T.O.R. does not assume responsibility for any expenses not assumed
hereunder.
8. Compensation. As compensation for the services performed and the
expenses assumed by T.O.R. under this Agreement including, but not limited to,
any commissions paid for sales of Shares, the Trust shall pay T.O.R., as
promptly as possible after the last day of each month, any fees that may become
payable to T.O.R. pursuant to the Distribution Plan and any retention of sales
loads that may become payable to T.O.R. See Schedule B for T.O.R.'s fee
schedule. The Trust's obligation for payment of fees under this Agreement are
limited to the aggregate amount of dealer retention and fees payable under a
distribution plan established pursuant to Rule 12b-1 under the 1940 Act.
9. Share Certificates. The Trust shall not issue certificates
representing Shares unless requested to do so by a shareholder. If such request
is transmitted through T.O.R., the Trust will cause certificates evidencing the
Shares owned to be issued in such names and denominations as T.O.R. shall from
time to time direct.
10. Status of T.O.R. T.O.R. is an independent contractor and shall be
agent of the Trust only with respect to the sale and redemption of Shares.
11. Indemnification.
(a) The Trust agrees to indemnify, defend, and hold T.O.R.,
its officers and directors, and any person who controls T.O.R. within the
meaning of Section 15 of the Securities Act, free and harmless from and against
any and all claims, demands, or liabilities, and expenses (including the cost of
investigating or defending such claims, demands, liabilities, and any counsel
fees incurred in connection therewith) that T.O.R., its officers and directors,
or any such controlling person may incur under the Securities Act, or under
common law or otherwise, arising out of based upon any (i) alleged untrue
statement of a material fact contained in the Registration Statement,
Prospectus, SAI, or sales literature; (ii) alleged omission to state a material
fact required to be stated in the either thereof or necessary to make the
statements therein not misleading; or (iii) failure by the Trust to comply with
the terms of the Agreement; provided, that in no event shall anything contained
herein be so construed as to protect T.O.R. against any liability to the Trust
or its shareholders to which T.O.R. would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations under this
Agreement.
(b) The Trust shall not be liable to T.O.R. under this
Agreement with respect to any claim made against T.O.R. or any person
indemnified unless T.O.R. or other such person shall have notified the Trust in
writing of the claim within a reasonable time after the summons or other first
written notification giving information of the nature of the claim shall have
been served upon T.O.R. or such other person (or after T.O.R. or other person
shall have received
4
<PAGE>
notice of service on any designated agent). However, failure to notify the Trust
of any claim shall not relieve the Trust from any liability that it may have to
T.O.R. or any person against whom such action is brought otherwise than on
account of this Agreement.
(c) The Trust shall be entitled to participate at its own
expense in the defense or, if it so elects, to assume the defense of any suit
brought to enforce any claims subject to this Agreement. If the Trust elects to
assume the defense of any such claim, the defense shall be conducted by counsel
chosen by the Trust and satisfactory indemnified defendants in the suit whose
approval shall not be unreasonably withheld. In the event that the Trust elects
to assume the defense of any suit and retain counsel, the indemnified defendants
shall bear the fees and expenses of any additional counsel retained by them. If
the Trust does not elect to assume the defense of a suit, it will reimburse the
indemnified defendants for the reasonable fees and expenses of any counsel
retained by the indemnified defendants. The Trust agrees to promptly notify
T.O.R. of the commencement of any litigation or proceedings against it or any of
its officers and directors in connection with the issuance or sale of any of its
Shares.
(d) T.O.R. agrees to indemnify, defend, and hold the Trust,
its officers and directors, and any person who controls the Trust within the
meaning of Section 15 of the Securities Act, free and harmless from and against
any and all claims, demands, liabilities, and expenses (including the cost of
investigating or defending against such claims, demands, or liabilities, and any
counsel fees incurred in connection therewith) that the Trust, its directors and
officers, or any such controlling person may incur under the Securities Act, or
under common law or otherwise, resulting from T.O.R.'s willful misfeasance, bad
faith, or gross negligence in the performance of its obligations and duties
under this Agreement, or arising out of or based upon any alleged untrue
statement of a material fact contained in information furnished in writing by
T.O.R. to the Trust for use in the Registration Statement, Prospectus, or SAI
arising out of or based upon any alleged omission to state a material fact in
connection with such information required to be stated in either thereof or
necessary to make such information not misleading.
(e) T.O.R. shall be entitled to participate, at its own
expense, in the defense or, if it so elects, to assume the defense of any suit
brought to enforce the claim, but if T.O.R. elects to assume the defense, the
defense shall be conducted by counsel chosen by T.O.R. and satisfactory to the
indemnified defendants whose approval shall not be unreasonably withheld. In the
event that T.O.R. elects to assume the defense of any suit and retain counsel,
the defendants in the suit shall bear the fees and expenses of any additional
counsel retained by them. If T.O.R. does not elect to assume the defense of any
suit, it will reimburse the indemnified defendants in the suit for the
reasonable fees and expenses of any counsel retained by them.
12. Duration and Termination.
(a) This Agreement shall become effective on the date first
written above or such later date as indicated in Schedule A and, unless sooner
terminated as provided herein, will continue in effect for two years from the
above written date. Thereafter, if not terminated, this
5
<PAGE>
Agreement shall continue in effect for successive annual periods, provided that
such continuance is specifically approved at least annually (i) by a vote of a
majority of the Trust's Board who are neither interested persons (as defined in
the 1940 Act) of the Trust ("Independent Trustees ") or T.O.R. cast in person at
a meeting called for the purpose of voting on such approval, and (ii) by the
Board or by vote of a majority of the outstanding voting securities of the
Trust.
(b) Notwithstanding the foregoing, this Agreement may be
terminated in its entirety at any time, without the payment of any penalty, by
vote of the Board, by vote of a majority of the Independent Trustees, or by vote
of a majority of the outstanding voting securities of the Trust on sixty days'
written notice to T.O.R. or by T.O.R. at any time, without the payment of any
penalty, on sixty days' written notice to the Trust. This Agreement will
automatically terminate in the event of its assignment.
13. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged, or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge, or termination is sought. This Agreement may be amended with the
approval of the Board or of a majority of the outstanding voting securities of
the Trust; provided, that in either case, such amendment also shall be approved
by a majority of the Independent Trustees.
14. Limitation of Liability. The Board and shareholders of the Trust
shall not be personally liable for obligations of the Trust in connection with
any matter arising from or in connection with this Agreement. If the Trust is a
Delaware business trust, this Agreement is not binding upon any trustees,
officer, or shareholder of the Trust individually, and no such person shall be
individually liable with respect to any action or inaction resulting from this
Agreement.
15. Notice. Any notice required or permitted to be given by either
party to the other shall be deemed sufficient upon receipt in writing at the
other party's principal offices.
16. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule, or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"interested person," and "assignment" shall have the same meaning as such terms
have in the 1940 Act.
17. Governing Law. This Agreement shall be construed in accordance with
the laws of the State of Connecticut and the 1940 Act (without regard, however,
to the conflicts of law principles). To the extent that the applicable laws of
the state of Connecticut conflict with the applicable provisions of the 1940
Act, the latter shall control.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated as of the day and year first above
written.
The Simms Funds T.O. Richardson Securities, Inc.
By__________________________ By: ____________________________
Print______________________ Print___________________________
Title_______________________ Title___________________________
Date_______________________ Date____________________________
Attest______________________ Attest__________________________
7
<PAGE>
AMENDMENT A
The Simms Funds (the "Trust") and T.O. Richardson Securities, Inc. ("T.O.R.S.")
further agree that the Trust has entered into the Fund Administrative Services
Agreement, Fund Accounting Services Agreement, Transfer Agent Agreement,
Custodian Agreement, and Fulfillment Services Agreement with Firstar Mutual Fund
Services, LLC of Milwaukee, Wisconsin ("FMFS"), or an affiliate, copies of which
are in the hands of the parties hereto and to which reference may be had (which
agreements are herein collectively referred to as the "Trust Operating
Agreements.") During the term of this Agreement, the Trust agrees to maintain
the Trust Operating Agreements (or other similar agreements with comparable
service providers) in effect during the term of this Agreement. The parties
hereto agree that T.O.R.S. is a third party beneficiary to the Trust Operating
Agreements and that substantial portions of the duties and services to be
provided by T.O.R.S. hereunder are to be performed by FMFS for T.O.R.S.'s and
the Trust's benefit. The Trust shall be responsible for all amounts due under
the Trust Operating Agreements and T.O.R.S. shall not be responsible for
duplication of duties or services provided for in the Trust Operating Agreements
or any fees or expenses thereunder.
The Simms Funds T.O. Richardson Securities, Inc.
Sign: _________________________ Sign: ___________________________
Print: _________________________ Print: __________________________
Title: _________________________ Title: __________________________
Date: _________________________ Date: ___________________________
Attest: _________________________ Attest: _________________________
<PAGE>
SCHEDULE A
to the
DISTRIBUTION AGREEMENT
between
The Simms Funds
and
T.O. Richardson Securities, Inc.
Pursuant to Section 1 of the Distribution Agreement between The Simms
Funds (the "Trust") and T.O. Richardson Securities, Inc. ("T.O.R."), the Trust
hereby appoints T.O.R. as its agent to be the principal underwriter of Trust
with respect to its following series:
1. U.S. Equity Fund, Class A and Class Y Shares
2. International Equity Fund, Class A and Class Y Shares
3. Global Equity Fund, Class A and Class Y Shares
Dated: December 1, 1998
<PAGE>
Schedule B
Mutual Fund Services
Nominal Distribution Services
Fee Schedule
The greater of the annual minimum of $7,500 for the initial share class of the
first Fund of the Trust and $4,000 per year per the initial share class of each
additional Fund and $1,500 per year per each additional share class of each
Fund, or 0.01% of the average daily net assets of each Fund, computed daily and
paid monthly;
Licensing of Investment Advisor's Staff
Annual fee of $450 per series 7 registered representative ("registered rep");
for compliance related costs. Compliance related costs for other licenses may
vary.
Advertising Legal Review and NASD Filing
$150 per job for the first ten pages of an advertisement and $20 per page
thereafter. NASD filing fees will be billed on an out-of-pocket basis. (Pass
through costs may change upon notice).
National Securities Clearing Corporation
Mutual Fund Services Fee Schedule (Pass through costs may change upon notice).
Refer to attached NSCC fee
schedule
Services include:
o Providing access to Fund/Serv as an NSCC member
o Filing marketing material with the NASD
o Providing principal review of marketing materials
o Execution broker dealer selling agreements
o Underwriting mutual fund shares
Plus out-of-pocked expenses, including but not limited to:
o Travel Expenses
o All associated NASD fees for Registered Representatives securities licenses
o Review and filing of NASD advertising material
o Retention of records
The Trust's obligations for payment of fees under this Agreement are limited to
the aggregate amount of dealer retention and fees payable under a distribution
plan established pursuant to Rule 12b-1 under the 1940 Act.
FORM OF CUSTODIAN SERVICING AGREEMENT
THIS AGREEMENT made on October 5, 1998, between The Simms
Funds, a Delaware business trust (hereinafter called the "Trust"), and Firstar
Bank Milwaukee, a bank chartered under the laws of the State of Wisconsin
(hereinafter called the "Custodian"),
WHEREAS, the Trust desires that its securities and cash shall
be hereafter held and administered by the Custodian pursuant to the terms of
this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements
herein made, the Trust and the Custodian agree as follows:
1. Definitions
The word "securities" as used herein includes stocks, shares,
bonds, debentures, notes, mortgages or other obligations, and any certificates,
receipts, warrants or other instruments representing rights to receive, purchase
or subscribe for the same, or evidencing or representing any other rights or
interests therein, or in any property or assets.
The words "officers' certificate" shall mean a request or
direction or certification in writing signed in the name of the Trust by any two
of the President, a Vice President, the Secretary and the Treasurer of the
Trust, or any other persons duly authorized to sign by the Board of Trustees of
the Trust (the "Board").
2. Names, Titles, and Signatures of the Trust's Officers
An officer of the Trust will certify to the Custodian the
names and signatures of those persons authorized to sign the officers'
certificates described in Section 1 hereof, and the names of the members of the
Board, together with any changes which may occur from time to time.
Additional Series. The Trust is authorized to issue separate
classes of shares of beneficial interest representing interests in separate
investment portfolios. The parties intend that each portfolio established by the
Trust, now or in the future, be covered by the terms and conditions of this
Agreement.
3. Receipt and Disbursement of Money
A. The Custodian shall open and maintain a separate account or
accounts in the name of the Trust, subject only to draft or order by
the Custodian acting pursuant to the terms of this Agreement. The
Custodian shall hold in such account or accounts, subject to the
provisions hereof, all cash received by it from or for the account of
the Trust. The Custodian shall make payments of cash to, or for the
account of, the Trust from such cash only:
(a) for the purchase of securities for the portfolio of
the Trust upon the delivery of such securities to the
Custodian, registered in the name of the Trust or of
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the nominee of the Custodian referred to in Section 7
of this Agreement or in proper form for transfer;
(b) for the purchase or redemption of shares of the
common stock of the Trust upon delivery thereof to
the Custodian, or upon proper instructions from the
Trust;
(c) for the payment of interest, dividends, taxes,
investment adviser's fees or operating expenses
(including, without limitation thereto, fees for
legal, accounting, auditing and custodian services
and expenses for printing and postage);
(d) for payments in connection with the conversion,
exchange or surrender of securities owned or
subscribed to by the Trust held by or to be delivered
to the Custodian; or
(e) for other proper corporate purposes certified by
resolution of the Board.
Before making any such payment, the Custodian shall receive
(and may rely upon) an officers' certificate requesting such payment and stating
that it is for a purpose permitted under the terms of items (a), (b), (c), or
(d) of this Subsection A, and also, in respect of item (e), upon receipt of an
officers' certificate specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person or persons to whom such payment
is to be made, provided, however, that an officers' certificate need not precede
the disbursement of cash for the purpose of purchasing a money market
instrument, or any other security with same or next-day settlement, if the
President, a Vice President, the Secretary or the Treasurer of the Trust issues
appropriate oral or facsimile instructions to the Custodian and an appropriate
officers' certificate is received by the Custodian within two business days
thereafter.
B. The Custodian is hereby authorized to endorse and collect
all checks, drafts or other orders for the payment of money received by
the Custodian for the account of the Trust.
C. The Custodian shall, upon receipt of proper instructions,
make federal funds available to the Trust as of specified times agreed
upon from time to time by the Trust and the Custodian in the amount of
checks received in payment for shares of the Trust which are deposited
into the Trust's account.
4. Segregated Accounts
Upon receipt of proper instructions, the Custodian shall
establish and maintain a segregated account(s) for and on behalf of any Series
of the Trust, into which account(s) may be
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transferred cash and/or securities.
5. Transfer, Exchange, Redelivery, etc. of Securities
The Custodian shall have sole power to release or deliver any
securities of the Trust held by it pursuant to this Agreement. The Custodian
agrees to transfer, exchange or deliver securities held by it hereunder only:
(a) for sales of such securities for the account of the
Trust upon receipt by the Custodian of payment
therefore;
(b) when such securities are called, redeemed or retired
or otherwise become payable;
(c) for examination by any broker selling any such
securities in accordance with "street delivery"
custom;
(d) in exchange for, or upon conversion into, other
securities alone or other securities and cash whether
pursuant to any plan of merger, consolidation,
reorganization, recapitalization or readjustment, or
otherwise;
(e) upon conversion of such securities pursuant to their
terms into other securities;
(f) upon exercise of subscription, purchase or other
similar rights represented by such securities;
(g) for the purpose of exchanging interim receipts or
temporary securities for definitive securities;
(h) for the purpose of redeeming in kind shares of common
stock of the Trust upon delivery thereof to the
Custodian; or
(i) for other proper corporate purposes.
