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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
Pre-Effective Amendment No. _________
Post-Effective Amendment No. ________
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. ___________
(Check Appropriate Box or Boxes)
e-navigator Fund
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(Exact Name of Registrant as Specified in Charter)
500 Boylston Street, Boston, Massachusetts 02116
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(Address of Principal Executive Offices) (Zip Code)
(800) (333-3204)
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(Registrant's Telephone Number, Including Area Code)
Frederick K. Zimmermann
501 Boylston Street
Boston, Massachusetts 02116
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(Name and Address of Agent for Service)
As soon as practicable after the effective date of this Registration Statement
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(Approximate Date of Proposed Public Offering)
It is proposed that this filing will become effective (check appropriate box):
[_] Immediately upon filing pursuant [_] On (date) pursuant to paragraph
to paragraph (b) (b)
[_] 60 days after filing pursuant to [_] On (date) pursuant to paragraph
paragraph (a)(1) (a)(1)
[_] 75 days after filing pursuant to [_] On (date) pursuant to paragraph
paragraph (a)(2) (a)(2) of rule 485
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If appropriate, check the following box:
[_] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall hereafter 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, may
determine.
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e~navigator Fund
CROSS REFERENCE SHEET
ITEMS REQUIRED BY FORM N-1A
Part A-
Item No. Item Caption Prospectus Caption
1. Cover Page Cover Page
2. Synopsis Summary of Expenses
3. Condensed Financial Information Not Applicable
4. General Description of the Registrant The Fund's Investment Objective;
Investment Policies; Two-Tiered
Structure; Investment Restrictions
and Organization and History
5. Management of the Fund How the Fund and the Portfolio are
Managed
5A. Management's Discussion of Fund Not Applicable
Performance
6. Capital Stock and Other Securities Organization and History; How the
Fund and the Portfolio are Managed;
Distributions and Taxes
7. Purchase of Securities Being Offered How the Fund and the Portfolio are
Managed; How to Buy Shares
8. Redemption or Repurchase How to Redeem Shares
9. Pending Legal Proceedings Not Applicable
Part B- Statement of Additional Information
Item No. Item Caption Caption
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Not Applicable
13. Investment Objective and Policies Investment Objective; Investment
Policies; Investment Restrictions
14. Management of the Fund Management of the Fund
15. Control Persons and Principal
Holders of Securities Principal Holder of Securities
16. Investment Advisory and Other Management of the Fund
Services
17. Brokerage Allocation and Other Portfolio Transactions
Practices
18. Capital Stock and Other Securities Shareholder Rights
19. Purchase, Redemption and Pricing of Purchases, Redemptions and
Securities Being Offered Rebalancing Transactions
20. Tax Status Dividends and Tax Matters
21. Underwriters Management of the Fund
22. Calculation of Performance Data Yield Information
23. Financial Statements Not Applicable
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[_______________], 1998
e~navigator Fund
PROSPECTUS
e~navigator Fund (the "Fund") is a money market mutual fund. Money transmitted
by customers (each an "e~navigator Customer") who open an e~navigator Electronic
Money Management Account (the "Electronic Money Management Account") is
automatically invested, in the e~navigator Customer's name, in shares of the
Fund.
This booklet is the Prospectus of the Fund. It contains basic information about
the Fund that you should know before transmitting money into your Electronic
Money Management Account. You should save this Prospectus for future reference.
The Fund's investment objective is to provide as high a level of current income
(before Fund expenses) as is consistent with the preservation of capital and
liquidity.
Unlike a traditional mutual fund that invests directly in individual securities,
the Fund currently seeks to achieve its objective by investing all of its
investible assets in Cortland General Money Market Fund, a money market fund
that has the same investment objective and substantially the same investment
policies as the Fund (the "Portfolio").
The Portfolio is a portfolio of Cortland Trust, Inc. ("Cortland"). Except for
certain separate expenses borne by the Fund, the Fund's investment experience
will correspond directly to that of the Portfolio for so long as the Fund
invests all of its investible assets in the Portfolio. The Portfolio is managed
by Reich & Tang Asset Management L.P. (the "Manager").
A Statement of Additional Information relating to the Fund dated [ ],
1998 (the "Statement of Additional Information") and a Statement of Additional
Information relating to the Portfolio (the "Portfolio Statement of Additional
Information") have been filed with the Securities and Exchange Commission (the
"SEC") and are incorporated in this Prospectus by reference. The Statement of
Additional Information and the Portfolio Statement of Additional Information are
available upon request and without charge by writing to New England Securities
Corporation, 399 Boylston Street, Boston, Massachusetts 02116, by calling toll
free at (800) 333-3204 or from the e~navigator web site
(http://www.enavigator.com). The SEC maintains a web site (http://www.sec.gov)
that contains the Statement of Additional Information, the Portfolio Statement
of Additional Information and other reports and information regarding the Fund
and Cortland which have been filed electronically with the SEC. The Fund and
Cortland are registered with the SEC as diversified open-end management
investment companies.
An investment in the Fund is not insured or guaranteed by the U.S. Government.
There can be no assurance that the $1.00 net asset value per share will be
maintained.
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An investment in the Fund is not a deposit or obligation of, or guaranteed or
endorsed by, any bank and is not insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other agency.
The Fund offers two classes of shares: Class A and Class B. The first $5,000 of
an e~navigator Customer's investment in the Fund will be invested in Class A
shares; any excess will be invested in Class B shares. Each day, after
processing any purchases (including reinvested dividends) and redemptions, if
any, the Fund will (1) automatically exchange Class A shares for Class B shares
in each Electronic Money Management Account to the extent necessary to reduce
the value of Class A shares in such account to $5,000, or (2) automatically
exchange Class B shares for Class A Shares in each Electronic Money Management
Account to the extent necessary to increase the value of Class A shares in such
account to $5,000. For a more complete discussion of this process, see
"Rebalancing Transactions."
The Fund bears a higher level of expenses than most other money market funds.
In addition to an annual fee of $24.00 charged to each e~navigator Customer for
use of the e~navigator Financial Organizer (the software package required to
access the Electronic Money Management Account) and other expenses of operating
the Fund, the Fund pays a fee of 5.00% of its average daily net assets
attributable to Class A shares for the services provided in connection with the
Electronic Money Management Account. Under current market and interest rate
conditions, the expenses of the Fund are expected to be greater than the yield
from the Fund's investment in the Portfolio attributable to Class A shares.
Therefore, the Fund does not currently expect to pay any dividends to
e~navigator Customers on Class A shares.
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NOT MAY LOSE VALUE.
FDIC-INSURED. NO BANK
GUARANTEE.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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SUMMARY OF EXPENSES
Expenses are one of several factors to consider when investing in the Fund.
This table summarizes estimated expenses in the Fund's first full fiscal year.
The table may help you to understand the costs and expenses that you could bear
directly or indirectly as an investor in the Fund. The table includes expenses
of the Portfolio (based on the Portfolio's most recent fiscal year), which
indirectly are borne by investors in the Fund. See "How the Fund and the
Portfolio are Managed" and "12b-1 Plan" for more complete descriptions of the
Fund's and the Portfolio's various costs and expenses.
Annual Operating Expenses (as a % of average net assets)
Class A Class B
Management Fees(1) 0.77% 0.77%
12b-1 fees(2) 0.25% 0.25%
Other expenses
e~navigator Servicing Fee(3)(4) 5.00% None
Administration Fee(5) 0.05% 0.05%
Miscellaneous Expenses 0.20% 0.20%
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Total Other Expenses 5.25% 0.25%
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Total operating expenses 6.27% 1.27%
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(1) The Fund does not have an investment adviser. The Management Fees shown
are those paid by the Portfolio to the Manager.
(2) The 12b-1 fees shown are those paid by the Portfolio to Reich & Tang
Distributors, Inc. under a plan adopted by the Portfolio. The Fund has
also adopted a plan under which the Fund may pay 12b-1 fees to its
distributor, New England Securities Corporation, but no fees will be
payable under such plan for so long as the Fund invests all of its
investible assets in the Portfolio. See "12b-1 Plan."
(3) Each e~navigator Customer must pay an annual fee of $24.00 in connection
with the e~navigator Financial Organizer. This annual fee is not reflected
in the table. See "How to Buy Shares."
(4) Interactive Financial Solutions, Inc. has agreed to waive a portion of the
e~navigator Servicing Fee to the extent that the total operating expenses
exceed the daily total return of the Class A shares.
(5) The Administration Fee is paid to the Manager as compensation for certain
administrative services provided to the Fund. See "Management of the
Fund."
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Example
The following Example shows the cumulative expenses attributable to a
hypothetical $1,000 investment in shares of the Fund for the periods specified,
assuming a 5% annual return. The 5% return and expenses used in this Example
should not be considered indicative of actual or expected Fund performance or
expenses, both of which will vary.
Period:
1 year $50
3 years $150
This example does not include the annual account fee of $24.00 charged to
e~navigator Customers in connection with the e~navigator Financial Organizer.
TWO-TIERED STRUCTURE
Unlike other mutual funds which invest directly in individual securities, the
Fund currently seeks to achieve its investment objective by investing all of its
investible assets in the Portfolio. The Portfolio itself is a money market fund.
The Portfolio has the same investment objective and substantially the same
investment policies as the Fund. The Portfolio invests directly in money market
investments of a variety of issuers.
See "The Fund's Investment Objective," "Investment Policies" and "How the Fund
and the Portfolio are Managed" for information concerning the Portfolio's and
the Fund's investment objectives, policies, management and expenses.
An investment in the Fund is subject to certain considerations in addition to
the risks and other considerations associated with a direct investment in the
Portfolio, including the possibility that the Fund's and the Portfolio's
investment objectives may be changed without shareholder approval. Matters
submitted by the Portfolio to its investors for a vote will be passed along by
the Fund to its shareholders, and the Fund will vote its entire interest in the
Portfolio in proportion to the votes actually received from Fund shareholders.
Other investors besides the Fund may invest in the Portfolio, on substantially
the same terms and conditions as the Fund. Each investor in the Portfolio will
bear its proportionate share of the Portfolio's expenses.
The Fund will continue to invest in the Portfolio only as long as the Fund's
Board of Trustees determines it is appropriate and in the best interest of Fund
shareholders to do so. In the event that the Portfolio's investment objective
or policies were changed so as to be inconsistent with the Fund's investment
objective or policies, the Board of Trustees of the Fund would consider what
action might be taken, including changes to the Fund's investment objective or
policies, withdrawal of the Fund's assets from the Portfolio and investment of
such assets in another
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pooled investment entity or the direct management of the Fund's investments by
an investment adviser. Certain of these actions would require Fund shareholder
approval. Withdrawal of the Fund's assets from the Portfolio could result in a
distribution by the Portfolio to the Fund of portfolio securities in kind (as
opposed to a cash distribution), and the Fund could incur brokerage fees or
other transaction costs and could realize distributable taxable gains in
converting such securities to cash.
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks to provide as high a level of current income (before Fund
expenses) as is consistent with the preservation of capital and liquidity.
INVESTMENT POLICIES
The Fund currently invests only in shares of the Portfolio.
The Portfolio invests in U.S. dollar-denominated securities which are rated in
one of the two highest rating categories for debt obligations by at least two
nationally recognized statistical rating organizations ("NRSROs") (or one NRSRO
if the instrument was rated by only one such organization) or, if unrated, are
of comparable quality as determined in accordance with procedures established by
Cortland's Board of Directors. The NRSROs currently rating instruments of the
type the Portfolio may purchase are Moody's Investors Service, Inc., Standard &
Poor's, Duff and Phelps, Inc., Fitch Investors Service, Inc., IBCA Limited and
IBCA Inc. (See the Portfolio Statement of Additional Information for
information with respect to rating criteria for each NRSRO.)
Investments in rated securities not rated in the highest category by at least
two NRSROs (or one NRSRO if the instrument was rated by only one such
organization), and unrated securities not determined by Cortland's Board of
Directors to be comparable to those rated in the highest category, will be
limited to 5% of the Portfolio's total assets, with the investment in any such
issuer being limited to not more than the greater of 1% of the Portfolio's total
assets or $1 million. The Portfolio may invest in obligations issued or
guaranteed by the U.S. Government without any such limitation.
The Portfolio seeks to achieve its objective by investing at least 80% of its
assets in marketable securities and instruments issued or guaranteed by the U.S.
Government or by its agencies or instrumentalities ("U.S. Government
Obligations"), in bank instruments, in trust instruments, in corporate
commercial instruments and in other corporate instruments maturing in thirteen
months or less (collectively, "Money Market Obligations").
The Portfolio may invest in bank instruments, which consist mainly of
certificates of deposit, bankers' acceptances and time deposits. The Portfolio
may also invest in corporate instruments supported by bank letters of credit.
The Portfolio generally limits investments in bank
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instruments to (a) those which are fully insured as to principal by the Federal
Deposit Insurance Corporation (the "FDIC") or (b) those issued by banks which at
the date of their latest public reporting have total assets in excess of $1.5
billion. However, the total assets of a bank will not be the sole factor
determining the Portfolio's investment decisions, and the Portfolio may invest
in bank instruments issued by institutions which Cortland's Board of Directors
believes present minimal credit risk.
The Portfolio may invest up to 100% of its assets in obligations issued by
banks, and up to 10% of its assets in obligations issued by any one bank,
subject to the provisions of Rule 2a-7 of the Investment Company Act of 1940
(the "1940 Act"). If the bank is a domestic bank, it must be a member of the
FDIC. The Portfolio may invest in U.S. dollar-denominated obligations issued by
foreign branches of domestic banks or foreign branches of foreign banks
("Eurodollar" obligations) and domestic branches of foreign banks ("Yankee
dollar" obligations). The Portfolio will limit its aggregate investments in
foreign bank obligations, including Eurodollar obligations and Yankee dollar
obligations, to 25% of its total assets at the time of purchase, provided that
there is no limitation upon the Portfolio investments in (a) Eurodollar
obligations, if the domestic parent of the foreign branch issuing the obligation
is unconditionally liable in the event that the foreign branch fails to pay on
the Eurodollar obligation for any reason; and (b) Yankee dollar obligations, if
the U.S. branch of the foreign bank is subject to the same regulation as U.S.
banks.
Eurodollar, Yankee dollar and other foreign bank obligations include time
deposits, which are non-negotiable deposits maintained in a bank for a specified
period of time at a stated interest rate. The Portfolio will limit its
purchases of time deposits to those which mature in seven days or less, and will
limit its purchases of time deposits maturing in two to seven days to 10% of the
Portfolio's total assets at the time of purchase.
Eurodollar, Yankee dollar and other foreign obligations involve special
investment risks, including the possibility that liquidity could be impaired
because of future political and economic developments, that the obligations may
be less marketable than comparable domestic obligations of domestic issuers,
that a foreign jurisdiction might impose withholding taxes on interest income
payable on those obligations, that deposits may be seized or nationalized, that
foreign governmental restrictions such as exchange controls may be adopted which
might adversely affect the payment of principal of and interest on those
obligations, that the selection of foreign obligations may be more difficult
because there may be less information publicly available concerning foreign
issuers, that there may be difficulties in enforcing a judgment against a
foreign issuer or that the accounting, auditing and financial reporting
standards, practices and requirements applicable to foreign issuers may differ
from those applicable to domestic issuers. In addition, foreign banks are not
subject to examination by U.S. Government agencies or instrumentalities.
The Portfolio may invest in short-term corporate obligations and instruments,
including but not limited to corporate commercial paper, notes, bonds and
debentures. Corporate commercial
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instruments generally consist of short-term unsecured promissory notes issued by
corporations. The Portfolio may also purchase variable amount master demand
notes, which are unsecured demand notes that permit investment of fluctuating
amounts of money at variable rates of interest pursuant to arrangements with
issuers who meet the foregoing quality criteria.
The interest rate on a variable amount master demand note is periodically
redetermined according to a prescribed formula. Although there is no secondary
market in master demand notes, the payee may demand payment of the principal and
interest upon notice not exceeding five business or seven calendar days. The
Portfolio may also purchase participation interests in loans extended by banks
to companies, provided that both such banks and such companies meet the quality
standards set forth above. (See the Statement of Additional Information for
information with respect to corporate commercial instruments and bond ratings.)
The Portfolio may also invest in fixed or variable rate debt units representing
an undivided interest in a trust's distributions of principal and interest that
a trust receives from an underlying portfolio of bonds issued by a highly rated
corporate or U.S. Government agency issuer and/or payments from re-characterized
distributions made possible by the swap of certain payments due on the
underlying bonds. The Portfolio's investment will be limited solely to the debt
units and in each case, must meet the credit quality standards under Rule 2a-7
of the 1940 Act. Debt units will be purchased by the Portfolio as an
institutional accredited investor pursuant to a private placement memorandum.
Sale of debt units will be effected pursuant to Rule 144A or other exemptions
from registration under the Securities Act of 1933, subject to the eligibility
of the purchaser and compliance with trust agreement requirements. The Manager
will monitor the liquidity of the debt units under the supervision of Cortland's
Board of Directors.
The securities in which the Portfolio invests may not yield as high a level of
current income as longer term or lower grade securities, which generally have
less liquidity and greater fluctuation in value. There can be no assurance that
the Portfolio will achieve its objectives. The values of the securities in
which the Portfolio invests fluctuate based upon interest rates, the financial
stability of the issuers and market factors.
The Portfolio may enter into the following arrangements:
Repurchase Agreements. Under a repurchase agreement, the purchaser (for
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example, the Portfolio) acquires ownership of an obligation and the seller
agrees, at the time of the sale, to repurchase the obligation at a mutually
agreed upon time and price, thereby determining the yield during the purchaser's
holding period. This arrangement results in a fixed rate of return insulated
from market fluctuations during such period. Although the underlying collateral
for repurchase agreements may have maturities exceeding one year, the Portfolio
will not enter into a repurchase agreement if as a result of such investment
more than 10% of such Portfolio's total assets would be invested in illiquid
securities, including repurchase agreements which expire in more than seven
days.
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The Portfolio may, however, enter into "continuing contract" or "open"
repurchase agreements under which the seller is under a continuing obligation to
repurchase the underlying obligation from the Portfolio on demand and the
effective interest rate is negotiated on a daily basis.
In general, the Portfolio will enter into repurchase agreements only with
domestic banks with total assets of at least $1.5 billion or with primary
dealers in U.S. Government securities. However, the total assets of a bank will
not be the sole factor determining the Portfolio's investment decisions, and
the Portfolio may enter into repurchase agreements with other institutions which
Cortland's Board of Directors believes present minimal credit risk.
Nevertheless, if the seller of a repurchase agreement fails to repurchase the
obligation in accordance with the terms of the agreement, the Portfolio may
incur a loss to the extent that the proceeds it realized on the sale of the
underlying obligation are less than the repurchase price. Repurchase agreements
may be considered loans to the seller of the underlying security. Income with
respect to repurchase agreements is not tax-exempt.
Securities purchased pursuant to a repurchase agreement are held by the
Portfolio's custodian and (i) are recorded in the name of the Portfolio with the
Federal Reserve Book-Entry System, or (ii) the Portfolio receives daily written
confirmation of each purchase of a security and a receipt from the custodian.
The Portfolio purchases securities subject to a repurchase agreement only when
the purchase price of the security acquired is equal to or less than its market
price at the time of purchase.
Reverse Repurchase Agreements. The Portfolio may also enter into reverse
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repurchase agreements which involve the sale by the Portfolio of a portfolio
security at an agreed upon price, date and interest payment. The Portfolio will
enter into reverse repurchase agreements for temporary or defensive purposes to
facilitate the orderly sale of portfolio securities, to accommodate abnormally
heavy redemption requests should they occur, or in some cases as a technique to
enhance income. The Portfolio will use reverse repurchase agreements when the
interest income to be earned from the investment of the proceeds of the
transaction is greater than the interest expense of the reverse repurchase
transaction. The Portfolio will enter into reverse repurchase agreements only
in amounts up to 10% of the value of its total assets at the time of entering
into such agreements. Reverse repurchase agreements involve the risk that the
market value of securities retained by the Portfolio in lieu of liquidation may
decline below the repurchase price of the securities sold by the Portfolio which
it is obligated to repurchase. This risk, if encountered, could cause a
reduction in the net asset value of the Portfolio's shares. Reverse repurchase
agreements are considered to be borrowings under the 1940 Act. See "Investment
Restrictions" in the Portfolio's Statement of Additional Information for the
Portfolio's percentage limitations on borrowings.
Delayed Delivery Agreement and When-issued Obligations. Delayed delivery
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agreements are commitments by the Portfolio to dealers or issuers to acquire
securities beyond the customary same-day settlement for money market
instruments. These commitments fix the payment price and interest rate to be
received on the investment. Delayed delivery agreements
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will not be used as a speculative or leverage technique. Rather, from time to
time, the Manager can anticipate that cash for investment purposes will result
from scheduled maturities of existing portfolio instruments or from net sales of
shares of the Portfolio; therefore, to assure that the Portfolio will be as
fully invested as possible in instruments meeting the Portfolio investment
objective, the Portfolio may enter into delayed delivery agreements, but only to
the extent of anticipated funds available for investment during a period of not
more than five business days.
Money Market Obligations are sometimes offered on a "when-issued" basis, that
is, the date for delivery of and payment for the securities is not fixed at the
date of purchase, but is set after the securities are issued (normally within
forty-five days after the date of the transaction). The payment obligation and
the interest rate that will be received on the securities are fixed at the time
the buyer enters into the commitment. The Portfolio will only make commitments
to purchase such Money Market Instruments with the intention of actually
acquiring such securities, but the Portfolio may sell these securities before
the settlement date if it is deemed advisable.
If the Portfolio enters into a delayed delivery agreement or purchases a when-
issued security, the Portfolio will direct its custodian bank to place cash or
other high grade securities (including Money Market Obligations) in a segregated
account of the Portfolio in an amount equal to its delayed delivery agreements
or when-issued commitments. If the market value of such securities declines,
additional cash or securities will be placed in the account on a daily basis so
that the market value of the account will equal the amount of the Portfolio's
delayed delivery agreements and when-issued commitments. To the extent that
funds are in a segregated account, they will not be available for new investment
or to meet redemptions. Investment in securities on a when-issued basis and use
of delayed delivery agreements may increase the Portfolio's exposure to market
fluctuation; or may increase the possibility that the Portfolio will incur a
short-term loss, if the Portfolio must engage in portfolio transactions in order
to honor a when-issued commitment or accept delivery of a security under a
delayed delivery agreement. The Portfolio will employ techniques designed to
minimize these risks.
No additional delayed delivery agreements or when-issued commitments will be
made if more than 25% of the Portfolio's net assets would become so committed.
The Portfolio will enter into when-issued and delayed delivery transactions only
when the time period between trade date and settlement date is at least 30 days
and not more than 120 days.
INVESTMENT RESTRICTIONS
The Portfolio's investment program is subject to a number of investment
restrictions which reflect self-imposed standards as well as federal and state
regulatory limitations. The most significant of these restrictions provide that
the Portfolio will not: (1) purchase securities of any issuer (other than U.S.
Government Obligations, repurchase agreements fully secured by such obligations
and any high quality, short-term municipal obligations guaranteed by the U.S.
Government) if as a result more than 5% of the Portfolio's total assets would be
invested in the securities of such issuer, except that in the case of
certificates of deposit and bankers'
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acceptances, up to 25% of the value of the Portfolio's total assets may be
invested without regard to such 5% limitation, but shall instead be subject to a
10% limitation (in each case, subject to the provisions of Rule 2a-7 of the 1940
Act); (2) purchase any corporate commercial instruments which would cause 25% of
the value of the Portfolio's total assets at the time of such purchase to be
invested in securities of one or more issuers conducting their principal
business activities in the same industry; (3) borrow money or pledge, mortgage
or hypothecate its assets except for temporary or emergency purposes (except to
secure reverse repurchase agreements and then only in an amount not exceeding
15% of the value of the Portfolio's total assets) except that the Portfolio may
purchase delayed delivery and when-issued securities consistent with its
investment objective and policies (the Portfolio will not make additional
investments while borrowings other than when-issued and delayed delivery
purchases and reverse repurchase agreements are outstanding); or (4) lend money
or securities except to the extent that the investments of the Portfolio may be
considered loans.
The Fund will also be subject to the foregoing investment restrictions if the
Fund no longer invests all of its investible assets in shares of the Portfolio.
HOW THE FUND AND THE PORTFOLIO ARE MANAGED
The Fund's trustees formulate the Fund's general policies and oversee the Fund's
affairs. The Fund currently seeks to achieve its investment objective by
investing all of its investible assets in the Portfolio. The Portfolio is
managed by the Manager. Subject to the supervision of Cortland's Board of
Directors, the Manager makes the Portfolio's day-to-day investment decisions,
arranges for the execution of portfolio transactions and generally manages the
Portfolio's investments.
The Manager. For investment advisory and other services provided to the
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Portfolio, Reich & Tang Asset Management L.P. (the "Manager") receives from the
Portfolio a fee at the annual rate of 0.80% of the first $500 million of the
Portfolio's average daily net assets, 0.775% of the next $500 million of such
assets, 0.750% of the next $500 million of such assets and 0.725% of such assets
in excess of $1.5 billion. At current asset levels, the Manager's annual fee
rate is approximately 0.77% of the Portfolio's average daily net assets.
Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City, Missouri
64105, acts as custodian for the Portfolio's securities and cash. Cortland acts
as its own transfer agent for the Portfolio's shares.
The Manager, in addition to providing investment advisory services to the
Portfolio, provides the Fund with certain administrative services and generally
oversees the operation of the Fund. The Fund, pursuant to an Administration
Agreement, pays the Manager a fee for these services at the annual rate of 0.05%
of the Fund's average daily net assets.
The Manager was, at June 30, 1998, investment manager, adviser or supervisor
with respect to assets aggregating in excess of $11.3 billion. The Manager
currently acts as investment manager or administrator of seventeen other
investment companies and also advises pension trusts, profit sharing trusts and
endowments.
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Nvest Companies, L.P. ("Nvest Companies") is the limited partner and owner of a
99.5% interest in the Manager. Reich & Tang Asset Management, Inc. (an indirect
wholly-owned subsidiary of Nvest Companies) is the sole general partner and
owner of the remaining 0.5% interest of the Manager. Reich & Tang Asset
Management, Inc. is an indirect subsidiary of Metropolitan Life Insurance
Company ("MetLife"). Also, MetLife directly and indirectly owns approximately
47% of the outstanding partnership interests of Nvest Companies and may be
deemed a "controlling person" of the Manager. Reich & Tang, Inc. owns, directly
and indirectly, approximately 13% of the outstanding partnership interests of
Nvest Companies.
The Distributor. New England Securities Corporation serves as the Fund's
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distributor (the "Distributor"). The Distributor is an indirect wholly-owned
subsidiary of MetLife.
Under a plan (a "12b-1 Plan") adopted by the Portfolio pursuant to Rule 12b-1
under the 1940 Act, the Portfolio pays Reich & Tang Distributors, Inc. (the
"Portfolio Distributor") a monthly service fee at the annual rate of 0.25% of
the net assets attributable to the Portfolio's shares. The Portfolio
Distributor uses the fees to defray the cost of commissions and service fees
paid to financial service firms which have sold Portfolio shares, and to defray
other expenses such as sales literature, prospectus printing and distribution,
shareholder servicing costs and compensation to wholesalers. Because the 12b-1
Plan is of the type known as a "compensation" plan, should the fees exceed the
Portfolio Distributor's expenses in any year, the Portfolio Distributor would
realize a profit. The Plan also authorizes other payments to the Portfolio
Distributor and its affiliates (including the Manager) which may be construed to
be indirect financing of Portfolio share sales.