As to any deliveries made by the Custodian pursuant to items
(a), (b), (d), (e), (f), and (g) above, securities or cash receivable in
exchange therefore shall be deliverable to the Custodian.
Before making any such transfer, exchange or delivery, the
Custodian shall receive (and may rely upon) an officers' certificate requesting
such transfer, exchange or delivery, and stating that it is for a purpose
permitted under the terms of items (a), (b), (c), (d), (e), (f), (g), or (h) of
this Section 5 and also, in respect of item (i), upon receipt of an officers'
certificate 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, provided, however, that an officers' certificate need
not precede any such transfer, exchange or delivery of a money market
instrument, or any other security with same or next-day settlement, if the
President, a Vice President, the Secretary or the Treasurer of the
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Trust issues appropriate oral or facsimile instructions to the Custodian and an
appropriate officers' certificate is received by the Custodian within two
business days thereafter.
6. Custodian's Acts Without Instructions
Unless and until the Custodian receives an officers'
certificate to the contrary, the Custodian shall: (a) present for payment all
coupons and other income items held by it for the account of the Trust, which
call for payment upon presentation and hold the cash received by it upon such
payment for the account of the Trust; (b) collect interest and cash dividends
received, with notice to the Trust, for the account of the Trust; (c) hold for
the account of the Trust hereunder all stock dividends, rights and similar
securities issued with respect to any securities held by it hereunder; and (d)
execute, as agent on behalf of the Trust, all necessary ownership certificates
required by the Internal Revenue Code of 1986, as amended (the "Code"), or the
Income Tax Regulations of the United States Treasury Department or under the
laws of any state now or hereafter in effect, inserting the Trust's name on such
certificates as the owner of the securities covered thereby, to the extent it
may lawfully do so.
7. Registration of Securities
Except as otherwise directed by an officers' certificate, the
Custodian shall register all securities, except such as are in bearer form, in
the name of a registered nominee of the Custodian as defined in the Code and any
Regulations of the Treasury Department issued hereunder or in any provision of
any subsequent federal tax law exempting such transaction from liability for
stock transfer taxes, and shall execute and deliver all such certificates in
connection therewith as may be required by such laws or regulations or under the
laws of any state. The Custodian shall use its best efforts to the end that the
specific securities held by it hereunder shall be at all times identifiable in
its records.
The Trust shall from time to time furnish to the Custodian
appropriate instruments to enable the Custodian to hold or deliver in proper
form for transfer, or to register in the name of its registered nominee, any
securities which it may hold for the account of the Trust and which may from
time to time be registered in the name of the Trust.
8. Voting and Other Action
Neither the Custodian nor any nominee of the Custodian shall
vote any of the securities held hereunder by or for the account of the Trust,
except in accordance with the instructions contained in an officers'
certificate. The Custodian shall deliver, or cause to be executed and delivered,
to the Trust all notices, proxies and proxy soliciting materials with relation
to such securities, such proxies to be executed by the registered holder of such
securities (if registered otherwise than in the name of the Trust), but without
indicating the manner in which such proxies are to be voted.
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<PAGE>
9. Transfer Tax and Other Disbursements
The Trust shall pay or reimburse the Custodian from time to
time for any transfer taxes payable upon transfers of securities made hereunder,
and for all other necessary and proper disbursements and expenses made or
incurred by the Custodian in the performance of this Agreement.
The Custodian shall execute and deliver such certificates in
connection with securities delivered to it or by it under this Agreement as may
be required under the provisions of the Internal Revenue Code and any
Regulations of the Treasury Department issued thereunder, or under the laws of
any state, to exempt from taxation any exemptable transfers and/or deliveries of
any such securities.
10. Concerning Custodian
The Custodian shall be paid as compensation for its services
pursuant to this Agreement such compensation as may from time to time be agreed
upon in writing between the two parties. Until modified in writing, such
compensation shall be as set forth in Exhibit A attached hereto. If the Trust
elects to terminate this Agreement prior to the first anniversary of this
Agreement, the Trust agrees to reimburse the Custodian for the difference
between the standard fee schedule and the discounted fee schedule agreed to
between the parties.
The Custodian shall not be liable for any action taken in good
faith upon any certificate herein described or certified copy of any resolution
of the Board, and may rely on the genuineness of any such document which it may
in good faith believe to have been validly executed.
The Trust agrees to indemnify and hold harmless the Custodian
and its nominee from all taxes, charges, expenses, assessments, claims and
liabilities (including counsel fees) incurred or assessed against the Custodian
or by the Custodian's nominee in connection with the performance of this
Agreement, except such as may arise from its or its nominee's own negligent
action, negligent failure to act or willful misconduct. The Custodian is
authorized to charge any account of the Trust for such items.
In the event of any advance of cash for any purpose made by
the Custodian resulting from orders or instructions of the Trust, or in the
event that the Custodian or its nominee shall incur or be assessed any taxes,
charges, expenses, assessments, claims or liabilities in connection with the
performance of this Agreement, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the Trust shall be security
therefore.
The Custodian agrees to indemnify and hold harmless Trust from
all charges, expenses, assessments, and claims/liabilities (including counsel
fees) incurred or assessed against the Trust in connection with the performance
of this Agreement, except such as may arise from the Trust's own negligent
action, negligent failure to act, or willful misconduct.
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<PAGE>
11. Subcustodians
The Custodian is hereby authorized to engage another bank or
trust company as a subcustodian for all or any part of the Trust's assets, so
long as any such bank or trust company is a bank or trust company organized
under the laws of any state of the United States, having an aggregate capital,
surplus and undivided profit, as shown by its last published report, of not less
than two million dollars ($2,000,000) and provided further that, if the
Custodian utilizes the services of a subcustodian, the Custodian shall remain
fully liable and responsible for any losses caused to the Trust by the
subcustodian as fully as if the Custodian was directly responsible for any such
losses under the terms of this Agreement.
Notwithstanding anything contained herein, if the Trust
requires the Custodian to engage specific subcustodians for the safekeeping
and/or clearing of assets, the Trust agrees to indemnify and hold harmless the
Custodian from all claims, expenses and liabilities incurred or assessed against
it in connection with the use of such Subcustodian in regard to the Trust's
assets, except as may arise from its own negligent action, negligent failure to
act or willful misconduct.
12. Reports by Trust's Custodian
The Custodian shall furnish the Trust periodically as agreed
upon with a statement summarizing all transactions and entries for the account
of Trust. The Custodian shall furnish to the Trust, at the end of every month, a
list of the portfolio securities showing the aggregate cost of each issue. The
books and records of the Custodian pertaining to its actions under this
Agreement shall be open to inspection and audit at reasonable times by officers
of, and of auditors employed by, the Trust.
13. Termination or Assignment
This Agreement may be terminated by the Trust, or by the
Custodian, on ninety (90) days' notice, given in writing and sent by registered
mail to the Custodian at P.O. Box 2054, Milwaukee, Wisconsin 53201, or to the
Trust at 55 Railroad Avenue, Greenwich, Connecticut 06830, as the case may be.
Upon any termination of this Agreement, pending appointment of a successor to
the Custodian or a vote of the shareholders of the Trust to dissolve or to
function without a custodian of its cash, securities and other property, the
Custodian shall not deliver cash, securities or other property of the Trust to
the Trust, but may deliver them to a bank or trust company of its own selection,
having an aggregate capital, surplus and undivided profits, as shown by its last
published report of not less than two million dollars ($2,000,000) as a
custodian for the Trust to be held under terms similar to those of this
Agreement, provided, however, that the Custodian shall not be required to make
any such delivery or payment until full payment shall have been made by the
Trust of all liabilities constituting a charge on or against the properties then
held by the Custodian or on or against the Custodian, and until full payment
shall have been made to the Custodian of all its fees, compensation, costs and
expenses, subject to the provisions of Section 10 of this Agreement.
This Agreement may not be assigned by the Custodian without
the consent of the Trust, authorized or approved by a resolution of its Board.
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<PAGE>
14. Deposits of Securities in Securities Depositories
No provision of this Agreement shall be deemed to prevent the
use by the Custodian of a central securities clearing agency or securities
depository, provided, however, that the Custodian and the central securities
clearing agency or securities depository meet all applicable federal and state
laws and regulations, and the Board approves by resolution the use of such
central securities clearing agency or securities depository.
15. Records
To the extent that the Custodian in any capacity prepares or
maintains any records required to be maintained and preserved by the Trust
pursuant to the provisions of the Investment Company Act of 1940, as amended
(the "1940 Act"), or the rules and regulations promulgated thereunder, the
Custodian agrees to make any such records available to the Trust upon request
and to preserve such records for the periods prescribed in Rule 31a-2 under the
1940 Act.
16. Year 2000 Compliance
The Custodian represents that it has examined and tested its
internal systems which have been developed to support the services outlined
herein, and as of the date of this Agreement, has no knowledge of any situation
or circumstance that will inhibit the systems' ability to perform the expected
functions, or inhibit the Custodian's ability to provide the expected services
as a result of any business interruptions or other business problems relating to
dates or days before, during, and after the year 2000. In connection with the
foregoing, the Custodian represents that it has made reasonable inquiry of its
business partners and other entities with whom it conducts business and has
carefully considered the responses of those third-parties.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and their respective corporate seals to be affixed
hereto as of the date first above-written by their respective officers thereunto
duly authorized.
Executed in several counterparts, each of which is an
original.
THE SIMMS FUNDS FIRSTAR BANK MILWAUKEE
By:______________________________ By:______________________________
Print:____________________________ Print:____________________________
Title:____________________________ Title:____________________________
Date:____________________________ Date:____________________________
Attest:____________________________ Attest:____________________________
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EXHIBIT A
Custody Services
Annual Fee Schedule - Domestic Funds
|X| Annual fee based upon market value
! 2 basis points per year
! Minimum annual fee per fund - $3,000
|X| Investment transactions (purchase, sale, exchange, tender, redemption,
maturity, receipt, delivery):
o $12.00 per book entry security (depository or Federal Reserve
system)
o $25.00 per definitive security (physical)
o $25.00 per mutual fund trade
o $75.00 per Euroclear
o $ 8.00 per principal reduction on pass-through certificates
o $35.00 per option/futures contract
o $15.00 per variation margin
o $15.00 per Fed wire deposit or withdrawal
|X| Variable Amount Demand Notes: Used as a short-term investment,
variable amount notes offer safety and prevailing high interest rates.
Our charge, which is 1/4 of 1%, is deducted from the variable amount
note income at the time it is credited to your account.
|X| Plus out-of-pocket expenses, and extraordinary expenses based upon
complexity
|X| Fees are billed monthly, based upon market value at the beginning of
the month
Dated as of October 5, 1998
FORM OF FUND ACCOUNTING SERVICING AGREEMENT
This Agreement between The Simms Funds, a Delaware business trust, hereinafter
called the "Trust" and Firstar Mutual Fund Services, LLC, a Wisconsin limited
liability company, hereinafter called "Firstar," is entered into on this 5th day
of October, 1998.
WHEREAS, the Trust is an open-ended management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, Firstar is in the business of providing, among other things,
mutual fund accounting services to investment companies;
NOW, THEREFORE, the parties do mutually promise and agree as follows:
1. Services. Firstar agrees to provide the following mutual fund
accounting services to the Trust:
A. Portfolio Accounting Services:
(1) Maintain portfolio records on a trade date +1 basis
using security trade information communicated from the investment
manager on a timely basis.
(2) For each valuation date, obtain prices from a pricing
source approved by the Board of Trustees of the Trust (the
"Board") and apply those prices to the portfolio positions. For
those securities where market quotations are not readily
available, the Board shall approve, in good faith, the method for
determining the fair value for such securities.
(3) Identify interest and dividend accrual balances as of
each valuation date and calculate gross earnings on investments
for the accounting period.
(4) Determine gain/loss on security sales and identify
them as to short-short, short- or long-term status; account for
periodic distributions of gains or losses to shareholders and
maintain undistributed gain or loss balances as of each valuation
date.
B. Expense Accrual and Payment Services:
(1) For each valuation date, calculate the expense accrual
amounts as directed by the Trust as to methodology, rate or
dollar amount.
(2) Record payments for Fund expenses upon receipt of
written authorization from the Trust.
(3) Account for fund expenditures and maintain expense
accrual balances at the level of accounting detail, as agreed
upon by Firstar and the Trust.
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(4) Provide expense accrual and payment reporting.
C. Fund Valuation and Financial Reporting Services:
(1) Account for fund share purchases, sales, exchanges,
transfers, dividend reinvestments, and other fund share activity
as reported by the transfer agent on a timely basis.
(2) Apply equalization accounting as directed by the
Trust.
(3) Determine net investment income (earnings) for the
Trust as of each valuation date. Account for periodic
distributions of earnings to shareholders and maintain
undistributed net investment income balances as of each valuation
date.
(4) Maintain a general ledger for the Trust in the form as
agreed upon.
(5) For each day the Trust is open as defined in the
prospectus, determine the net asset value of the according to the
accounting policies and procedures set forth in the prospectus.
(6) Calculate per share net asset value, per share net
earnings, and other per share amounts reflective of fund
operation at such time as required by the nature and
characteristics of the Trust.
(7) Communicate, at an agreed upon time, the per share
price for each valuation date to parties as agreed upon from time
to time.
(8) Prepare monthly reports which document the adequacy of
accounting detail to support month-end ledger balances.
D. Tax Accounting Services:
(1) Maintain accounting records for the investment
portfolios of the Trust to support the tax reporting required for
IRS-defined regulated investment companies.
(2) Maintain tax lot detail for the investment portfolio.
(3) Calculate taxable gain/loss on security sales using
the tax lot relief method designated by the Trust.
(4) Provide the necessary financial information to support
the taxable components of income and capital gains distributions
to the transfer agent to support tax reporting to the
shareholders.
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E. Compliance Control Services:
(1) Support reporting to regulatory bodies and support
financial statement preparation by making the fund accounting
records available to the Trust, the Securities and Exchange
Commission, and the outside auditors.
(2) Maintain accounting records according to the 1940 Act
and regulations provided thereunder.
2. Pricing of Securities. For each valuation date, obtain prices from a
pricing source selected by Firstar but approved by the Trust's Board and apply
those prices to the portfolio positions. For those securities where market
quotations are not readily available, the Trust's Board shall approve, in good
faith, the method for determining the fair value for such securities.
If the Trust desires to provide a price which varies from the
pricing source, the Trust shall promptly notify and supply Firstar with the
valuation of any such security on each valuation date. All pricing changes made
by the Trust will be in writing and must specifically identify the securities to
be changed by CUSIP, name of security, new price or rate to be applied, and, if
applicable, the time period for which the new prices are effective.
3. Changes in Accounting Procedures. Any resolution passed by the Board
that affects accounting practices and procedures under this agreement shall be
effective upon written receipt and acceptance by the Firstar.
4. Changes in Equipment, Systems, Service, Etc. Firstar reserves the
right to make changes from time to time, as it deems advisable, relating to its
services, systems, programs, rules, operating schedules and equipment, so long
as such changes do not adversely affect the service provided to the Trust under
this Agreement.
5. Compensation. Firstar shall be compensated for providing the services
set forth in this Agreement in accordance with the Fee Schedule attached hereto
as Exhibit A and as mutually agreed upon and amended from time to time. If the
Trust elects to terminate this Agreement prior to the first anniversary of this
Agreement, the Trust agrees to reimburse Agent for the difference between the
standard fee schedule and the discounted fee schedule agreed to between the
parties.
6. Performance of Service.
A. Firstar shall exercise reasonable care in the
performance of its duties under this Agreement. Firstar shall not
be liable for any error of judgment or mistake of law or for any
loss suffered by the Trust in connection with matters to which
this Agreement relates, including losses resulting from
mechanical breakdowns or the failure of communication or power
supplies beyond Firstar's control, except a loss resulting from
Firstar's refusal or failure to comply with the terms of this
Agreement or from bad faith, negligence, or willful misconduct on
its part in the performance of its duties under this Agreement.
Notwithstanding any other provision of this Agreement, the Trust
shall indemnify and hold harmless Firstar from and against any
and all
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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 Firstar may sustain
or incur or which may be asserted against Firstar by any person
arising out of any action taken or omitted to be taken by it in
performing the services hereunder (i) in accordance with the
foregoing standards, or (ii) in reliance upon any written or oral
instruction provided to Firstar by any duly authorized officer of
the Trust, such duly authorized officer to be included in a list
of authorized officers furnished to Firstar and as amended from
time to time in writing by resolution of the Board.
In the event of a mechanical breakdown or failure of
communication or power supplies beyond its control, Firstar shall
take all reasonable steps to minimize service interruptions for
any period that such interruption continues beyond Firstar's
control. Firstar 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 Firstar. Firstar 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 Firstar's premises and operating
capabilities at any time during regular business hours of
Firstar, upon reasonable notice to Firstar.
Regardless of the above, Firstar reserves the right to
reprocess and correct administrative errors at its own expense.
B. In order that the indemnification provisions contained
in this section shall apply, it is understood that if in any case
the Trust may be asked to indemnify or hold Firstar harmless, the
Trust shall be fully and promptly advised of all pertinent facts
concerning the situation in question, and it is further
understood that Firstar 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. The Trust shall have the
option to defend Firstar against any claim which may be the
subject of this indemnification. In the event that the Trust so
elects, it will so notify Firstar and thereupon the Trust shall
take over complete defense of the claim, and Firstar shall in
such situation initiate no further legal or other expenses for
which it shall seek indemnification under this section. Firstar
shall in no case confess any claim or make any compromise in any
case in which the Trust will be asked to indemnify Firstar except
with the Trust's prior written consent.
C. Firstar 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
may be asserted against the Trust by any person arising out of
any action taken or omitted to be taken by Firstar as a result of
Firstar's refusal or failure to comply with the terms of this
Agreement, its bad faith, negligence, or willful misconduct.
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7. Records. Firstar shall keep records relating to the services to be
performed hereunder, in the form and manner, and for such period as it may deem
advisable and is agreeable to the Trust but not inconsistent with the rules and
regulations of appropriate government authorities, in particular, Section 31 of
the 1940 Act, and the rules thereunder. Firstar agrees that all such records
prepared or maintained by Firstar relating to the services to be performed by
Firstar hereunder are the property of the Trust and will be preserved,
maintained, and made available with such section and rules of the 1940 Act and
will be promptly surrendered to the Trust on and in accordance with its request.
8. Confidentiality. Firstar shall handle in confidence all information
relating to the Trusts' or 's business, which is received by Firstar during the
course of rendering any service hereunder.
9. Data Necessary to Perform Services. The Trust or its agent, which
may be Firstar, shall furnish to Firstar the data necessary to perform the
services described herein at times and in such form as mutually agreed upon.
10. Notification of Error. The Trust will notify Firstar of any
balancing or control error caused by Firstar within three (3) business days
after receipt of any reports rendered by Firstar to the Trust, or within three
(3) business days after discovery of any error or omission not covered in the
balancing or control procedure, or within three (3) business days of receiving
notice from any shareholder.
11. Additional Series. In the event that the Trust establishes one or
more series of shares with respect to which it desires to have Firstar render
accounting services, under the terms hereof, it shall so notify Firstar in
writing, and if Firstar agrees in writing to provide such services, such series
will be subject to the terms and conditions of this Agreement, and shall be
maintained and accounted for by Firstar on a discrete basis. The portfolios
currently covered by this Agreement are: the U.S. Equity Fund, the International
Equity Fund and the Global Equity Fund.
12. Term of Agreement. This Agreement may be terminated by either party
upon giving ninety (90) days' prior written notice to the other party or such
shorter period as is mutually agreed upon by the parties. However, this
Agreement may be replaced or modified by a subsequent agreement between the
parties.
13. Duties in the Event of Termination. In the event that in connection
with termination a Successor to any of Firstar's duties or responsibilities
hereunder is designated by the Trust by written notice to Firstar, Firstar will
promptly, upon such termination and at the expense of the Trust, transfer to
such Successor all relevant books, records, correspondence and other data
established or maintained by Firstar under this Agreement in a form reasonably
acceptable to the Trust (if such form differs from the form in which Firstar has
maintained the same, the Trust shall pay any expenses associated with
transferring the same to such form), and will cooperate in the transfer of such
duties and responsibilities, including provision for assistance from Firstar's
personnel in the establishment of books, records and other data by such
successor.
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14. Notices. Notices of any kind to be given by either party to the
other party shall be in writing and shall be duly given if mailed or delivered
as follows: Notice to Firstar shall be sent to:
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
and notice to Trust shall be sent to:
The Simms Funds
55 Railroad Avenue
Greenwich, Connecticut 06830
15. Choice of Law. This Agreement shall be construed in accordance with
the laws of the State of Wisconsin.
16. Year 2000 Compliance. Firstar represents that it has examined and
tested its internal systems which have been developed to support the services
outlined herein, and as of the date of this Agreement, has no knowledge of any
situation or circumstance that will inhibit the systems' ability to perform the
expected functions, or inhibit Firstar's ability to provide the expected
services as a result of any business interruptions or other business problems
relating to dates or days before, during, and after the year 2000. In connection
with the foregoing, Firstar represents that it has made reasonable inquiry of
its business partners and other entities with whom it conducts business and has
carefully considered the responses of those third-parties.
IN WITNESS WHEREOF, the due execution hereof on the date first above
written.
The Simms Funds Firstar Mutual Fund Services, LLC
Sign:______________________________ Sign:________________________________
Print:_____________________________ Print:_______________________________
Title:_____________________________ Title:_______________________________
Date:______________________________ Date:________________________________
Attest:____________________________ Attest:______________________________
6
<PAGE>
EXHIBIT A
Fund Accounting Services
Annual Fee Schedule
<TABLE>
<CAPTION>
<S> <C>
|X| Domestic Equity Funds* |X| Multiple Classes - Each class is an additional
o $22,000 for the first $40 million 25% of the charge of the initial class.
o 1 basis point on the next $200 million
o 1/2 basis point on the balance
|X| Domestic Balanced Funds * - Subject to change depending upon the use of
o $23,500 for the first $40 million options, futures, short sales, ADRs versus foreign
o 1.5 basis points on the next $200 million securities.
o 1 basis point on the balance
|X| Domestic Fixed Income Funds
|X| International Equity Funds
o $25,000 for the first $40 million
o 2 basis points on the next $200 million |X| All fees are billed monthly plus out-of-pocket
o 1 basis point on the balance expenses, including pricing service:
|X| Domestic Money Market Funds |X| Domestic and Canadian Equities $.15
o $25,000 for the first $40 million |X| Options $.15
o 1 basis point on the next $200 million |X| Corp/Gov/Agency Bonds $.50
o 1/2 basis point on the balance |X| CMO's $.80
|X| International Equities and Bonds $.50
|X| International Income Funds |X| Municipal Bonds $.80
o $27,500 for the first $40 million |X| Money Market Instruments $.80
o 2 basis points on the next $200 million
o 1 basis point on the balance
</TABLE>
Dated: October 5, 1998
---------------
FORM OF FUND Administration Servicing Agreement
This Agreement is made and entered into on this 5th day of October, 1998, by and
between The Simms Funds, a Delaware business trust (the "Trust"), and Firstar
Mutual Fund Services, LLC, a limited liability company organized under the laws
of the State of Wisconsin ("Firstar").
WHEREAS, the Trust is an open-end management investment company which is
registered under the Investment Company Act of 1940, as amended (the "1940
Act");
WHEREAS, Firstar is a trust company and, among other things, is in the business
of providing fund administration services for the benefit of its customers;
NOW, THEREFORE, the Trust and Firstar do mutually promise and agree as follows:
I. Appointment of Administrator
The Trust hereby appoints Firstar as Administrator of the Trust on the
terms and conditions set forth in this Agreement, and Firstar hereby
accepts such appointment and agrees to perform the services and duties
set forth in this Agreement in consideration of the compensation
provided for herein.
II. Duties and Responsibilities of Firstar
A. General Trust Management
1. Act as liaison among all fund service providers
2. Coordinate board communication by:
a. Assisting fund counsel in establishing
meeting agendas
b. Preparing board reports based on financial
and administrative data
c. Evaluating independent auditor
d. Securing and monitoring fidelity bond and
director and officers liability
coverage, and making the necessary SEC
filings relating thereto
3. Audits
a. Prepare appropriate schedules and assist
independent auditors
b. Provide information to SEC and facilitate
audit process
c. Provide office facilities
4. Assist in overall operations of the Trust
<PAGE>
B. Compliance
1. Regulatory Compliance
a. Periodically monitor compliance with 1940
Act requirements
1) Asset diversification tests
2) Total return and SEC yield
calculations
3) Maintenance of books and records
under Rule 31a-3
4) Code of ethics
b. Periodically monitor Trust's compliance with
the policies and investment limitations of
the Trust as set forth in its prospectus and
statement of additional information
2. Blue Sky Compliance
a. Prepare and file with the appropriate state
securities authorities any and all required
compliance filings relating to the
registration of the securities of the Trust
so as to enable the Trust to make a
continuous offering of its shares
b. Monitor status and maintain registrations in
each state
3. SEC Registration and Reporting
a. Assisting the Trust's counsel in updating
prospectus and statement of additional
information; and in preparing proxy
statements, and Rule 24f-2 notice,
b. Annual and semiannual reports
4. IRS Compliance
a. Periodically monitor the Trust's status as
a regulated investment company
under Subchapter M through review of the
following:
1) Asset diversification requirements
2) Qualifying income requirements
3) Distribution requirements
b. Calculate required distributions (including
excise tax distributions)
C. Financial Reporting
1. Provide financial data required by fund prospectus
and statement of additional information
2
<PAGE>
2. Prepare financial reports for shareholders, the
board, the SEC, and independent auditors
3. Supervise the Trust's Custodian and Trust Accountants
in the maintenance of the Trust's general ledger and
in the preparation of the Trust's financial
statements including oversight of expense accruals
and payments, of the determination of net asset value
of the Trust's net assets and of the Trust's shares,
and of the declaration and payment of dividends and
other distributions to shareholders
D. Tax Reporting
1. Prepare and file on a timely basis appropriate
federal and state tax returns including forms
1120/8613 with any necessary schedules
2. Prepare state income breakdowns where relevant
3. File 1099 Miscellaneous for payments to directors and
other service providers
4. Monitor wash losses
5. Calculate eligible dividend income for corporate
shareholders
III. Compensation
The Trust agrees to pay Firstar for performance of the duties listed in
this Agreement and the fees and out-of-pocket expenses as set forth in
the attached Schedule A.
These fees may be changed from time to time, subject to mutual written
Agreement between the Trust and Firstar. If the Trust elects to
terminate this Agreement prior to the first anniversary of this
Agreement, the Trust agrees to reimburse Firstar for the difference
between the standard fee schedule and the discounted fee schedule
agreed to between the parties.
The Trust agrees to pay all fees and reimbursable expenses within ten
(10) business days following the mailing of the billing notice.
IV. Additional Series
In the event that the Trust establishes one or more series of shares
with respect to which it desires to have Firstar render fund
administration services, under the terms hereof, it shall so notify
Firstar in writing, and if Firstar agrees in writing to provide such
services, such series will be subject to the terms and conditions of
this Agreement, and shall be maintained and accounted for by Firstar on
a discrete basis. The funds currently covered by this Agreement are:
the U.S. Equity Trust, the International Equity Trust and the Global
Equity Trust.
3
<PAGE>
V. Performance of Service; Limitation of Liability
A.
Firstar shall exercise reasonable care in the performance of
its duties under this Agreement. Firstar shall not be liable
for any error of judgment or mistake of law or for any loss
suffered by the Trust in connection with matters to which this
Agreement relates, including losses resulting from mechanical
breakdowns or the failure of communication or power supplies
beyond Firstar's control, except a loss resulting from
Firstar's refusal or failure to comply with the terms of this
Agreement or from bad faith, negligence, or willful misconduct
on its part in the performance of its duties under this
Agreement. Notwithstanding any other provision of this
Agreement, the Trust shall indemnify and hold harmless Firstar
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 Firstar may sustain or incur or which
may be asserted against Firstar by any person arising out of
any action taken or omitted to be taken by it in performing
the services hereunder (i) in accordance with the foregoing
standards, or (ii) in reliance upon any written or oral
instruction provided to Firstar by any duly authorized officer
of the Trust, such duly authorized officer to be included in a
list of authorized officers furnished to Firstar and as
amended from time to time in writing by resolution of the
Board of Directors of the Trust.
In the event of a mechanical breakdown or failure of
communication or power supplies beyond its control, Firstar
shall take all reasonable steps to minimize service
interruptions for any period that such interruption continues
beyond Firstar's control. Firstar 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
Firstar. Firstar 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 Firstar's premises and operating capabilities at any
time during regular business hours of Firstar, upon reasonable
notice to Firstar.
Regardless of the above, Firstar reserves the right to
reprocess and correct administrative errors at its own
expense.
B. In order that the indemnification provisions contained in this
section shall apply, it is understood that if in any case the
Trust may be asked to indemnify or hold Firstar harmless, the
Trust shall be fully and promptly advised of all pertinent
facts concerning the situation in question, and it is further
understood that Firstar 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. The Trust shall have the
option to defend Firstar against any claim which may be the
subject of this indemnification. In the event that the Trust
so elects, it will so notify Firstar and thereupon the Trust
shall take
4
<PAGE>
over complete defense of the claim, and Firstar shall in such
situation initiate no further legal or other expenses for
which it shall seek indemnification under this section.
Firstar shall in no case confess any claim or make any
compromise in any case in which the Trust will be asked to
indemnify Firstar except with the Trust's prior written
consent.
C. Firstar 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 may be asserted against the Trust by any person arising
out of any action taken or omitted to be taken by Firstar as a
result of Firstar's refusal or failure to comply with the
terms of this Agreement, its bad faith, negligence, or willful
misconduct.
VI. Confidentiality
Firstar shall handle, in confidence, all information relating to the
Trust's business which is received by Firstar during the course of
rendering any service hereunder.
VII. Data Necessary to Perform Service
The Trust or its agent, which may be Firstar, shall furnish to Firstar
the data necessary to perform the services described herein at times
and in such form as mutually agreed upon.
VIII. Terms of Agreement
This Agreement shall become effective on October 5, 1998 and, unless
sooner terminated as provided herein, shall continue automatically in
effect for successive annual periods. The Agreement may be terminated
by either party upon giving ninety (90) days' prior written notice to
the other party or such shorter period as is mutually agreed upon by
the parties.
IX. Duties in the Event of Termination
In the event that, in connection with termination, a successor to any
of Firstar's duties or responsibilities hereunder is designated by the
Trust by written notice to Firstar, Firstar will promptly, upon such
termination and at the expense of the Trust, transfer to such successor
all relevant books, records, correspondence, and other data established
or maintained by Firstar under this Agreement in a form reasonably
acceptable to the Trust (if such form differs from the form in which
Firstar has maintained, the Trust shall pay any expenses associated
with transferring the data to such form), and will cooperate in the
transfer of such duties and responsibilities, including provision for
assistance from Firstar's personnel in the establishment of books,
records, and other data by such successor.