There is currently in place a 12b-1 Plan under which the Fund will pay to the
Distributor a monthly service fee at the annual rate of up to 0.25% of the net
assets of each Class of the Fund. However, no fees shall be payable under this
plan for so long as the Fund invests all of its investible assets in the
Portfolio. If the Fund were to invest in securities other than shares of the
Portfolio, no additional shareholder action would be required to commence
payments under the 12b-1 Plan for the Fund.
The Transfer Agent and Dividend Paying Agent. Reich & Tang Services, Inc.
- --------------------------------------------
serves as the Fund's transfer agent (the "Transfer Agent"). The Transfer Agent
receives no fee from the Fund for serving as Transfer Agent.
The Custodian. Investors Fiduciary Trust Company serves as the Fund's custodian
- -------------
("the Custodian").
e~navigator Servicing Agent. Interactive Financial Solutions, Inc. ("IFS" or
- ---------------------------
the "e~navigator Servicing Agent") provides, directly or indirectly, certain
shareholder services to the shareholders of the Fund. Shareholder services
include paper checkwriting, expense coding on checks to aid e~navigator
Customers in expense identification, a comprehensive annual summary
<PAGE>
statement, electronic bill-payments, a debit card with various cardholder
benefits and, for e~navigator Customers who apply for and receive a New England
Financial Visa Card, electronic transaction downloads into that e~navigator
Customer's e~navigator Financial Organizer, the software package required to
open an Electronic Money Management Account. For more information about these
services or your Electronic Money Management Account, call 1-800-333-3204.
As compensation for the provision of these shareholder services, the e~navigator
Servicing Agent receives an annual fee (the "e~navigator Servicing Fee") equal
to 5.00% of the average daily net assets of the Fund attributable to Class A
shares. The e~navigator Servicing Agent has agreed to waive a portion of the
e~navigator Servicing Fee to the extent that the daily total operating expenses
of the Fund (without giving effect to the Financial Organizer Fee, as described
below) exceed the daily total return of Class A shares. The e~navigator
Servicing Agent will also charge a fee (the "Financial Organizer Fee") to each
person who purchases the e~navigator Financial Organizer at the time of such
purchase. Every year thereafter, on the anniversary of the date of such initial
purchase, each e~navigator Customer will be charged the Financial Organizer Fee.
Currently, the e~navigator Servicing Agent plans to collect the Financial
Organizer Fee by charging the credit card account provided by each e~navigator
Customer. However, the e~navigator Servicing Agent reserves the right to deduct
automatically the Financial Organizer Fee from each e~navigator Customer's
Electronic Money Management Account instead of charging the e~navigator
Customers' credit card accounts. The Financial Organizer Fee is currently
$24.00. The Fund reserves the right to increase or decrease this fee without
obtaining a shareholder vote, although the Fund currently has no plans to do so.
Service Systems -- Year 2000. Many of the services provided to the Fund depend
- ----------------------------
on the smooth functioning of computer systems. Many systems in use today cannot
distinguish between the year 1900 and the year 2000. Failure of any of the
service systems to process information properly in the year 2000 could have an
adverse impact on the Fund's operations and services provided to shareholders.
The Manager, the Transfer Agent, the Distributor, the Custodian, e~navigator
Servicing Agent, the Portfolio, the Portfolio's custodian, transfer agent and
distributor, and certain other service providers to the Fund have reported that
each expects to modify its systems, as necessary, prior to January 1, 2000 to
address the so-called "year 2000 problem." However, there can be no assurance
that the problem will be corrected in all respects and that the Fund's
operations and services provided to shareholders will not be adversely affected.
Expenses. The Fund is responsible for payment of all of its expenses that are
- --------
not borne by the Manager, which may include, among other types of expenses, the
following: (i) the costs of preparing, printing and distributing sales
literature; (ii) charges and expenses of any entity appointed by the Fund for
custodial, paying agent, shareholder servicing and plan agent services; (iii)
charges and expenses of independent accountants retained by the Fund; (iv)
charges and expenses of any transfer agents and registrars appointed by the
Fund; (v) brokers' commissions and issue and transfer taxes chargeable to the
Fund in connection with securities transactions to
-12-
<PAGE>
which the Fund is a party; (vi) taxes and fees payable by Fund to federal, state
or other governmental agencies; (vii) any cost of certificates representing
shares of the Fund; (viii) expenses of meetings of shareholders and trustees of
the Fund; and (ix) interest, including interest on borrowings by the Fund.
ORGANIZATION AND HISTORY
The Fund was organized in 1998 as a Massachusetts business trust and is
authorized to issue an unlimited number of full and fractional shares in
multiple series and classes. The Fund is not required to hold annual
shareholder meetings, but special meetings may be called for certain purposes.
Shareholders receive one vote for each Fund share. Shares of the Fund vote
together except when required by law or as otherwise determined by the Board of
Trustees. Shareholders owning in the aggregate ten percent of Fund shares may
call meetings to consider removal of Trustees. Under certain circumstances, the
Fund will provide information to assist shareholders in calling such a meeting.
See the Statement of Additional Information for more information.
As of [______________], 1998, [IFS] owned all of the outstanding shares of the
Fund.
HOW TO BUY SHARES
Shares of the Fund are offered continuously. Properly completed orders received
prior to the time at which the Fund values its shares will be processed based on
that day's closing net asset value. An order to purchase Fund shares will be
considered properly completed only when it is received in proper form and
payment in the form of federal funds (member bank deposits with the Federal
Reserve Bank) is received by the Fund for investment. The Fund reserves the
right to reject any order for the purchase of shares.
Each e~navigator Customer will be offered the opportunity to purchase shares at
the time the e~navigator Customer purchases the e~navigator Financial Organizer.
e~navigator Customers may initially invest any amount greater than $1 and make
subsequent investments in any amount greater than $1.
Fund shares are purchased at the net asset value next determined after
acceptance of the order. Net asset value is normally determined at 4:00 p.m.
Eastern time on each day the New York Stock Exchange is open (a "Business Day").
Because the Portfolio uses the amortized cost method of valuing the securities
held by the Portfolio and rounds the Portfolio's per share net asset value to
the nearest whole cent, it is anticipated that the net asset value of the shares
of the Fund will remain constant at $1.00 per share. However, the Fund makes no
assurance that it can maintain a $1.00 net asset value per share. In order to
earn dividends the next day, purchase orders must be received before 4:00 p.m.
Eastern time; otherwise, the purchase of shares will occur the following
business day. Payments transmitted by check are normally converted into federal
funds within one business day and are accepted subject to collection at full
face amount. Purchases may be made by following the procedures specified below.
The Fund will not issue
-13-
<PAGE>
share certificates but will record each investor's holdings on the books of the
Fund in noncertificate form and record this amount in the investor's Electronic
Money Management Account. See the Statement of Additional Information for more
information.
Initial Purchase of Shares
Mail. You may send a check made payable to "e~navigator Fund" along with a
- ----
completed subscription order form to:
e~navigator Fund
c/o e~navigator Customer Service
P.O. Box 1277
Boston, Massachusetts 02117
Checks are accepted subject to collection at full value in U.S. dollars.
Payment by a check drawn on any member bank of the Federal Reserve System can
normally be converted into federal funds within one business day after receipt
of the check. Checks drawn on a nonmember bank may take substantially longer to
convert into federal funds and to be invested in Fund shares. Your subscription
will not be accepted until the Fund receives federal funds.
Bank Wire. To purchase shares of the Fund using the wire system for transmittal
- ---------
of money among banks, you should first obtain a new account number by
telephoning the Fund at (800) 333-3204 and then instruct a member commercial
bank to wire money immediately to:
[Custodian Bank Wire Info]
You should then promptly complete and mail the subscription order form.
If you plan to wire funds, you should instruct your bank to wire before 12 noon
Eastern time, on the same day. Your bank may charge you for transmitting the
money by bank wire, and may also charge you for the use of federal funds. The
Fund does not charge investors for its receipt of wire transfers. Payment in
the form of a "bank wire" received prior to 4:00 p.m. Eastern time on a Business
Day will be treated as a federal funds payment received on that day.
Subsequent Purchases of Shares
There is a $1.00 minimum for each subsequent purchase. All payments should
clearly indicate the e~navigator Customer's Electronic Money Management Account
number. Provided that the information on the subscription order form on file
with the Fund is still applicable, an e~navigator Customer may reopen an account
without filing a new subscription order form at any time during the year the
e~navigator Customer's Electronic Money Management Account is closed or during
the following calendar year. Subsequent purchases can be made by bank
wire, as indicated above, or you may send a check payable to "e~navigator Fund"
along with your Electronic Money Management Account number to:
e~navigator Fund
c/o Reich & Tang Services, Inc.
600 Fifth Avenue
New York, New York 10020
-14-
<PAGE>
Electronic Funds Transfer (EFT) and Direct Deposit. You may purchase additional
- --------------------------------------------------
shares of the Fund by having salary, dividend payments, interest payments or any
other payments you designate, including social security, or certain veteran's,
military or other payments from the federal government, automatically invested
in Fund shares. You may deposit as much of such payments as you elect. To
enroll in this program, you must file with [the Fund] a completed EFT
Application. EFT Applications may be obtained by calling 1(800)333-3204. To
commence Direct Deposit, you may need to submit to your employer a Direct
Deposit Sign-Up Form (which you may obtain from your employer or by calling
1(800)333-3204. You may elect at any time to terminate EFT or Direct Deposit
purchases by notifying in writing the entity transmitting such payments. Death
or legal incapacity will terminate such purchases. Further, the Fund may
terminate such purchases upon 30 days' notice to you.
HOW TO REDEEM SHARES
You may redeem your shares, in whole or in part, on any day on which the Fund's
net asset value is calculated. Shares are redeemed at the net asset value next
determined after receipt of proper notice of redemption. If you redeem all of
your shares, you will receive payment of all dividends declared but unpaid
through the date of redemption. If you redeem only a portion of the shares in
your Electronic Money Management Account, the dividends declared but unpaid on
the shares redeemed will not be distributed to you until the next regular
dividend payment date. If your redemption order is received prior to 4:00 p.m.
Eastern time, payment will ordinarily be made on the next Business Day.
However, under unusual circumstances, the Fund may suspend redemptions, or
postpone payment for more than seven days, as permitted by federal securities
law.
Some of the redemption procedures described below may require you to complete
and file an authorization form in advance. Shares purchased by check will not
be redeemed until the check for the purchase has cleared, which may take up to
fifteen calendar days after purchase. The Fund will not honor redemptions of
shares purchased by check until the check has cleared. The Fund reserves the
right to change, modify or terminate the redemption procedures described below
at any time upon prior written notice to shareholders. The Fund also reserves
the right to effect the automatic redemption of shares maintained in Electronic
Money Management Accounts whose value falls below a minimum amount that may be
set by the Fund's Board of Trustees. The Fund's Board of Trustees has not yet
established any such minimum amount. e~navigator Customers will be notified
prior to the automatic redemption of their Fund shares.
Redemptions by Check
You may use the paper draft checking feature of your Electronic Money Management
Account to redeem Fund shares. The Electronic Money Management Account entitles
you to write checks in any amount up to the value of the shares held in your
Electronic Money Management Account.
-15-
<PAGE>
The payee of a check may cash or deposit the check in the same way as an
ordinary bank check. When a check is presented to the Fund's agent bank for
payment, the agent bank will cause the Fund to redeem a sufficient number of
shares to cover the amount of the check. Shareholders are entitled to dividends
on the shares redeemed up until the day on which the check is presented to the
agent bank for payment. Checks drawn on insufficient funds will be returned to
the payee and the agent bank will cause a fee (currently $16) to be imposed on
the Electronic Money Management Account on which the check was written. Shares
purchased with a check that has not yet cleared will not constitute funds
available for redemption. Additionally, the agent bank will cause a fee
(currently $20) to be imposed on Electronic Money Management Account on which
checks that are subject to stop payment orders are written.
Electronic Bill Payment
Shareholders may authorize the redemption of shares in such amounts as may from
time to time be required to pay certain specified bills. Provided that the
Electronic Money Management Account contains sufficient funds to cover the bill
payment, shares are automatically redeemed, and payments are automatically
entered into the e~navigator Customer's check register, on the designated date
of payment. Shares purchased with a check that has not yet cleared will not
constitute funds available for redemption. Payments are delivered to payees
within 2 to 10 days of the redemption of shares. If a payee does not cash or
deposit a check generated by the electronic bill payment feature within 90 days
of the date of the electronic check was written, shares equal to the value of
such electronic bill payment will be invested in the e~navigator Customer's
Electronic Money Management Account, and the check will be voided. e~navigator
Customers cease to earn a return on shares redeemed to make electronic bill
payments. Any uncashed electronic bill payment checks that are credited to the
e~navigator Customer's Electronic Money Management Account (after 90 days from
the date on which the electronic check was written), may earn a return for such
e~navigator Customer beginning on the date that they are credited.
Debit Card Redemptions
As described above, you have the option of receiving a debit card that is linked
to your Electronic Money Management Account. You may use your debit card to
access funds in your Electronic Money Management Account [anywhere debit cards
are accepted]. Your use of the debit card will authorize the Fund's agent bank
to redeem shares from your Electronic Money Management Account in the same
manner as a check, except that debited amounts are effectively "presented for
payment" on the day the card is used, limiting the time during which you earn
dividends on debited amounts.
-16-
<PAGE>
Telephone Redemptions
Shareholders may redeem Fund shares valued at up to $[25,000] by calling 1-800-
333-3204 toll free any Business Day between 9:00 a.m. and 4:00 p.m. The
Transfer Agent will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine and may be liable for losses related to
unauthorized or fraudulent transactions in the event reasonable procedures are
not employed. Such procedures include restrictions on where proceeds of
telephone redemptions may be sent, limitations on the ability to redeem by
telephone shortly after an address change, recording of telephone lines and
requirements that the redeeming shareholder provide certain identifying
information. Shareholders wishing to redeem or exchange shares by telephone may
experience difficulty in reaching the Fund at its toll free telephone number
during periods of drastic economic or market changes. In that event,
shareholders should follow the procedures for redemption or exchange by mail.
The Fund reserves the right to change, modify or terminate the telephone
redemption services at any time upon prior written notice to shareholders.
Automatic Redemptions
You may establish an automatic redemption plan, under which a specified amount
will automatically be redeemed monthly or quarterly, as you request. You may
establish an automatic redemption plan by calling 1(800)333-3204 or sending a
telegram or letter to the Transfer Agent. The proceeds from such redemption
will be mailed or wired only to a previously designated bank account, and you
must complete the telephone redemption authorization included in the Electronic
Money Management Account application in order to make automatic redemptions.
The proceeds from your automatic redemption will not be mailed or wired to other
than the designated account. Redemptions of $10,000 or more will be sent by
bank wire if requested. Smaller amounts will normally be mailed to the
designated account.
Redemptions by Letter of Instruction
You may redeem shares by sending a letter of instruction to the Transfer Agent
containing:
(a) your Electronic Money Management Account number
(b) your name and telephone number
(c) the dollar amount or number of shares to be redeemed or a statement
that all shares in the account are to be redeemed
(d) payment instructions (normally redemption proceeds will be mailed to
the shareholder's address as registered with the Fund)
(e) signature(s) of the registered shareholder(s)
-17-
<PAGE>
(f) signature(s) guaranteed stamped under the signature and signed and
guaranteed by an eligible guarantor institution which includes a
domestic bank, a domestic savings and loan institution, a domestic
credit union, a member bank of the Federal Reserve System or a
member firm of a national securities exchange, pursuant to the
Fund's standards and procedures.
The proceeds of redemption are sent to your bank or address as it appears in the
Fund's records. In order to change such designation, you must submit a written
notification to the Fund with the signature guarantee(s) described above.
REBALANCING TRANSACTIONS
The Fund offers two classes of shares: Class A and Class B. The first $5,000 of
an e~navigator Customer's investment in the Fund will be invested in Class A
shares. Any amount over $5,000 that an e~navigator Customer invests in the Fund
will be invested in Class B shares, as explained below.
At the close of each Business Day, the Transfer Agent will aggregate each
e~navigator Customer's purchases (including reinvested dividends) and
redemptions, if any. As described above, the Fund will not redeem any shares
purchased by check until the check has cleared. Accordingly, shares purchased by
checks that have not yet cleared, shares to be purchased by check and any
attempted redemptions of such shares will be disregarded for these purposes. If
there are net redemptions from a Customer's Electronic Money Management Account
on a given day, Class B shares and, if there are insufficient Class B shares to
satisfy the redemption, Class A shares, will be redeemed to the extent necessary
to satisfy such redemption. If there are net purchases into a Customer's
Electronic Money Management Account on a given day, Class A shares will be
purchased to the extent that the value of the Class A shares in such account is
less than $5,000, and Class B shares will be purchased with the remainder of
such purchase.
Immediately after processing all purchases and redemptions as described above,
the Fund will (1) automatically exchange Class A shares for Class B shares in
each Electronic Money Management Account to the extent necessary to reduce the
value of Class A shares in such account to $5,000, or (2) automatically exchange
Class B shares for Class A shares in each Electronic Money Management Account to
the extent necessary to increase the value of Class A shares in such account to
$5,000. The transactions described in this paragraph will occur without taking
into account any shares in the account that were purchased by a check that has
not yet cleared.
PERFORMANCE INFORMATION
The Fund will provide yield quotations based on its daily dividends.
-18-
<PAGE>
The Fund may include the yield of either Class of shares, accompanied by the
total return, in advertising and other written material. Yield will be computed
in accordance with the SEC's standardized formula as described in the Portfolio
Statement of Additional Information and can be expected to fluctuate
substantially over time.
The Fund may include total return information for each Class of shares in
advertisements or other written sales material. The Fund may show each Class's
average annual total return for the one-, five- and ten-year periods (or the
life of the Class, if shorter) through the end of the most recent calendar
quarter. Total return is measured by comparing the value of a hypothetical
$1,000 investment in a Class at the beginning of the relevant period to the
value of the investment at the end of the period (assuming automatic
reinvestment of all dividends and capital gains distributions). Total return
may be quoted with or without giving effect to any voluntary expense limitations
in effect for the Class in question during the relevant period. The Class may
also show total return over other periods, on an aggregate basis for the period
presented.
The Fund may also present the distribution rates for each Class of shares in its
sales literature. These rates will be determined by annualizing the Class's
distributions from net investment income and net short-term capital gain over a
recent 12-month, 3-month or 30-day period and dividing that amount by the
maximum offering price or the net asset value on the last day of such period.
Total return will generally be higher for Class B shares than for Class A
shares, because of the e~navigator Servicing Fee paid by Class A shares. You
should remember that the first $5,000 of your Electronic Money Management
Account will automatically be invested in Class A shares, and therefore, you
will earn the higher Class B return only on Electronic Money Management Account
amounts in excess of $5,000.
DISTRIBUTIONS AND TAXES
The Fund intends to qualify as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended (the "Code") and to distribute to its
shareholders net income and any net realized gains at least annually.
As discussed above, the Fund does not expect, under current market and interest
rate conditions, to pay any dividends on Class A shares. The Fund generally
declares distributions daily and pays them monthly. Distributions are invested
in additional shares of the same Class of the Fund at net asset value [unless
the shareholder elects to receive cash]. If an investment is made by federal
funds wire, dividends start accruing on the next Business Day. Regardless of the
shareholder's election, distributions of $10 or less will not be paid in cash to
shareholders but will be invested in additional shares of the same Class of the
Fund at net asset value. If a shareholder has elected to receive dividends
and/or capital gain distributions in cash and the postal or other delivery
service selected by the Transfer Agent is unable to deliver checks to the
shareholder's address of record, such shareholder's distribution option will
automatically be
-19-
<PAGE>
converted to having all dividend and other distributions reinvested in
additional shares. No interest will accrue on amounts represented by uncashed
distribution or redemption checks. To change your election, call the Transfer
Agent at [ ].
It is the Fund's policy to distribute to shareholders all of its net investment
income and any capital gains (net of capital losses) in accordance with the
timing requirements imposed by the Code, so that the Fund will satisfy the
distribution requirement of Subchapter M and not be subject to federal income
taxes or the 4% excise tax. So long as the Fund qualifies for this tax
treatment, the Fund will not be subject to federal income tax on amounts
distributed to shareholders.
Shareholders will be subject to federal income taxes and any applicable state or
local income taxes on amounts distributed as dividends unless such shareholders
are otherwise exempt. It is not expected that any portion of taxable dividends
paid by the Fund will qualify for the federal dividends-received deduction for
corporations.
Distributions to shareholders will be treated in the same manner for federal
income tax purposes whether a shareholder elects to receive them in cash or
reinvest them in additional shares. In general, shareholders take distributions
into account in the year in which they are made. However, shareholders are
required to treat certain distributions made during January as having been paid
and received on December 31 of the preceding year. A statement setting forth
the federal income tax status of all distributions made (or deemed made) during
the year will be sent to shareholders promptly after the end of each year.
If the Fund fails to satisfy any of the Code requirements for qualification as a
regulated investment company, it will be taxed at regular corporate tax rates on
all of its taxable income (including capital gains) without any deduction for
distributions to shareholders, and distributions will be taxable to shareholders
as ordinary dividends (even if derived from the Fund's net long-term capital
gains) 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.
To avoid being subject to a 31% federal backup withholding on taxable dividends
and redemption payments, each shareholder must furnish the Fund with its
taxpayer identification number and certify, under penalties of perjury, that
such number is correct and that such shareholder is not subject to backup
withholding for any reason.
The foregoing discussion of federal income tax consequences is based on tax laws
and regulations in effect on the date of this Prospectus, and is subject to
change by legislation or administrative action. As the foregoing discussion is
for general information only, shareholders should also review the more detailed
discussion of federal income tax considerations relevant to the Fund that is
contained in the Statement of Additional Information. Shareholders are advised
to consult with their tax advisors concerning the application of state, local
and foreign taxes on
-20-
<PAGE>
investments in the Fund which may differ from the federal income tax
consequences described above.
-21-
<PAGE>
Manager
Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, NY 10020
Distributor of the Fund
New England Securities Corporation
399 Boylston Street
Boston, MA 02116
Distributor of the Portfolio
Reich & Tang Distributors, Inc.
600 Fifth Avenue
New York, NY 10020
Transfer Agent
Reich & Tang Services, Inc.
600 Fifth Avenue
New York, NY 10020
Custodian
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
Independent Auditors
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, New York 10017-2416
Legal Counsel to the Fund
Ropes & Gray
One International Place
Boston, MA 02110-2624
[ ], 1998
-22-
<PAGE>
e~navigator Fund
PROSPECTUS
e~navigator Fund seeks to provide as high a level of current income as is
consistent with the preservation of capital and liquidity. The Fund currently
seeks to achieve its objective by investing all of its assets in the Cortland
General Money Market Fund, a diversified open-end management company which has
the same investment objective and policies as the Fund.
For more detailed information about the Fund, call 1-800-333-3204 for the [date]
Statement of Additional Information.
Contents Page
Cover Page ................................................................Cover
Summary of Expenses ...........................................................3
Two-tiered Structure ..........................................................4
The Fund's Investment Objective ...............................................5
Investment Policies ...........................................................5
Investment Restrictions .......................................................9
How the Fund and the Portfolio Are Managed ...................................10
Organization and History .....................................................13
How to Buy Shares ............................................................13
How to Redeem Shares .........................................................15
Rebalancing Transactions .....................................................18
Performance Information ......................................................18
Distributions and Taxes ......................................................19
-23-
<PAGE>
- --------------------------------------------------------------------------------
e~navigator Fund
================================================================================
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
[ ], 1998
Relating to e~navigator Fund's Prospectus
dated [ ], 1998
This Statement of Additional Information (the "SAI") contains information which
may be useful to investors but is not included in the Prospectus of e~navigator
Fund (the "Fund"). The SAI is not a Prospectus. It should be read in
conjunction with the Prospectus which may be obtained by writing to New England
Securities Corporation, 399 Boylston Street, Boston, Massachusetts 02116, by
calling toll free at (800) 333-3204 or from the e~navigator web site
(http://www.enavigator.com). Capitalized terms which are not defined herein are
used as defined in the Prospects. The SAI and other documents relating to
e~navigator Fund may be accessed electronically through the Securities and
Exchange Commission's web site (http://www.sec.gov).
All information contained in the Statement of Additional Information of Cortland
Trust, Inc. dated July 29, 1998 (the "Portfolio SAI") [(SEC File No. 811-
01479)], pertaining to the Cortland General Money Market Fund (the
"Portfolio"), other than the financial statements and report of independent
accountants thereon (which are incorporated into the Portfolio SAI by
reference), is incorporated herein by reference. A copy of the Portfolio SAI
should accompany this SAI, and additional copies of the Portfolio SAI are
available by writing to New England Securities Corporation, 399 Boylston Street,
Boston, Massachusetts 02116, by calling toll free at (800) 333-3204 or from the
e~navigator web site (http://www.enavigator.com).
Table of Contents
Introduction............................................................... 1
Investment Objective....................................................... 2
Investment Policies........................................................ 2
Investment Agreements................................................. 3
When-issued Securities................................................ 4
Investment Restrictions.................................................... 5
Shareholder Rights......................................................... 7
Management of the Fund..................................................... 7
Trustees and Officers................................................. 7
Compensation Table.................................................... 8
The Manager........................................................... 9
The Distributor....................................................... 9
e~navigator Servicing Agent........................................... 10
Custodian............................................................. 11
Transfer Agent........................................................ 11
Management of the Portfolio................................................ 11
Expenses................................................................... 11
Principal Holders of Securities............................................ 12
Reports.................................................................... 12
Purchases, Redemptions and Rebalancing
Transactions.......................................................... 12
Purchases and Redemptions............................................. 12
Rebalancing Transactions.............................................. 12
Net Asset Value Determination......................................... 13
<PAGE>
Dividends and Tax Matters.................................................. 13
Dividends.............................................................. 13
Tax Matters............................................................ 14
Yield Information........................................................... 18
Portfolio Transactions...................................................... 19
Performance Comparisons..................................................... 19
Description of the Fund..................................................... 20
Voting Rights............................................................... 21
Shareholder and Trustee Liability........................................... 22
Investment Ratings.......................................................... 23
e~navigator Fund is a diversified open-end management investment company (the
"Fund"). The Fund is organized as a Massachusetts business trust pursuant
to an Agreement and Declaration of Trust dated [ ].
INVESTMENT OBJECTIVE
Information concerning the investment objective of the Fund and the investment
policies implemented to achieve that objective is set forth in the Prospectus
under the captions "The Fund's Investment Objective" and "Investment Policies."
The principal features of the investment policies and the primary risks
associated with the investment policies of the Fund and the Portfolio are
discussed in the Prospectus under "Investment Policies."
As described in the Fund's Prospectus, the Fund currently seeks to achieve its
investment objective by investing all its assets in the Portfolio. There can be
no assurance that the Fund's objective will be achieved.
The Portfolio seeks to achieve its objective by investing in portfolios of
short-term instruments rated high quality by a major rating service or
determined to be of high quality by the Manager under the supervision of the
Board of Directors. There can be no assurance that the Portfolio's objective
will be achieved.
INVESTMENT POLICIES
The following supplements the summary of the Fund's investment program which
appears in the Prospectus. Except as otherwise noted, the policies of the Fund
are not "fundamental" and may be changed without a vote of the majority of the
outstanding shares of the Fund. (See "Shareholder Rights.") As used in the
Prospectus, the term "majority of the outstanding shares" of the Fund means,
respectively, the vote of the lesser of (i) 67% or more of the shares of the
Fund present at a meeting, if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by proxy or (ii) more than 50% of
the outstanding shares of the Fund.