X. Choice of Law
This Agreement shall be construed in accordance with the laws of the
State of Wisconsin.
5
<PAGE>
XI. Notices
Notices of any kind to be given by either party to the other party
shall be in writing and shall be duly given if mailed or delivered as
follows: Notice to Firstar shall be sent to:
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
and notice to Trust shall be sent to:
The Simms Funds
55 Railroad Avenue
Greenwich, Connecticut 06830
XII. Records
Firstar shall keep records relating to the services to be performed
hereunder, in the form and manner, and for such period as it may deem
advisable and is agreeable to the Trust but not inconsistent with the
rules and regulations of appropriate government authorities, in
particular, Section 31 of the 1940 Act and the rules thereunder.
Firstar agrees that all such records prepared or maintained by Firstar
relating to the services to be performed by Firstar hereunder are the
property of the Trust and will be preserved, maintained, and made
available with such section and rules of the 1940 Act and will be
promptly surrendered to the Trust on and in accordance with its
request.
XIII. Year 2000 Compliance
Firstar represents that it has examined and tested its internal systems
which have been developed to support the services outlined herein, and
as of the date of this Agreement, has no knowledge of any situation or
circumstance that will inhibit the systems' ability to perform the
expected functions, or inhibit Firstar's ability to provide the
expected services as a result of any business interruptions or other
business problems relating to dates or days before, during, and after
the year 2000. In connection with the foregoing, Firstar represents
that it has made reasonable inquiry of its business partners and other
entities with whom it conducts business and has carefully considered
the responses of those third-parties.
The Simms Funds Firstar Mutual Fund Services, LLC
Sign: ____________________________ Sign: _____________________________________
Print:____________________________ Print:_____________________________________
Title:____________________________ Title:_____________________________________
Date:_____________________________ Date:______________________________________
Attest:___________________________ Attest:____________________________________
6
<PAGE>
EXHIBIT A
Fund Administration and Compliance
Annual Fee Schedule - Domestic Funds
|X| Annual fee based upon assets per fund
o 6 basis points on the first $400 million
o 5 basis points on the next $1 billion
o 3 basis points on the balance
o Minimum annual fee: $30,000 for each fund
$15,000 for each class of share
|X| Plus out-of-pocket expenses, including but not limited to:
o Postage
o Programming
o Stationery
o Proxies
o Retention of records
o Special reports
o Federal and state regulatory filing fees
o Certain insurance premiums
o Expenses from board of directors meetings
o Auditing and legal expenses
o All other out-of-pocket expenses
|X| Fees are billed monthly
FORM OF TRANSFER AGENT AGREEMENT
THIS AGREEMENT is made and entered into on this 5th day of October,
1998, by and between The Simms Funds, a Delaware business trust (the "Trust")
and Firstar Mutual Fund Services, LLC, a limited liability company organized
under the laws of the State of Wisconsin (the "Agent").
WHEREAS, the Trust is an open-end management investment company which
is registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Agent is a limited liability company and, among other
things, is in the business of administering transfer and dividend disbursing
agent functions for the benefit of its customers;
NOW, THEREFORE, the Trust and the Agent do mutually promise and agree
as follows:
1. Terms of Appointment; Duties of the Agent
Subject to the terms and conditions set forth in this Agreement, the
Trust hereby employ and appoint the Agent to act as transfer agent and dividend
disbursing agent.
The Agent shall perform all of the customary services of a transfer
agent and dividend disbursing agent, and as relevant, agent in connection with
accumulation, open account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program), including but not
limited to:
A. Receive orders for the purchase of shares, with prompt delivery,
where appropriate, of payment and supporting documentation to the
Trust's custodian;
B. Process purchase orders and issue the appropriate number of
certificated or uncertificated shares with such uncertificated
shares being held in the appropriate shareholder account;
C. Process redemption requests received in good order and, where
relevant, deliver appropriate documentation to the Trust's
custodian;
D. Pay monies upon receipt from the Trust's custodian, where
relevant in accordance with the instructions of redeeming
shareholders;
E. Process transfers of shares in accordance with the shareowner's
instructions;
F. Process exchanges between series of the Trust and other funds
managed by Simms Capital Management, Inc., the Trust's investment
adviser;
<PAGE>
G. Issue and cancel certificates as instructed; replace lost, stolen
or destroyed certificates upon receipt of satisfactory
indemnification or surety bond;
H. Prepare and transmit payments for dividends and distributions
declared by the Trust;
I. Make changes to shareholder records, including, but not limited
to, address changes in plans (i.e., systematic withdrawal,
automatic investment, dividend reinvestment, etc.);
J. Record the issuance of shares of the Trust and maintain, pursuant
to Rule 17Ad-10(e) under Securities Exchange Act of 1934, as
amended (the "Exchange Act"), a record of the total number of
shares of the Trust which are authorized, issued and outstanding;
K. Prepare shareholder meeting lists and, if applicable, mail,
receive and tabulate proxies;
L. Mail shareholder reports and prospectuses to current
shareholders;
M. Prepare and file U.S. Treasury Department Form 1099 and other
appropriate information required with respect to dividends and
distributions for all shareholders;
N. Provide shareholder account information upon request and prepare
and mail confirmations and statements of account to shareholders
for all purchases, redemptions and other confirmable transactions
as agreed upon with the Trust; and
O. Provide a Blue Sky System which will enable the Trust to monitor
the total number of shares sold in each state. In addition, the
Trust shall identify to the Agent in writing those transactions
and assets to be treated as exempt from the Blue Sky reporting to
the Trust for each state. The responsibility of the Agent for the
Trust's Blue Sky state registration status is solely limited to
the initial compliance by the Trust and the reporting of such
transactions to the Trust.
2. Compensation
The Trust agrees to pay the Agent for performance of the
duties listed in this Agreement in accordance with the attached Schedule A; the
fees and out-of-pocket expenses include, but are not limited to the following:
printing, postage, forms, stationery, record retention, mailing, insertion,
programming, labels, shareholder lists and proxy expenses. If the Trust elects
to terminate this Agreement prior to the first anniversary of this Agreement,
the Trust agrees to reimburse Agent for the difference between the standard fee
schedule and the discounted fee schedule agreed to between the parties.
2
<PAGE>
The Trust agrees to pay all fees and reimbursable expenses within ten
(10) business days following receipt of the billing notice.
3. Representations of Agent
The Agent represents and warrants to the Trust that:
A. It is a limited liability company duly organized, existing and in
good standing under the laws of Wisconsin;
B. It is a registered transfer agent under the Exchange Act.
C. It is duly qualified to carry on its business in the state of
Wisconsin;
D. It is empowered under applicable laws and by its charter and
bylaws to enter into and perform this Agreement;
E. All requisite corporate proceedings have been taken to authorize
it to enter and perform this Agreement; and
F. It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
G. It will comply with all applicable requirements of the Securities
Act of 1933, as amended (the "Securities Act"), the Exchange Act,
the 1940 Act, and any laws, rules, and regulations of
governmental authorities having jurisdiction.
4. Representations of the Trust
The Trust represent and warrant to the Agent that:
A. The Trust is an open-end diversified investment company under the
1940 Act;
B. The Trust is a business trust organized, existing, and in good
standing under the laws of the State of Delaware;
C. The Trust is empowered under applicable laws and by its Trust
Instrument and bylaws to enter into and perform this Agreement;
D. All necessary proceedings required by the Trust Instrument have
been taken to authorize it to enter into and perform this
Agreement;
E. The Trust will comply with all applicable requirements of the
Securities Act, the Exchange Act, the 1940 Act, and any laws,
rules and regulations of governmental authorities having
jurisdiction; and
3
<PAGE>
F. A registration statement under the Securities Act is currently
effective and will remain effective, and appropriate state
securities law filings have been made and will continue to be
made, with respect to all shares of the Trust being offered for
sale.
5. Covenants of the Trust and Agent
The Trust shall furnish the Agent a certified copy of the resolution of
the Board of Trustees of the Trust (the "Board") authorizing the appointment of
the Agent and the execution of this Agreement. The Trust shall provide to the
Agent a copy of the Trust Instrument, bylaws of the Trust, and all amendments.
The Agent shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the 1940 Act, and the rules thereunder, the Agent
agrees that all such records prepared or maintained by the Agent relating to the
services to be performed by the Agent hereunder are the property of the Trust
and will be preserved, maintained and made available in accordance with such
section and rules and will be surrendered to the Trust on and in accordance with
its request.
6. Indemnification; Remedies Upon Breach
The Agent shall exercise reasonable care in the performance of its
duties under this Agreement. The Agent shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Trust in connection
with matters to which this Agreement relates, including losses resulting from
mechanical breakdowns or the failure of communication or power supplies beyond
the Agent's control, except a loss resulting from the Agent's refusal or failure
to comply with the terms of this Agreement or from bad faith, negligence, or
willful misconduct on its part in the performance of its duties under this
Agreement. Notwithstanding any other provision of this Agreement, the Trust
shall indemnify and hold harmless the Agent 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 Agent may sustain or incur or which may be asserted against the Agent
by any person arising out of any action taken or omitted to be taken by it in
performing the services hereunder (i) in accordance with the foregoing
standards, or (ii) in reliance upon any written or oral instruction provided to
the Agent by any duly authorized officer of the Trust, such duly authorized
officer to be included in a list of authorized officers furnished to the Agent
and as amended from time to time in writing by resolution of the Board.
Further, the Trust will indemnify and hold the Agent harmless against
any and all losses, claims, damages, liabilities or expenses (including
reasonable counsel fees and expenses) resulting from any claim, demand, action,
or suit as a result of the negligence of the Trust or the principal underwriter
(unless contributed to by the Agent's breach of this Agreement or other
Agreements between the Trust and the Agent, or the Agent's own negligence or bad
faith); or as a result of the Agent acting upon telephone instructions relating
to the exchange or redemption of shares received by the Agent and reasonably
believed by the Agent under a standard of care customarily used in the industry
to have originated from the record owner of the subject shares; or as a result
of acting in reliance upon any genuine instrument or stock certificate signed,
4
<PAGE>
countersigned, or executed by any person or persons authorized to sign,
countersign, or execute the same.
In the event of a mechanical breakdown or failure of communication or
power supplies beyond its control, the Agent shall take all reasonable steps to
minimize service interruptions for any period that such interruption continues
beyond the Agent's control. The Agent 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 the Agent. The Agent 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 the Agent's premises and operating capabilities at
any time during regular business hours of the Agent, upon reasonable notice to
the Agent.
Regardless of the above, the Agent reserves the right to reprocess and
correct administrative errors at its own expense.
In order that the indemnification provisions contained in this section
shall apply, it is understood that if in any case the Trust may be asked to
indemnify or hold the Agent harmless, the Trust shall be fully and promptly
advised of all pertinent facts concerning the situation in question, and it is
further understood that the Agent 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.
The Trust shall have the option to defend the Agent against any claim which may
be the subject of this indemnification. In the event that the Trust so elects,
it will so notify the Agent and thereupon the Trust shall take over complete
defense of the claim, and the Agent shall in such situation initiate no further
legal or other expenses for which it shall seek indemnification under this
section. The Agent shall in no case confess any claim or make any compromise in
any case in which the Trust will be asked to indemnify the Agent except with the
Trust's prior written consent. The Agent 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 may be asserted against the
Trust by any person arising out of any action taken or omitted to be taken by
the Agent as a result of the Agent's refusal or failure to comply with the terms
of this Agreement, its bad faith, negligence, or willful misconduct.
7. Confidentiality
The Agent agrees on behalf of itself and its employees to treat
confidentially all records and other information relative to the Trust and its
shareholders and shall not be disclosed 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 the Agent may be exposed
to civil or criminal contempt proceedings for failure to comply after being
requested to divulge such information by duly constituted authorities.
5
<PAGE>
8. Additional Series
The Trust is authorized to issue separate classes of shares of
beneficial interest representing interests in separate investment portfolios.
The parties intend that each portfolio established by the Trust, now or in the
future, be covered by the terms and conditions of this agreement.
9. Records
The Agent shall keep records relating to the services to be performed
hereunder, in the form and manner, and for such period as it may deem advisable
and is agreeable to the Trust but not inconsistent with the rules and
regulations of appropriate government authorities, in particular, Section 31 of
the 1940 Act and the rules thereunder. The Agent agrees that all such records
prepared or maintained by the Agent relating to the services to be performed by
the Agent hereunder are the property of the Trust and will be preserved,
maintained, and made available with such section and rules of the 1940 Act and
will be promptly surrendered to the Trust on and in accordance with its request.
10. Wisconsin Law to Apply
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the state of Wisconsin.
11. Amendment, Assignment, Termination and Notice
A. This Agreement may be amended by the mutual written consent of
the parties.
B. This Agreement may be terminated upon ninety (90) days' written
notice given by one party to the other.
C. This Agreement and any right or obligation hereunder may not be
assigned by either party without the signed, written consent of
the other party.
D. Any notice required to be given by the parties to each other
under the terms of this Agreement shall be in writing, addressed
and delivered, or mailed to the principal place of business of
the other party. If to the Agent, such notice should to be sent
to 615 East Michigan Street, Milwaukee, Wisconsin 53202. If to
the Trust, such notice should be sent to 55 Railroad Avenue,
Greenwich, Connecticut 06830.
E. In the event that the Trust gives to the Agent its written
intention to terminate and appoints a successor transfer agent,
the Agent agrees to cooperate in the transfer of its duties and
responsibilities to the successor, including any and all relevant
books, records and other data established or maintained by the
Agent under this Agreement.
6
<PAGE>
F. Should the Trust exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records
and material will be paid by the Trust.
12. Year 2000 Compliance
The Agent represents that it has examined and tested its internal
systems which have been developed to support the services outlined herein, and
as of the date of this Agreement, has no knowledge of any situation or
circumstance that will inhibit the systems' ability to perform the expected
functions, or inhibit the Agent's ability to provide the expected services as a
result of any business interruptions or other business problems relating to
dates or days before, during, and after the year 2000. In connection with the
foregoing, the Agent represents that it has made reasonable inquiry of its
business partners and other entities with whom it conducts business and has
carefully considered the responses of those third-parties.