-2-
<PAGE>
Investment Agreements
If the Fund no longer invests all of its investible assets in the Portfolio, the
Fund may enter into Repurchase agreements, which are agreements under which the
purchaser (for example, the Fund) acquires ownership of an obligation (e.g., a
debt instrument or time deposit) and the seller agrees, at the time of the sale,
to repurchase the obligation at a mutually agreed upon time and price, thereby
determining the yield during the purchaser's holding period. This arrangement
results in a fixed rate of return insulated from market fluctuations during such
period. Although the underlying collateral for repurchase agreements may have
maturities exceeding one year, a Fund will not enter into a repurchase agreement
if as a result of such transaction more than 10% of the Fund's total assets
would be invested in liquid securities, including repurchase agreements expiring
in more than seven days. The Fund may, however, enter into a "continuing
contract" or "open" repurchase agreement under which the seller is under a
continuing obligation to repurchase the underlying obligation from the Fund on
demand and the effective interest rate is negotiated on a daily basis. In
general, the Fund will enter into repurchase agreements only with domestic banks
with total assets of at least $1.5 billion or with primary dealers in U.S.
Government securities, but total assets will not be the sole determinative
factor, and the Fund may enter into repurchase agreements with other
institutions which the Board of Trustees believes present minimal credit risks.
Nevertheless, if the seller of a repurchase agreement fails to repurchase the
debt instrument in accordance with the terms of the agreement, the Fund may
incur a loss to the extent that the proceeds it realizes on the sale of the
underlying obligation are less than the repurchase price. Repurchase agreements
are considered to be loans by the Fund under the Investment Company Act of 1940,
as amended (the "1940 Act").
If the Fund no longer invests all of its investible assets in the Portfolio, the
Fund may enter into reverse repurchase agreements involving the sale of money
market instruments held by the Fund, with an agreement that the Fund will
repurchase the instruments at an agreed upon price and date. The Fund will
employ reverse repurchase agreements when necessary to meet unanticipated net
redemptions so as to avoid liquidating other money market instruments during
unfavorable market conditions, or in some cases as a technique to enhance
income, and only in amounts up to 10% of the value of the Fund's total assets at
the time it enters into a reverse repurchase agreement. At the time it enters
into a reverse repurchase agreement, the Fund will place in a segregated
custodial account high-quality debt securities having a dollar value equal to
the repurchase price. The Fund will utilize reverse repurchase agreements when
the interest income to be earned from portfolio investments which would
otherwise have to be liquidated to meet redemptions is greater than the interest
expense incurred as a result of the reverse repurchase transactions.
If the Fund no longer invests all of its investible assets in the Portfolio, the
Fund may enter delayed delivery agreements involving commitments by the Fund to
dealers or issuers to acquire securities or instruments at a specified future
date beyond the customary same-day settlement for money market instruments.
These commitments may fix the payment price and interest rate to be received on
the investment. Delayed delivery agreements will not be used as a speculative
or leverage technique. Rather, from time to time, the Fund's investment adviser
can anticipate that cash for investment purposes will result from scheduled
maturities of existing portfolio instruments or from
-3-
<PAGE>
net sales of shares of the Fund. To assure that the Fund will be as fully
invested as possible in instruments meeting the Fund's investment objective, the
Fund may enter into delayed delivery agreements, but only to the extent of
anticipated funds available for investment during a period of not more than five
business days. Until the settlement date, the Fund will set aside in a
segregated account high-quality debt securities of a dollar value sufficient at
all times to make payment for the delayed delivery securities. Not more than 25%
of the Fund's total assets will be committed to delayed delivery agreements and
when-issued securities, as described below. The delayed delivery securities,
which will not begin to accrue interest until the settlement date, will be
recorded as an asset of the Fund and will be subject to the risks of market
fluctuation. The purchase price of the delayed delivery securities is a
liability of the Fund until settlement. Absent extraordinary circumstances, the
Fund will not sell or otherwise transfer the delayed delivery securities prior
to settlement. If cash is not available to the Fund at the time of settlement,
the Fund may be required to dispose of portfolio securities that it would
otherwise hold to maturity in order to meet its obligation to accept delivery
under a delayed delivery agreement. The Board of Trustees has determined that
entering into delayed delivery agreements does not present a materially
increased risk of loss to shareholders but the Board of Trustees may restrict
the use of delayed delivery agreements if the risk of loss is determined to be
material or if it affects the constant net asset value of the Fund.
When-Issued Securities
Many new issues of Money Market Obligations are offered on a "when-issued"
basis, that is, the date for delivery of and payment for the securities is not
fixed at the date of purchase, but is set after the securities are issued
(normally within forty-five days after the date of the transaction). The
payment obligation and the interest rate that will be received on the securities
are fixed at the time the buyer enters into the commitment. Although the Fund
does not currently intend to invest in Money Market Obligations directly, the
Fund is permitted to make such investments. The Fund will only make commitments
to purchase such Money Market Obligations with the intention of actually
acquiring such securities, but the Fund may sell these securities before the
settlement date if it is deemed advisable. No additional when-issued
commitments will be made if as a result more than 25% of the Fund's net assets
would become committed to purchases of when-issued securities and delayed
delivery agreements.
If the Fund purchases a when-issued security, it will direct its custodian bank
to collateralize the when-issued commitment by establishing a segregated account
in the same fashion as required for a Delayed Delivery Agreement. The special
custody account will likewise be marked-to-market, and the amount in the special
custody account will be increased if necessary to maintain adequate coverage of
the when-issued commitments.
Securities purchased on a when-issued basis and the securities held by the Fund
are subject to changes in market value based upon the public's perception of the
creditworthiness of the issuer and changes in the level of interest rates (which
will generally result in all of those securities changing in value in the same
way, i.e., all those securities experiencing appreciation when interest rates
rise).
-4-
<PAGE>
Therefore, if, in order to achieve higher interest income, the Fund is to
remain substantially fully invested at the same time that it has purchased
securities on a when-issued basis, there will be a possibility that the market
value of the Fund's assets will fluctuate to a greater degree. Furthermore,
when the time comes for the Fund to meet its obligations under when-issued
commitments, the Fund will do so by using then-available cash flow, by sale of
the securities held in the separate account, by sale of other securities or,
although it would not normally expect to do so, by directing the sale of the
when-issued securities themselves (which may have a market value greater or less
than the Fund's payment obligation).
A sale of securities to meet such obligations carries with it a greater
potential for the realization of net short-term capital gains, which are not
exempt from federal income taxes. The value of when-issued securities on the
settlement date may be more or less than the purchase price.
INVESTMENT RESTRICTIONS
The most significant investment restrictions applicable to the Portfolio's
investment program (and the Fund's investment program, should the Fund no longer
invest all of its investible assets in shares of the Portfolio) are set forth in
Prospectus under the caption "Investment Restrictions." Additionally, as a
matter of fundamental policy which may not be changed without the vote of a
majority of the outstanding shares (as that term is defined above), the Fund may
not:
1. Borrow money in excess of 50% of the value (taken at the lower of cost or
current value) of its total assets (not including the amount borrowed) at
the time the borrowing is made, and then only from banks as a temporary
measure to facilitate the meeting of redemption requests (not for leverage)
which might otherwise require the untimely disposition of portfolio
investments or for extraordinary or emergency purposes. Such borrowings
will be repaid before any additional investments are purchased.
2. Underwrite securities issued by other persons except to the extent that, in
connection with the disposition of its portfolio investments, it may be
deemed to be an underwriter under certain federal securities laws.
3. Purchase or sell real estate, although it may purchase securities of
issuers which deal in real estate, securities which are secured by
interests in real estate, and securities which represent interests in real
estate, and it may acquire and dispose of real estate or interests in real
estate acquired through the exercise of its rights as a holder of debt
obligations secured by real estate or interests therein.
4. Purchase or sell commodities or commodity contracts, except that the Fund
may purchase and sell financial futures contracts and options and may enter
into foreign exchange contracts and other financial transactions not
involving physical commodities.
-5-
<PAGE>
5. Make loans, except by purchase of debt obligations in which the Fund may
invest consistent with its investment policies, by entering into repurchase
agreements, or by lending its portfolio securities.
6. With respect to 75% of its total assets, invest in the securities of any
issuer if, immediately after such investment, more than 5% of the total
assets of the Fund (taken at current value) would be invested in the
securities of such issuer; provided that this limitation does not apply to
obligations issued or guaranteed as to interest or principal by the U.S.
government or its agencies or instrumentalities, or to securities of any
registered investment company.
7. With respect to 75% of its total assets, acquire more than 10% of the
outstanding voting securities of any issuer other than a registered
investment company.
8. Purchase securities (other than securities of the U.S. government, its
agencies or instrumentalities, or securities of a registered investment
company) if, as a result of such purchase, more than 25% of the Fund's
total assets would be invested in any one industry.
9. Issue any class of securities which is senior to the Fund's shares of
beneficial interest, except for permitted borrowings.
The Fund is also subject to certain additional non-fundamental investment
restrictions. As a matter of non-fundamental policy, the Fund may not:
1) purchase any Money Market Obligation, if, as a result of such
purchase, more than 5% of the Fund's total assets would be invested in
securities of issuers, which, with their predecessors, have been in
business for less than three years;
2) invest in shares of any other investment company, other than shares of
the Portfolio or in connection with a merger, consolidation,
reorganization or acquisition of assets;
3) invest more than 10% of the value of the Fund's total assets in
illiquid securities, including variable amount master demand notes (if
such notes provide for prepayment penalties) and repurchase agreements
with remaining maturities in excess of seven days;
4) invest in companies for the purpose of exercising control;
5) sell securities short or purchase any securities on margin, except for
such short-term credits as are necessary for the clearance of
transactions;
6) mortgage, pledge or hypothecate any assets held by the Fund except to
secure permitted borrowing and reverse repurchase agreements and then
only in an amount
-6-
<PAGE>
up to 15% of the value of the Fund's total assets, respectively, at
the time of borrowing or entering into a reverse repurchase agreement;
or
7) purchase or sell commodities or commodity futures contracts or
interests in oil, gas or other mineral exploration or development
program (the Fund may, however, purchase and sell securities of
companies engaged in the exploration, development, production,
refining, transporting and marketing of oil, gas or minerals).
For a complete description of the fundamental investment restrictions of the
Portfolio, see "Investment Program and Restrictions" in the Portfolio SAI.
SHAREHOLDER RIGHTS
Shareholders of the Fund do not have cumulative voting rights, and therefore the
holders of more than 50% of the outstanding shares of the Fund voting together
for the election of Trustees may elect all of the members of the Board of
Trustees.
The Board of Trustees may classify or reclassify any unissued shares to create a
new class or classes in addition to those already authorized by setting or
changing in any one or more respects, from time to time, prior to the issuance
of such shares, the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption, of such shares.
As described in the Prospectus, the Fund will not normally hold annual
shareholders' meetings. Under Massachusetts law and the Fund's By-Laws, an
annual meeting is not required to be held in any year in which the election of
trustees is not required to be acted upon under the 1940 Act. At such time as
less than a majority of the trustees have been elected by the shareholders, the
trustees then in office will call a shareholders' meeting for the election of
trustees.
Except as otherwise disclosed in the Prospectus and in this Statement of
Additional Information, the trustees shall continue to hold office and may
appoint their successors.
MANAGEMENT OF THE FUND
Trustees and Officers
The trustees and executive officers of the Fund and their principal occupations
during the last five years are set forth below. Unless otherwise noted, the
address of each trustee and officer is 501 Boylston Street, Boston,
Massachusetts 02116.
FREDERICK K. ZIMMERMANN* (46)-- Chairman of the Board, Chief Executive Officer,
-----------------------------------------------
President and Trustee; Chief Investment Officer and Executive Vice President,
- ---------------------
New England Financial ("NEF"); Chairman of the Board and President, TNE
Advisers, Inc; Chairman of the
-7-
<PAGE>
Board, Chief Executive Officer, President and Trustee, New England Zenith Fund;
Director and Vice President-Investments, NEF until 1996; Chairman of the Board
and President, New England Pension and Annuity Company.
[Insert information on "disinterested" trustees and officers of the Fund]
*Denotes a trustee who is an "interested person" as defined in the 1940 Act.
Each trustee who is not an "interested person" receives an annual fee from the
Fund of $7,500 for his or her services as a trustee and a fee of $1,000 for each
Board meeting attended, and all trustees are reimbursed by the Fund for expenses
incurred in connection with attendance at meetings of the Board of Trustees.
The following table shows estimated amounts to be paid to each trustee by the
Fund for the Fund's first full fiscal year.
COMPENSATION TABLE
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Aggregate Pension or
Compensation Retirement Estimated Total
Name of Person, from Registrant Benefits Annual Benefits Compensation
Position for Fiscal Year Accrued as Part upon Retirement from Fund Paid
of Fund to Trustees
Expenses
<S> <C> <C> <C> <C>
[______Trustee] $12,500 0 0 $12,500
[______Trustee] $12,500 0 0 $12,500
</TABLE>
The Manager
In addition to serving as investment adviser and administrator to the Portfolio,
Reich & Tang Asset Management L.P. serves as administrator of the Fund.
Nvest Companies, L.P. ("Nvest Companies") is the limited partner and owner of a
99.5% interest in the Manager. Reich & Tang Asset Management, Inc. (an indirect
wholly-owned subsidiary of Nvest Companies) is the sole general partner and
owner of the remaining 0.5% interest of the Manager. Reich & Tang Asset
Management, Inc. is an indirect subsidiary of Metropolitan Life Insurance
Company ("MetLife"). Also, MetLife directly and indirectly owns approximately
47% of the outstanding partnership interests of Nvest Companies and may be
deemed a "controlling person" of the Manager. Reich & Tang, Inc. owns, directly
and indirectly, approximately 13% of the outstanding partnership interests of
Nvest Companies.
The Administration Agreement. Reich & Tang Asset Management L.P. serves as
- -----------------------------
Manager of the Fund pursuant to an Administration Agreement dated [ ]
(the "Administration Agreement"). Pursuant to the terms of the Administration
Agreement, the Manager, either directly or through
-8-
<PAGE>
separate contracts (at no additional cost to the Fund): (a) provides the Fund
with office space and supplies as may be agreed upon by the Fund and the
Manager; (b) provides the Fund certain executive, administrative and clerical
services necessary to manage the affairs of the Fund; and (c) provides all
services, other than service of counsel, required in connection with the
preparation of registration statements and prospectuses, all annual and
semiannual reports and notices and proxy solicitation materials ([other
than/including] state securities filings) to the extent the foregoing relate to
the Fund. For these services and facilities, the Fund pays a fee at the annual
rate of 0.05% of the average daily net assets of the Fund.
The Distributor
New England Securities Corporation, the Distributor, serves as the principal
underwriter of the Fund's shares pursuant to a distribution agreement dated [
], (the "Distribution Agreement"). The Distributor has an office located at 399
Boylston Street, Boston, Massachusetts 02116.
Distribution Agreement. Pursuant to the Distribution Agreement, the
- -----------------------
Distributor: (a) solicits and receives orders for the purchase of shares of the
Fund, accepts or rejects such orders on behalf of the Fund in accordance with
the Fund's currently effective Prospectus and transmits such orders as are
accepted to the Fund as promptly as possible; (b) receives requests for
redemptions and transmits such redemption requests to the Fund as promptly as
possible; (c) responds to inquiries from e~navigator Customers concerning the
status of their Electronic Money Management Accounts and the operation of the
Fund; and (d) provides daily information concerning yields and dividend rates to
shareholders. The Distributor shall not be liable to the Fund or to its
shareholders for any act or omission or any loss sustained by the Fund or its
shareholders except in the case of the Distributor's willful misfeasance, bad
faith, gross negligence or reckless disregard of duty. The Distributor
currently receives no compensation from the Fund for its services.
Distribution Plan. The Fund has adopted a plan of distribution under Rule 12b-1
- ------------------
of the 1940 Act (the "Plan"). Pursuant to the Plan, the Distributor may pay
certain promotional and advertising expenses and may compensate certain
registered securities dealers and financial institutions for services provided
in connection with the processing of orders for purchase or redemption of the
shares of the Fund and furnishing other shareholder services. Payments by the
Distributor may be paid out of distribution plan payments received by the
Distributor from the Fund, out of past profits or from any other source
available to the Distributor.
Under the Plan, the Fund will pay the Distributor a monthly service fee at an
annual rate of up to 0.25% of the net assets attributable to the Fund's shares.
The Plan is a "compensation" type plan of distribution, which means that should
the fees collected under the Plan exceed the Distributor's expenses, the
Distributor may make a profit. No fees shall be payable under this plan for so
long as the Fund invests all of its investible assets in the Portfolio, however,
no additional shareholder action would be required to commence or effect the
payment of the monthly fee by the Fund if the Fund no longer invests all of its
investible assets in the Portfolio.
-9-
<PAGE>
Although it is a primary objective of the Plan to reduce expenses of the Fund by
fostering growth in the Fund's net assets, there can be no assurance that this
objective of the Plan will be achieved; however, based on the data and
information presented to the Board of Trustees, the Board of Trustees determined
that there is a reasonable likelihood that the benefits of growth in the size of
the Fund can be accomplished under the Plan.
The Distribution Agreement and the Plan will continue in effect from year to
year if specifically approved at least annually by the Board of Trustees and the
affirmative vote of a majority of the trustees who are not parties to the
Distribution Agreement or "interested persons" of any such party by votes cast
in person at a meeting called for such purpose. In approving the Plan, the
trustees of the Fund determined, in the exercise of their business judgment and
in light of their fiduciary duties as trustees of the Fund, that there was a
reasonable likelihood that the Plan would benefit the Fund and its shareholders.
The Plan may only be renewed if the trustees of the Fund make a similar
determination for each subsequent year. The Plan may not be amended to increase
the maximum amount of payments by the Fund without shareholder approval, and all
material amendments to the provisions of the Plan must be approved by the Board
of Trustees and by the trustees of the Fund who have no direct or indirect
financial interest in the Plan, by votes cast in person at a meeting called for
the purpose of such vote. The Board of Trustees or the shareholders of the Fund
may terminate the Distribution Agreement without penalty on 60 days' written
notice and New England Securities Corporation may terminate the Distribution
Agreement without penalty on 90 days' written notice. The Distribution
Agreement terminates automatically in the event of its "assignment," as defined
in the 1940 Act. The services of the Distributor to the Fund are not exclusive,
the Distributor is free to render similar services to others.
E~NAVIGATOR SERVICING AGENT
Interactive Financial Solutions, Inc. ("IFS"), 500 Boylston Street, Boston,
Massachusetts 02116 acts as e~navigator servicing agent to the Fund (the
"e~navigator Servicing Agent") pursuant to a service agreement with the Fund.
E~NAVIGATOR SERVICING AGREEMENT. Pursuant to a service agreement (the
- --------------------------------
"e~navigator Servicing Agreement"), IFS provides, or has arranged for the
provision of (at no further cost to the Fund), the following services:
a. paper checkwriting,
b. expense coding on checks to aid shareholders in expense
identification,
c. a comprehensive annual summary statement,
d. electronic bill-payments, and
e. a debit card.
For more information about these services or your Electronic Money Management
Account call 1(800) 333-3204.
-10-
<PAGE>
As compensation for the provision of these shareholder services, IFS receives a
fee (the "e~navigator Servicing Fee") equal to 5.00% of the average daily net
assets of the Fund attributable to Class A shares. IFS has agreed to waive a
portion of the e~navigator Servicing Fee to the extent that the daily total
operating expenses of the Fund (without giving effect to the Financial Organizer
Fee, as described below) exceed the daily total return of Class A shares. IFS
also receives a fee (the "Financial Organizer Fee") from each person who
purchases the e~navigator Financial Organizer, at the time of such purchase.
Every year thereafter, on the anniversary of the date of such initial purchase,
the Financial Organizer Fee will be automatically charged to the credit card
account provided by each e~navigator Customer. The Financial Organizer Fee is
currently $24.00. The e~navigator Servicing Agent reserves the right todeduct
automatically the Financial Organizer Fee from each e~navigator Customer's
Electronic Money Management Account instead of charging the e~navigator
Customers' credit card accounts. The Fund reserves the right to increase or
decrease this fee without a shareholder vote, although the Fund currently has no
plans to do so. In addition, when IFS redeems shares from an e~navigator
Customer's Electronic Money Management Account and issues a check to satisfy
such e~navigator Customer's bill payment request (as described in the Prospectus
in "How to Redeem Shares"), any benefit deriving from holding funds after such
redemption will accrue to IFS until such check is presented for payment to IFS
or until 90 days have elapsed, at which time IFS will deposit shares in such
e~navigator Customer's Electronic Money Management Account equal to the value of
shares redeemed for such check and cancel the outstanding check.
CUSTODIAN
Investors Fiduciary Trust Company serves as the Fund's custodian (the
"Custodian"). As such, the Custodian is the registered owner of securities held
in book-entry form belonging to the Fund. Upon instruction, the Custodian
receives and delivers cash and securities of the Fund. The Custodian also
maintains certain accounts and records of the Fund and calculates the total net
asset value, total net income and net asset value per share of the Fund on a
daily basis.
TRANSFER AGENT
Reich & Tang Services, Inc., 600 Fifth Avenue, New York, New York 10020, acts as
Transfer Agent to the Fund. All costs associated with performing such services
are borne by the Manager.
MANAGEMENT OF THE PORTFOLIO
For a complete description of the management of the Portfolio, see "General
Information about the Company," "Manager and Investment Advisor" and
"Distributor and Plan of Distribution" in the Portfolio SAI.
EXPENSES
-11-
<PAGE>
The Fund is responsible for payment of all expenses not borne by the Manager,
which may include the following: (i) any of the costs of preparing, printing and
distributing sales literature; (ii) the charges and expenses of any entity
appointed by the Fund for custodial, paying agent, shareholder servicing and
plan agent services; (iii) charges and expenses of independent accountants
retained by the Fund; (iv) charges and expenses of any transfer agents and
registrars appointed by the Fund; (v) brokers' commissions and issue and
transfer taxes chargeable to the Fund in connection with securities transactions
to which the Fund is a party; (vi) taxes and fees payable by Fund to federal,
state or other governmental agencies; (v) any cost of certificates representing
shares of the Fund; (vi) expenses of meetings of shareholders and trustees of
the Fund; and (vii) interest, including interest on borrowings by the Fund.
Expenses which are attributable to the Fund are charged against the income of
the Fund in determining net income for dividend purposes.
PRINCIPAL HOLDERS OF SECURITIES
As of [______________], 1998, [IFS] owned of record beneficially all of the
outstanding shares of the Fund. [IFS] is organized under the laws of
Massachusetts. The address of IFS is 500 Boylston Street, Boston, Massachusetts
02116.
REPORTS
The Fund furnishes shareholders with semi-annual reports containing information
about the Fund and its operations, including the financial statements for the
Fund. The annual financial statements are audited by the Fund's independent
auditors. The Board of Trustees has selected McGladrey & Pullen as the Fund's
independent auditors to audit the Fund's financial statements and to review the
Fund's tax returns.
PURCHASES, REDEMPTIONS AND REBALANCING TRANSACTIONS
Purchases and Redemptions
A complete description of the manner in which the Fund's shares may be purchased
and redeemed appears in the Prospectus under the captions "How to Buy Shares"
and "How to Redeem Shares."
As described under the caption "How to Redeem Shares," accounts that fall below
a minimum value (which may be set by the Trustees in the future) may be subject
to automatic redemption. If the Board of Trustees establishes such a minimum
value and authorizes automatic redemption of accounts under that value, the
holders of such shares will be notified that they must increase their investment
to the minimum value or their shares will be redeemed on or after the 30th day
following such notice.
-12-
<PAGE>
The right of redemption may be suspended or the date of payment postponed when
(a) trading on the New York Stock Exchange is restricted, as determined by
applicable rules and regulations of the SEC, (b) the New York Stock Exchange is
closed for other than customary weekend and holiday closings, (c) the SEC has by
order permitted such suspension, or (d) an emergency as determined by the SEC
exists making disposal of portfolio securities or the valuation of the net
assets of the Fund not reasonably practicable.
Rebalancing Transactions
A complete description of the circumstances under which shares of one Class will
be redeemed in order to purchase shares of the other Class appears in the
Prospectus under the caption "Rebalancing Transactions." As described in the
Prospectus, immediately after processing all purchases and redemptions as
described above, the Fund will (1) automatically exchange Class A shares for
Class B shares in each Electronic Money Management Account to the extent
necessary to reduce the value of Class A shares in such account to $5,000, or
(2) automatically exchange Class B shares for Class A shares in each Electronic
Money Management Account to the extent necessary to increase the value of Class
A shares in such account to $5,000. The transactions described in this
paragraph will occur without regard to whether any shares in the account were
purchased by a check that has not yet cleared.
Net Asset Value Determination
The total net asset value of the Fund is determined as of the close of regular
trading (normally 4:00 p.m. Eastern time) on each Business Day.
For the purpose of determining the price at which shares of the Fund are issued
and redeemed, the net asset value per share is calculated immediately after the
daily dividend declaration by: (a) valuing the securities held by the Fund, (b)
deducting the Fund's liabilities; (c) dividing the resulting amount by the
number of shares outstanding of the Fund; and (d) rounding the per share net
asset value to the nearest whole cent. As discussed below, it is the intention
of the Fund to maintain a net asset value per share of $1.00 for the Fund.
For a complete description of how the Portfolio calculates its net asset value,
see "Share Purchases and Redemptions" in the Portfolio SAI.
DIVIDENDS AND TAX MATTERS
Dividends
All of the net income earned by the Fund is declared daily as dividends to the
respective holders of record of shares of the Fund. The Fund expects to earn no
net income under current market and interest rate conditions.
-13-
<PAGE>
Should the Fund incur or anticipate any unusual expense, loss or depreciation
which would adversely affect the net asset value per share or net income per
share of the Fund for a particular period, the Board of Trustees would at that
time consider whether to adhere to the present dividend policy described above
or to revise it in light of then prevailing circumstances. For example, if the
net asset value per share of the Fund were reduced, or was anticipated to be
reduced, below $1.00, the Board of Trustees may suspend further dividend
payments with respect to the Fund until the net asset value per share returns to
$1.00. Thus, such expense, loss or depreciation might result in a shareholder
receiving no dividends for the period during which he or she held shares of the
Fund and/or in his or her receiving upon redemption a price per share lower than
the price paid.
Dividends on the Fund's shares are normally payable on the first day following
the date that a share purchase order is effective and, for shareholders who
redeem all of their shares, on the date that a redemption order is effective.
The net income of the Fund for dividend purposes is determined immediately prior
to the determination of the Fund's net asset value on that day. Dividends are
declared daily and reinvested in additional full and fractional shares of the
Fund at net asset value. A shareholder may elect to have the declared dividends
paid monthly to him by check.
Tax Matters
The following is only a summary of certain additional tax considerations
generally affecting the Fund and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Fund or its shareholders, and the discussions here and in the
Prospectus are not intended as substitutes for careful tax planning.
Qualification as a Regulated Investment Company
- -----------------------------------------------
The Fund has elected to be taxed as a regulated investment company (a "RIC")
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As a RIC, the 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) and tax-exempt income for the
taxable year (the "Distribution Requirement"), and satisfies certain other
requirements of the Code that are described below. Distributions by the Fund
made during the taxable year or, under specified circumstances, within twelve
months after the close of the taxable year, will be considered distributions of
income and gains of the taxable year for purposes of satisfying the Distribution
Requirement. If the Fund has net capital loss (i.e., the excess of capital
losses over capital gains) for any year, the amount thereof may be carried
forward up to eight years and treated as a short-term capital loss which can be
used to offset capital gains in such years.
In addition to satisfying the Distribution Requirement, a RIC must derive at
least 90% of its gross income from dividends, interest, certain payments with
respect to securities loans, gains from the
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<PAGE>
sale or other disposition of stock or securities or foreign currencies 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").
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 incurred after October 31 as
if it had been incurred in the succeeding year.
In addition to satisfying the requirements described above, the Fund must
satisfy an asset diversification test in order to qualify as a RIC. Under this
test, at the close of each quarter of each 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 each of which the Fund has not invested more
than 5% of the value of the Fund's total assets in securities of such issuer and
as to which the Fund 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. Due to the fact that the Fund expects to
invests solely in the Portfolio, which also has elected to qualify as a RIC, the
Fund expects to satisfy the asset diversification test. However, in the event
that the Portfolio no longer qualifies as a RIC, the Fund would cease to qualify
as a RIC.
If for any taxable year the Fund were to fail to qualify or be eligible for
treatment as a RIC, all of its taxable income (including its net capital gain)
would be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions would be taxable to the
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. Such distributions generally would 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 RIC to the extent that the RIC
fails to distribute in each calendar year an amount equal to at least the sum of
98% of ordinary taxable income for the 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")) and certain undistributed amounts from previous years. (Tax-exempt
interest on municipal obligations is not subject to the excise tax.) The
balance of such income must be distributed during the next calendar year. For
the foregoing purposes, a RIC is treated as having distributed any amount on
which it is subject to income tax for any taxable year ending in such calendar
year.
-15-
<PAGE>
For purposes of the excise tax, a RIC shall: (1) reduce its capital gain net
income (i.e., the excess of capital gains over capital losses), but not below
its net capital gain (i.e., the excess of net long-term capital gain over net
short-term capital loss) by the amount of any net ordinary loss for the calendar
year; and (2) exclude foreign currency gains and losses 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).
The 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 the Fund may in certain circumstances be required to liquidate
portfolio investments to make sufficient distributions to avoid excise tax
liability.
FUND DISTRIBUTIONS
- ------------------
The 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.
The Fund may either retain or distribute to shareholders its net capital gain,
if any, for each taxable year. The Fund currently intends to distribute any
such amounts. Net capital gain that is distributed and designated as a capital
gain dividend will be taxable to shareholders as long-term capital gain,
regardless of the length of time the shareholder has held his or her shares or
whether such gain was recognized by the Fund prior to the date on which the
shareholder acquired his or her shares.
Conversely, if the 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 the 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 or her pro rata share of such gain, with the result that each shareholder
will be required to report his or her 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 or her shares by an amount equal to the deemed distribution less
the tax credit.
Distributions by the Fund that do not constitute ordinary income dividends,
exempt-interest 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 or her shares; any excess will be treated as gain from the sale of his or
her shares, as discussed below.
Distributions by the 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
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<PAGE>
the 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 they economically constitute a return of capital to
the shareholder.
Ordinarily, shareholders are required to take distributions by the 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.
The 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 provided
either an incorrect tax identification number or no number at all, (2) who is
subject to backup withholding by the IRS for failure to 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 an "exempt
recipient" (such as a corporation).
Sale or Redemption of Fund Shares
- ---------------------------------
The Fund seeks to maintain a stable net asset value of $1.00 per share; however,
there can be no assurance that the Fund will be able to do so. A shareholder
may therefore recognize gain or loss on the sale or redemption of shares of the
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 the 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 the Fund will be considered capital gain or loss and
will be long-term capital gain or loss if the shares were held for longer than
one year. However, any capital loss arising from the sale or redemption of
shares held for six months or less will be disallowed to the extent of the
amount of exempt-interest dividends received on such shares and (to the extent
not disallowed) 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) (suspending the
holding period in certain cases where the shareholder's risk of loss is
diminished) generally will apply in determining the holding period of shares.
Although it is unlikely that a shareholder would recognize long-term capital
gain in respect of his or her Fund shares, such gains are, in the case of
noncorporate shareholders, generally subject to tax at 20% rate. 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.
Foreign Shareholders
- --------------------
-17-
<PAGE>
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 business carried on by such
shareholder.
If the income from the 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. Such a
foreign shareholder would generally be exempt from U.S. federal income tax on
gains realized on the sale of shares of the Fund, capital gain dividends and
exempt-interest dividends and amounts retained by the Fund that are designated
as undistributed capital gains.
If the income from the 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 noncorporate shareholder, the 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 its
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 the Fund, including the
applicability of foreign taxes.
Effect of Future Legislation and 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 Statement of Additional Information. 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 with respect to the transactions contemplated herein.
Rules of state and local taxation of ordinary income dividends, exempt-interest
dividends and capital gain dividends from regulated investment companies often
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 the Fund.
YIELD INFORMATION
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<PAGE>
The yield for the Fund can be obtained by calling the Distributor toll free at
1(800) 333-3204. Quotations of yield on the Fund may also appear from time to
time in the financial press and in advertisements.
The current yield quoted will be the net average annualized yield for an
identified period, usually seven consecutive calendar days. Yield for the Fund
will be computed by assuming that an account was established with a single share
of the Fund (the "Single Share Account") on the first day of the period. To
arrive at the quoted yield, the net change in the value of the Single Share
Account for the period (which would include dividends accrued with respect to
the share, and dividends declared on shares purchased with dividends accrued and
paid, if any, but would not include realized gains and losses or unrealized
appreciation or depreciation) will be multiplied by 365 and then divided by the
number of days in the period, with the resulting figure carried to the nearest
hundredth of 1%. The Fund may also furnish a quotation of effective yield that
assumes the reinvestment of dividends for a 365 day year and a return for the
entire year equal to the average annualized yield for the period, which will be
computed by compounding the unannualized current yield for the period by adding
1 to the unannualized current yield, raising the sum to a power equal to 365
divided by the number of days in the period, and then subtracting 1 from the
result. Historical yields are not necessarily indicative of future yields.
Rates of return will vary as interest rates and other conditions affecting money
market instruments change. Yields also depend on the quality, length of
maturity and type of instruments held by the Portfolio and the Fund's and the
Portfolio's operating expenses. Quotations of yields will be accompanied by
information concerning the average weighted maturity of the Fund. Comparison of
the quoted yields of various investments is valid only if yields are calculated
in the same manner and for identical limited periods. When comparing the yield
for the Fund with yields quoted with respect to other investments, shareholders
should consider (a) possible differences in time periods, (b) the effect of the
methods used to calculate quoted yields, (c) the quality and average-weighted
maturity of portfolio investments, expenses, convenience, liquidity and other
important factors, and (d) the taxable or tax-exempt character of all or part of
dividends received.
PORTFOLIO TRANSACTIONS
For so long as the Fund invests all of its investible assets in shares of the
Portfolio, all orders for the purchase and sale of Portfolio shares by the Fund
will be transmitted to the Portfolio by the Transfer Agent. No brokerage
commissions will be paid by the Fund on such transactions.
For a complete discussion of the portfolio transactions of the Portfolio, See
"Portfolio Transactions" in the Portfolio SAI.
PERFORMANCE COMPARISONS
Yield and total return will generally be higher for Class B shares than for
Class A because of the imposition of the e~navigator Servicing Fee on Class A
shares. You should remember that the first
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<PAGE>
$5,000 of your Electronic Money Management Account will automatically be
invested in Class A shares, and therefore, you will earn the higher Class B
return only on amounts in excess of $5,000.
The Fund may from time to time include its yield and total return in
advertisements or in information furnished to present or prospective
shareholders. The Fund may from time to time include in advertisements its
total return and the ranking of those performance figures relative to such
figures for groups of mutual funds categorized by Lipper Analytical Services,
Inc. ("Lipper") as having similar investment objectives. Lipper is an
independent service that monitors the performance of over 1,300 mutual funds,
and calculates total return for the funds grouped by investment objectives.
Lipper's Mutual Fund Performance Analysis and Mutual Fund Indices measure total
return and average yield for the mutual fund industry. Rankings of individual
fund performance over specified time periods assume reinvestment of all
distributions, exclusive of sales charges.
Articles and releases, developed by the Fund and other parties, about the Fund
regarding performance, rankings, statistics and analyses of the Fund's asset
levels and sales volume, numbers of shareholders, statistics and analyses of
industry sales volumes and asset levels, and other characteristics may appear in
advertising, promotional literature and publications and on various computer
networks, such as the Internet. In particular, some or all of these
publications may publish their own rankings or performance reviews of mutual
funds, including, but not limited to, Lipper and Morning Star. References to
these rankings or reviews or reprints of such articles may be used in the Fund's
advertising and promotional literature. Such advertising and promotional
literature may refer to the Fund, the Manager, NEF and Nvest, as well as NEF and
Nvest's structure, goals and objectives and the advisory subsidiaries of NEF and
Nvest, including their portfolio management responsibilities, portfolio managers
and their categories and background, their tenure, styles and strategies and
their shared commitment to fundamental investment principles and may identify
specific clients, as well as discuss the types of institutional investors who
have selected the advisers to manage their investment portfolios and the reasons
for that selection. The references may discuss the independent, entrepreneurial
nature of each advisory organization and allude to or include excerpts from
articles appearing in the media regarding NEF, Nvest, each of their advisory
subsidiaries and their personnel.
The Fund's advertising and sales literature may refer to historical, current and
prospective political, social, economic and financial trends and developments
that affect domestic and international investment as it relates to the Fund.
The Fund's advertising and sales literature may include historical and current
performance and total returns of investment alternatives to the Fund. Articles,
releases, advertising and literature may discuss the range of services offered
by the Fund and NEF with respect to investing in shares of the Fund. Such
materials may discuss the multiple classes of shares available through the Fund
and their features and benefits, including the details of the pricing structure.
In addition, sales literature may be published concerning topics of general
investor interest for the benefit of registered representatives and the Fund's
prospective shareholders. These materials may include, but are not limited to,
discussions of college planning, retirement planning, reasons for
-20-
<PAGE>
investing and historical examples of the investment performance of various
classes of securities, securities markets and indices.
DESCRIPTION OF THE FUND
The Fund is organized as a Massachusetts business trust pursuant to a
Declaration of Trust dated [ ], 1998 (the "Declaration of Trust"). The
Declaration of Trust currently permits the Fund's trustees to issue an unlimited
number of full and fractional shares. The Fund is a "series" company as
described in Section 18(f)(2) of the 1940 Act, although the Fund currently
consists of only one series. The Declaration of Trust further permits the
Fund's trustees to divide the shares of the Fund into any number of separate
classes, each having such rights and preferences relative to the other classes
as the trustees may determine. The shares of the Fund do not have any
preemptive rights. Upon termination of the Fund, whether pursuant to liquidation
of the Fund or otherwise, shareholders of each class of the Trust are entitled
to share pro rata in the net assets attributable to that class of shares of the
Fund available for distribution to shareholders. The Declaration of Trust also
permits the trustees to charge shareholders directly for custodial, transfer
agency and servicing expenses.
The shares of the Fund are currently divided into two classes: Class A and Class
B. The Fund offers such classes of shares as set forth in the Prospectus. All
expenses of the Fund other than the e~navigator Servicing Fee are borne by the
Class A and Class B shares on a pro rata basis.
The Declaration of Trust also permits the Fund's trustees, without shareholder
approval, to establish one or more series or classes and to subdivide any series
or class of shares into various sub-series or sub-classes with such dividend
preferences and other rights as the trustees may designate. Although the
trustees of the Fund have no current intention to exercise this power, it is
intended to allow them to provide for an equitable allocation of the impact of
any future regulatory requirements which might affect various classes of
shareholders differently. The trustees may also, without shareholder approval,
merge two or more existing series or classes.
The Declaration of Trust provides for the perpetual existence of the Fund. The
Fund, however, may be terminated at any time by vote of at least two-thirds of
the outstanding shares of the Fund. Similarly, any class within a series may be
terminated by a vote of at least two-thirds of the outstanding shares of each
class. Although the Declaration of Trust further provides that the Board of
Trustees may also terminate the Fund upon written notice to its shareholders,
the 1940 Act requires that the Fund receive the authorization of a majority of
its outstanding shares in order to change the nature of its business so as to
cease to be an investment company.
VOTING RIGHTS
As summarized in the Prospectus, shareholders are entitled to one vote for each
full share held (with fractional votes for each fractional share held) and may
vote (to the extent provided therein) in the
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<PAGE>
election of trustees and the termination of the Trust and on other matters
submitted to the vote of shareholders.
The Declaration of Trust provides that on any matter submitted to a vote of all
shareholders of the Fund, all Fund shares entitled to vote shall be voted
together irrespective of series or class unless the rights of a particular class
or series would be adversely affected by the vote, in which case a separate vote
of that series or class shall also be required to decide the question. Also, a
separate vote shall be held whenever required by the 1940 Act or any rule
thereunder. Rule 18f-2 under the 1940 Act provides in effect that a series or
class shall be deemed to be affected by a matter unless it is clear that the
interests of each series or class in the matter are substantially identical or
that the matter does not affect any interest of such series or class. On
matters affecting an individual series or class, only shareholders of all series
or class are entitled to vote. Consistent with the current position of the SEC,
shareholders of all series and classes vote together, irrespective of series or
class, on the election of trustees and the selection of the Fund's independent
accountants, but shareholders of each series vote separately on other matters
requiring shareholder approval, such as certain changes in investment policies
of that series or the approval of the investment advisory agreement (if any)
relating to that series, and shareholders of each class within a series vote
separately as to the Rule 12b-1 plan (if any) relating to that class.
There will normally be no meetings of shareholders for the purpose of electing
trustees except that, in accordance with the 1940 Act, (i) the Fund will hold a
shareholders' meeting for the election of trustees at such time as less than a
majority of the trustees holding office have been elected by shareholders, and
(ii) if, as a result of a vacancy on the Board of Trustees, less than two-thirds
of the trustees holding office have been elected by the shareholders, that
vacancy may be filled only by a vote of the shareholders. In addition, trustees
may be removed from office by a written consent signed by the holders of two-
thirds of the outstanding shares and filed with the Custodian or by a vote of
the holders of two-thirds of the outstanding shares at a meeting duly called for
that purpose, which meeting shall be held upon the written request of the
holders of not less than 10% of the outstanding shares.
Except as set forth above, the trustees shall continue to hold office and may
appoint successor trustees. Shareholder rights are not cumulative.
No amendment may be made to the Declaration of Trust without the affirmative
vote of a majority of the outstanding shares of the Fund except (i) to change
the Fund's name or to cure technical problems in the Declaration of Trust, (ii)
to establish and designate new series or classes of Fund shares and (iii) to
establish, designate or modify new and existing series or classes of Fund shares
or other provisions relating to Fund shares in response to applicable laws or
regulations.
SHAREHOLDER AND TRUSTEE LIABILITY
Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Fund. However, the
Declaration of Trust disclaims shareholder liability
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<PAGE>
for acts or obligations of a Fund and require that notice of such disclaimer be
given in each agreement, obligation or instrument entered into or executed by
the Fund or the trustees. The Declaration of Trust provides for indemnification
out of the Fund's property for all loss and expense of any shareholder held
personally liable for the obligation of the Fund by reason of owning shares of
the Fund. Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is considered remote since it is limited to circumstances
in which the disclaimer is inoperative and the Fund itself would be unable to
meet its obligations.
The Declaration of Trust further provides that the Board of Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declaration of Trust protects 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
his or her office. The By-Laws of the Fund provide for indemnification by the
Fund of trustees and officers of the Fund, except with respect to any matter as
to which any such person did not act in good faith in the reasonable belief that
his or her action was in or not opposed to the best interests of the Fund. Such
person may not be indemnified against any liability to the Fund or the Fund's
shareholders to which he or she 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 or her office.
INVESTMENT RATINGS
The following is a description of the two highest commercial paper, bond,
municipal bond and other short- and long-term categories assigned by Standard &
Poor's Rating Services, a division of the McGraw-Hill Companies ("S&P"), Moody's
Investors Service, Inc. ("Moody's"), Fitch Investors Service, Inc. ("Fitch"),
Duff and Phelps ("Duff"), and IBCA Inc. and IBCA Limited ("IBCA"):
Commercial Paper and Short-Term Ratings
The designation A-1 by S&P indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus sign (+)
designation. Capacity for timely payment on issues with an A-2 designation is
strong. However, the relative degree of safety is not as high as for issues
designated A-1.
The rating Prime-1 (P-1) is the highest commercial paper rating assigned by
Moody's. Issuers of P-1 paper must have a superior capacity for repayment of
short-term promissory obligations, and ordinarily will be evidenced by leading
market positions in well established industries, high rates of return of funds
employed, conservative capitalization structures with moderate reliance on debt
and amble asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well established access
to a range of financial markets and assured sources of alternate liquidity.
Issues rated Prime-2 (P-2) have a strong capacity for repayment of short-term
promissory obligations. This ordinarily will be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more
-23-
<PAGE>
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternative liquidity is
maintained.
The rating Fitch-1 (Highest Grade) is the highest commercial rating assigned by
Fitch. Paper rated Fitch-1 is regarded as having the strongest degree of
assurance for timely payment. The rating Fitch-2 (Very Good Grade) is the
second highest commercial paper rating assigned by Fitch which reflects an
assurance of timely payment only slightly less in degree than the strongest
issues.
The rating Duff-1 is the highest commercial paper rating assigned by Duff.
Paper rated Duff-1 is regarded as having very high certainty of timely payment
with excellent liquidity factors which are supported by ample asset protection.
Risk factors are minor. Paper rated Duff-2 is regarded as having good certainty
of timely payment, good access to capital markets and sound liquidity factors
and company fundamentals. Risk factors are small.
The designation A1 by IBCA indicates that the obligation is supported by a very
strong capacity for timely repayment. Those obligations rated A1+ are supported
by the highest capacity for timely repayment. Obligations rated A2 are
supported by a strong capacity for timely repayment, although such capacity may
be susceptible to adverse changes in business, economic or financial conditions.
BOND AND LONG-TERM RATINGS
Bonds rated AAA are considered by S&P to be the highest grade obligations and
possesses an extremely strong capacity to pay principal and interest. Bonds
rated AA by S&P are judged by S&P to have a very strong capacity to pay
principal and interest, and in the majority of instances, differ only in small
degrees from issues rated AAA.
Bonds which are rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are general referred to as "gilt edge."
Bonds rated Aa by Moody's are judged by Moody's 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 Aaa bonds because margins of
protection may not be as large or fluctuations of protective elements may be of
greater amplitude or there may be other elements present which make the long-
term risks appear somewhat larger. Moody's applies numerical modifiers 1, 2 and
3 in the Aa rating category. The modifier 1 indicates a ranking for the
security in the higher end of this rating category, the modifier 2 indicates a
mid-range ranking, and the modifier 3 indicates a ranking in the lower end of
the rating category.
Bonds rated AAA by Fitch are judged by Fitch to be strictly high grade, broadly
marketable, suitable for investment by trustees and fiduciary institutions and
are liable to but slight market fluctuation other than through changes in the
money rate. The prime feature of an AAA bond is a showing of earnings several
times or many times interest requirements, with such stability of applicable
earnings that safety is beyond reasonable question whatever changes occur in
conditions. Bonds rated AA by Fitch are judged by Fitch to be of safety
virtually beyond question and are readily salable, whose merits are not unlike
those of the AAA class, but whose margin of safety is less strikingly broad.
-24-
<PAGE>
The issue may be the obligation of a small company, strongly secured but
influenced as to rating by the lesser financial power of the enterprise and more
local type market.
Bonds rated Duff-1 are judged by Duff to be of the highest credit quality with
negligible risk factors; only slightly more than U.S. Treasury debt. Bonds
rated Duff-2, 3 and 4 are judged by Duff to be of high credit quality with
strong protection factors. Risk is modest but may vary slightly from time to
time because of economic conditions.
Obligations rated AAA by IBCA have the lowest expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial, such
that adverse changes in business, economic or financial conditions are unlikely
to increase investment risk significantly. Obligations for which there is a
very low expectation of investment risk are rated AA by IBCA.
Capacity for timely repayment of principal and interest is substantial. Adverse
changes in business, economic or financial conditions may increase investment
risk albeit not very significantly.
Municipal Bond Ratings
S&P's Municipal Bond Ratings cover obligations of states and political
subdivisions. Ratings are assigned to general obligations and revenue bonds.
General obligation bonds are usually secured by all resources available to the
municipality and the factors outlined in the rating definitions below are
weighed in determining the rating. Because revenue bonds in general are payable
from specifically pledged revenues, the essential element in the security for a
revenue bond is the quantity of the pledged revenues available to pay debt
service.
Although an appraisal of most of the same factors that bear on the quality of
general obligation bond credit is usually appropriate in the rating analysis of
a revenue bond, other facts are also important, including particularly the
competitive position of the municipal enterprise under review and the basic
security covenants. Although a rating reflects S&P's judgment as to the
issuer's capacity for the timely payment of debt service, in certain
circumstances it may also reflect a mechanism or procedure for an assured and
prompt cure of a default, should one occur, i.e., an insurance program, federal
or state guaranty, or the automatic withholding and use of state aid to pay the
default debt service.
AAA
These are obligations of the highest quality. They have the strongest capacity
for timely payment of debt service.
General Obligation Bonds - In a period of economic stress, the issuers will
suffer the smallest declines in income and will be least susceptible to
autonomous decline. Debt burden is moderate. A strong revenue structure appears
more than adequate to meet future expenditure requirements. Quality of
management appears superior.
-25-
<PAGE>
Revenue Bonds - Debt service coverage has been, and is expected to remain,
substantial. Stability of the pledged revenues is also exceptionally strong,
due to the competitive position of the municipal enterprise or to the nature of
the revenues. Basic security provisions (including rate covenants, earing tests
for insurance of additional bonds, and debt service reserve requirements) are
rigorous. There is evidence of superior management.
AA
The investment characteristics of general obligation and revenue bonds in this
group are only slightly less marked than those of the AAA category. Bonds rated
"AA" have the second strongest capacity for payment of debt service.
S&P's bond letter ratings may be modified by the addition of a plus (+) or a
minus (-) sign which designates a bond's relative quality within the major
rating categories, except in the AAA category.
S&P Tax-Exempt Demand Bonds Ratings
S&P assigns "dual" ratings to all long-term debt issues that have as part of
their provisions a demand feature.
The first rating addresses the likelihood of repayment of principal and interest
as due, the second rating addresses only the demand feature. The long-term debt
rating symbols are used for bonds to denote the long-term maturity, and the
commercial paper rating symbols are used to denote the put option (e.g., "AAA/
A-1+").
Moody's Municipal Bond Ratings
Aaa
Bonds which are judged to be of the highest quality are rated "Aaa." They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin, and principal is secure. While the various protective elements are
likely to change, such changes as can be anticipated 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 Ass group they comprise what are generally known as "high
grade" bonds. They are rated lower than the Aaa bonds because margins of
protection may not be as large as the Aaa securities or the fluctuation of
protective elements may be of greater amplitude, or other elements may be
present which make the long-term risks appear somewhat larger than in Aaa
securities.
-26-
<PAGE>
Moody's State and Municipal Short-Term Ratings
Moody's assigns state and municipal notes, as well as other short-term
obligations, a Moody's Investment Grade ("MIG") rating. Factors affecting the
liquidity of the borrower and short-term cyclical elements are critical in
short-term ratings, while other factors of major importance in evaluating bond
risk may be less important over the short run.
MIG 1
Notes bearing this designation are of the best quality. The notes enjoy strong
"protection" by established cash flows, superior liquidity support or a
demonstrated broad-based access to the market for refinancing.
MIG 2
Notes bearing this designation are of high quality. Margins of protection are
ample although not as large as in the preceding group.
Moody's Tax-Exempt Demand Ratings
Moody's assigns issues which have demand features (i.e., variable rate demand
obligations) a VMIG symbol. This symbol reflects such characteristics as
payment upon periodic demand rather than fixed maturity, and payment relying on
external liquidity. The VMIG rating is modified by the numbers 1, 2 or 3.
VMIG1 represents the best quality in the VMIG category and VMIG2 represents high
quality.
International and U.S. Bank Ratings
An IBCA bank rating represents IBCA's current assessment of the strength of the
bank and whether such bank would receive support should it experience
difficulties. In its assessment of a bank, IBCA uses a dual rating system
comprised of Legal Ratings and Individual Ratings. In addition, IBCA assigns
banks Long- and Short-Term Ratings as used in the corporate ratings discussed
above. Legal Ratings, which range in gradation from 1 through 5, address the
question of whether the bank would receive support provided by central banks or
shareholders if it experienced difficulties, and such ratings are considered by
IBCA to be a prime factor in its assessment of credit risk. Individual Ratings,
which range in gradations from A through E, represent IBCA's assessment of a
bank's economic merits and address the question of how the bank would be viewed
if it were entirely independent and could not rely on support from state
authorities or its owners.
-27-
<PAGE>
e~navigator Fund Part C
-----------------------
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements: To be filed by amendment
(b) Exhibits:
(1) Agreement and Declaration of Trust is filed herewith as Exhibit 1.
(2) By-Laws are filed herewith as Exhibit 2.
(3) None.
(4) None.
(5) None.
(6) Form of Distribution Agreement between New England Securities
Corporation and the Fund is filed herewith as Exhibit 3.
(7) None.
(8) Form of Custody Agreement among the Fund, New England Mutual Life
Insurance Company ("New England Financial") and Investors
Fiduciary Trust Company ("IFTC") is filed herewith as Exhibit 4.
(9)(a) Form of Transfer Agency Agreement by and between the Fund and
Reich & Tang Services, L.P. is filed herewith as Exhibit 5.
(b) Form of Service Agreement between the Fund and Interactive
Financial Solutions, Inc. is filed herewith as Exhibit 6.
(c) Form of Administrative Services Agreement between the Fund and
Reich & Tang Asset Management L.P. is filed herewith as Exhibit 7.
(10) Form of Opinion and Consent of counsel is filed herewith as
Exhibit 8.
(11) Consent of Independent Accountants to be filed by amendment.
(12) None.
<PAGE>
(13) Investment Letter of New England Financial to be filed by
amendment.
(14) None.
(15) Form of 12b-1 Plan relating to shares of the Fund is filed
herewith as Exhibit 9.
(16) None.
(17) None.
(18) None.
Item 25. Persons Controlled by or Under Common Control with Registrant
-------------------------------------------------------------
None.
Item 26. Number of Holders of Securities
-------------------------------
The number of record holders of shares of the Fund as of [ ],
1998 is ___________.
Item 27. Indemnification
---------------
See Article 4 of the Fund's By-Laws filed herewith as Exhibit 2. In
addition, the Fund maintains a trustees and officers liability insurance policy
with a maximum coverage of $[ ] million under which the Fund and its trustees
and officers are named insureds.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to trustees, officers and controlling persons of the
Registrant pursuant to the Fund's By-Laws, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit of proceeding) is asserted by such
trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
-2-
<PAGE>
Item 28. Business and other Connections of Manager
-----------------------------------------
None.
Item 29. Principal Underwriters
----------------------
(a) New England Securities Corporation also serves as principal underwriter for:
New England Variable Life Separate Account
New England Variable Annuity Fund I
New England Life Retirement Investment Account
The New England Variable Account
New England Variable Annuity Separate Account
New England Zenith Fund
(b) The directors and officers of the Registrant's principal underwriter, New
England Securities Corporation, and their addresses are as follows:
<TABLE>
<CAPTION>
Positions and Officer's
Name Principal Underwriter Offices with Registrant
---- ----------------------- -----------------------
<S> <C> <C>
Thomas W. McConnell** President, Director and Chief None
Executive Officer
Frederick K. Zimmermann* Chairman of the Board, Director Chairman of the Board,
President, Treasurer, Clerk
and Trustee
Michael E. Toland** Vice President, Chief None
Financial Officer, Treasurer,
Assistant Secretary, Assistant
Clerk and Chief Financial
Officer
John Peruzzi** Assistant Vice President and None
Controller
Anne M. Goggin* Vice President, General None
Counsel, Secretary and Clerk
</TABLE>
-3-
<PAGE>
<TABLE>
<S> <C> <C>
Mark F. Greco** Vice President and Chief None
Operating Officer
Bradley Anderson** Vice President and Chief None
Operating Officer
Laura A. Hutner** Vice President None
Mitchell A. Karman* Vice President None
Robert F. Regan*** Vice President None
Jonathan M. Rozek** Vice President None
Larry Thiel Vice President None
Robert E. Schneider* Director None
</TABLE>
* Business Address: 501 Boylston Street, Boston, MA 02116
** Business Address: 399 Boylston Street, Boston, MA 02116
*** Business Address: 500 Boylston Street, Boston, MA 02116
Item 30. Location of Accounts and Records
--------------------------------
The following companies maintain possession of the documents required
by the specified rules:
(a) Registrant
Rule 31a-1(a)(4)
Rule 31a-2(a)
(b) Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
Rule 31a-1(a)
Rule 31a-1(b)(1), (2), (3), (5), (6),
(7), (8)
Rule 31a-2(a)
(c) Reich & Tang Asset Management L.P.