The Simms Funds Firstar Mutual Fund Services, LLC
By: ______________________________ By: ______________________________
Print:_____________________________ Print:_____________________________
Title:_____________________________ Title:_____________________________
Date:_____________________________ Date:_____________________________
Attest: __________________________ Attest: ___________________________
7
<PAGE>
SCHEDULE A
Transfer Agent and Shareholder Servicing
Annual Fee Schedule
|X| $16.00 per shareholder account - load/no-load funds
|X| Minimum annual fees of $24,000 for the first fund and $14,000 for each
additional fund and/or class of share
<TABLE>
<S> <C>
|X| Plus out-of-pocket expenses, including but not |X| ACH Shareholder Services
limited to: -- $125.00 per month per fund group
o Telephone - toll free lines o $ .50 per account set-up and/or change
o Postage o $ .50 per item for AIP purchases
o Programming o $ .50 per item for EFT payments and purchases
o Stationery/Envelope o $3.50 per correction, reversal, return item
o Mailing
o Insurance
o Proxies
o Retention of records
o Microfilm/fiche of records
o Special reports
o ACH fees
o NSCC charges
o All other out-of-pocket expenses
</TABLE>
Service Charges to Investors
- - ----------------------------
<TABLE>
<S> <C>
|X| Qualified Plan Fees (Billed to Investors)
o Annual maintenance fee per account (Cap at $25.00 per SSN) $12.50 / acct
o Transfer to successor trustee $15.00 / trans.
o Distribution to participant (Exclusive of SWP) $15.00 / trans.
o Refund of excess contribution $15.00 / trans.
|X| Additional Shareholder Fees (Billed to Investors)
o Any outgoing wire transfer $ 12.00 / wire
o Telephone exchange $ 5.00 exch.
o Return check fee $ 20.00 /item
o Stop payment (Liquidation, dividend, draft check) $ 20.00 / stop
o Research fee (For requested items of the second calendar year [or previous] to $ 5.00 / item
the request) (Cap at $25.00)
|X| Fees and out-of-pocket expenses are billed to the fund monthly
</TABLE>
<PAGE>
NSCC
Out-of-Pocket Charges
<TABLE>
<S> <C>
|X| NSCC Interfaces
-- Set-Up
o Fund/SERV, Networking, ACATS, Exchanges DCCS, $5,000 set-up (one time)
RAT
o Commission Settlement $5,000 set-up (one time)
-- Processing
o FundServ $ 50 / month
o Networking $ 250 / month
o CPU Access $ 40 / month
o FundServ Transactions $ .35 / trade
o Networking - per item $ .025 / monthly dividend fund
o Networking - per item $ .015 / non-mo. dividend fund
o First Data $ .10 / next-day FundServ trade
o First Data $ .15 / same-day FundServ trade
-- NSCC Implementation
o 8 to 10 weeks lead time
</TABLE>
<PAGE>
Mutual Fund Services
Additional Out-of-Pocket Expenses
<TABLE>
<S> <C>
|X| Database Select Request $200 per select request
|X| Postage $.31 per one ounce pre-sort first class envelope
|X| Shareholder Records Search $3.00 per search of lost shareholder (based upon 2 returned
mail items)
|X| PAR System Restore $1,500 per restore
|X| Data and Report Transmission
-- Monthly Service and Support
-- Per Record transmitted $160 per month
$.01 per record
|X| New Fund Programming
-- Fund Group Setup $1,500 per fund group
-- Fund Addition to Existing Group $600 per fund
-- Additional Classes to Existing Group $250 per class
-- Additional Programming $150.00 per hour
</TABLE>
<PAGE>
Firstar Client Remote Connectivity
Installation and Operating Costs
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C>
|X| Tier 1 |X| Installation $1,500 per concurrent session
-- Remote access to AMtrust, CPORT, PAR (one-time)
-- Installation support |X| Maintenance $125 per month per concurrent
-- Help Desk maintenance and support connection
o Connectivity
o Application (Client will have additional costs of communication
connection at client site, modems, PC requirements)
- - ---------------------------------------------------------------------------------------------------------------------
|X| Tier II |X| Installation $2,600 per concurrent session
-- Remote access to Trust Touch (one-time) Additional PC's -
-- Installation support $100 per PC beyond concurrent connection
-- Help Desk maintenance and support requirement
o Connectivity $100 setup per additional
o Application connection
|X| Maintenance $125 per month per concurrent
connection
(Client will have
additional costs of
communication connection
at client site, modems,
PC requirements)
- - ---------------------------------------------------------------------------------------------------------------------
|X| Tier III |X| Installation $2,600 per concurrent session
-- Remote access to Firstar Impress (one-time) Additional PC's -
-- Installation support $100 per PC beyond concurrent connection
-- Help Desk maintenance and support requirement
o Connectivity $100 setup per additional
o Application connection
|X| Maintenance $125 per month per concurrent
-- Recommend WAN connection
connection starting at $170 per month per
256kb license per concurrent
connection
(Client will have
additional costs of
communication connection
at client site, modems,
PC requirements)
</TABLE>
4
<PAGE>
Mutual Fund Services
Internet Services
<TABLE>
<S> <C>
|X| Internet Services |X| Customer assistance with fund net site integration
|X| Internet on-line
access to shareholder account
data subject to
Firstar security constraints
|X| PIN administration through Firstar customer service
|X| Shareholder Transactions-exchange, redemption, purchase based
upon preauthorized shareholder instructions
|X| Fund Group Setup
o Initial Access |X| $25,000 per fund group (one-time)
o Technical Setup |X| $135.00 per hour (maximum $4,500.00)
o Page Customization |X| $135.00 per hour (maximum $6,700.00)
|X| Recurring Costs
o Annual Access |X| $10,000 per year
o Account Inquiries |X| $ .25 per inquiry
o Financial Transactions |X| $ 1.00 per financial transaction
o PIN Administration |X| $ .40 per PIN assignment or acknowledgment
|X| Firstar Customer Requirements |X| Customer net site
|X| Provide content for site integration
|X| Signed Firstar service agreement
</TABLE>
5
<PAGE>
DAZL
Out-of-Pocket Charges
|X| DAZL Services - DAZL (Data Access Zip Link) is the electronic delivery
system transfer of mutual fund data and shareholder account data to the
financial intermediary firm (financial planners, broker/dealers, etc.) that
can be easily imported into the intermediary firm's portfolio management
software.
|X| DAZL and DAZL Direct
(Electronic data delivery of fund and shareholder information to financial
intermediaries/advisors-either mainframe to mainframe or file delivery to
electronic mailbox service)
o Set-up $5,000 / interface
o Monthly Usage $1,000 / month
o Transmission $ .015 / price record
$ .025 / other record
o Enhancement $ 125 / hour
(Electronic data delivery of fund and shareholder information and generate
financial transactions from financial intermediary firms back to Firstar,
capabilities through DAZL)
o Same charges as above
o No charge for transmission of financial trades to Firstar
Dated as of October 5, 1998
Form of Fulfillment Servicing Agreement
This Agreement between Firstar Mutual Fund Services, LLC ("Firstar") and The
Simms Funds (the "Trust") is entered into on this 5th day of October, 1998.
WHEREAS, the Trust provides investment opportunities to prospective shareholders
through a family of open end mutual funds; and
WHEREAS, Firstar provides fulfillment services to mutual funds; NOW
THEREFORE, the parties agree as follows:
Duties and responsibilities of Firstar
o Answer all prospective shareholder calls concerning any of the
Trust funds listed in the attached Schedule A which may be
modified from time to time.
o Send all available fund(s) materials requested by the prospect
which may within 24 hours from time of call.
o Receive and update all the Trust's fulfillment literature so that
most current information is sent and quoted.
o Provide 24 hour answering service to record prospect calls made
after hours (7 p.m. to 8 a.m. CT).
o Maintain and store Trust fulfillment inventory.
o Send periodic fulfillment reports to the Trust as agreed upon
between the parties.
Duties and responsibilities of the Trust
o Provide the Trust's fulfillment literature updates to Firstar as
necessary.
o File with the NASD, SEC and State Regulatory Agencies, as
appropriate, all fulfillment literature that the Trust requests
Firstar send to prospective shareholders.
o Supply Firstar with sufficient inventory of fulfillment materials
as requested from time to time by Firstar.
o Provide Firstar with any sundry information about the Trust in
order to answer prospect questions.
Indemnification
The Trust agrees to indemnify Firstar from any liability arising out of the
distribution of fulfillment literature which has not been approved by the
appropriate Federal and State Regulatory Agencies.
<PAGE>
Compensation
The Trust agrees to compensate Firstar for the services performed under this
agreement in accordance with the attached Schedule B; the Trust agrees to pay
all invoices within ten days of receipt.
Proprietary and Confidential Information
Firstar agrees on behalf of itself and its directors, officers, and employees to
treat confidentiality and as proprietary information of the Trust all records
and other information relative to the Trust and prior, present, or potential
shareholders of the Trust (and clients of said shareholders), and not to use
such records and information for any purpose other than performance of its
responsibilities and duties thereunder, 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 Firstar may be exposed to civil or
criminal contempt proceedings for failure to comply, when requested to divulge
such information by duly constituted authorities, or when so requested by the
Trust.
Termination
This agreement may be terminated by either party upon 30 days' written notice.
Notices
Notices of any kind to be given by either party to the other party shall be in
writing and shall be duly given if mailed or delivered as follows: Notice to
Firstar shall be sent to:
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
and notice to the Trust shall be sent to:
The Simms Funds
55 Railroad Avenue
Greenwich, Connecticut 06830
Year 2000 Compliance
Firstar represents that it has examined and tested its internal systems which
have been developed to support the services outlined herein, and as of the date
of this Agreement, has no knowledge of any situation or circumstance that will
inhibit the systems' ability to perform the expected functions, or inhibit
Firstar's ability to provide the expected services as a result of any business
interruptions or other business problems relating to dates or days before,
during, and after the year 2000. In connection with the foregoing, Firstar
represents that it has made reasonable inquiry of its business partners and
other entities with whom it conducts business and has carefully considered the
responses of those third-parties.
2
<PAGE>
Dated this 5th day of October, 1998.
The Simms Funds Firstar Mutual Fund Services, LLC
Sign: _____________________________ Sign: ______________________________
Print:_____________________________ Print:______________________________
Title:_____________________________ Title:______________________________
Date:_____________________________ Date:_______________________________
Attest: __________________________ Attest: __________________________
3
<PAGE>
Schedule A
Funds offered by The Simms Funds:
o U.S. Equity Fund
o International Equity Fund
o Global Equity Fund
Dated: October 5, 1998
<PAGE>
SCHEDULE B
Literature Fulfillment Service
Annual Fee Schedule
|X| Customer Service
o State registration compliance edits
o Literature database
o Record prospect request and profile
o Prospect servicing 8:00 am to 7:00 p.m. CT
o Recording and transcription of requests received off-hours
o Service Fee: $.99 / minute
$100 / month minimum
$780 one-time set-up
|X| Assembly and Distribution of Literature Requests
o Generate customized prospect letters
o Assembly and insertion of literature items
o Inventory tracking
o Inventory storage, reporting
o Periodic reporting of leads by state, items requested,
market source
o Service Fee: $.45 / lead - insertion of up to 4 items/lead
$.15 / additional inserts
Dated: October 5, 1998
[Letterhead of Kramer Levin Naftalis & Frankel LLP]
November 25, 1998
The Simms Funds
55 Railroad Avenue
Greenwich, Connecticut 06830
Re: The Simms Funds
---------------
Ladies and Gentlemen:
We have acted as counsel to The Simms Funds, a Delaware
business trust (the "Trust"), in connection with certain matters relating to the
creation of the Trust and the issuance of Shares of beneficial interest therein.
Capitalized terms used herein and not otherwise herein defined are used as
defined in the Amended and Restated Trust Instrument of the Trust dated as of
October 5, 1998 (the "Governing Instrument").
In rendering this opinion, we have examined copies of the
following documents, each in the form provided to us: the Certificate of Trust
of the Trust as filed in the Office of the Secretary of State of the State of
Delaware (the "Recording Office") on July 1, 1998 (the "Certificate"); the
Amended and Restated Certificate of Trust of the Trust as filed in the Recording
Office on October 5, 1998; the Governing Instrument; the Trust Instrument of the
Trust dated June 30, 1998 (the "Original Governing Instrument"); the Amended and
Restated Bylaws of the Trust dated October 5, 1998 (the "Bylaws"); certain
resolutions of the Trustees of the Trust prepared for adoption at the September
14, 1998 meeting of the Trustees (such resolutions, together with the Governing
Instrument and the Bylaws, the "Governing Documents"); the Trust's Notification
of Registration filed pursuant to Section 8(a) of the Investment Company Act of
1940 on Form N-8A filed with the Securities and Exchange Commission on July 9,
1998; the Trust's Registration Statement under the Securities Act of 1933 on
Form N-1A as filed with the Securities and Exchange Commission on July 9, 1998
(the "Registration Statement"); and a certification of good standing of the
Trust obtained as of a recent date from the Recording Office. In such
examinations, we have assumed the genuineness of all signatures, the conformity
to original documents of all documents submitted to us as copies or drafts of
documents to be executed, and the legal capacity of natural persons to complete
the execution of documents. As to any facts material to our opinion, other than
those assumed, we have relied without independent investigation on the
above-referenced documents and on the accuracy, as of the date hereof, of the
matters therein contained.
Based on and subject to the foregoing, it is our opinion that:
1. The Trust is a duly formed and validly existing business
trust in good standing under the laws of the State of Delaware.
2. The Shares, when issued to Shareholders in accordance with
the terms, conditions, requirements and procedures set forth in the Governing
Documents, will constitute legally issued, fully paid and non-assessable Shares
of beneficial interest in the Trust.
<PAGE>
The Simms Funds
November 25, 1998
Page 2
We are members of the Bar of the State of New York and do not
hold ourselves out as experts on, or express any opinion as to, the law of any
other state or jurisdiction other than the laws of the State of New York and
applicable federal laws of the United States. As to matters involving Delaware
law, with your permission, we have relied solely upon an opinion of Morris,
Nichols, Arsht & Tunnell, special Delaware counsel to the Trust, a copy of which
is attached hereto as Exhibit A, concerning the organization of the Trust and
the authorization and issuance of the Shares, and our opinion is subject to the
qualifications and limitations set forth therein, which are incorporated herein
by reference as though fully set forth herein.
This opinion is solely for your benefit and is not to be
quoted in whole or in part, summarized or otherwise referred to, nor is it to be
filed with or supplied to any governmental agency or other person without the
written consent of this firm. This opinion letter is rendered as of the date
hereof, and we specifically disclaim any responsibility to update or supplement
this letter to reflect any events or state of facts which may hereafter come to
our attention or any changes in statutes or regulations or any court decisions
which may hereafter occur.
Notwithstanding the previous paragraph, we consent to the
filing of this opinion as an exhibit to Pre-Effective Amendment No. 1 the
Trust's Registration Statement.
Very truly yours,
Kramer Levin Naftalis & Frankel LLP
[LETTERHEAD OF MORRIS, NICHOLS, ARSHT & TUNNELL]
November 25, 1998
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
Re: The Simms Funds
---------------
Ladies and Gentlemen:
We have acted as special Delaware counsel to The Simms Funds,
a Delaware business trust (the "Trust"), in connection with certain matters
relating to the creation of the Trust and the issuance of Shares of beneficial
interest therein. Capitalized terms used herein and not otherwise herein defined
are used as defined in the Amended and Restated Trust Instrument of the Trust
dated as of October 5, 1998 (the "Governing Instrument").