600 Fifth Avenue
-4-
<PAGE>
New York, NY 10020-2302
Rule 31a-1(a); 31a-1(b)(9), (10),
(11); 31a-1(f)
Rule 31a-2(a); 31a-2(e)
(d) New England Securities Corporation
399 Boylston Street
Boston, Massachusetts 02116
Rule 31a-1(d)
Rule 31a-2(c)
Item 31. Management Services
-------------------
Not applicable.
Item 32. Undertakings
------------
(a) The Registrant undertakes to provide the Fund's annual report to any
person who receives a Fund prospectus and who requests the annual report.
********
A copy of the Agreement and Declaration of Trust establishing e~navigator Fund
is on file with the Secretary of State of the Commonwealth of Massachusetts, and
notice is hereby given that this Registration Statement is executed on behalf of
the Fund by officers of the Fund as officers and not individually and that the
obligations of or arising out of this Registration Statement are not binding
upon any of the Trustees, officers or shareholders individually but are binding
only upon the assets and property of the Fund.
-5-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the registrant has duly caused this registration
statement to be signed on its behalf by the undersigned, thereto duly authorized
in the city of Boston and the Commonwealth of Massachusetts on the twenty-first
day of September, 1998.
e-navigator Fund
By /s/ Frederick K. Zimmermann
----------------------------
Frederick K. Zimmermann
President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following person in the
capacities and on the date indicated.
/s/ Frederick K. Zimmermann
-----------------------------------------
Frederick K. Zimmermann
President, Treasurer, Clerk and Sole Trustee
September 21, 1998
<PAGE>
e-navigator Fund
AGREEMENT AND DECLARATION OF TRUST
----------------------------------
THIS AGREEMENT AND DECLARATION OF TRUST made at Boston, Massachusetts this
third day of September, 1998 by the Trustees hereunder and the holders of shares
of beneficial interest issued hereunder and to be issued hereunder as
hereinafter provided:
WITNESSETH that
WHEREAS, this Trust has been formed to carry on the business of an
investment company; and
WHEREAS, the Trustees have agreed to manage all property coming into their
hands as trustees of a Massachusetts voluntary association with transferable
shares in accordance with the provisions hereinafter set forth;
NOW, THEREFORE, the Trustees hereby declare that they will hold all cash,
securities and other assets, which they may from time to time acquire in any
manner as Trustee hereunder, IN TRUST to manage and dispose of the same upon the
following terms and conditions for the benefit of the holders from time to time
of shares in this Trust as hereinafter set forth.
ARTICLE I
Name and Definitions
Section 1. This Trust shall be known as "e-navigator Fund" and the
----------
Trustees shall conduct the business of the Trust under that name or any other
name as they may from time to time determine.
Section 2. Definitions. Whenever used herein, unless otherwise required
---------- -----------
by the context or specifically provided:
(a) "Trust" refers to the Massachusetts business trust established by this
Agreement and Declaration of Trust, as amended from time to time;
(b) "Trustees" refers to the Trustees of the Trust named in Article IV
hereof or elected in accordance with such Article;
<PAGE>
(c) "Shares" means the equal proportionate units of interest into which the
beneficial interest in the Trust or in the Trust property belonging to any
Series of the Trust or in any class of Shares of the Trust (as the context may
require) shall be divided from time to time;
(d) "Shareholder" means a record owner of Shares;
(e) "1940 Act" refers to the Investment Company Act of 1940 and the Rules
and Regulations thereunder, all as amended from time to time;
(f) The terms "Commission" and "principal underwriter" shall have the
meanings given them in the 1940 Act;
(g) "Declaration of Trust" or "Declaration" shall mean this Agreement and
Declaration of Trust, as amended or restated from time to time;
(h) "By-Laws" shall mean the By-Laws of the Trust, as amended from time to
time;
(i) "Series Company" refers to the form of registered open-end investment
company described in Section 18(f)(2) of the 1940 Act or in any successor
statutory provision;
(j) "Series" refers to Series of Shares established and designated under or
in accordance with the provisions of Article III;
(k) "Multi-Class Series" refers to Series of Shares established and
designated as Multi-Class Series under or in accordance with the provisions of
Article III, Section 6; and
(l) The terms "class" and "class of Shares" refer to each class of Shares
into which the Shares of any Multi-Class Series may from time to time be divided
in accordance with the provisions of Article III.
ARTICLE II
Purpose of Trust
The purpose of the Trust is to provide investors a managed investment
primarily in securities (including options), debt instruments, commodities,
commodity contracts and options thereon.
-2-
<PAGE>
ARTICLE III
Shares
Section 1. Division of Beneficial Interest. The beneficial interest in
---------- -------------------------------
the Trust shall at all times be divided into an unlimited number of Shares,
without par value. Subject to the provisions of Section 6 of this Article III,
each Share shall have voting rights as provided in Article V hereof, and holders
of the Shares of any Series or class shall be entitled to receive dividends,
when and as declared with respect thereto in the manner provided in Article VI,
Section 1 hereof. Except as otherwise provided in Section 6 of this Article III
with respect to Shares of Multi-Class Series, no Share shall have any priority
or preference over any other Share of the same Series with respect to dividends
or distributions upon termination of the Trust or of such Series made pursuant
to Article VIII, Section 4 hereof. Except as otherwise provided in Section 6 of
this Article III with respect to Shares of Multi-Class Series, all dividends and
distributions shall be made ratably among all Shareholders of a particular
Series from the assets belonging to such Series according to the number of
Shares of such Series held of record by such Shareholders on the record date for
any dividend or distribution or on the date of termination, as the case may be.
Shareholders shall have no preemptive or other right to subscribe to any
additional Shares or other securities issued by the Trust. The Trustees may
from time to time divide or combine the Shares of any particular Series or class
into a greater or lesser number of Shares of that Series or class without
thereby changing the proportionate beneficial interest of the Shares of that
Series or class in the assets belonging to that Series or attributable to that
class or in any way affecting the rights of Shares of any other Series or class.
Section 2. Ownership of Shares. The ownership of Shares shall be recorded
---------- -------------------
on the books of the Trust or a transfer or similar agent for the Trust, which
books shall be maintained separately for the Shares of each Series and class.
No certificates certifying the ownership of Shares shall be issued except as the
Trustees may otherwise determine from time to time. The Trustees may make such
rules as they consider appropriate for the transfer of Shares of each Series and
class and similar matters. The record books of the Trust as kept by the Trust
or any transfer or similar agent, as the case may be, shall be conclusive as to
who are the Shareholders of each Series and class and as to the number of Shares
of each Series and class held from time to time by each.
Section 3. Investments in the Trust. The Trustees shall accept
---------- ------------------------
investments in the Trust from such persons and on such terms and for such
consideration as they from time to time authorize.
Section 4. Status of Shares and Limitation of Personal Liability. Shares
---------- -----------------------------------------------------
shall be deemed to be personal property giving only the rights provided in this
instrument. Every Shareholder by virtue of having become a Shareholder shall be
held to have expressly assented and agreed to the terms hereof and to have
become a party hereto. The death of a Shareholder
-3-
<PAGE>
during the continuance of the Trust shall not operate to terminate the same nor
entitle the representative of any deceased Shareholder to an accounting or to
take any action in court or elsewhere against the Trust or the Trustees, but
entitles such representative only to the rights of said deceased Shareholder
under this Trust. Ownership of Shares shall not entitle the Shareholder to any
title in or to the whole or any part of the Trust property or right to call for
a partition or division of the same or for an accounting, nor shall the
ownership of Shares constitute the Shareholders partners. Neither the Trust nor
the Trustees, nor any officer, employee or agent of the Trust, shall have any
power to bind personally any Shareholders, nor except as specifically provided
herein to call upon any Shareholder for the payment of any sum of money or
assessment whatsoever other than such as the Shareholder may at any time
personally agree to pay.
Section 5. Power of Trustees to Change Provisions Relating to Shares.
---------- ---------------------------------------------------------
Notwithstanding any other provisions of this Declaration of Trust and without
limiting the power of the Trustees to amend the Declaration of Trust as provided
elsewhere herein, the Trustees shall have the power to amend this Declaration of
Trust, at any time and from time to time, in such manner as the Trustees may
determine in their sole discretion, without the need for Shareholder action, so
as to add to, delete, replace or otherwise modify any provisions relating to the
Shares contained in this Declaration of Trust for the purpose of (i) responding
to or complying with any regulations, orders, rulings or interpretations of any
governmental agency or any laws, now or hereafter applicable to the Trust, or
(ii) designating and establishing Series or classes in addition to those
established in Section 6 of this Article III; provided that before adopting any
such amendment without Shareholder approval the Trustees shall determine that it
is consistent with the fair and equitable treatment of all Shareholders. The
establishment and designation of any Series of Shares in addition to the Series
established and designated in Section 6 of this Article III shall be effective
upon the execution by a majority of the then Trustees of an amendment to this
Declaration of Trust, taking the form of a complete restatement or otherwise,
setting forth such establishment and designation and the relative rights and
preferences of such Series, or as otherwise provided in such instrument. The
establishment and designation of any class of Shares shall be effective upon
either the execution by a majority of the then Trustees of an amendment to this
Declaration of Trust or the adoption by vote or written consent of a majority of
the then Trustees of a resolution setting forth such establishment and
designation and the relative rights and preferences of such class and such
eligibility requirements for investment therein as the Trustees may determine,
or as otherwise provided in such amendment or resolution.
Without limiting the generality of the foregoing, the Trustees may, for the
above-stated purposes, amend the Declaration of Trust to:
(a) create one or more Series or classes of Shares (in addition to any
Series or classes already existing or otherwise) with such rights and
preferences and such eligibility requirements for investment therein as the
Trustees shall determine and reclassify any or all
-4-
<PAGE>
outstanding Shares as shares of particular Series or classes in accordance with
such eligibility requirements;
(b) amend any of the provisions set forth in paragraphs (a) through (j) of
Section 6 of this Article III;
(c) combine one or more Series or classes of Shares into a single Series or
class on such terms and conditions as the Trustees shall determine;
(d) change or eliminate any eligibility requirements for investment in
Shares of any Series or class, including without limitation the power to provide
for the issue of Shares of any Series or class in connection with any merger or
consolidation of the Trust with another trust or company or any acquisition by
the Trust of part or all of the assets of another trust or company;
(e) change the designation of any Series or class of Shares;
(f) change the method of allocating dividends among the various Series and
classes of Shares;
(g) allocate any specific assets or liabilities of the Trust or any
specific items of income or expense of the Trust to one or more Series or
classes of Shares; and
(h) specifically allocate assets to any or all Series of Shares or create
one or more additional Series of Shares which are preferred over all other
Series of Shares in respect of assets specifically allocated thereto or any
dividends paid by the Trust with respect to any net income, however determined,
earned from the investment and reinvestment of any assets so allocated or
otherwise and provide for any special voting or other rights with respect to
such Series or any classes of Shares thereof.
Section 6. Establishment and Designation of Series and Classes. Without
---------- ---------------------------------------------------
limiting the authority of the Trustees set forth in Section 5, inter alia, to
----- ----
establish and designate any further Series or classes or to modify the rights
and preferences of any Series or class, the following Series shall be, and is
hereby, established and designated as a Multi-Class Series: the "Original
Series."
Shares of each Series established in this Section 6 shall have the
following rights and preferences relative to Shares of each other Series, and
Shares of each class of a Multi-Class Series shall have such rights and
preferences relative to other classes of the same Series as are set forth below,
together with such other rights and preferences relative to such other classes
as are set forth in any resolution of the Trustees establishing and designating
such class of Shares:
-5-
<PAGE>
(a) Assets belonging to Series. Subject to the provisions of paragraph (c)
--------------------------
of this Section 6:
All consideration received by the Trust for the issue or sale of Shares of
a particular Series, together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits and proceeds thereof from
whatever source derived, including, without limitation, any proceeds derived
from the sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same may be,
shall irrevocably belong to that Series for all purposes, subject only to the
rights of creditors, and shall be so recorded upon the books of account of the
Trust. Such consideration, assets, income, earnings, profits and proceeds
thereof, from whatever source derived, including, without limitation, any
proceeds derived from the sale, exchange or liquidation of such assets, and any
funds or payments derived from any reinvestment of such proceeds, in whatever
form the same may be, are herein referred to as "assets belonging to" that
Series. In the event that there are any assets, income, earnings, profits and
proceeds thereof, funds or payments which are not readily identifiable as
belonging to any particular Series (collectively "General Assets"), the Trustees
shall allocate such General Assets to, between or among any one or more of the
Series established and designated from time to time in such manner and on such
basis as they, in their sole discretion, deem fair and equitable, and any
General Asset so allocated to a particular Series shall belong to that Series.
Each such allocation by the Trustees shall be conclusive and binding upon the
Shareholders of all Series for all purposes.
(b) Liabilities Belonging to Series. Subject to the provisions of
-------------------------------
paragraph (c) of this Section 6:
The assets belonging to each particular Series shall be charged solely with
the liabilities of the Trust in respect to that Series, the expenses, costs,
charges and reserves attributable to that Series, and any general liabilities of
the Trust which are not readily identifiable as belonging to any particular
Series but which are allocated and charged by the Trustees to and among any one
or more of the Series established and designated from time to time in a manner
and on such basis as the Trustees in their sole discretion deem fair and
equitable. The liabilities, expenses, costs, charges and reserves so charged to
a Series are herein referred to as "liabilities belonging to" that Series. Each
allocation of liabilities, expenses, costs, charges and reserves by the Trustees
shall be conclusive and binding upon the Shareholders of all Series for all
purposes.
(c) Apportionment of Assets etc. in Case of Multi-Class Series. In the
----------------------------------------------------------
case of any Multi-Class Series, to the extent necessary or appropriate to give
effect to the relative rights and preferences of any classes of Shares of such
Series, (i) any assets, income, earnings, profits, proceeds, liabilities,
expenses, charges, costs and reserves belonging or attributable to that Series
may be allocated or attributed to a particular class of Shares of that Series or
apportioned among two or more classes of Shares of that Series; and (ii) Shares
of any class of
-6-
<PAGE>
such Series may have priority or preference over shares of other classes of such
Series with respect to dividends or distributions upon termination of the Trust
or of such Series or class or otherwise, provided that no Share shall have any
priority or preference over any other Shares of the same class and that all
dividends and distributions to Shareholders of a particular class shall be made
ratably among all Shareholders of such class according to the number of Shares
of such class held of record by such Shareholders on the record date for any
dividend or distribution or on the date of termination, as the case may be.
(d) Dividends, Distributions, Redemptions and Repurchases. Notwithstanding
-----------------------------------------------------
any other provisions of this Declaration, including, without limitation, Article
VI, no dividend or distribution (including, without limitation, any distribution
paid upon termination of the Trust or of any Series or class) with respect to,
nor any redemption or repurchase of, the Shares of any Series or class shall be
effected by the Trust other than from the assets belonging to such Series or
attributable to such class, nor shall any Shareholder of any particular Series
or class otherwise have any right or claim against the assets belonging to any
other Series or attributable to any other class except to the extent that such
Shareholder has such a right or claim hereunder as a Shareholder of such other
Series or class.
(e) Voting. Notwithstanding any of the other provisions of this
------
Declaration, including, without limitation, Section 1 of Article V, the
Shareholders of any particular Series or class shall not be entitled to vote on
any matters as to which such Series or class is not affected. On any matter
submitted to a vote of Shareholders, all Shares of the Trust then entitled to
vote shall, except as otherwise provided in the By-Laws, be voted in the
aggregate as a single class without regard to Series or class of Shares, except
that (1) when required by the 1940 Act or when the Trustees shall have
determined that the matter affects one or more Series or classes of Shares
materially differently, Shares shall be voted by individual Series or class and
(2) when the matter affects only the interests of one or more Series or classes,
only Shareholders of such Series or classes shall be entitled to vote thereon.
There shall be no cumulative voting in the election of Trustees.
(f) Equality. Except to the extent necessary or appropriate to give effect
--------
to the relative rights and preferences of any classes of Shares of a Multi-Class
Series, all the Shares of each particular Series shall represent an equal
proportionate interest in the assets belonging to that Series (subject to the
liabilities belonging to that Series), and each Share of any particular Series
shall be equal to each other Share of that Series. All the Shares of each
particular class of Shares within a Multi-Class Series shall represent an equal
proportionate interest in the assets belonging to such Series that are
attributable to such class (subject to the liabilities attributable to such
class), and each Share of any particular class within a Multi-Class Series shall
be equal to each other Share of such class.
(g) Fractions. Any fractional Share of a Series or class shall carry
---------
proportionately all the rights and obligations of a whole Share of that Series
or class, including rights with
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respect to voting, receipt of dividends and distributions, redemption of Shares
and termination of the Trust.
(h) Exchange Privilege. The Trustees shall have the authority to provide
------------------
that the holders of Shares of any Series or class shall have the right to
exchange said Shares for Shares of one or more other Series or classes of Shares
in accordance with such requirements and procedures as may be established by the
Trustees.
(i) Combination of Series or Classes. The Trustees shall have the
--------------------------------
authority, without the approval of the Shareholders of any Series or class
unless otherwise required by applicable law, to combine the assets and
liabilities belonging to any two or more Series or attributable to any class
into assets and liabilities belonging to a single Series or attributable to a
single class.
(j) Elimination of Series or Class. At any time that there are no Shares
------------------------------
outstanding of any particular Series previously established and designated, the
Trustees may amend this Declaration of Trust to abolish that Series and to
rescind the establishment and designation thereof, such amendment to be effected
in the manner provided in Section 5 of this Article III for the establishment
and designation of Series. At any time that there are no Shares outstanding of
any particular class previously established and designated of a Multi-Series
Class, the Trustees may abolish that class and rescind the establishment and
designation thereof, either by amending this Declaration of Trust in the manner
provided in Section 5 of this Article III for the establishment and designation
of classes (if such class was established and designated by an amendment to this
Declaration of Trust), or by vote or written consent of a majority of the then
Trustees (if such class was established and designated by Trustee vote or
written consent).
Section 7. Indemnification of Shareholders. In case any Shareholder or
---------- -------------------------------
former Shareholder shall be held to be personally liable solely by reason of his
or her being or having been a Shareholder of the Trust or of a particular Series
or class and not because of his or her acts or omissions or for some other
reason, the Shareholder or former Shareholder (or his or her 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 of the Series (or attributable to the class) of which he or she is
a Shareholder or former Shareholder to be held harmless from and indemnified
against all loss and expense arising from such liability.
Section 8. No Preemptive Rights. Shareholders shall have no preemptive or
---------- --------------------
other right to subscribe to any additional Shares or other securities issued by
the Trust.
Section 9. Derivative Claims. No Shareholder shall have the right to
---------- -----------------
bring or maintain any court action, proceeding or claim on behalf of the Trust
or any Series without first making demand on the Trustees requesting the
Trustees to bring or maintain such action, proceeding or
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<PAGE>
claim. Such demand shall be excused only when the plaintiff makes a specific
showing that irreparable injury to the Trust or Series would otherwise result.
Such demand shall be mailed to the Secretary of the Trust at the Trust's
principal office and shall set forth in reasonable detail the nature of the
proposed court action, proceeding or claim and the essential facts relied upon
by the Shareholder to support the allegations made in the demand. The Trustees
shall consider such demand within 45 days of its receipt by the Trust. In their
sole discretion, the Trustees may submit the matter to a vote of Shareholders of
the Trust or Series, as appropriate. Any decision by the Trustees to bring,
maintain or settle (or not to bring, maintain or settle) such court action,
proceeding or claim, or to submit the matter to a vote of Shareholders, shall be
made by the Trustees in their business judgment and shall be binding upon the
Shareholders. Any decision by the Trustees to bring or maintain a court action,
proceeding or suit on behalf of the Trust or a Series shall be subject to the
right of the Shareholders under Article V, Section 1 hereof to vote on whether
or not such court action, proceeding or suit should or should not be brought or
maintained.
ARTICLE IV
The Trustees
Section 1. Election and Tenure. The initial Trustee shall be Frederick K.
---------- -------------------
Zimmermann. The Trustees may fix the number of Trustees, fill vacancies in the
Trustees, including vacancies arising from an increase in the number of
Trustees, or remove Trustees with or without cause. Each Trustee shall serve
during the continued lifetime of the Trust until he or she dies, resigns or is
removed, or, if sooner, until the next meeting of Shareholders called for the
purpose of electing Trustees and until the election and qualification of his or
her successor. Any Trustee may resign at any time by written instrument signed
by him or her and delivered to any officer of the Trust or to a meeting of the
Trustees. Such resignation shall be effective upon receipt unless specified to
be effective at some other time. Except to the extent expressly provided in a
written agreement with the Trust, no Trustee resigning and no Trustee removed
shall have any right to any compensation for any period following his or her
resignation or removal, or any right to damages on account of such removal. The
Shareholders may fix the number of Trustees and elect Trustees at any meeting of
Shareholders called by the Trustees for that purpose and to the extent required
by applicable law, including paragraphs (a) and (b) of Section 16 of the 1940
Act.
Section 2. Effect of Death, Resignation, etc. of a Trustee. The death,
---------- -----------------------------------------------
declination, resignation, retirement, removal or incapacity of the Trustees, or
any of them, shall not operate to annul the Trust or to revoke any existing
agency created pursuant to the terms of this Declaration of Trust.
Section 3. Powers. Subject to the provisions of this Declaration of
---------- ------
Trust, the business of the Trust shall be managed by the Trustees, and they
shall have all powers necessary or
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<PAGE>
convenient to carry out that responsibility including the power to engage in
securities transactions of all kinds on behalf of the Trust. Without limiting
the foregoing, the Trustees may adopt By-Laws not inconsistent with this
Declaration of Trust providing for the regulation and management of the affairs
of the Trust and may amend and repeal them to the extent that such By-Laws do
not reserve that right to the Shareholders; they may elect and remove such
officers and appoint and terminate such agents as they consider appropriate;
they may appoint from their own number and terminate one or more committees
consisting of two or more Trustees which may exercise the powers and authority
of the Trustees to the extent that the Trustees determine; they may employ one
or more custodians of the assets of the Trust and may authorize such custodians
to employ subcustodians and to deposit all or any part of such assets in a
system or systems for the central handling of securities or with a Federal
Reserve Bank, retain a transfer agent or a shareholder servicing agent, or both,
provide for the distribution of Shares by the Trust, through one or more
principal underwriters or otherwise, set record dates for the determination of
Shareholders with respect to various matters, and in general delegate such
authority as they consider desirable to any officer of the Trust, to any
committee of the Trustees and to any agent or employee of the Trust or to any
such custodian or underwriter.
Without limiting the foregoing, the Trustees shall have power and
authority:
(a) To invest and reinvest cash, and to hold cash uninvested;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate, lease, write
options with respect to or otherwise deal in any property rights relating to any
or all of the assets of the Trust;
(c) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
proxies or powers of attorney to such person or persons as the Trustees shall
deem proper, granting to such person or persons such power and discretion with
relation to securities or property as the Trustees shall deem proper;
(d) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities;
(e) To hold any security or property in a form not indicating any trust,
whether in bearer, unregistered or other negotiable form, or in its own name or
in the name of a custodian or subcustodian or a nominee or nominees or
otherwise;
(f) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer of any security which is
held in the Trust; to consent to any contract, lease, mortgage, purchase or sale
of property by such corporation or issuer; and to pay calls or subscriptions
with respect to any security held in the Trust;
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<PAGE>
(g) To join with other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to deposit any
security with, or transfer any security to, any such committee, depositary or
trustee, and to delegate to them such power and authority with relation to any
security (whether or not so deposited or transferred) as the Trustees shall deem
proper, and to agree to pay, and to pay, such portion of the expenses and
compensation of such committee, depositary or trustee as the Trustees shall deem
proper;
(h) 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;
(i) To enter into joint ventures, general or limited partnerships and any
other combinations or associations;
(j) To borrow funds or other property;
(k) To endorse or guarantee the payment of any notes or other obligations
of any person; and to make contracts of guaranty or suretyship, or otherwise
assume liability for payment of such notes or other obligations;
(l) To purchase and pay for entirely out of Trust property such insurance
as they may deem necessary or appropriate for the conduct of the business of the
Trust, including, without limitation, insurance policies insuring the assets of
the Trust and payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, investment advisers, principal underwriters or
independent contractors of the Trust individually against all claims and
liabilities of every nature arising by reason of holding, being or having held
any such office or position, or by reason of any action alleged to have been
taken or omitted by any such person as Trustee, officer, employee, agent,
investment adviser, principal underwriter or independent contractor, including
any action taken or omitted that may be determined to constitute negligence,
whether or not the Trust would have the power to indemnify such person against
liability; and
(m) To pay pensions as deemed appropriate by the Trustees and to adopt,
establish and carry out pension, profit-sharing, share bonus, share purchase,
savings, thrift and other retirement, incentive and benefit plans, trusts and
provisions, including the purchasing of life insurance and annuity contracts as
a means of providing such retirement and other benefits, for any or all of the
Trustees, officers, employees and agents of the Trust.
The Trustees shall not in any way be bound or limited by any present or
future law or custom in regard to investments by Trustees. The Trustees shall
not be required to obtain any court order to deal with any assets of the Trust
or take any other action hereunder.
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<PAGE>
Section 4. Payment of Expenses by the Trust. The Trustees are authorized
---------- --------------------------------
to pay or cause to be paid out of the principal or income of the Trust, or
partly out of principal and partly out of income, as they deem fair, all
expenses, fees, charges, taxes and liabilities incurred or arising in connection
with the Trust, or in connection with the management thereof, including but not
limited to, the Trustees' compensation and such expenses and charges for the
services of the Trust's officers, employees, administrators, investment advisers
or managers, principal underwriter, auditor, counsel, custodian, transfer agent,
shareholder servicing agent, and such other agents or independent contractors,
and such other expenses and charges, as the Trustees may deem necessary or
proper to incur.
Section 5. Payment of Expenses by Shareholders. The Trustees shall have
---------- -----------------------------------
the power, as frequently as they may determine, to cause each Shareholder, or
each Shareholder of any particular Series or class, to pay directly, in advance
or arrears, for charges of the Trust's custodian or transfer, shareholder
servicing or similar agent, an amount fixed from time to time by the Trustees,
by setting off such charges due from such Shareholder from declared but unpaid
dividends owed such Shareholder and/or by reducing the number of Shares in the
account of such Shareholder by that number of full and/or fractional Shares
which represents the outstanding amount of such charges due from such
Shareholder.
Section 6. Ownership of Assets of the Trust. Title to all of the assets
---------- --------------------------------
of the Trust shall at all times be considered as vested in the Trustees.
Section 7. Advisory, Management and Distribution Contracts. Subject to
---------- -----------------------------------------------
such requirements and restrictions as may be set forth in the By-Laws, the
Trustees may, at any time and from time to time, contract for exclusive or
nonexclusive advisory and/or management services for the Trust or for any Series
or class with TNE Advisers, Inc. or any other corporation, trust, association or
other organization (the "Manager"); and any such contract may contain such other
terms as the Trustees may determine, including without limitation, authority for
a Manager to determine from time to time without prior consultation with the
Trustees what investments shall be purchased, held, sold or exchanged and what
portion, if any, of the assets of the Trust shall be held uninvested and to make
changes in the Trust's investments. The Trustees may also, at any time and from
time to time, contract with New England Securities Corporation, the Manager or
any other corporation, trust, association or other organization, appointing it
exclusive or nonexclusive distributor or principal underwriter for the Shares,
every such contract to comply with such requirements and restrictions as may be
set forth in the By-Laws; and any such contract may contain such other terms as
the Trustees may determine.
The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager,
adviser, principal underwriter, distributor or affiliate or agent of or for
any corporation, trust, association or other
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<PAGE>
organization, or of or for any parent or affiliate of any organization,
with which an advisory or management contract, or principal underwriter's
or distributor's contract or transfer, shareholder servicing or other
agency contract may have been or may hereafter be made, or that any such
organization, or any parent or affiliate thereof, is a Shareholder or has
an interest in the Trust, or that
(ii) any corporation, trust, association or other organization with
which an advisory or management contract or principal underwriter's or
distributor's contract, or transfer, shareholder servicing or other agency
contract may have been or may hereafter be made also has an advisory or
management contract, or principal underwriter's or distributor's contract
or transfer, shareholder servicing or other agency contract with one or
more other corporations, trusts, associations or other organizations, or
has other business or interests
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to the Trust or its Shareholders.
ARTICLE V
Shareholders' Voting Powers and Meetings
Section 1. Voting Powers. The Shareholders shall have power to vote only
---------- -------------
(i) for the election of Trustees as provided in Article IV, Section 1, (ii) with
respect to any amendment of this Declaration of Trust to the extent and as
provided in Article VIII, Section 8, (iii) to the same extent as the
stockholders of a Massachusetts business corporation as to whether or not a
court action, proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or the Shareholders,
(iv) with respect to the termination of the Trust or any Series or class to the
extent and as provided in Article VIII, Section 4, (v) to remove Trustees from
office to the extent and as provided in Article V, Section 7 and (vi) with
respect to such additional matters relating to the Trust as may be required by
this Declaration of Trust, the By-Laws or any registration of the Trust with the
Commission (or any successor agency) or any state, or as the Trustees may
consider necessary or desirable. Each whole Share shall be entitled to one vote
as to any matter on which it is entitled to vote and each fractional Share 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.
A proxy with respect to Shares held in the name of two or more persons shall be
valid if executed by any one of them unless at or prior to exercise of the proxy
the Trust receives a specific written notice to the contrary from any one of
them. A proxy purporting to be executed by or on behalf of a Shareholder shall
be deemed valid unless challenged at or prior to its exercise and the burden of
proving invalidity shall rest on the challenger. At any time when no Shares of
a Series or class are outstanding the Trustees may exercise all rights of
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<PAGE>
Shareholders of that Series or class with respect to matters affecting that
Series or class and may with respect to that Series or class take any action
required by law, this Declaration of Trust or the By-Laws to be taken by the
Shareholders thereof.
Section 2. Voting Power and Meetings. Meetings of the Shareholders may be
---------- -------------------------
called by the Trustees for the purpose of electing Trustees as provided in
Article IV, Section 1 and for such other purposes as may be prescribed by law,
by this Declaration of Trust or by the By-Laws. Meetings of the Shareholders
may also be called by the Trustees from time to time for the purpose of taking
action upon any other matter deemed by the Trustees to be necessary or
desirable. A meeting of Shareholders may be held at any place designated by the
Trustees. Notice of any meeting of Shareholders, stating the time and place of
the meeting, shall be given or caused to be given by the Trustees to each
Shareholder by mailing such notice, postage prepaid, at least seven days before
such meeting, at the Shareholder's address as it appears on the records of the
Trust, or by facsimile or other electronic transmission, at least seven days
before such meeting, to the telephone or facsimile number or e-mail or other
electronic address most recently furnished to the Trust (or its agent) by the
Shareholder. Whenever notice of a meeting is required to be given to a
Shareholder under this Declaration of Trust or the By-Laws, a written waiver
thereof, executed before or after the meeting by such Shareholder or his
attorney thereunto authorized and filed with the records of the meeting, shall
be deemed equivalent to such notice.
Section 3. Quorum and Required Vote. Except when a larger quorum is
---------- ------------------------
required by law, by the By-Laws or by this Declaration of Trust, 40% of the
Shares entitled to vote shall constitute a quorum at a Shareholders' meeting.
When any one or more Series or classes is to vote as a single class separate
from any other Shares which are to vote on the same matters as a separate class
or classes, 40% of the Shares of each such class entitled to vote shall
constitute a quorum at a Shareholders' meeting of that class. Any meeting of
Shareholders may be adjourned from time to time by a majority of the votes
properly cast upon the question, whether or not a quorum is present, and the
meeting may be held as adjourned within a reasonable time after the date set for
the original meeting without further notice. When a quorum is present at any
meeting, a majority of the Shares voted shall decide any questions and a
plurality shall elect a Trustee, except when a larger vote is required by any
provision of this Declaration of Trust or the By-Laws or by law. If any
question on which the Shareholders are entitled to vote would adversely affect
the rights of any Series or class of Shares, the vote of a majority (or such
larger vote as is required as aforesaid) of the Shares of such Series or class
which are entitled to vote, voting separately, shall also be required to decide
such question.
Section 4. Action by Written Consent. Any action taken by Shareholders
---------- -------------------------
may be taken without a meeting if Shareholders holding a majority of the Shares
entitled to vote on the matter (or such larger proportion thereof as shall be
required by any express provision of this Declaration of Trust or by the By-
Laws) and holding a majority (or such larger proportion as aforesaid) of the
Shares of any Series or class entitled to vote separately on the matter consent
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<PAGE>
to the action in writing and such written consents are filed with the records of
the meetings of Shareholders. Such consent shall be treated for all purposes as
a vote taken at a meeting of Shareholders.
Section 5. Record Dates. For the purpose of determining the Shareholders
---------- ------------
of any Series or class who are entitled to vote or act at any meeting or any
adjournment thereof, the Trustees may from time to time fix a time, which shall
be not more than 90 days before the date of any meeting of Shareholders, as the
record date for determining the Shareholders of such Series or class having the
right to notice of and to vote at such meeting and any adjournment thereof, and
in such case only Shareholders of record on such record date shall have such
right, notwithstanding any transfer of Shares on the books of the Trust after
the record date. For the purpose of determining the Shareholders of any Series
or class who are entitled to receive payment of any dividend or of any other
distribution, the Trustees may from time to time fix a date, which shall be on
or before the date for the payment of such dividend or such other payment, as
the record date for determining the Shareholders of such Series or class having
the right to receive such dividend or distribution. Without fixing a record
date the Trustees may for voting and/or distribution purposes close the register
or transfer books for one or more Series or classes for all or any part of the
period prior to a meeting of Shareholders or the payment of a distribution.
Nothing in this Section shall be construed as precluding the Trustees from
setting different record dates for different Series or classes.
Section 6. Additional Provisions. The By-Laws may include further
---------- ---------------------
provisions for Shareholders' votes and meetings and related matters.
Section 7. Removal of Trustees. No natural person shall serve as Trustee
---------- -------------------
after the holders of record of not less than two-thirds of the outstanding
Shares have declared that such Trustee be removed from that office either by
declaration in writing filed with the Trust's custodian or by votes cast in
person or by proxy at a meeting called for the purpose. The Trustees shall
promptly call a meeting of Shareholders for the purpose of voting upon the
question of removal of any Trustee when requested in writing so to do by the
record holders of not less than 10 per centum of the outstanding Shares.
Whenever ten or more Shareholders of record who have been such for at least
six months preceding the date of application, and who hold in the aggregate
Shares having a net asset value of at least 1 per centum of the outstanding
Shares, shall apply to the Trustees in writing, stating that they wish to
communicate with other Shareholders with a view to obtaining signatures to a
request for a meeting pursuant to this Section and accompanied by a form of
communication and request which they wish to transmit, the Trustees shall within
five business days after receipt of such application either (a) afford to such
applicants access to a list of the names and addresses of all Shareholders as
recorded on the books of the Trust; or (b) inform such applicants as to the
approximate number of Shareholders of record, and the approximate cost of
transmitting to them the proposed communication and form of request. If the
Trustees elect to follow the course specified in clause (b), the Trustees, upon
the written
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<PAGE>
request of such applicants, accompanied by a tender of the material to be
transmitted and of the reasonable expenses of transmittal, shall, with
reasonable promptness, transmit such material to all Shareholders of record at
their addresses as recorded on the books of the Trust (or at the telephone or
facsimile number or e-mail or other electronic address most recently furnished
to the Trust (or its agent) by the Shareholder), unless within five business
days after such tender the Trustees shall transmit to such applicants and file
with the Commission, together with a copy of the material proposed to be
transmitted, a written statement signed by at least a majority of the Trustees
to the effect that in their opinion either such material contains untrue
statements of fact or omits to state facts necessary to make the statements
contained therein not misleading, or would be in violation of applicable law,
and specifying the basis of such opinion. If the Commission shall enter an order
refusing to sustain any of the objections specified in the written statement so
filed, or if, after the entry of an order sustaining one or more of such
objections, the Commission shall find, after notice and opportunity for hearing,
that all objections so sustained have been met, and shall enter an order so
declaring, the Trustees shall transmit copies of such material to all
Shareholders with reasonable promptness after the entry of such order and the
renewal of such tender.
ARTICLE VI
Net Income, Distributions, and Redemptions and Repurchases
Section 1. Distributions of Net Income. The Trustees shall each year, or
---------- ---------------------------
more frequently if they so determine in their sole discretion, distribute to the
Shareholders of each Series, in Shares of that Series, cash or otherwise, an
amount approximately equal to the net income attributable to the assets
belonging to such Series and may from time to time distribute to the
Shareholders of each Series, in Shares of that Series, cash or otherwise, such
additional amounts, but only from the assets belonging to such Series, as they
may authorize. Except as otherwise permitted by paragraph (c) of Section 6 of
Article III in the case of Multi-Class Series, all dividends and distributions
on Shares of a particular Series shall be distributed pro rata to the holders of
that Series in proportion to the number of Shares of that Series held by such
holders and recorded on the books of the Trust at the date and time of record
established for the payment of such dividend or distributions.
The manner of determining net income, income, asset values, capital gains,
expenses, liabilities and reserves of any Series or class may from time to time
be altered as necessary or desirable in the judgment of the Trustees to conform
such manner of determination to any other method prescribed or permitted by
applicable law. Net income shall be determined by the Trustees or by such
person as they may authorize at the times and in the manner provided in the By-
Laws. Determinations of net income of any Series or class and determinations of
income, asset value, capital gains, expenses and liabilities made by the
Trustees, or by such person as they may authorize, in good faith, shall be
binding on all parties concerned. The foregoing sentence shall not be construed
to protect any Trustee, officer or agent of the Trust
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<PAGE>
against any liability to the Trust or its security holders to which he or she
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.
If, for any reason, the net income of any Series or class determined at any
time is a negative amount, the pro rata share of such negative amount allocable
to each Shareholder of such Series or class shall constitute a liability of such
Shareholder to that Series or class which shall be paid out of such
Shareholder's account at such times and in such manner as the Trustees may from
time to time determine (x) out of the accrued dividend account of such
Shareholder, (y) by reducing the number of Shares of that Series or class in the
account of such Shareholder or (z) otherwise.
Section 2. Redemptions and Repurchases. The Trust shall purchase such
---------- ---------------------------
Shares as are offered by any Shareholder for redemption, upon the presentation
of a proper instrument of transfer together with a request directed to the Trust
or a person designated by the Trust that the Trust purchase such Shares or in
accordance with such other procedures for redemption as the Trustees may from
time to time authorize; and the Trust will pay therefor the net asset value
thereof, as determined in accordance with the By-Laws, next determined. Payment
for said Shares shall be made by the Trust to the Shareholder within seven days
after the date on which the request is made. The obligation set forth in this
Section 2 is subject to the provision that in the event that any time the New
York Stock Exchange is closed for other than weekends or holidays, or if
permitted by the rules of the Commission during periods when trading on the New
York Stock Exchange is restricted or during any emergency which makes it
impracticable for the Trust to dispose of the investments of the applicable
Series or to determine fairly the value of the net assets belonging to such
Series or attributable to any class thereof or during any other period permitted
by order of the Commission for the protection of investors, such obligations may
be suspended or postponed by the Trustees. The Trust may also purchase or
repurchase Shares at a price not exceeding the net asset value of such Shares in
effect when the purchase or repurchase or any contract to purchase or repurchase
is made.
The redemption price may in any case or cases be paid wholly or partly in
kind if the Trustees determine that such payment is advisable in the interest of
the remaining Shareholders of the Series the Shares of which are being redeemed.
In making any such payment wholly or partly in kind, the Trust shall, so far as
may be practicable, deliver assets which approximate the diversification of all
of the assets belonging at the time to the Series the Shares of which are being
redeemed. Subject to the foregoing, the fair value, selection and quantity of
securities or other property so paid or delivered as all or part of the
redemption price may be determined by or under authority of the Trustees. In no
case shall the Trust be liable for any delay of any corporation or other person
in transferring securities selected for delivery as all or part of any payment
in kind.
Section 3. Redemptions at the Option of the Trust. The Trust shall have
---------- --------------------------------------
the right at its option and at any time to redeem Shares of any Shareholder at
the net asset value thereof as
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described in Section 1 of this Article VI: (i) if at such time such Shareholder
owns Shares of any Series or class having an aggregate net asset value of less
than an amount determined from time to time by the Trustees; or (ii) to the
extent that such Shareholder owns Shares equal to or in excess of a percentage
determined from time to time by the Trustees of the outstanding Shares of the
Trust or of any Series or class.
ARTICLE VII
Compensation and Limitation of Liability of Trustees
Section 1. Compensation. The Trustees as such shall be entitled to
---------- ------------
reasonable compensation from the Trust; they may fix the amount of their
compensation. Nothing herein shall in any way prevent the employment of any
Trustee for advisory, management, legal, accounting, investment banking or other
services and payment for the same by the Trust.
Section 2. Limitation of Liability. The Trustees shall not be responsible
---------- -----------------------
or liable in any event for any neglect or wrong-doing of any officer, agent,
employee, Manager or principal underwriter of the Trust, nor shall any Trustee
be responsible for the act or omission of any other Trustee, but nothing herein
contained shall protect any Trustee against any liability to which he or she
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 or
her office.
Every note, bond, contract, instrument, certificate or undertaking and
every other act or thing whatsoever issued, executed or done by or on behalf of
the Trust or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been issued, executed or done only in or with
respect to their or his or her capacity as Trustees or Trustee, and such
Trustees or Trustee shall not be personally liable thereon.
ARTICLE VIII
Miscellaneous
Section 1. Trustees, Shareholders, etc. Not Personally Liable; Notice.
---------- ----------------------------------------------------------
All persons extending credit to, contracting with or having any claim against
the Trust or any Series or class shall look only to the assets of the Trust, or,
to the extent that the liability of the Trust may have been expressly limited by
contract to the assets of a particular Series or attributable to a particular
class, only to the assets belonging to the relevant Series or attributable to
the relevant class, for payment under such credit, contract or claim; and
neither the Shareholders nor the Trustees, nor any of the Trust's officers,
employees or agents, whether past, present or future, shall be personally liable
therefor. Nothing in this Declaration of Trust shall protect
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<PAGE>
any Trustee against any liability to which such 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.
Every note, bond, contract, instrument, certificate or undertaking made or
issued on behalf of the Trust by the Trustees, by any officer or officers or
otherwise shall give notice that this Declaration of Trust is on file with the
Secretary of the Commonwealth of Massachusetts and shall recite that the same
was executed or made by or on behalf of the Trust or by them as Trustee or
Trustees or as officer or officers or otherwise and not individually and that
the obligations of such instrument are not binding upon any of them or the
Shareholders individually but are binding only upon the assets and property of
the Trust or upon the assets belonging to the Series or attributable to the
class for the benefit of which the Trustees have caused the note, bond,
contract, instrument, certificate or undertaking to be made or issued, and may
contain such further recital as he or she or they may deem appropriate, but the
omission of any such recital shall not operate to bind any Trustee or Trustees
or officer or officers or Shareholders or any other person individually.
Section 2. Trustee's Good Faith Action, Expert Advice, No Bond or Surety.
---------- -------------------------------------------------------------
The exercise by the Trustees of their powers and discretions hereunder shall be
binding upon everyone interested. A Trustee shall be liable for his or her own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee, and for nothing else,
and shall not be liable for errors of judgment or mistakes of fact or law. The
Trustees may take advice of counsel or other experts with respect to the meaning
and operation of this Declaration of Trust, and shall be under no liability for
any act or omission in accordance with such advice or for failing to follow such
advice. The Trustees shall not be required to give any bond as such, nor any
surety if a bond is required.
Section 3. Liability of Third Persons Dealing with Trustees. No person
---------- ------------------------------------------------
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
Section 4. Termination of Trust, Series or Class. Unless terminated as
---------- -------------------------------------
provided herein, the Trust shall continue without limitation of time. The Trust
may be terminated at any time by vote of at least 66-2/3% of the Shares of each
Series entitled to vote and voting separately by Series, or by the Trustees by
written notice to the Shareholders. Any Series or class may be terminated at
any time by vote of at least 66-2/3% of the Shares of that Series or class, or
by the Trustees by written notice to the Shareholders of that Series or class.
Upon termination of the Trust (or any Series or class, as the case may be),
after paying or otherwise providing for all charges, taxes, expenses and
liabilities belonging, severally, to each Series (or the applicable Series or
attributable to the particular class, as the case may be), whether due or
accrued or anticipated as may be determined by the Trustees, the Trust shall, in
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<PAGE>
accordance with such procedures as the Trustees consider appropriate, reduce the
remaining assets belonging, severally, to each Series (or the applicable Series
or attributable to the particular class, as the case may be), to distributable
form in cash or shares or other securities, or any combination thereof, and
distribute the proceeds belonging to each Series (or the applicable Series or
attributable to the particular class, as the case may be), to the Shareholders
of that Series (or class, as the case may be), as a Series (or class, as the
case may be), ratably according to the number of Shares of that Series (or
class, as the case may be) held by the several Shareholders on the date of
termination.
Section 5. Merger and Consolidation. The Trustees may cause the Trust to
---------- ------------------------
be merged into or consolidated with another trust or company or its shares
exchanged under or pursuant to any state or federal statute, if any, or
otherwise to the extent permitted by law, if such merger or consolidation or
share exchange has been authorized by vote of a majority of the outstanding
Shares; provided that in all respects not governed by statute or applicable law,
the Trustees shall have power to prescribe the procedure necessary or
appropriate to accomplish a sale of assets, merger or consolidation.
Section 6. Filing of Copies, Reference, Headings. The original or a copy
---------- -------------------------------------
of this instrument and of each amendment hereto shall be kept at the office of
the Trust where it may be inspected by any Shareholder. A copy of this
instrument and of each amendment hereto shall be filed by the Trust with the
Secretary of the Commonwealth of Massachusetts and with any other governmental
office where such filing may from time to time be required. Anyone dealing with
the Trust may rely on a certificate by an officer of the Trust as to whether or
not any such amendments have been made and as to any matters in connection with
the Trust hereunder; and, with the same effect as if it were the original, may
rely on a copy certified by an officer of the Trust to be a copy of this
instrument or of any such amendments. In this instrument and in any such
amendment, references to this instrument, and all expressions like "herein,"
"hereof" and "hereunder," shall be deemed to refer to this instrument as amended
or affected by any such amendments. Headings are placed herein for convenience
of reference only and shall not be taken as a part hereof or to control or
affect the meaning, construction or effect of this instrument. This instrument
may be executed in any number of counterparts each of which shall be deemed an
original.
Section 7. Applicable Law. This Declaration of Trust is made in the
---------- --------------
Commonwealth of Massachusetts, and it is created under and is to be governed by
and construed and administered according to the laws of said Commonwealth. The
Trust shall be of the type commonly called a Massachusetts business trust, and,
without limiting the provisions hereof, the Trust may exercise all powers which
are ordinarily exercised by such a trust.
Section 8. Amendments. This Declaration of Trust may be amended at any
---------- ----------
time by an instrument in writing signed by a majority of the then Trustees when
authorized so to do by vote of a majority of the Shares entitled to vote with
respect to such amendment, except that amendments described in Article III,
Section 5 or Article III, Section 6 hereof or having the
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<PAGE>
purpose of changing the name of the Trust or of any Series or class of Shares or
of supplying any omission, curing any ambiguity or curing, correcting or
supplementing any defective or inconsistent provision contained herein shall not
require authorization by Shareholder vote.
Section 9. Addresses. The address of the Trust is 501 Boylston Street,
---------- ---------
Boston, Massachusetts 02117. The address of the initial Trustee is c/o New
England Life Insurance Company, 501 Boylston Street, Boston, Massachusetts
02117.
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<PAGE>
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal for
himself and for his successors and assigns this third day of September, 1998.
/s/ Frederick K. Zimmermann
---------------------------
Frederick K. Zimmermann
Initial Trustee
THE COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss. Boston, September 3, 1998
Then personally appeared the above named Frederick K. Zimmermann, and
acknowledged the foregoing instrument to be his free act and deed, before me.
/s/ Catherine Topouzoglou
-------------------------
Notary Public
My Commission Expires December 14, 2001
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<PAGE>
BY-LAWS
OF
e-navigator FUND
ARTICLE 1
Agreement and Declaration
of Trust and Principal Office
1.1 Agreement and Declaration of Trust. These By-Laws shall be subject to the
----------------------------------
Agreement and Declaration of Trust, as from time to time in effect (the
"Declaration of Trust"), of e-navigator Fund (the "Trust"), the Massachusetts
business trust established by the Declaration of Trust.
1.2 Principal Office of the Trust. The principal office of the Trust shall be
-----------------------------
located in Boston, Massachusetts.
ARTICLE 2
Meetings of Trustees
2.1 Regular Meetings. Regular meetings of the Trustees may be held without
----------------
call or notice at such places and at such times as the Trustees may from time to
time determine, provided that notice of the first regular meeting following any
such determination shall be given to absent Trustees.
2.2 Special Meetings. Special meetings of the Trustees may be held, at any
----------------
time and at any place designated in the call of the meeting, when called by the
Chairman of the Board, if any, the President or the Treasurer or by two or more
Trustees, sufficient notice thereof being given to each Trustee by the Clerk or
an Assistant Clerk or by the officer or the Trustees calling the meeting.
2.3 Notice. It shall be sufficient notice to a Trustee of a special meeting to
------
send notice by mail or courier at least forty-eight hours or by telegram at
least twenty-four hours before the meeting addressed to the Trustee at his or
her usual or last known business or residence address or to give notice to him
or her in person or by telephone at least twenty-four hours before the meeting.
Notice of a meeting need not be given to any Trustee if a written waiver of
notice, executed by him or her before or after the meeting, is filed with the
records of the meeting, or to any Trustee who attends the meeting without
protesting prior thereto or at its commencement the lack of notice to him or
her. Except as required by law, neither notice of a meeting nor a waiver of a
notice need specify the purposes of the meeting.
<PAGE>
2.4 Quorum. At any meeting of the Trustees a majority of the Trustees then in
------
office shall constitute a quorum. Any meeting may be adjourned from time to
time by a majority of the votes cast upon the question, whether or not a quorum
is present, and the meeting may be held as adjourned without further notice to
any Trustee who was present at the time of such adjournment; notice of the time
and place of any adjourned session of such meeting shall, however, be given in
the manner provided in Section 2.3 of these By-Laws to each Trustee who was not
present at the time of such adjournment.
2.5 Action by Vote. When a quorum is present at any meeting, a majority of
--------------
Trustees present may take any action, except when a larger vote is expressly
required by law, by the Declaration of Trust or by these By-Laws.
2.6 Action by Writing. Except as required by law, any action required or
-----------------
permitted to be taken at any meeting of the Trustees may be taken without a
meeting if a majority of the Trustees (or such larger proportion thereof as
shall be required by any express provision of the Declaration of Trust or these
By-Laws) consent to the action in writing and such written consents are filed
with the records of the meetings of the Trustees. Such consent shall be treated
for all purposes as a vote taken at a meeting of Trustees.
2.7 Presence through Communications Equipment. Except as required by law, the
-----------------------------------------
Trustees may participate in a meeting of Trustees by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other at the same time, and
participation by such means shall constitute presence in person at a meeting.
ARTICLE 3
Officers
3.1 Enumeration; Qualification. The officers of the Trust shall be a
--------------------------
President, a Treasurer, a Clerk and such other officers, if any, as the Trustees
from time to time may in their discretion elect. The Trust may also have such
agents as the Trustees from time to time may in their discretion appoint. If a
Chairman of the Board is elected, he or she shall be a Trustee and may but need
not be a Shareholder; and any other officer may be but none need be a Trustee or
Shareholder. Any two or more offices may be held by the same person.
3.2 Election and Tenure. The President, the Treasurer, the Clerk and such
-------------------
other officers as the Trustees may in their discretion from time to time elect
shall each be elected by the Trustees to serve until his or her successor is
elected or qualified, or until he or she sooner dies, resigns, is removed or
becomes disqualified. Each officer shall hold office and each agent shall
retain authority at the pleasure of the Trustees.
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<PAGE>
3.3 Powers. Subject to the other provisions of these By-Laws, each officer
------
shall have, in addition to the duties and powers herein and in the Declaration
of Trust set forth, such duties and powers as are commonly incident to the
office occupied by him or her as if the Trust were organized as a Massachusetts
business corporation and such other duties and powers as the Trustees may from
time to time designate.
3.4 President and Vice Presidents. The President shall have the duties and
-----------------------------
powers specified in these By-Laws and shall have such other duties and powers as
may be determined by the Trustees.
Any Vice Presidents shall have such duties and powers as shall be designated
from time to time by the Trustees.
3.5 Chief Executive Officer. The Chief Executive Officer of the Trust shall be
-----------------------
the Chairman of the Board, the President or such other officer as is designated
by the Trustees and shall, subject to the control of the Trustees, have general
charge and supervision of the business of the Trust and, except as the Trustees
shall otherwise determine, preside at all meetings of the Shareholders and of
the Trustees. If no such designation is made, the President shall be the Chief
Executive Officer.
3.6 Chairman of the Board. If a Chairman of the Board of Trustees is elected,
---------------------
he shall have the duties and powers specified in these By-Laws and shall have
such other duties and powers as may be determined by the Trustees.
3.7 Treasurer. The Treasurer shall be the chief financial and accounting
---------
officer of the Trust, and shall, subject to the provisions of the Declaration of
Trust and to any arrangement made by the Trustees with a custodian, investment
adviser or manager, administrator or transfer, shareholder servicing or similar
agent, be in charge of the valuable papers, books of account and accounting
records of the Trust, and shall have such other duties and powers as may be
designated from time to time by the Trustees or by the President.
3.8 Clerk. The Clerk shall record all proceedings of the Shareholders and the
-----
Trustees in books to be kept therefor, which books or a copy thereof shall be
kept at the principal office of the Trust. In the absence of the Clerk from any
meeting of the Shareholders or Trustees, an assistant Clerk, or if there be none
or if he or she is absent, a temporary clerk chosen at such meeting shall record
the proceedings thereof in the aforesaid books.