In rendering this opinion, we have examined copies of the
following documents, each in the form provided to us: the Certificate of Trust
of the Trust as filed in the Office of the Secretary of State of the State of
Delaware (the "Recording Office") on July 1, 1998 (the "Certificate"); the
Amended and Restated Certificate of Trust of the Trust as filed in the Recording
Office on October 5, 1998; the Governing Instrument; the Trust Instrument of the
Trust dated June 30, 1998 (the "Original Governing Instrument"); the Amended and
Restated Bylaws of the Trust dated October 5, 1998 (the "Bylaws"); certain
resolutions of the Trustees of the Trust prepared for adoption at the September
14, 1998 meeting of the Trustees (such resolutions, together with the Governing
Instrument and the Bylaws, the "Governing Documents"); the Trust's Notification
of Registration filed pursuant to Section 8(a) of the Investment Company Act of
1940 on Form N-8A filed with the Securities and Exchange Commission on July 9,
1998; the Trust's Registration Statement under the Securities Act of 1933 on
Form N-1A as filed with the Securities and Exchange Commission on July 9, 1998
(the "Registration Statement"); and a certification of good standing of the
Trust obtained as of a recent date from the Recording Office. In such
examinations, we have assumed the genuineness of all signatures, the conformity
to original documents of all documents submitted to us as copies or drafts of
documents to be executed, and the legal capacity of natural persons to complete
the execution of documents. We have further assumed for the purpose of this
opinion: (i) the due adoption, authorization, execution and delivery by, or on
behalf of, each of the parties thereto of the above-referenced resolutions,
instruments, certificates and other documents, and of all documents contemplated
by the Governing Instrument and all applicable resolutions of the Trustees to be
executed by investors desiring to become Shareholders; (ii) the payment of
consideration for Shares, and the application of such consideration, as provided
in the Governing Instrument, and compliance with the other terms, conditions and
restrictions set forth in the Governing Instrument and all applicable
resolutions of the Trustees in connection with the issuance of Shares
(including, without limitation, the taking of all appropriate action by the
<PAGE>
Kramer Levin Naftalis & Frankel LLP
November 25, 1998
Page 2
Trustees to designate Series and Classes of Shares and the rights and
preferences attributable thereto as contemplated by the Governing Instrument);
(iii) that appropriate notation of the names and addresses of, the number of
Shares held by, and the consideration paid by, Shareholders will be maintained
in the appropriate registers and other books and records of the Trust in
connection with the issuance or transfer of Shares; (iv) that no event has
occurred subsequent to the filing of the Certificate that would cause a
termination or reorganization of the Trust under Sections 11.04 or 11.05 of the
Original Governing Instrument or the Governing Instrument; (v) that the
activities of the Trust have been and will be conducted in accordance with the
terms of the Original Governing Instrument or the Governing Instrument, as
applicable, and the Delaware Act; (vi) that the Trust is, becomes, or will
become prior to or within 180 days following the first issuance of beneficial
interest therein, a registered investment company under the Investment Company
Act of 1940, as amended; and (vii) that each of the documents examined by us is
in full force and effect and has not been amended, supplemented or otherwise
modified. No opinion is expressed herein with respect to the requirements of, or
compliance with, federal or state securities or blue sky laws. Further, we
express no opinion on the sufficiency or accuracy of any registration or
offering materials relating to the Trust or the Shares. As to any facts material
to our opinion, other than those assumed, we have relied without independent
investigation on the above-referenced documents and on the accuracy, as of the
date hereof, of the matters therein contained.
Based on and subject to the foregoing, and limited in all
respects to matters of Delaware law, it is our opinion that:
1. The Trust is a duly formed and validly existing business
trust in good standing under the laws of the State of Delaware.
2. The Shares, when issued to Shareholders in accordance with
the terms, conditions, requirements and procedures set forth in the Governing
Documents, will constitute legally issued, fully paid and non-assessable Shares
of beneficial interest in the Trust.
We understand that you wish to rely on this opinion in
connection with the delivery of your opinion to the Trust dated on or about the
date hereof and we hereby consent to such reliance. Except as provided in the
immediately preceding sentence, this opinion may not be relied on by any person
on or for any purpose without our prior written consent. We hereby consent to
the filing of a copy of this opinion with the Securities and Exchange Commission
as part of the pre-effective amendment to the Trust's Registration Statement. In
giving this consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder. This opinion speaks only as of the date hereof and is
based on our understandings and assumptions as to present facts and our review
of the above-referenced documents and certificates and the application of
Delaware law as the same exists on the date hereof, and we undertake no
obligation to update or supplement this opinion after the date hereof for the
benefit of any person or entity with respect to any facts or circumstances that
may hereafter come to our attention or any changes in facts or law that may
hereafter occur or take effect.
<PAGE>
Kramer Levin Naftalis & Frankel LLP
November 25, 1998
Page 3
Sincerely,
MORRIS, NICHOLS, ARSHT & TUNNELL
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the use in the Statement of Additional Information
constituting part of this Pre-Effective Amendment No. 1 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
November 24, 1998, relating to the financial statements of The Simms Funds,
which appears in such Statement of Additional Information, and to the
incorporation by reference of our report into the Prospectus which constitutes
part of this Registration Statement. We also consent to the references to us
under the heading "Independent Accountants" in such Prospectus and Statement of
Additional Information.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
November 24, 1998
SIMMS FUNDS
RULE 12B-1 DISTRIBUTION PLAN
FOR PAYMENT OF CERTAIN CLASS A SHARE
DISTRIBUTION EXPENSES
This Rule 12b-1 Distribution Plan (the "Plan") pertains to the Class A
shares of each series as listed in Schedule I (individually, a "Fund," and
collectively, the "Funds"), of Simms Funds, a Delaware business trust (the
"Trust") and an open-end, diversified management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), has been
adopted pursuant to Section 12(b) of the 1940 Act and Rule 12b-1 thereunder
("Rule 12b-1").
1. Principal Underwriter. Merit Capital Associates, Inc. ("the
Distributor"), acts as the principal underwriter of the Funds' Class A shares
pursuant to a Distribution Agreement with the Trust. Simms Capital Management,
Inc. (the "Investment Advisor"), acts as the Funds' investment adviser pursuant
to an Investment Advisory Agreement with the Trust.
2. Distribution Payments.
(a) The Class A shares of each Fund either directly or through the
Investment Advisor, may make payments periodically (i) to the
Distributor or to any broker-dealer (a "Broker") who is
registered under the Securities Exchange Act of 1934, as amended
(the "1934 Act") and a member in good standing of the National
Association of Securities Dealers, Inc. (the NASD") and who has
entered into a selected dealer agreement with the Distributor,
(ii) to other persons or organizations ("Distribution Agents")
who have entered into agreements with the Trust on behalf of a
Fund for the distribution of the Fund's Class A shares, or (iii)
to the Distributor, a Broker, the Investment Advisor, a
Distribution Agent, or any other person for expenses associated
with distribution of the Fund's Class A shares, including the
compensation of the sales personnel of the Distributor.
(b) The schedule of such fees and the basis upon which such fees will
be paid shall be determined from time to time by the Distributor
and the Investment Advisor, subject to approval by the Board of
Trustees of the Trust (the "Board").
(c) Payments may also be made for any advertising and promotional
expenses relating to selling efforts, including but not limited
to the incremental costs of printing prospectuses, statements of
additional information, annual reports and other periodic reports
for distribution to persons who are not Class A shareholders of a
Fund; costs of preparing and distributing any other supplemental
sales literature; costs of radio, television, newspaper and other
advertising; telecommunications expenses, including the cost of
telephones, telephone lines and other communications equipment,
incurred
<PAGE>
by or for the Distributor in carrying out its obligations under
the Distribution Agreement.
(d) The aggregate amount of all payments by the Class A shares of a
Fund in any fiscal year, to the Distributor, Brokers, the
Investment Advisor, Distribution Agents and for advertising and
promotional expenses pursuant to paragraphs (a), (b), (c) of this
Section 2 shall not exceed 0.50% of the average daily net asset
value attributable to the Class A shares of the Fund on an annual
basis for such fiscal year, or such lesser amounts as determined
appropriate. The Plan will only make payments for expenses
actually incurred on a first-in, first-out basis. The amount of
expenses incurred in any year may not exceed the rate of
reimbursement set forth in the Plan. The unreimbursed amounts may
be recovered through future payments under the Plan. Carry-over
amounts are not limited in the number of years they may be
carried forward. If the Plan is terminated in accordance with its
terms with respect to the Class A shares of a Fund, the
obligations of the Fund to make payments pursuant to the Plan
will cease and the Class A shares of the Fund will not be
required to make any payments past the date the Plan terminates.
3. Reports. Quarterly, in each year that this Plan remains in effect,
the Trust's Principal Financial Officer shall prepare and furnish to the Board a
written report, complying with the requirements of Rule 12b-l, setting forth the
amounts expended by the Class A shares of each Fund under the Plan and purposes
for which such expenditures were made.
4. Approval of Plan. This Plan shall become effective upon approval of
the Plan as it pertains to the Class A shares of a Fund and the form of Selected
Dealer Agreement, by the majority votes of the Board and the Qualified Trustees
(as defined in Section 6), cast in person at a meeting called for the purpose of
voting on the Plan.
5. Term. This Plan as it pertains to the Class A shares of a Fund shall
remain in effect for one year from its adoption date and may be continued
thereafter if this Plan and all related agreements are approved at least
annually by a majority vote of the Trustees, including a majority of the
Qualified Trustees, cast in person at a meeting called for the purpose of voting
on such Plan and agreements. This Plan may not be amended as it pertains to the
Class A shares of a Fund in order to increase materially the amount to be spent
for distribution assistance without Class A shareholder approval of such Fund.
All material amendments to this Plan must be approved by a vote of the Board,
and of the Qualified Trustees (as hereinafter defined), cast in person at a
meeting called for the purpose of voting thereon.
6. Termination. This Plan may be terminated as it pertains to the Class
A shares of a Fund at any time by a majority vote of the Trustees who are not
interested persons (as defined in section 2(a)(19) of the 1940 Act) of the Fund
and have no direct or indirect financial interest in the operation of the Plan
or in any agreements related to the Plan (the "Qualified Trustees") or by vote
of a majority of the outstanding voting securities of the Class A shares of
2
<PAGE>
the Fund, as defined in section 2(a)(42) of the 1940 Act. The Plan may remain in
effect with respect to the Class A shares of a Fund even if the Plan has been
terminated in accordance with this Section 6 with respect to the Class A shares
of any other Fund.
7. Nomination of "Disinterested" Trustees. While this Plan shall be in
effect, the selection and nomination of the "disinterested" Trustees of the
Trust shall be committed to the discretion of the Qualified Trustees then in
office.
8. Miscellaneous.
(a) Any termination or noncontinuance of (i) a Selected Dealer
Agreement between the Distributor and a particular Broker, or
(ii) any other Agreement between the Investment Advisor or the
Trust on behalf of the Class A shares of a Fund and a particular
person or organization, shall have no effect on any similar
agreements between Brokers or other persons and the Fund and its
Class A shares, the Investment Advisor or the Distributor
pursuant to this Plan.
(b) Neither the Distributor, the Investment Advisor nor the Class A
shares of a Fund shall be under any obligation because of this
Plan to execute any Selected Dealer Agreement with any Broker or
any other Agreement with any person or organization.
(c) All agreements with any person or organization relating to the
implementation of this Plan shall be in writing and any agreement
related to this Plan shall be subject to termination, without
penalty, pursuant to the provisions of Section 6 hereof.
(d) This Plan shall not be construed to contain any of the terms and
provisions of the Simms Funds Shareholder Servicing Plan (the
"Servicing Plan") and all payments under this Plan for
distribution services shall be separate and in addition to
payments for shareholder servicing services provided under the
Servicing Plan.
Approved: September 14, 1998
3
<PAGE>
SCHEDULE I
This Distribution Plan shall be adopted with respect to the Class A
shares of the following Funds of Simms Funds:
1. Equity Fund
2. International Equity Fund
3. Global Equity Fund
4
<PAGE>
Simms Funds
55 Railroad Avenue
Greenwich, CT 06830
Re: Selected Dealer Agreement for Class A Shares
of the Equity Fund, a Series of Simms Funds
---------------------------------------------------------------
Gentlemen:
We understand that the Simms Funds (the "Trust") has adopted a Plan for
Payment of Certain Class A Share Distribution Expenses (the "Plan") on behalf of
the ______ Equity Fund (the "Fund"), a series of the Trust, pertaining to the
Fund's Class A shares, pursuant to Rule 12b-l of the Investment Company Act of
1940, as amended (the "1940 Act"), for making payments to selected brokers for
distribution assistance of the Fund's Class A shares.
We desire to enter into an Agreement with you for the sale and
distribution of the Class A shares of the Fund for which you are Distributor and
whose Class A shares are offered to the public at net asset value plus any
initial sales charge as set forth in the current Prospectus. Upon acceptance of
this Agreement by you, we understand that we may offer and sell Class A shares
of the Fund, subject, however, to all of the terms and conditions hereof and to
your right to suspend or terminate the sale of such securities.
1. We understand that the Class A shares of the Fund covered by this
agreement will be offered and sold at the public offering price. The public
offering price is the net asset value described in the Fund's current Prospectus
in effect at the time the order for such shares is confirmed and accepted on
your behalf by the Fund plus any initial sales charge. We further understand
that all purchase requests and applications submitted by us are subject to
acceptance or rejection in the Fund's or your sole discretion.
2. We certify that we are members of the National Association of
Securities Dealers, Inc. ("NASD") and agree to maintain Membership in said
Association, or in the alternative, that we are foreign brokers not eligible for
membership in said Association. In either case, we agree to abide by all the
rules and regulations of the NASD which are binding upon underwriters and
brokers in the distribution of the shares of open-end investment companies,
including without limitation, NASD Conduct Rule 2830, all of which are
incorporated herein as if set forth in full. We further agree to comply with all
applicable state and Federal laws and the rules and regulations of authorized
regulatory agencies. We agree that we will not sell or offer for sale, Class A
shares of the Fund in any state or jurisdiction where they are not exempt from
registration or have not been qualified for sale.
3. We will offer and sell the Class A shares of the Fund covered by
this Agreement only in accordance with the terms and conditions of its then
current Prospectus, and we will make no representations not included in said
Prospectus or in any authorized supplemental material supplied by you. We will
use our best efforts in the development and promotion of sales of the Class A
shares covered by this Agreement and agree to be responsible for the proper
instruction and training of all sales personnel employed by us, in order that
the
<PAGE>
Class A shares will be offered in accordance with the terms and conditions of
this Agreement and all applicable laws, rules and regulations. We agree to hold
you harmless and indemnify you in the event that we, or any of our sales
representatives, should violate any law, rule or regulation, or any provisions
of this Agreement, which may result in liability to you; and in the event you
determine to refund any amount paid by any investor by reason of any such
violation on our part, we shall return to you any distribution assistance
payments previously paid or allowed by you to us with respect to the transaction
for which the refund is made. All expenses which we incur in connection with our
activities under this Agreement shall be borne by us.
4. We shall be entitled to receive a commission on the sale of Class A
shares in the amount set forth in the Fund's current Prospectus, subject to any
quantity or other discounts or eliminations of commission as set forth in said
Prospectus. We may allow sub-agents or dealers commissions or discounts not
exceeding the total commission as we shall deem advisable so long as any such
commissions or discounts are set forth in the Fund's current Prospectus.
5. In consideration of the distribution services and facilities
described herein, we shall be entitled to receive from you such fees as are set
forth in Exhibit A, attached hereto. We understand that the payment of such fees
has been authorized pursuant to the Plan approved by the Trust's Board of
Trustees and shall be paid only so long as this Agreement is in effect.
6. The frequency of payment, the terms of any right to sell in a
territory, and any other supplemental terms, conditions or qualifications for us
to receive such payments are subject to change by you from time to time, upon 30
days' written notice. Any orders placed after the effective date of such change
shall be subject to the fee rates in effect at the time of receipt of the
payment by the Fund or you. Such 30-day period may be waived at your sole option
in the event such change increases the distribution assistance payments due us.
7. Payment for Class A shares shall be made to the Fund and shall be
received by the Fund promptly after the acceptance of our order. If such payment
is not received by the Fund, we understand that the Fund reserves the right
without notice, forthwith to cancel the sale, or, at the Fund's option, to sell
the Class A shares ordered by us back to the Fund in which latter case we may be
held responsible for any loss, including loss of profit, suffered by the Fund
resulting from our failure to make payments aforesaid.
8. Your obligations to us under this Agreement are subject to all the
provisions of any underwriting agreements you have or may enter into with the
Fund. We understand and agree that in performing our services covered by this
Agreement we are acting as principal, and you are in no way responsible for the
manner of our performance or for any of our acts or omissions in connection
therewith. Nothing in this Agreement or in the Plan shall be construed to
constitute us or any of our agents, employees or representatives as your agent,
partner or employee, or the agent, partner or employee of the Fund.
9. This Agreement shall terminate automatically (i) in the event of its
assignment, the term "assignment" for this purpose having the meaning defined in
Section 2(a)(4) of the 1940 Act or (ii) in the event the Plan is terminated.
2
<PAGE>
10. This Agreement may be terminated at any time (without payment of
any penalty) by a majority of the "Qualified Trustees" as defined in the Plan or
by a vote of a majority of the outstanding voting Class A securities of the Fund
as defined in the Plan (on not more than 60 days' written notice to us at our
principal place of business). We, on 60 days' written notice addressed to you at
your principal place of business, may terminate this Agreement. You may also
terminate this Agreement for cause on violation by us of any of the provisions
of this Agreement, said termination to become effective on the date of mailing
notice to us of such termination. Without limiting the generality of the
foregoing and any provision hereof to the contrary notwithstanding, our
expulsion from the NASD will automatically terminate this Agreement without
notice; our suspension from the NASD or violation of applicable state or Federal
laws or rules and regulations of authorized regulatory agencies will terminate
this Agreement effective upon date of mailing notice to us of such termination.
Your failure to terminate for any cause shall not constitute a waiver of your
right to terminate at a later date for any such cause.
11. A copy of the Certificate of Trust is on file with the Secretary of
State of Delaware, and notice is hereby given that this instrument is executed
on behalf of the Trustees as Trustees and not individually and that the
obligations of this instrument are not binding upon any of the Trustees or
shareholders individually but are binding only upon the assets and property of
the Fund.
12. All communications to you shall be sent to you at your offices at
___________________________. Any notice to us shall be duly given if mailed or
telegraphed to us at the address shown on this Agreement.
13. This Agreement shall become effective as of the date when it is
executed and dated by you below. This Agreement and all the rights and
obligations of the parties hereunder shall be governed by and construed under
the laws of the State of Delaware.
ACCEPTED: (Broker/Dealer)
SIMMS FUNDS
By:_______________________ By: :_______________________
Name: Name:
Title: Title:
Dated: _____________________ (Address)
3
<PAGE>
EXHIBIT A
Fees Payable Pursuant to Paragraph 5
- - ------------------------------------
On an annual basis, ____% of the average daily net asset value
attributable to the Class A shares of the Fund to which we provide
distribution services and facilities.
4
SIMMS FUNDS
SHAREHOLDER SERVICING PLAN
This Shareholder Servicing Plan (the "Plan") is adopted by Simms Funds,
a business trust organized under the laws of the State of Delaware (the
"Trust"), on behalf of each of its series (individually, a "Fund," and
collectively, the "Funds") as set forth in Schedule I, as amended from time to
time, subject to the following terms and conditions:
Section 1. Annual Fees.
Shareholder Services Fee. Each Fund (or Class thereof, as the case may
be) may pay to the distributor of its shares (the "Distributor") or financial
institutions that provide certain services to the Funds, a shareholder services
fee under the Plan (the "Services Fee"). Each Fund's Class A Shares shall pay a
Services Fee equal to the amounts set forth in Schedule I to the Distributor or
financial institution.
Adjustment to Fees. Any Fund may pay a Services Fee to the Distributor
or financial institution at a lesser rate than the fees specified in Section 1
hereof as agreed upon by the Board of Trustees (the "Board") and the Distributor
or financial institution and approved in the manner specified in Section 3 of
this Plan.
Payment of Fees. The Services Fees will be calculated daily and paid
monthly by each Fund at the annual rates indicated on Schedule I.
Section 2. Expenses Covered by the Plan.
Services Fees may be used by the Distributor or financial institution
for payments to financial institutions and persons who provide administrative
and support services to their customers who may from time to time beneficially
own shares, which may include (i) establishing and maintaining accounts and
records relating to shareholders; (ii) processing dividend and distribution
payments from the Fund on behalf of shareholders; (iii) providing information
periodically to shareholders showing their positions in shares and integrating
such statements with those of other transactions and balances in shareholders
other accounts serviced by such financial institution; (iv) arranging for bank
wires; (v) responding to shareholder inquiries relating to the services
performed; (vi) responding to routine inquiries from shareholders concerning
their investments; (vii) providing subaccounting with respect to shares
beneficially owned by shareholders, or the information to the Fund necessary for
subaccounting; (viii) if required by law, forwarding shareholder communications
from the Fund (such as proxies, shareholder reports, annual and semi-annual
financial statements and dividend, distribution and tax notices) to
shareholders; (ix) assisting in processing purchase, exchange and redemption
requests from shareholders and in placing such orders with our service
contractors; (x) assisting shareholders in changing dividend options, account
designations and addresses; (xi) providing shareholders with a service that
invests the assets of their accounts in shares pursuant to specific or
pre-authorized instructions; and (xii) providing such other similar services as
the Fund may
<PAGE>
reasonably request to the extent the Distributor or financial institution is
permitted to do so under applicable statutes, rules and regulations.
Section 3. Approval of Trustees.
Neither the Plan nor any related agreements will take effect until
approved by a majority of both (a) the full Board and (b) those Trustees who are
not "interested persons" of the Funds (as defined in Section 2(a)(19) of the
Investment Company Act of 1940, as amended (the "1940 Act")) and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreements related to it (the "Qualified Trustees"), cast in person at a meeting
called for the purpose of voting on the Plan and the related agreements.
Section 4. Continuance of the Plan.
The Plan will continue in effect until September 14, 1999, and
thereafter for successive twelve-month periods: provided, however, that such
continuance is specifically approved at least annually by the Board and by a
majority of the Qualified Trustees.
Section 5. Termination.
The Plan may be terminated at any time with respect to a Fund (i) by
the Fund without the payment of any penalty, by the vote of a majority of the
outstanding voting securities of the Fund (or, the shareholders of a particular
class, if applicable) or (ii) by a vote of the Qualified Trustees. The Plan may
remain in effect with respect to a Fund even if the Plan has been terminated in
accordance with this Section 5 with respect to any other Fund.
Section 6. Amendments.
No material amendment to the Plan may be made unless approved by the
Board in the manner described in Section 3 above.
Section 7. Selection of Certain Trustees.
While the Plan is in effect, the selection and nomination of the Fund's
Trustees who are not interested persons of the Fund will be committed to the
discretion of the Trustees then in office who are not interested persons of the
Fund.
Section 8. Written Reports.
In each year during which the Plan remains in effect, a person
authorized to direct the disposition of monies paid or payable by a Fund
pursuant to the Plan or any related agreement will prepare and furnish to the
Board, and the Board will review, at least quarterly, written reports complying
with the requirements of the Rule which set out the amounts expended under the
Plan and the purposes for which those expenditures were made.
2
<PAGE>
Section 9. Preservation of Materials.
The Fund will preserve copies of the Plan, any agreement relating to
the Plan and any report made pursuant to Section 8 above, for a period of not
less than six years (the first two years in an easily accessible place) from the
date of the Plan, agreement or report.
Section 10. Limit of Liability.
The limitation of shareholder liability set forth in the Trust's Trust
Instrument is hereby acknowledged. The obligations of the Trust under this Plan,
if any, shall not be binding upon the Trustees individually or upon holders of
shares of the Trust individually but shall be binding only upon the assets and
property of the Trust, and upon the Trustees insofar as they hold title thereto.
Section 11. Meanings of Certain Terms.
As used in the Plan, the terms "interested person" and "majority of the
outstanding voting securities" will be deemed to have the same meaning that
those terms have under the 1940 Act by the Securities and Exchange Commission.
IN WITNESS WHEREOF, the Funds executed this Plan as of September 14,
1998.
Simms Funds
By: __________________________
3
<PAGE>
SCHEDULE I
This Shareholder Servicing Plan shall be adopted with respect to the following
Funds of the Trust at the indicated annual rate of the average daily net assets
of each Fund's respective Class of Shares:
Class A Shares
U.S. Equity Fund 0.25%
International Equity Fund 0.25%
Global Equity Fund 0.25%
Dated as of September 14, 1998
- - ------------------------------
<PAGE>
SHAREHOLDER SERVICING AGREEMENT
Simms Funds
55 Railroad Avenue
Greenwich, CT 06830
To: _______________
We (the "Trust") wish to enter into this Servicing Agreement with you
concerning the provision of support services to your client ("Clients") who may
from time to time beneficially own shares ("Shares") of the Funds (the "Funds")
offered by us.
The terms and conditions of this Servicing Agreement are as follows:
Section 1. You agree to provide the following support services to
Clients who may from time to time beneficially own Shares:/1/ (i) establishing
and maintaining accounts and records relating to Clients that invest in Shares;
(ii) processing dividend and distribution payments from us on behalf of Clients;
(iii) providing information periodically to Clients showing their positions in
Shares and integrating such statements with those of other transactions and
balances in Clients' other accounts serviced by you; (iv) arranging for bank
wires; (v) responding to Client inquiries relating to the services performed by
you; (vi) responding to routine inquiries from Clients concerning their
investments in Shares; (vii) providing subaccounting with respect to Shares
beneficially owned by Clients, or the information to us necessary for
subaccounting; (viii) if required by law, forwarding shareholder communications
from us (such as proxies, shareholder reports, annual and semi-annual financial
statements and dividend, distribution and tax notices) to Clients; (ix)
assisting in processing purchase, exchange and redemption requests from Clients
and in placing such orders with our service contractors; (x) assisting Clients
in changing dividend options, account designations and addresses; (xi) providing
Clients with a service that invests the assets of their accounts in Shares
pursuant to specific or pre-authorized instructions; and (xii) providing such
other similar services as we may reasonably request to the extent you are
permitted to do so under applicable statutes, rules and regulations.
Section 2. You will provide such office space and equipment, telephone
facilities and personnel (which may be any part of the space, equipment and
facilities currently used in your business, or any personnel employed by you) as
may be reasonably necessary or beneficial in order to provide the aforementioned
services and assistance to Clients.
Section 3. Neither you nor any of your officers, employees or agents
are authorized to make any representations concerning us or the Shares except
those contained in our then current prospectuses and statement of additional
information, copies of which will be supplied by us to you, or in such
supplemental literature or advertising as may be authorized by us in writing.
/1/ Series may be modified or omitted in the particular case and items
renumbered.
<PAGE>
Section 4. For all purposes of this Agreement you will be deemed to be
an independent contractor, and will have no authority to act as agent for us in
any matter or in any respect. By your written acceptance of this Agreement, you
agree to and do release, indemnify and hold us harmless from and against any and
all direct or indirect liabilities or losses resulting from requests,
directions, actions, or inactions of or by you or your officers, employees or
agents regarding your responsibilities hereunder or the purchase, redemption,
transfer or registration of Shares (or orders relating to the same) by or on
behalf of Clients. You and your employees will, upon request, be available
during normal business hours to consult with us or our designees concerning the
performance of your responsibilities under this Agreement.
Section 5. In consideration of the services and facilities provided by
you hereunder, we will pay to you, and you will accept as full payment therefor,
a fee at the annual rate as set forth on Schedule I with respect to the shares
beneficially owned by your Clients for whom you are the dealer of record or
holder of record or with whom you have a servicing relationship (the "Clients'
Shares"), which fee will be computed daily (on the basis of 360-day year) and
payable monthly. For purposes of determining the fees payable under this Section
5, the average daily net asset value of the Clients' Shares will be computed in
the manner specified in our Registration Statement (as the same is in effect
from time to time) in connection with the computation of the net asset value of
Shares for purposes of purchases and redemptions. By your written acceptance of
this Agreement, you agree to and do waive such portion of any fee payable to you
hereunder to the extent necessary to assure that such fee and other expenses
required to be accrued by us on any day with respect to the Clients' Share in
any Fund that declares its net investment income as a dividend to shareholders
on a daily basis does not exceed the income to be accrued by us to such Shares
on that day. The fee rate stated above may be prospectively increased or
decreased by us, in our sole discretion, at any time upon notice to you.
Further, we may, in our discretion and without notice, suspend or withdraw the
sale of Shares, including the sale of Shares to you for the account of any
Client or Clients.
Section 6. Any person authorized to direct the disposition of monies
paid or payable by us pursuant to this Agreement will provide to our Board of
Trustees (the "Board"), and our Trustees will review, at least quarterly, a
written report of the amounts so expended and the purposes for which such
expenditures were made. In addition, you will furnish us or our designees with
such information as we or they may reasonably request (including, without
limitation, periodic certifications confirming the provision to Clients of the
services described herein), and will otherwise cooperate with us and our
designees (including, without limitation, any auditors designated by us), in
connection with the preparation of reports to the Board concerning this
Agreement and the monies paid or payable by us pursuant hereto, as well as any
other reports or filings that may be required by law.
Section 7. We may enter into other similar Servicing Agreements with
any other person or persons without your consent.
Section 8. By your written acceptance of this Agreement, you represent,
warrant and agree that: (i) the compensation payable to you in connection with
the investment of your Clients' assets in Shares will be disclosed by you to
your Clients, will be authorized by your Clients and
6
<PAGE>
will not be excessive; and (ii) the series provided by you under this Agreement
will in no event be primarily intended to result in the sale of Shares.
Section 9. This Agreement will become effective on the date a fully
executed copy of this Agreement is received by us or our designee. Unless sooner
terminated, this Agreement will continue automatically for successive annual
periods provided such continuance is specifically approved at least annually by
us in the manner described in Section 12. This Agreement is terminable without
penalty at any time by us (which termination may be by a vote of a majority of
the Disinterested Trustees as defined in Section 12) or by you upon written
notice to the other party hereto.
Section 10. All notices and other communications to either you or us
will be duly given if mailed, telegraphed, telexed or transmitted by similar
telecommunication device to the appropriate address stated herein, or to such
other address as either party shall so provide the other.
Section 11. This Agreement will be construed in accordance with the
laws of the State of Connecticut and is non-assignable by the parties hereto.
Section 12. This Agreement has been approved by vote of a majority of
(i) the Board and (ii) those Trustees who are not "interested persons" (as
defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended
(the "1940 Act")) of us and have no direct or indirect financial interest in
this Agreement ("Disinterested Trustees"), cast in person at a meeting called
for the purpose of voting on such approval.
Section 13. The names "Simms Funds" and the "Board of Trustees" refer
respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Certificate of
Trust filed at the office of the Secretary of the State of Delaware on July 1,
1998. The obligations of "Simms Funds" entered into in the name or on behalf
thereof by any of the Trustees, representatives or agents are made not
individually but in such capacities, and are not binding upon any of the
Trustees, Shareholders or representatives of the Trust personally, but bind only
the Trust Property (as defined in the Trust Instrument), and all persons dealing
with any class of Shares of our must look solely to the Trust Property belonging
to such class for the enforcement of any claims against us.
7
<PAGE>
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly return it
to us, c/o Simms Funds, 55 Railroad Avenue, Greenwich, CT 06830.
Very truly yours,
SIMMS FUNDS
Date: ________________________ By: ________________________
(Authorized Officer)
Title:
Accepted and Agreed to:
Date: ________________________ By: ________________________
(Authorized Officer)
Title:
8
<PAGE>
SCHEDULE I
This Shareholder Servicing Agreement shall apply to the following Funds of the
Trust at the indicated annual rate of the average daily net assets of each
Fund's respective Class of Shares:
Class A Shares
U.S. Equity Fund 0.25%
International Equity Fund 0.25%
Global Equity Fund 0.25%
Dated as of September 14, 1998
- - ------------------------------
SIMMS FUNDS
Rule 18f-3 Multi-Class Plan
I. Introduction
Pursuant to Rule 18f-3 under the Investment Company Act of 1940, as
amended (the "1940 Act"), the following sets forth the method for allocating
fees and expenses among each class of shares of the various series (each series
a "Fund" and collectively the "Funds") of Simms Funds (the "Trust") that issue
multiple classes of shares, whether now existing or subsequently established
(the "Multi-Class Funds"). In addition, this Rule 18f-3 Multi-Class Plan (the
"Plan") sets forth the shareholder servicing arrangements, distribution
arrangements, conversion features, exchange privileges, and other shareholder
services of each class of shares in the Multi-Class Funds.