3.9 Resignations and Removals. Any officer may resign at any time by written
-------------------------
instrument signed by him or her and delivered to the President or the Clerk or
to a meeting of the Trustees. Such resignation shall be effective upon receipt
unless specified to be effective at some other time. The Trustees may remove
any officer with or without cause. Except to the extent expressly provided in a
written agreement with the Trust, no officer resigning and no
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<PAGE>
officer removed shall have any right to any compensation for any period
following his or her resignation or removal, or any right to damages on account
of such removal.
ARTICLE 4
Indemnification
4.1 Trustees, Officers, etc. The Trust shall indemnify each of its Trustees
-----------------------
and officers (including persons who serve at the Trust's request as directors,
officers or trustees of another organization in which the Trust has any interest
as a shareholder, creditor or otherwise) (hereinafter referred to as a "Covered
Person") against all liabilities and expenses, including but not limited to
amounts paid in satisfaction of judgments, in compromise or as fines and
penalties, and counsel fees reasonably incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such Covered Person may be or may have
been threatened, while in office or thereafter, by reason of any alleged act or
omission as a Trustee or officer or by reason of his or her being or having been
such a Trustee or officer, except with respect to any matter as to which such
Covered Person shall have been finally adjudicated in any such action, suit or
other proceeding not to have acted in good faith in the reasonable belief that
such Covered Person's action was in the best interest of the Trust and except
that no Covered Person shall be indemnified against any liability to the Trust
or its Shareholders to which such Covered Person would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such Covered Person's office.
Expenses, including counsel fees so incurred by any such Covered Person, may be
paid from time to time by the Trust in advance of the final disposition of any
such action, suit or proceeding on the condition that the amounts so paid shall
be repaid to the Trust if it is ultimately determined that indemnification of
such expenses is not authorized under this Article.
4.2 Compromise Payment. As to any matter disposed of by a compromise payment
------------------
by any such Covered Person referred to in Section 4.1 above, pursuant to a
consent decree or otherwise, no such indemnification either for said payment or
for any other expenses shall be provided unless such compromise shall be
approved as in the best interests of the Trust, after notice that it involved
such indemnification, (a) by a disinterested majority of the Trustees then in
office; or (b) by a majority of the disinterested Trustees then in office; or
(c) by any disinterested person or persons to whom the question may be referred
by the Trustees, provided that in the case of approval pursuant to clause (b) or
(c) there has been obtained an opinion in writing of independent legal counsel
to the effect that such Covered Person appears to have acted in good faith in
the reasonable belief that his or her action was in the best interests of the
Trust and that such indemnification would not protect such person against any
liability to the Trust or its Shareholders to which such person would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties
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<PAGE>
involved in the conduct of office; or (d) by vote of Shareholders holding a
majority of the Shares entitled to vote thereon, exclusive of any Shares
beneficially owned by any interested Covered Person. Approval by the Trustees
pursuant to clause (a) or (b) or by any disinterested person or persons pursuant
to clause (c) of this Section shall not prevent the recovery from any Covered
Person of any amount paid to such Covered Person in accordance with any of such
clauses as indemnification if such Covered Person is subsequently adjudicated by
a court of competent jurisdiction not to have acted in good faith in the
reasonable belief that such Covered Person's action was in the best interests of
the Trust or to have been liable to the Trust or its Shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office.
4.3 Indemnification Not Exclusive. The right of indemnification hereby
-----------------------------
provided shall not be exclusive of or affect any other rights to which any such
Covered Person may be entitled. As used in this Article 4, the term "Covered
Person" shall include such person's heirs, executors and administrators; an
"interested Covered Person" is one against whom the action, suit or other
proceeding in question or another action, suit or other proceeding on the same
or similar grounds is then or has been pending; and a "disinterested Trustee" or
"disinterested person" is a Trustee or a person against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending. Nothing contained in
this Article shall affect any rights to indemnification to which personnel of
the Trust, other than Trustees and officers, and other persons may be entitled
by contract or otherwise under law, nor the power of the Trust to purchase and
maintain liability insurance on behalf of any such person.
ARTICLE 5
Reports
5.1 General. The Trustees and officers shall render reports at the time and in
-------
the manner required by the Declaration of Trust or any applicable law. Officers
shall render such additional reports as they may deem desirable or as may from
time to time be required by the Trustees.
ARTICLE 6
Fiscal Year
6.1 General. Except as from time to time otherwise provided by the Trustees,
-------
the fiscal year of the Trust shall end on December 31 in each year.
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<PAGE>
ARTICLE 7
Seal
7.1 General. The seal of the Trust shall consist of a flat-faced die with the
-------
word "Massachusetts," together with the name of the Trust and the year of its
organization cut or engraved thereon, but, unless otherwise required by the
Trustees, the seal shall not be necessary to be placed on, and its absence shall
not impair the validity of, any document, instrument or other paper executed and
delivered by or on behalf of the Trust.
ARTICLE 8
Execution of Papers
8.1 General. Except as the Trustees may generally or in particular cases
-------
authorize the execution thereof in some other manner, all checks, notes, drafts
and other obligations and all registration statements and amendments thereto and
all applications and amendments thereto to the Securities and Exchange
Commission shall be signed by the Chairman, if any, the President, any Vice
President or the Treasurer or any of such other officers or agents as shall be
designated for that purpose by a vote of the Trustees.
ARTICLE 9
Provisions Relating to the
Conduct of the Trust's Business
9.1 Determination of Net Asset Value. The Trustees or any officer or officers
--------------------------------
or agent or agents of the Trust designated from time to time for this purpose by
the Trustees shall determine at least once daily the net income and the value of
all the assets belonging to any Series or attributable to any class of Shares of
the Trust on each day upon which the New York Stock Exchange is open for
unrestricted trading and at such other times as the Trustees shall designate.
In determining asset values, all securities for which representative market
quotations are readily available shall be valued at market value, and all
securities and other assets for which representative market quotations are not
readily available shall be valued at fair value, all as determined in good faith
by the Trustees or an officer or officers or agent or agents, as aforesaid, in
accordance with accounting principles generally accepted at the time.
Notwithstanding the foregoing, the assets belonging to any Series or
attributable to any class of Shares of the Trust may, if so authorized by the
Trustees, be valued in accordance with the amortized cost method, and the asset
value so determined, subject to the power of the Trustees to alter the asset
value so determined, less total liabilities belonging to that Series or
attributable to any class of Shares (exclusive of capital stock and surplus)
shall be the net asset value until a new asset value is determined by the
Trustees or such officers or agents. In determining the net asset value the
Trustees or such officers or agents may include in liabilities
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<PAGE>
such reserves for taxes, estimated accrued expenses and contingencies in
accordance with accounting principles generally accepted at the time as the
Trustees or such officers or agents may in their best judgment deem fair and
reasonable under the circumstances. The manner of determining net asset value
may from time to time be altered as necessary or desirable in the judgment of
the Trustees to conform it to any other method prescribed or permitted by
applicable law or regulation. Determinations of net asset value made by the
Trust or such officers or agents in good faith shall be binding on all parties
concerned. The foregoing sentence shall not be construed to protect any Trustee,
officer or agent of the Trust against any liability to the Trust or its security
holders to which he or she 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 or her office.
ARTICLE 10
Amendments to the By-Laws
10. General. These By-Laws may be amended or repealed, in whole or in part, by
-------
a majority of the Trustees then in office at any meeting of the Trustees, or by
written consent in lieu thereof.
ARTICLE 11
11. Proxy Instructions Transmitted by Telephonic or Electronic Means. The
----------------------------------------------------------------
placing of a Shareholder's name on a proxy pursuant to telephonic or
electronically transmitted instructions obtained pursuant to procedures
reasonably designed to verify that such instructions have been authorized by
such Shareholder shall constitute execution of such proxy by or on behalf of
such Shareholder.
-7-
<PAGE>
e~navigator Fund
Form of
Distribution Agreement
AGREEMENT made this __ day of ______, 1998 by and between e~navigator Fund,
a Massachusetts business trust (the "Fund"), and NEW ENGLAND SECURITIES
CORPORATION, a Massachusetts corporation (the "Distributor").
W I T N E S S E T H:
WHEREAS, this Agreement has been approved by the Trustees of the Trust in
contemplation of the transfer by the Distributor of its rights to receive the
Distribution Fee (as defined in the Distribution and Service Plan attached
hereto as Exhibit A) to a financing party in order to raise funds to cover
distribution expenditures;
WHEREAS, the Trustees of the Trust recognize the importance to the Trust of
the Distributor being able to obtain financing with which to pay commissions on
shares of the Trust at the time of sale;
WHEREAS, the Trustees of the Trust acknowledge that by providing financing
to the Distributor the financing party enables the Distributor to provide
valuable services to the Trust (as defined below); and
WHEREAS, the Trustees of the Trust, in the context of considering the best
interests of the Trust and its shareholders at the time of and in preparation
for any vote, consent or other action that the Trustees of the Trust may from
time to time take relating to the continued receipt by the Distributor (and/or
the financing party) of the Distribution Fee, intend to consider the effect on
the Distributor and any financing party of any such vote, consent or action.
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained, the Trust and the Distributor agree as follows:
1. Distributor. The Trust hereby appoints the Distributor as general
-----------
distributor of shares of beneficial interest of the Trust ("Trust shares")
during the term of this Agreement. The Trust reserves the right, however,
to refuse at any time or times to sell any Trust shares hereunder for any
reason deemed adequate by the Board of Trustees of the Trust.
<PAGE>
2. Sale and Payment. Under this agreement, the following provisions shall
----------------
apply with respect to the sale of and payment for Trust shares:
(a) The Distributor shall have the right, as principal, to purchase Trust
shares from the Trust at their net asset value and to sell such shares
to the public against orders therefor at the applicable public offering
price, as defined in Section 4 hereof. The Distributor shall also have
the right, as principal, to sell shares to dealers against orders
therefor at the public offering price less a concession determined by
the Distributor.
(b) Prior to the time of delivery of any shares by the Trust to, or on the
order of, the Distributor, the Distributor shall pay or cause to be
paid to the Trust or to its order an amount in Boston or New York
clearing house funds equal to the applicable net asset value of such
shares. The Distributor shall retain so much of any sales charge or
underwriting discount as is not allowed by it as a concession to
dealers.
3. Fees. For its services as general distributor of the Trust shares, the
----
Trust shall pay to the Distributor (or its designee or transferee), the
Distribution Fee at the rate and upon the terms and conditions set forth in
the Distribution and Service Plan attached as Exhibit A hereto, and as
amended from time to time. The Distribution Fee shall be accrued daily and
paid monthly to the Distributor (or, at its direction, to its designee or
transferee) as soon as practicable after the end of the calendar month in
which it accrues, but in any event within five business days following the
last day of the month. So long as this agreement and the Distribution and
Service Plan have not been terminated in accordance with their respective
terms, the Trust's obligation to pay the Distribution Fee to the
Distributor shall be absolute and unconditional and shall not be subject to
any dispute, offset, counterclaim or defense whatsoever (it being
understood that nothing in this sentence shall be deemed a waiver by the
Trust of its right separately to pursue any claims it may have against the
Distributor and to enforce such claims against any assets (other than its
rights to be paid the Distribution Fee of the Distributor)).
4. Public Offering Price. The public offering price shall be the net asset
---------------------
value of Trust shares, plus any applicable sales charge, all as set forth
in the current prospectus and statement of additional information
("prospectus") of the Trust. In no event shall the public offering price
exceed 1000/942.50 of such net asset value, and in no event shall any
underwriting discount exceed 5.75% of the public offering price. The net
asset value of Trust shares shall be determined in accordance with the
provisions of the agreement and declaration of trust and by-laws of the
Trust and the current prospectus of the Trust.
5. Trust Issuance of Trust Shares. The delivery of Trust shares shall be made
------------------------------
promptly by a credit to a shareholder's open account for the Trust or by
delivery of a share certificate. The Trust reserves the right (a) to issue
Trust shares at any time directly to the shareholders of the Trust as a
stock dividend or stock split, (b) to issue to such
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<PAGE>
shareholders shares of the Trust, or rights to subscribe to shares of the
Trust, as all or part of any dividend that may be distributed to
shareholders of the Trust or as all or part of any optional or alternative
dividend that may be distributed to shareholders of the Trust, and (c) to
sell Trust shares in accordance with the current applicable prospectus of
the Trust relating to the Trust shares.
6. Redemption or Repurchase. The Distributor shall act as agent for the Trust
------------------------
in connection with the redemption or repurchase of Trust shares by the
Trust to the extent and upon the terms and conditions set forth in the
current applicable prospectus of the Trust, and the Trust agrees to
reimburse the Distributor, from time to time upon demand, for any
reasonable expenses incurred in connection with such redemptions or
repurchases.
7. Undertaking Regarding Sales. The Distributor shall use reasonable efforts
---------------------------
to sell Trust shares but does not agree hereby to sell any specific number
of Trust shares and shall be free to act as distributor of the shares of
other investment companies. Trust shares will be sold by the Distributor
only against orders therefor. The Distributor shall not purchase Trust
shares from anyone except in accordance with Sections 2 and 6 and shall not
take "long" or "short" positions in Trust shares contrary to the agreement
and declaration of trust or by-laws of the Trust.
8. Compliance. The Distributor shall conform to the Rules of Fair Practice of
----------
the NASD and the sale of securities laws of any jurisdiction in which it
sells, directly or indirectly, any Trust shares. The Distributor agrees to
make timely filings, with the Securities and Exchange Commission in
Washington, D.C. (the "SEC"), the NASD and such other regulatory
authorities as may be required, of any sales literature relating to the
Trust and intended for distribution to prospective investors. The
Distributor also agrees to furnish to the Trust sufficient copies of any
agreements or plans it intends to use in connection with any sales of Trust
shares in adequate time for the Trust to file and clear them with the
proper authorities before they are put in use (which the Trust agrees to
use its best efforts to do as expeditiously as reasonably possible), and
not to use them until so filed and cleared.
9. Registration and Qualification of Trust Shares. The Trust agrees to
----------------------------------------------
execute such papers and to do such acts and things as shall from time to
time be reasonably requested by the Distributor for the purpose of
qualifying and maintaining qualification of the Trust shares for sale under
the so-called Blue Sky Laws of any state or for maintaining the
registration of the Trust and of the Trust shares under the federal
Securities Act of 1933 and the federal Investment Company Act of 1940 (the
"1940 Act"), to the end that there will be available for sale from time to
time such number of Trust shares as the Distributor may reasonably be
expected to sell. The Trust shall advise the Distributor promptly of (a)
any action of the SEC or any authorities of any state or territory, of
which it may be advised, affecting registration or qualification of the
Trust or the Trust shares, or rights to offer Trust shares for sale, and
(b) the happening of any event which makes untrue any
-3-
<PAGE>
statement or which requires the making of any change in the Trust's
registration statement or its prospectus relating to the Trust shares in
order to make the statements therein not misleading.
10. Distributor Independent Contractor. The Distributor shall be an
----------------------------------
independent contractor and neither the Distributor nor any of its officers
or employees as such is or shall be an employee of the Trust. The
Distributor is responsible for its own conduct and the employment, control
and conduct of its agents and employees and for injury to such agents or
employees or to others through its agents or employees. The Distributor
assumes full responsibility for its agents and employees under applicable
statutes and agrees to pay all employer taxes thereunder.
11. Expenses Paid by Distributor. While the Distributor continues to act as
----------------------------
agent of the Trust to obtain subscriptions for and to sell Trust shares,
the Distributor shall pay the following:
(a) all expenses of printing (exclusive of typesetting) and distributing
any prospectus for use in offering Trust shares for sale, and all other
copies of any such prospectus used by the Distributor, and
(b) all other expenses of advertising and of preparing, printing and
distributing all other literature or material for use in connection
with offering Trust shares for sale.
12. Interests in and of Distributor. It is understood that any of the
-------------------------------
shareholders, trustees, officers, employees and agents of the Trust may be
a shareholder, director, officer, employee or agent of, or be otherwise
interested in, the Distributor, any affiliated person of the Distributor,
any organization in which the Distributor may have an interest or any
organization which may have an interest in the Distributor; that the
Distributor, any such affiliated person or any such organization may have
an interest in the Trust; and that the existence of any such dual interest
shall not affect the validity hereof or of any transaction hereunder except
as otherwise provided in the agreement and declaration of trust or by-laws
of the Trust, in the limited partnership agreement of the Distributor or by
specific provision of applicable law.
13. Effective Date and Termination. This Agreement shall become effective as
------------------------------
of the date of its execution, and
(a) Unless otherwise terminated, this Agreement shall continue in effect
with respect to the shares of the Trust so long as such continuation is
specifically approved at least annually (i) by the Board of Trustees of
the Trust or by the vote of a majority of the votes which may be cast
by shareholders of the Trust and (ii) by a vote of a majority of the
Board of Trustees of the Trust who are not interested persons of
-4-
<PAGE>
the Distributor or the Trust, cast in person at a meeting called for
the purpose of voting on such approval.
(b) This Agreement may at any time be terminated on sixty days' notice to
the Distributor either by vote of a majority of the Trust's Board of
Trustees then in office or by the vote of a majority of the votes which
may be cast by shareholders of the Trust.
(c) This Agreement shall automatically terminate in the event of its
assignment (excluding for this purpose any assignment of rights to
payment described in the recitals and in Section 18 of the Agreement
which are hereby ratified and approved).
(d) This Agreement may be terminated by the Distributor on ninety days'
written notice to the Trust.
Termination of this Agreement pursuant to this section shall be without payment
of any penalty.
14. Definitions. For purposes of this Agreement, the following definitions
-----------
shall apply:
(a) The "vote of a majority of the votes which may be cast by shareholders
of the Trust" means (1) 67% or more of the votes of the Trust present
(in person or by proxy) and entitled to vote at such meeting, if the
holders of more than 50% of the outstanding shares of the Trust
entitled to vote at such meeting are present; or (2) the vote of the
holders of more than 50% of the outstanding shares of the Trust
entitled to vote at such meeting, whichever is less.
(b) The terms "affiliated person", "interested person" and "assignment"
shall have their respective meanings as defined in the 1940 Act
subject, however, to such exemptions as may be granted by the SEC under
the 1940 Act.
15. Amendment. This Agreement may be amended at any time by mutual consent of
---------
the parties, provided that such consent on the part of the Trust shall be
approved (i) by the Board of Trustees of the Trust or by vote of a majority
of the votes which may be cast by shareholders of the Trust and (ii) by a
vote of a majority of the Board of Trustees of the Trust who are not
interested persons of the Distributor or the Trust cast in person at a
meeting called for the purpose of voting on such approval.
16. Applicable Law and Liabilities. This Agreement shall be governed by and
------------------------------
construed in accordance with the laws of The Commonwealth of Massachusetts.
All sales hereunder are to be made, and title to the Trust shares shall
pass, in Boston, Massachusetts.
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<PAGE>
17. Limited Recourse. The Distributor hereby acknowledges that the Trust's
----------------
obligations hereunder with respect to the shares of the Series are binding
only on the assets and property belonging to the Trust.
18. Payments to Distributor's Transferees. The Distributor may transfer its
-------------------------------------
rights to payments hereunder with respect to Trust shares (but not its
obligations hereunder) in order to raise funds to cover distribution
expenditures, and any such transfer shall be effective upon written notice
from the Distributor to the Trust. In connection with the foregoing, the
Series is authorized to pay all or a part of the Distribution Fee directly
to such transferee as directed by the Distributor.
19. Liquidation etc. As long as the Distribution and Service Plan is in
---------------
effect, the Trust shall not change the manner in which the Distribution Fee
is computed (except as may be required by a change in applicable law after
the date hereof) or adopt a plan of liquidation without the consent of the
Distributor (or any designee or transferee of the Distributor's rights to
receive payment hereunder in respect of Trust shares) except in
circumstances where a surviving entity or transferee of the Trust's assets
adopts the Distribution and Service Plan and assumes the obligations of the
Trust to make payments to the Distributor (or its transferee) hereunder in
respect of Trust shares.
20. "Distributor's Shares" etc. The Trust agrees that it will not pay any
---------------------------
portion of the Distribution Fee to any person other than the Distributor
(or its designee or transferee) without the written consent of the
Distributor. To the extent permitted under the 1940 Act, the terms of this
Section 20 shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
e~navigator Fund
By________________________________
New England Securities Corporation
By________________________________
A copy of the Agreement and Declaration of Trust establishing e~navigator
Fund (the "Trust") is on file with the Secretary of The Commonwealth of
Massachusetts, and notice is hereby given that this Agreement is executed on
behalf of the Trust by officers of the Trust as officers and not individually
and that the obligations of or arising out of this Agreement are not
-6-
<PAGE>
binding upon any of the trustees, officers or shareholders of the Trust
individually but are binding only upon the assets and property of the Trust.
-7-
<PAGE>
FORM OF
-------
CUSTODY AGREEMENT
-----------------
THIS AGREEMENT made the [ ] day of [ ], 19__, by and between
INVESTORS FIDUCIARY TRUST COMPANY, a trust company chartered under the laws of
the State of Missouri, having its trust office located at 127 West 10th Street,
Kansas City, Missouri 64105 ("Custodian"), and e-navigator Fund, having its
principal office and place of business at 501 Boylston Street, Boston,
Massachusetts 02116 ("Fund").
WITNESSETH:
WHEREAS, Fund desires to appoint Investors Fiduciary Trust Company as
custodian of the securities and monies of Fund's investment portfolio; and
WHEREAS, Investors Fiduciary Trust Company is willing to accept such
appointment;
NOW THEREFORE, for and in consideration of the mutual promises contained
herein, the parties hereto, intending to be legally bound, mutually covenant and
agree as follows:
1. APPOINTMENT OF CUSTODIAN. Fund hereby constitutes and appoints Custodian
------------------------
as custodian of the securities and monies at any time owned by the Fund.
2. REPRESENTATIONS AND WARRANTIES.
------------------------------
A. Fund hereby represents, warrants and acknowledges to Custodian:
1. That it is a trust (as specified above) duly organized and
existing and in good standing under the laws of its state of
organization, and that it is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
<PAGE>
2. That it has the requisite power and authority under applicable
law, its articles of incorporation and its bylaws to enter into
this Agreement; that it has taken all requisite action necessary
to appoint Custodian as custodian for the Fund; that this
Agreement has been duly executed and delivered by Fund; and that
this Agreement constitutes a legal, valid and binding obligation
of Fund, enforceable in accordance with its terms, except to the
extent that the enforcement of rights and remedies created hereby
is subject to bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting the rights and
remedies of creditors.
B. Custodian hereby represents, warrants and acknowledges to Fund:
1. That it is a trust company duly organized and existing and in
good standing under the laws of the State of Missouri; and
2. That it has the requisite power and authority under applicable
law, its charter and its bylaws to enter into and perform this
Agreement; that this Agreement has been duly executed and
delivered by Custodian; and that this Agreement constitutes a
legal, valid and binding obligation of Custodian, enforceable in
accordance with its terms.
3. DUTIES AND RESPONSIBILITIES OF CUSTODIAN
----------------------------------------
A. Delivery of Assets
------------------
Except as permitted by the 1940 Act, Fund will deliver or cause to be
delivered to Custodian on the effective date of this Agreement, or as
soon thereafter as practicable, and from time to time thereafter, all
portfolio securities acquired by it
-2-
<PAGE>
and monies then owned by it or from time to time coming into its
possession during the time this Agreement shall continue in effect.
Custodian shall have no responsibility or liability whatsoever for or
on account of securities or monies not so delivered.
B. Delivery of Accounts and Records
--------------------------------
Fund shall turn over or cause to be turned over to Custodian all of
the Fund's relevant accounts and records previously maintained.
Custodian shall be entitled to rely conclusively on the completeness
and correctness of the accounts and records turned over to it, and
Fund shall indemnify and hold Custodian harmless of and from any and
all expenses, damages and losses whatsoever arising out of or in
connection with any error, omission, inaccuracy or other deficiency of
such accounts and records or in the failure of Fund to provide, or to
provide in a timely manner, any accounts, records or information
needed by the Custodian to perform its function hereunder.
C. Delivery of Assets to Third Parties
-----------------------------------
Custodian will receive delivery of and keep safely the assets of Fund
delivered to it from time to time segregated in a separate account,
and if Fund is comprised of more than one portfolio of investment
securities (each a "Portfolio") Custodian shall keep the assets of
each Portfolio segregated in a separate account. Custodian will not
deliver, assign, pledge or hypothecate any such assets to any person
except as permitted by the provisions of this Agreement or any
agreement executed by it according to the terms of Section 3.S. of
this Agreement. Upon
-3-
<PAGE>
delivery of any such assets to a subcustodian pursuant to Section 3.S.
of this Agreement, Custodian will create and maintain records
identifying those assets which have been delivered to the subcustodian
as belonging to the Fund, by Portfolio if applicable. The Custodian is
responsible for the safekeeping of the securities and monies of Fund
only until they have been transmitted to and received by other persons
as permitted under the terms of this Agreement, except for securities
and monies transmitted to subcustodians appointed under Section 3.S.
of this Agreement, for which Custodian remains responsible to the
extent provided in Section 3.S. hereof. Custodian may participate
directly or indirectly through a subcustodian in the Depository Trust
Company (DTC), Treasury/Federal Reserve Book Entry System (Fed
System), Participant Trust Company (PTC) or other depository approved
by the Fund (as such entities are defined at 17 CFR Section 270.17f-
4(b)) (each a "Depository" and collectively, the "Depositories").
D. Registration of Securities
--------------------------
The Custodian shall at all times hold registered securities of the
Fund in the name of the Custodian, the Fund or a nominee of either of
them, unless specifically directed by instructions to hold such
registered securities in so-called "street name," provided that, in
any event, all such securities and other assets shall be held in an
account of the Custodian containing only assets of the Fund, or only
assets held by the Custodian as a fiduciary or custodian for
customers, and provided further, that the records of the Custodian at
all time shall indicate the
-4-
<PAGE>
Fund or other customer for which such securities and other assets are
held in such account and the respective interests therein. If,
however, the Fund directs the Custodian to maintain securities in
"street name", notwithstanding anything contained herein to the
contrary, the Custodian shall be obligated only to utilize its best
efforts to timely collect income due the Fund on such securities and
to notify the Fund of relevant corporate actions including, without
limitation, pendency of calls, maturities, tender or exchange offers.
All securities, and the ownership thereof by Fund, which are held by
Custodian hereunder, however, shall at all times be identifiable on
the records of the Custodian. The Fund agrees to hold Custodian and
its nominee harmless for any liability as a shareholder of record of
securities held in custody.
E. Exchange of Securities
----------------------
Upon receipt of instructions as defined herein in Section 4.A,
Custodian will exchange, or cause to be exchange, portfolio securities
held by it for the account of Fund for other securities or cash issued
or paid in connection with any reorganization, recapitalization,
merger, consolidation, split-up of shares, change of par value,
conversion or otherwise, and will deposit any such securities in
accordance with the terms of any reorganization or protective plan.
Without instructions, Custodian is authorized to exchange securities
held by it in temporary form for securities in definitive form, to
effect an exchange of shares when par value of the stock is changed,
and, upon receiving payment therefor, to surrender bonds or other
securities held by it at maturity or when advised of
-5-
<PAGE>
earlier call for redemption, except that Custodian shall receive
instructions prior to surrendering any convertible security.
F. Purchases of Investments of the Fund
------------------------------------
Fund will, on each business day on which a purchase of securities
shall be made by it, deliver to Custodian instructions which shall
specify with respect to each such purchase:
1. If applicable, the name of the Portfolio making such purchase;
2. The name of the issuer and description of the security;
3. The number of shares and the principal amount purchased, and
accrued interest, if any;
4. The trade date;
5. The settlement date;
6. The purchase price per unit and the brokerage commission, taxes
and other expenses payable in connection with the purchase;
7. The total amount payable upon such purchase; and
8. The name of the person from whom or the broker or dealer through
whom the purchase was made.