The Trust is an open-end series investment company registered under the
1940 Act, the shares of which are registered on Form N-1A under the Securities
Act of 1933, as amended (the "1933 Act") (Registration Nos. 333-58813 and
811-08871). Upon the effective date of this Plan, the Trust hereby elects to
offer multiple classes of shares in the Multi-Class Funds pursuant to the
provisions of Rule 18f-3 of the 1940 Act and this Plan.
The Trust currently consists of the following three separate Funds:
U.S. Equity Fund, International Equity Fund and Global Equity Fund.
Each Fund is authorized to issue Class A Shares and Class Y Shares
representing interests in the same underlying portfolio of assets of the Fund.
II. Class Arrangements
The following summarizes the Rule 12b-1 distribution fees, shareholder
servicing fees, conversion features, and exchange privileges applicable to each
particular class of shares of the Funds. Additional details regarding such fees
and services are set forth in each Fund's current Prospectus and Statement of
Additional Information.
A. Class A Shares:
1. Distribution Plan: "Reimbursement" Rule 12b-1 Plan
2. Rule 12b-1 Distribution Fees: 0.50% per annum of average
daily net assets.
3. Conversion Features: None.
4. Shareholder Servicing Fee: 0.25% per annum of average daily
net assets.
<PAGE>
5. Exchange Privileges: Class A shares may be exchanged with
Class A shares of other Funds.
B. Class Y Shares:
1. Distribution Plan: None
2. Rule 12b-1 Distribution Fees: None.
3. Conversion Features: None.
4. Shareholder Servicing Fee: None.
5. Exchange Privileges: Class Y shares may be exchanged with
Class Y shares of other Funds.
III. Allocation of Expenses
Pursuant to Rule 18f-3 under the 1940 Act, the Trust shall allocate to
each class of shares in a Multi-Class Fund any fees and expenses incurred by the
Trust in connection with the distribution of such class of shares under a
distribution plan adopted for such class of shares pursuant to Rule 12b-1 ("Rule
12b-1 Fees"). In addition, pursuant to Rule 18f-3, the Trust may allocate the
following fees and expenses (the "Class Expenses") to a particular class of
shares in a single Multi-Class Fund:
1. transfer agent fees identified by the transfer agent as
being attributable to such class of shares;
2. printing and postage expenses related to preparing and
distributing materials such as shareholder reports,
prospectuses, reports, and proxies to current shareholders
of such class of shares or to regulatory agencies with
respect to such class of shares;
3. blue sky registration or qualification fees incurred by such
class of shares;
4. Securities and Exchange Commission registration fees
incurred by such class of shares;
5. the expense of administrative personnel and services
(including, but not limited to, those of a fund accountant
or dividend paying agent charged with calculating net asset
values or determining or paying dividends) as required to
support the shareholders of such class of shares;
6. litigation or other legal expenses relating solely to such
class of shares;
7. fees of the Board of Trustees of the Trust (the "Board")
incurred as result of issues relating to such class of
shares;
2
<PAGE>
8. independent accountants' fees relating solely to such class
of shares; and
9. shareholder meeting expenses for meetings of a particular
class.
Class Expenses and Rule 12b-1 Fees are the only expenses allocated to
the classes disproportionately. The Class Expenses allocated to each share of a
class during a year will differ from the Class Expenses allocated to each share
of any other class by less than 25 basis points of the average daily net asset
value of the class of shares with the smallest average daily net asset value.
The initial determination of fees and expenses that will be allocated
by the Trust to a particular class of shares and any subsequent changes thereto
will be reviewed by the Board and approved by a vote of the Board including a
majority of the Trustees who are not "interested persons" of the Trust as
defined in Section 2(a)(19) of the 1940 Act. The Board will monitor conflicts of
interest among the classes and agree to take any action necessary to eliminate
conflicts.
Income, realized and unrealized capital gains and losses, and any
expenses of a Fund not allocated to a particular class of any such Fund pursuant
to this Plan shall be allocated to each class of the Fund on the basis of the
net asset value of that class in relation to the net asset value of the Fund.
Any dividends and other distributions on shares of a class will differ
from dividends and other distributions on shares of other classes only as a
result of the allocation of Class Expenses, Rule 12b-1 Fees, and the effects of
such allocations.
The Investment Adviser will waive or reimburse its management fee in
whole or in part only if the fee is waived or reimbursed to all shares of a Fund
in proportion to their relative average daily net asset values. The Investment
Adviser, and any entity related to the Investment Adviser, who charges a fee for
a Class Expense will waive or reimburse that fee in whole or in part only if the
revised fee more accurately reflects the relative costs of providing to each
class the service for which the Class Expense is charged.
IV. Board Review
The Board shall review this Plan as frequently as it deems necessary.
Prior to any material amendment(s) to this Plan, the Board, including a majority
of the Trustees that are not "interested persons" of the Trust as defined in
Section 2(a)(19) of the 1940 Act, shall find that the Plan, as proposed to be
amended (including any proposed amendments to the method of allocating Class
Expenses and/or Fund expenses), is in the best interest of each class of shares
of a Multi-Class Fund individually and the Fund as a whole. In considering
whether to approve any proposed amendment(s) to the Plan, the Board shall
request and evaluate such information as it considers reasonably necessary to
evaluate the proposed amendment(s) to the Plan. Such information shall address
the issue of whether any waivers or reimbursements of advisory or administrative
fees could be considered a cross-subsidization of one class by another and other
potential conflicts of interest between classes.
3
<PAGE>
In making its initial determination to approve this Plan, the Board has
focused on, among other things, the relationship between or among the classes
and has examined potential conflicts of interest among classes (including those
potentially involving a cross-subsidization between classes) regarding the
allocation of fees, services, waivers and reimbursements of expenses, and voting
rights. The Board has evaluated the level of services provided to each class and
the cost of those services to ensure that the services are appropriate and the
allocation of expenses is reasonable. In approving any subsequent amendments to
this Plan, the Board shall focus on and evaluate such factors as well as any
others it deems necessary.
Adopted: September 14, 1998; Effective ____________, 1998
4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Trustee of THE
SIMMS FUNDS, a Delaware business trust (the "Trust"), constitutes and appoints
Robert A. Simms, Arthur O. Poltrack and Jay G. Baris my true and lawful
attorneys-in-fact, with full power of substitution and resubstitution, for me
and in my name, place and stead, in any and all capacities as a trustee of the
Trust, to sign for me and in my name in the appropriate capacity, any and all
Pre-Effective Amendments to any Registration Statement of the Trust, any and all
Post-Effective Amendments to said Registration Statements, any Registration
Statements on Form N-14, and any supplements or other instruments in connection
therewith, and generally to do all such things in my name and behalf in
connection therewith as said attorneys-in-fact deem necessary or appropriate,
and that have been approved by the Board of Trustees of the Trust or by the
appropriate officers of the Trust, acting in good faith and in a manner they
reasonably believe to be in the best interests of the Trust, upon the advice of
counsel, such approval to be conclusively evidenced by their execution thereof,
to comply with the provisions of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, and all related requirements of the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact or their substitutes may do or cause to be done by virtue
hereof.
Witness my hand on this 11th day of November, 1998.
/s/ Beverly W. Aisenbrey
-----------------------------
Beverly W. Aisenbrey
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Trustee of SIMMS
FUNDS, a Delaware business trust (the "Trust"), constitutes and appoints Robert
A. Simms, Arthur O. Poltrack and Jay G. Baris my true and lawful
attorneys-in-fact, with full power of substitution and resubstitution, for me
and in my name, place and stead, in any and all capacities as a trustee of the
Trust, to sign for me and in my name in the appropriate capacity, any and all
Pre-Effective Amendments to any Registration Statement of the Trust, any and all
Post-Effective Amendments to said Registration Statements, any Registration
Statements on Form N-14, and any supplements or other instruments in connection
therewith, and generally to do all such things in my name and behalf in
connection therewith as said attorneys-in-fact deem necessary or appropriate,
and that have been approved by the Board of Trustees of the Trust or by the
appropriate officers of the Trust, acting in good faith and in a manner they
reasonably believe to be in the best interests of the Trust, upon the advice of
counsel, such approval to be conclusively evidenced by their execution thereof,
to comply with the provisions of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, and all related requirements of the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact or their substitutes may do or cause to be done by virtue
hereof.
Witness my hand on this 14th day of September, 1998.
/s/ Arthur S. Bahr
-----------------------------
Arthur S. Bahr
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Trustee of SIMMS
FUNDS, a Delaware business trust (the "Trust"), constitutes and appoints Robert
A. Simms, Arthur O. Poltrack and Jay G. Baris my true and lawful
attorneys-in-fact, with full power of substitution and resubstitution, for me
and in my name, place and stead, in any and all capacities as a trustee of the
Trust, to sign for me and in my name in the appropriate capacity, any and all
Pre-Effective Amendments to any Registration Statement of the Trust, any and all
Post-Effective Amendments to said Registration Statements, any Registration
Statements on Form N-14, and any supplements or other instruments in connection
therewith, and generally to do all such things in my name and behalf in
connection therewith as said attorneys-in-fact deem necessary or appropriate,
and that have been approved by the Board of Trustees of the Trust or by the
appropriate officers of the Trust, acting in good faith and in a manner they
reasonably believe to be in the best interests of the Trust, upon the advice of
counsel, such approval to be conclusively evidenced by their execution thereof,
to comply with the provisions of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, and all related requirements of the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact or their substitutes may do or cause to be done by virtue
hereof.
Witness my hand on this 14th day of September, 1998.
/s/ Robert G. Blount
-----------------------------
Robert G. Blount
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Trustee of SIMMS
FUNDS, a Delaware business trust (the "Trust"), constitutes and appoints Robert
A. Simms, Arthur O. Poltrack and Jay G. Baris my true and lawful
attorneys-in-fact, with full power of substitution and resubstitution, for me
and in my name, place and stead, in any and all capacities as a trustee of the
Trust, to sign for me and in my name in the appropriate capacity, any and all
Pre-Effective Amendments to any Registration Statement of the Trust, any and all
Post-Effective Amendments to said Registration Statements, any Registration
Statements on Form N-14, and any supplements or other instruments in connection
therewith, and generally to do all such things in my name and behalf in
connection therewith as said attorneys-in-fact deem necessary or appropriate,
and that have been approved by the Board of Trustees of the Trust or by the
appropriate officers of the Trust, acting in good faith and in a manner they
reasonably believe to be in the best interests of the Trust, upon the advice of
counsel, such approval to be conclusively evidenced by their execution thereof,
to comply with the provisions of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, and all related requirements of the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact or their substitutes may do or cause to be done by virtue
hereof.
Witness my hand on this 14th day of September, 1998.
/s/ Robert E. Kelley
-----------------------------
Robert E. Kelley
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Trustee of SIMMS
FUNDS, a Delaware business trust (the "Trust"), constitutes and appoints Robert
A. Simms, Arthur O. Poltrack and Jay G. Baris my true and lawful
attorneys-in-fact, with full power of substitution and resubstitution, for me
and in my name, place and stead, in any and all capacities as a trustee of the
Trust, to sign for me and in my name in the appropriate capacity, any and all
Pre-Effective Amendments to any Registration Statement of the Trust, any and all
Post-Effective Amendments to said Registration Statements, any Registration
Statements on Form N-14, and any supplements or other instruments in connection
therewith, and generally to do all such things in my name and behalf in
connection therewith as said attorneys-in-fact deem necessary or appropriate,
and that have been approved by the Board of Trustees of the Trust or by the
appropriate officers of the Trust, acting in good faith and in a manner they
reasonably believe to be in the best interests of the Trust, upon the advice of
counsel, such approval to be conclusively evidenced by their execution thereof,
to comply with the provisions of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, and all related requirements of the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact or their substitutes may do or cause to be done by virtue
hereof.
Witness my hand on this 14th day of September, 1998.
/s/ Michael A. McManus
-----------------------------
Michael A. McManus
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Trustee of SIMMS
FUNDS, a Delaware business trust (the "Trust"), constitutes and appoints Robert
A. Simms, Arthur O. Poltrack and Jay G. Baris my true and lawful
attorneys-in-fact, with full power of substitution and resubstitution, for me
and in my name, place and stead, in any and all capacities as a trustee of the
Trust, to sign for me and in my name in the appropriate capacity, any and all
Pre-Effective Amendments to any Registration Statement of the Trust, any and all
Post-Effective Amendments to said Registration Statements, any Registration
Statements on Form N-14, and any supplements or other instruments in connection
therewith, and generally to do all such things in my name and behalf in
connection therewith as said attorneys-in-fact deem necessary or appropriate,
and that have been approved by the Board of Trustees of the Trust or by the
appropriate officers of the Trust, acting in good faith and in a manner they
reasonably believe to be in the best interests of the Trust, upon the advice of
counsel, such approval to be conclusively evidenced by their execution thereof,
to comply with the provisions of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, and all related requirements of the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact or their substitutes may do or cause to be done by virtue
hereof.
Witness my hand on this 14th day of September, 1998.
/s/ Thomas L. Melly
-----------------------------
Thomas L. Melly
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Trustee of SIMMS
FUNDS, a Delaware business trust (the "Trust"), constitutes and appoints Arthur
O. Poltrack and Jay G. Baris my true and lawful attorneys-in-fact, with full
power of substitution and resubstitution, for me and in my name, place and
stead, in any and all capacities as a trustee of the Trust, to sign for me and
in my name in the appropriate capacity, any and all Pre-Effective Amendments to
any Registration Statement of the Trust, any and all Post-Effective Amendments
to said Registration Statements, any Registration Statements on Form N-14, and
any supplements or other instruments in connection therewith, and generally to
do all such things in my name and behalf in connection therewith as said
attorneys-in-fact deem necessary or appropriate, and that have been approved by
the Board of Trustees of the Trust or by the appropriate officers of the Trust,
acting in good faith and in a manner they reasonably believe to be in the best
interests of the Trust, upon the advice of counsel, such approval to be
conclusively evidenced by their execution thereof, to comply with the provisions
of the Securities Act of 1933, as amended, and the Investment Company Act of
1940, as amended, and all related requirements of the Securities and Exchange
Commission, hereby ratifying and confirming all that said attorneys-in-fact or
their substitutes may do or cause to be done by virtue hereof.
Witness my hand on this 14th day of September, 1998.
/s/ Robert A. Simms
-----------------------------
Robert A. Simms
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Trustee of SIMMS
FUNDS, a Delaware business trust (the "Trust"), constitutes and appoints Robert
A. Simms and Jay G. Baris my true and lawful attorneys-in-fact, with full power
of substitution and resubstitution, for me and in my name, place and stead, in
any and all capacities as a trustee of the Trust, to sign for me and in my name
in the appropriate capacity, any and all Pre-Effective Amendments to any
Registration Statement of the Trust, any and all Post-Effective Amendments to
said Registration Statements, any Registration Statements on Form N-14, and any
supplements or other instruments in connection therewith, and generally to do
all such things in my name and behalf in connection therewith as said
attorneys-in-fact deem necessary or appropriate, and that have been approved by
the Board of Trustees of the Trust or by the appropriate officers of the Trust,
acting in good faith and in a manner they reasonably believe to be in the best
interests of the Trust, upon the advice of counsel, such approval to be
conclusively evidenced by their execution thereof, to comply with the provisions
of the Securities Act of 1933, as amended, and the Investment Company Act of
1940, as amended, and all related requirements of the Securities and Exchange
Commission, hereby ratifying and confirming all that said attorneys-in-fact or
their substitutes may do or cause to be done by virtue hereof.
Witness my hand on this 14th day of September, 1998.
/s/ Arthur O. Poltrack
-----------------------------
Arthur O. Poltrack