9. Whether the securities is to be received in certificated from or
via a specified Depository.
In accordance with such instructions, Custodian will pay for out of
monies held for the account of Fund, but only insofar as such monies
are available for such purpose, and receive the portfolio securities
so purchased by or for the account of
-6-
<PAGE>
Fund, except that Custodian may in its sole discretion advance funds
to the Fund which may result in an overdraft because the monies held
by the Custodian on behalf of the Fund are insufficient to pay the
total amount payable upon such purchase. Except as otherwise
instructed by Fund, such payment shall be made by the Custodian only
upon receipt of securities: (a) by the Custodian; (b) by a clearing
corporation of a national exchange of which the Custodian is a member;
or (c) by a Depository. Notwithstanding the foregoing, (i) in the case
of a repurchase agreement, the Custodian may release funds to a
Depository prior to the receipt of advice from the Depository that the
securities underlying such repurchase agreement have been transferred
by book-entry into the account maintained with such Depository by the
Custodian, on behalf of its customers, provided that the Custodian's
instructions to the Depository require that the Depository make
payment of such funds only upon transfer by book-entry of the
securities underlying the repurchase agreement in such account; (ii)
in the case of time deposits, call accounts deposits, currency
deposits and other deposits, foreign exchange transactions, futures
contracts or options, the Custodian may make payment therefor before
receipt of an advice or confirmation evidencing said deposit or entry
into such transaction; and (iii) in the case of the purchase of
securities, the settlement of which occurs outside of the United
States of America, the Custodian may make, or cause a subcustodian
appointed pursuant to Section 3.S.2. of this Agreement to make,
payment therefor in accordance with generally accepted local custom
and market practice.
-7-
<PAGE>
G. Sales and Deliveries of Investments of the Fund - Other than Options
--------------------------------------------------------------------
and Futures
-----------
Fund will, on each business day on which a sale of investment
securities (other than options and futures) of Fund has been made,
deliver to Custodian instructions specifying with respect to each such
sale:
1. If applicable, the name of the Portfolio making such sale;
2. The name of the issuer and description of the securities;
3. The number of shares and principal amount sold, and accrued
interest, if any;
4. The date on which the securities sold were purchased or other
information identifying the securities sold and to be delivered;
5. The trade date;
6. The settlement date;
7. The sale price per unit and the brokerage commission, taxes or
other expenses payable in connection with such sale;
8. The total amount to be received by Fund upon such sale; and
9. The name and address of the broker or dealer through whom or
person to whom the sale was made.
In accordance with such instructions, Custodian will deliver or cause
to be delivered the securities thus designated as sold for the account
of Fund to the broker or other person specified in the instructions
relating to such sale. Except as otherwise instructed by Fund, such
delivery shall be made upon receipt of payment therefor: (a) in such
form as is satisfactory to the Custodian; (b) credit to
-8-
<PAGE>
the account of the Custodian with a clearing corporation of a national
securities exchange of which the Custodian is a member; or (c) credit
to the account of the Custodian, on behalf of its customers, with a
Depository. Notwithstanding the foregoing: (i) in the case of
securities held in physical form, such securities shall be delivered
in accordance with "street delivery custom" to a broker or its
clearing agent; or (ii) in the case of the sale of securities, the
settlement of which occurs outside of the United States of America,
the Custodian may make, or cause a subcustodian appointed pursuant to
3.S.2. of this Agreement to make, payment therefor in accordance with
generally accepted local custom and market practice.
H. Purchases or Sales of Options and Futures
-----------------------------------------
Fund will, on each business day on which a purchase or sale of the
following options and/or futures shall be made by it, deliver to
Custodian instructions which shall specify with respect to each such
purchase or sale:
1. If applicable, the name of the Portfolio making such purchase or
sale;
2. Security Options
a. The underlying security;
b. The price at which purchased or sold;
c. The expiration date;
d. The number of contracts;
e. The exercise price;
f. Whether the transaction is an opening, exercising, expiring
or closing transaction;
-9-
<PAGE>
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased;
i. Market on which option traded; and
j. Name and address of the broker or dealer through whom the
sale or purchase was made.
3. Options on Indices
a. The index;
b. The price at which purchased or sold;
c. The exercise price;
d. The premium,
e. The multiple;
f. The expiration date;
g. Whether the transaction is an opening, exercising, expiring
or closing transactions;
h. Whether the transaction involves a put or call;
i. Whether the option is written or purchased; and
j. The name and address of the broker or dealer through whom
the sale or purchase was made, or other applicable
settlement instructions.
4. Security Index Futures Contracts
a. The last trade date specified in the contract and, when
available, the closing level thereof;
-10-
<PAGE>
b. The index level on the date the contract is entered into;
c. The multiple;
d. Any margin requirements;
e. The need for a segregated margin account (in addition to
instructions, and if not already in the possession of
Custodian, Fund shall deliver a substantially complete and
executed custodial safekeeping account and procedural
agreement which shall be incorporated by reference into this
Custody Agreement); and
f. The name and address of the futures commission merchant
through whom the sale or purchase was made, or other
applicable settlement instructions.
5. Options on Index Future Contracts
a. The underlying index future contract;
b. The premium;
c. The expiration date;
d. The number of options;
e. The exercise price;
f. Whether the transaction involves and opening, exercising,
expiring or closing transaction'
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased; and
i. The market on which the option is traded.
-11-
<PAGE>
I. Securities Pledged or Loaned
----------------------------
If specifically allowed for in the prospectus of Fund, and subject to
such additional terms and conditions as Custodian may require:
1. Upon receipt of instructions, Custodian will release or cause to
be released securities held in custody to the pledge designated
in such instructions by way of pledge or hypothecation to secure
any loan incurred by Fund; provided, however, that the securities
shall be released only upon payment to Custodian of the monies
borrowed, except that in cases where additional collateral is
required to secure a borrowing already made, further securities
may be released to secure a borrowing already made, further
securities may be released or caused to be released for that
purpose upon receipt of instructions. Upon receipt of
instructions, Custodian will pay, but only from funds available
for such purpose, any such loan upon redelivery to it of the
securities pledged or hypothecated therefor and upon surrender of
the note or notes evidencing such loan.
2. Upon receipt of instructions, Custodian will release securities
held in custody to the borrower designated in such instructions;
provided, however that the securities will be released only upon
deposit with Custodian of full cash collateral as specified in
such instructions, and that Fund will retain the right to any
dividends, interest or distribution on such loaned securities.
Upon receipt of instructions and the loaned securities, Custodian
will release the cash collateral to the borrower.
-12-
<PAGE>
J. Routine Matters
---------------
Custodian will, in general, attend to all routine and mechanical
matters in connection with the sale, exchange, substitution, purchase,
transfer or other dealings with securities or other property of Fund
except as may be otherwise provided in this Agreement or directed from
time to time by the Fund in writing.
K. Deposit Accounts
----------------
Custodian will open and maintain one or more special purpose deposit
accounts in the name of Custodian ("Accounts"), subject only to draft
or order by Custodian upon receipt of instructions. All monies
received by Custodian from or for the account of Fund shall be
deposited in said Accounts. Barring events not in the control of the
Custodian such as strikes, lockouts or labor disputes, riots, war or
equipment or transmission failure or damage, fire, flood, earthquake
or other natural disaster, action or inaction of governmental
authority or other causes beyond its control, at 9:00 a.m., Kansas
City time, on the second business day after deposit of any check into
an Account, Custodian agrees to make Fed Funds available to the Fund
in the amount of the check. Deposits made by Federal Reserve wire will
be available to the Fund immediately and ACH wires will be available
to the Fund on the next business day. Income earned on the portfolio
securities will be credited to the Fund based on the schedule attached
as Exhibit A. The Custodian will be entitled, upon notice to the Fund,
to reverse any credited amounts where credits have been made and
monies are not finally collected. If monies are collected after such
reversal, the Custodian will credit the
-13-
<PAGE>
Fund in that amount. Custodian may open and maintain Accounts in its
own banking department, or in such other banks or trust companies as
may be designated by it or by Fund in writing, all such Accounts,
however, to be in the name of Custodian and subject only to its draft
or order. Funds received and held for the account of different
Portfolios shall be maintained in separate Accounts established for
each Portfolio.
L. Income and other Payments to Fund
---------------------------------
Custodian will:
1. Collect, claim and receive and deposit for the account of Fund
all income and other payments which become due and payable on or
after the effective date of this Agreement with respect to the
securities deposited under this Agreement, and credit the account
of Fund in accordance with the schedule attached hereto as
Exhibit A. If, for any reason, the Fund is credited with income
that is not subsequently collected, Custodian may reverse that
credited amount.
2. Execute ownership and other certificates and affidavits for all
federal, state and local tax purposes in connection with the
collection of bond and note coupons; and
3. Take such other action as may be necessary or proper in
connection with:
a. the collection, receipt and deposit of such income and other
payments, including but not limited to the presentation for
payment of:
-14-
<PAGE>
1. all coupons and other income items requiring
presentation; and
2. all other securities which may mature or be called,
redeemed, retired or otherwise become payable and
regarding which the Custodian has actual knowledge, or
should reasonably be expected to have knowledge; and
b. the endorsement for collection, in the name of Fund, of all
checks, drafts or other negotiable instruments.
Custodian, however, will not be required to institute suit or take
other extraordinary action to enforce collection except upon receipt
of instructions and upon being indemnified to its satisfaction against
the costs and expenses of such suit or other action. Custodian will
receive, claim and collect all stock dividends, rights and other
similar items and will deal with the same pursuant to instructions.
Unless prior instructions have been received to the contrary,
Custodian will, without further instructions, sell any rights held for
the account of Fund on the last trade date prior to the date of
expiration of such rights.
M. Payment of Dividends and other Distributions
--------------------------------------------
On the declaration of any dividend or other distribution on the shares
of Fund ("Fund Shares") by the Board of Trustees of Fund, Fund shall
deliver to Custodian instructions with respect thereto. On the date
specified in such instructions for the payment of such dividend or
other distribution, Custodian will pay out of the monies held for the
account of Fund, insofar as the same shall be
-15-
<PAGE>
available for such purposes, and credit to the account of the Dividend
Disbursing Agent for Fund, such amount as may be necessary to pay the
amount per share payable in cash on Fund Shares issued and outstanding
on the record date established by such resolution.
N. Shares of Fund Purchased by Fund
--------------------------------
Whenever any Fund Shares are repurchased or redeemed by Fund, Fund or
its agent shall advise Custodian of the aggregate dollar amount to be
paid for such shares and shall confirm such advice in writing. Upon
receipt of such advice, Custodian shall charge such aggregate dollar
amount to the account of Fund and either deposit the same in the
account maintained for the purpose of paying for the repurchase or
redemption of Fund Shares or deliver the same in accordance with such
advice. Custodian shall not have any duty or responsibility to
determine that Fund Shares have been removed from the proper
shareholder account or accounts or that the proper number of Fund
Shares have been canceled and removed from the shareholder records.
O. Shares of Fund Purchased from Fund
----------------------------------
Whenever Fund Shares are purchased from Fund, Fund will deposit or
cause to be deposited with Custodian the amount received for such
shares. Custodian shall not have any duty or responsibility to
determine that Fund Shares purchased from Fund have been added to the
proper shareholder account or accounts or that the proper number of
such shares have been added to the shareholder records.
P. Proxies and Notices
-------------------
-16-
<PAGE>
Custodian will promptly deliver or mail or have delivered or mailed to
Fund all proxies properly signed, all notices of meetings, all proxy
statements and other notices, requests or announcements affecting or
relating to securities held by Custodian for Fund and will, upon
receipt of instructions, execute and deliver or cause its nominee to
execute and deliver or mail or have delivered or mailed such proxies
or other authorizations as may be required. Except as provided by this
Agreement or pursuant to instructions hereafter received by Custodian,
neither it nor its nominee will exercise any power inherent in any
such securities, including any power to vote the same, or execute any
proxy, power of attorney, or other similar instrument voting any of
such securities, or give any consent, approval or waiver with respect
thereto, or take any other similar action.
Q. Disbursements
-------------
Custodian will pay or cause to be paid, insofar as funds are available
for the purpose, bills, statements other obligations of Fund
(including but not limited to obligations in connection with the
conversion, exchange or surrender of securities owned by Fund,
interest charges, dividend disbursements, taxes, management fees,
custodian fees, legal fees, auditors' fees, transfer agents' fees,
brokerage commissions, compensation to personnel, and other operating
expenses of Fund) pursuant to instructions of Fund setting forth the
name of the person to whom payment is to be made, the amount of the
payment, and the purpose of the payment.
-17-
<PAGE>
R. Daily Statement of Accounts
---------------------------
Custodian will, within a reasonable time render to Fund a detailed
statement of the amounts received or paid and of securities received
of delivered for the account of Fund during each business day.
Custodian will, from time to time, upon request by Fund, render a
detailed statement of the securities and monies held for Fund under
this Agreement, and Custodian will maintain such books and records as
are necessary to enable it to do so. Custodian will permit such
persons as are authorized by Fund, including Fund's independent public
accountants, reasonable access to such records or will provide
reasonable confirmation of the contents of such records, and if
demanded, Custodian will permit federal and state regulatory agencies
to examine the securities, books and records. Upon the written
instructions of Fund or as demanded by federal or state regulatory
agencies, Custodian will instruct any subcustodian to permit such
persons as are authorized by Fund, including Fund's independent public
accountants, reasonable access to such records or to provide
reasonable confirmation of the contents of such records, and to permit
such agencies to examine the books, records and securities held by
such subcustodian which relate to Fund.
S. Appointment of Subcustodians
----------------------------
1. Notwithstanding any other provisions of this Agreement, all or
any of the monies or securities of Fund may be held in
Custodian's own custody or in the custody of one or more other
banks or trust companies acting as subcustodians as may be
selected by Custodian. Any such subcustodian
-18-
<PAGE>
selected by the Custodian must have the qualifications required
for a custodian under the 1940 Act, as amended. It is understood
that Custodian initially intends to appoint United Missouri Bank,
N.A. (UMB) and United Missouri Trust Company of New York (UMTCNY)
as subcustodians. Custodian shall be responsible to the Fund for
any loss, damage or expense suffered or incurred by the Fund
resulting from the actions or omissions of UMB, UMTCNY and any
other subcustodians selected and appointed by Custodian (except
subcustodians appointed at the request of Fund and as provided in
Subsection 2 below) to the same extent Custodian would be
responsible to the Fund under Section 5. of this Agreement if it
committed the act or omission itself. Upon request of the Fund,
Custodian shall be willing to contract with other subcustodians
reasonably acceptable to the Custodian for purposes of (i)
effecting third-party repurchase transactions with banks,
brokers, dealers, or other entities through the use of a common
custodian or subcustodian, or (ii) providing depository and
clearing agency services with respect to certain variable rate
demand note securities, or (iii) for other reasonable purposes
specified by Fund; provided, however, that the Custodian shall be
responsible to the Fund for any loss, damage or expense suffered
or incurred by the Fund resulting from the actions or omissions
of any such subcustodian only to the same extent such
subcustodian is responsible to the Custodian. The Fund shall be
entitled to review the Custodian's contracts with any such
-19-
<PAGE>
subcustodians appointed at the request of the Fund. Custodian
shall be responsible for any loss, damage or expense suffered or
incurred by Fund resulting from the acts or omissions of any
Depository only to the same extent such Depository is responsible
to Custodian.
2. Notwithstanding any other provisions of this Agreement, Fund's
foreign securities (as defined in Rule 17f-5(c)(1) under the 1940
Act) and Fund's cash or cash equivalents, in amounts deemed by
the Fund to be reasonably necessary to effect Fund's foreign
securities transactions, may be held in the custody of one or
more banks or trust companies acting as subcustodians, and
thereafter, pursuant to a written contract or contracts as
approved by Fund's Board of Trustees, may be transferred to
accounts maintained by any such subcustodian with eligible
foreign custodians, as defined in Rule 17f-5(c)(2). Custodian
shall be responsible to the Fund for any loss, damage or expense
suffered or incurred by the Fund resulting from the actions or
omissions of any foreign subcustodians or a domestic subcustodian
contracting with such foreign subcustodians only to the same
extent such domestic subcustodian is responsible to the
Custodian.
T. Accounts and Records Property of Fund
-------------------------------------
Custodian acknowledges that all of the accounts and records maintained
by Custodian pursuant to this Agreement are the property of Fund, and
will be made available to Fund for inspection or reproduction within a
reasonable period of time, upon demand. Custodian will assist Fund's
independent auditors, or upon
-20-
<PAGE>
approval of Fund, or upon demand, any regulatory body, in any requested
review of Fund's accounts and records but shall be reimbursed by Fund for
all expenses and employee time invested in any such review outside of
routine and normal periodic reviews. Upon receipt from Fund of the
necessary information or instructions, Custodian will supply information
from the books and records it maintains for Fund that Fund needs for tax
returns, questionnaires, periodic reports to shareholders and such other
reports and information requests as Fund and Custodian shall agree upon
from time to time.
U. Adoption of Procedures
----------------------
Custodian and Fund may from time to time adopt procedures as they agree
upon, and Custodian may conclusively assume that no procedure approved or
directed by Fund or its accountants or other advisors conflicts with or
violates any requirements of its prospectus, articles of incorporation,
bylaws, any applicable law, rule or regulation, or any order, decree or
agreement by which Fund may be bound. Fund will be responsible to notify
Custodian of any changes in statutes, regulations, rules, requirements or
policies which might necessitate changes in Custodian's responsibilities or
procedures.
V. Overdrafts
----------
If Custodian shall in its sole discretion advance funds to the account
of the Fund which results in an overdraft in any Account because the monies
held therein by Custodian on behalf of the Fund are insufficient to pay the
total amount payable upon a purchase of securities as specified in Fund's
instructions or for some other
-21-
<PAGE>
reason, the amount of the overdraft shall be payable by the Fund to
Custodian upon demand together with the overdraft charge set forth on
the then-current Fee Schedule from the date advanced until the date of
payment. Fund hereby grants Custodian a lien on and security interest
in the assets of the Fund to secure the full amount of any outstanding
overdraft and related overdraft charges.
W. Exercise of Rights; Tender Offers
---------------------------------
Upon receipt of instructions, the Custodian shall: (a) deliver
warrants, puts, calls, rights or similar securities to the issuer or
trustee thereof, or to the agent of such issuer or trustee, for the
purpose of exercise or sale, provided that the new securities, cash or
other assets, if any, are to be delivered to the Custodian; and (b)
deposit securities upon invitations for tenders thereof, provided that
the consideration for such securities is to be paid or delivered to
the Custodian or the tendered securities are to be returned to the
Custodian.
4. INSTRUCTIONS.
------------
A. The term "instructions" as used herein, means written (including
telecopied or telexed) or oral instructions which Custodian reasonably
believes were given by a designated representative of Fund. Fund shall
deliver to Custodian, prior to delivery of any assets of Custodian and
thereafter from time to time as changes therein are necessary, written
instructions naming one or more designated representatives to give
instructions in the name and on behalf of Fund, which instructions may
be received and accepted by Custodian as conclusive evidence of the
authority of any designated representative to act for Fund and may be
-22-
<PAGE>
considered to be in full force and effect (and Custodian will be fully
protected in acting in reliance thereon) until receipt by Custodian of
notice to the contrary. Unless such written instructions delegating
authority to any person to give instructions specifically limit such
authority to specific matters or require that the approval of anyone
else will first have been obtained, Custodian will be under no
obligation to inquire into the right of such person, acting alone, to
give any instructions whatsoever which Custodian may receive from such
person. If Fund fails to provide Custodian any such instructions
naming designated representatives, any instructions received by
Custodian from a person reasonably believed to be an appropriate
representative of Fund shall constitute valid and proper instructions
hereunder.
B. No later than the next business day immediately following each oral
instruction, Fund will send Custodian written confirmation of such
oral instruction. At Custodian's sole discretion, Custodian may record
on tape, or otherwise, any oral instruction whether given in person or
via telephone, each such recording identifying the parties, the date
and the time of the beginning and ending of such oral instruction.
5. LIMITATION OF LIABILITY OF CUSTODIAN.
------------------------------------
A. Custodian shall at all times use reasonable care and due diligence and
act in good faith in performing its duties under this Agreement.
Custodian shall not be responsible for, and the Fund shall indemnify
and hold Custodian harmless from and against, any and all losses,
damages, costs, charges, counsel fees, payments,
-23-
<PAGE>
expenses and liability which may be asserted against Custodian,
incurred by Custodian or for which Custodian may be held to be liable,
arising out of or attributable to:
1. All actions taken by Custodian pursuant to this Agreement or any
instructions provided to it hereunder, provided that Custodian
has acted in good faith and with due diligence and reasonable
care; and
2. The Fund's refusal or failure to comply with the terms of this
Agreement (including without limitation the Fund's failure to pay
or reimburse Custodian under this indemnification provision), the
Fund's negligence or willful misconduct, or the failure of any
representation or warranty of the Fund hereunder to be and remain
true and correct in all respects at all times.
B. Custodian may request and obtain at the expense of Fund the advice and
opinion of counsel for Fund or of its own counsel with respect to
questions or matters of law, and it shall be without liability to Fund
for any action taken or omitted by it in good faith, in conformity
with such advice or opinion. If Custodian reasonably believes that it
could not prudently act according to the instructions of the Fund or
the Fund's accountants or counsel, it may in its discretion, with
notice of the Fund, not act according to such instructions.
C. Custodian may rely upon the advice and statements of Fund, Fund's
accountants and officers or other authorized individuals, and other
persons believed by it in good faith to be expert in matters upon
which they are consulted, and Custodian
-24-
<PAGE>
shall not be liable for any actions taken, in good faith, upon such
advice and statements.
D. If Fund requests Custodian in any capacity to take any action which
involves the payment of money by Custodian, or which might make it or
its nominee liable for payment of monies or in any other way,
Custodian shall be indemnified and held harmless by Fund against any
liability on account of such action; provided, however, that nothing
herein shall obligate Custodian to take any such action except in its
sole discretion.
E. Custodian shall be protected in acting as custodian hereunder upon any
instructions, advice, notice, request, consent, certificate or other
instrument or paper appearing to it to be genuine and to have been
properly executed and shall be entitled to receive upon request as
conclusive proof of any fact or matter required to be ascertained from
Fund hereunder a certificate signed by an officer or designated
representative of Fund.
F. Custodian shall be under no duty or obligation to inquire into, and
shall not be liable for:
1. The validity of the issue of any securities purchased by or for
Fund, the legality of the purchase of any securities or foreign
currency positions or evidence of ownership required by Fund to
be received by Custodian, or the proprietary of the decision to
purchase or amount paid therefor;
2. The legality of the sale of any securities or foreign currency
positions by or for Fund, or the property of the amount for which
the same are sold;
-25-
<PAGE>
3. The legality of the issue or sale of Fund Shares, or the
sufficiency of the amount to be received therefor;
4. The legality of the repurchase or redemption of any Fund Shares,
or the proprietary of the amount to be paid therefor; or
5. The legality of the declaration of any dividend by Fund, or the
legality of the issue of any Fund Shares in payment of any stock
dividend.
G. Custodian shall not be liable for, or considered to be Custodian of,
any money represented by any check, draft, wire transfer,
clearinghouse funds, uncollected funds, or instrument for the payment
of money to be received by it on behalf of Fund until Custodian
actually receives such money; provided, however, that it shall advise
Fund promptly if it fails to receive any such money in the ordinary
course of business and shall cooperate with Fund toward the end that
such money shall be received.
H. Except as provided in Section 3.S., Custodian shall not be responsible
for loss occasioned by the acts, neglects, defaults or insolvency of
any broker, bank, trust company, or any other person with whom
Custodian may deal.
I. Custodian shall not responsible or liable for the failure or delay in
performance of its obligations under this Agreement, or those of any
entity for which it is responsible hereunder, arising out of or
caused, directly or indirectly, by circumstances beyond the affected
entity's reasonable control, including, without limitation: any
interruption, loss or malfunction of any utility, transportation,
computer (hardware or software) or communication service; inability to
obtain
-26-
<PAGE>
labor, material, equipment or transportation, or a delay in mails;
governmental or exchange action, statute, ordinance, rulings,
regulations or direction; war, strike, riot, emergency, civil
disturbance, terrorism, vandalism, explosions labor disputes, freezes,
floods, fires, tornados, acts of God or public enemy, revolutions, or
insurrection.
J. IN NO EVENT AND UNDER NO CIRCUMSTANCES SHALL EITHER PARTY TO THIS
AGREEMENT BE LIABLE TO ANYONE, INCLUDING, WITHOUT LIMITATION TO THE
OTHER PARTY, FOR CONSEQUENTIAL SPECIAL OR PUNITIVE DAMAGES FOR ANY ACT
OR FAILURE TO ACT UNDER ANY PROVISION OF THIS AGREEMENT EVEN IF
ADVISED OF THE POSSIBILITY THEREOF.
6. COMPENSATION. In consideration for its services hereunder, Fund will pay
------------
to Custodian such compensation as shall be set forth in a separate fee
schedule to be agreed to by Fund and Custodian from time to time. A copy
of the initial fee schedule is attached hereto and incorporated herein by
reference. Custodian shall also be entitled to receive, and Fund agrees to
pay to Custodian, on demand, reimbursement for Custodian's cash
disbursements and reasonable out-of-pocket costs and expenses, including
attorney's fees, incurred by Custodian in connection with the performance
of services hereunder. Custodian may charge such compensation against
monies held by it for the account of Fund. Custodian will also be entitled
to charge against any monies held by it for the account of Fund the amount
of any loss, damage, liability, advance, overdraft or expense for which it
shall be entitled to reimbursement from Fund, including but not limited to
-27-
<PAGE>
fees and expenses due to Custodian for other services provided to the Fund
by Custodian. Custodian will be entitled to reimbursement by the Fund for
the losses, damages, liabilities, advances, overdrafts and expenses of
subcustodians only to the extent that (i) Custodian would have been
entitled to reimbursement hereunder if it had incurred the same itself
directly, and (ii) Custodian is obligated to reimburse the subcustodian
therefor.
7. TERM AND TERMINATION. The initial term of this Agreement shall be for a
--------------------
period of ______. Thereafter, either party to this Agreement may terminate
the same by notice in writing, delivered or mailed, postage prepaid, to the
other party hereto and received not less than ninety (90) days prior to the
date upon which such termination will take effect. Upon termination of this
Agreement, Fund will pay Custodian its fees and compensation due hereunder
and its reimbursable disbursements, costs and expenses paid or incurred to
such date and Fund shall designate a successor custodian by notice in
writing to Custodian by the termination date. In the event no written
order designating a successor custodian has been delivered to Custodian on
or before the date when such termination becomes effective, then Custodian
may, at it option, deliver the securities, funds and properties of Fund to
a bank or trust company at the selection of Custodian, and meeting the
qualifications for custodian set forth in the 1940 Act and having not less
than Two Million Dollars ($2,000,000) aggregate capital, surplus and
undivided profits, as shown by its last published report, or apply to a
court of competent jurisdiction for the appointment of a successor
custodian or other proper relief, or take any other lawful action under the
circumstances; provided, however, that Fund shall reimburse Custodian
-28-
<PAGE>
for its costs and expenses, including reasonable attorney's fees, incurred
in connection therewith. Custodian will, upon termination of this Agreement
and payment of all sums due to Custodian from Fund hereunder or otherwise,
deliver to the successor custodians so specified or appointed, or as
specified by the court, at Custodian's office, all securities then held by
Custodian hereunder, duly endorsed and in form for transfer, and all funds
and other properties of Fund deposited with or held by Custodian hereunder,
and Custodian will co-operate in effecting changes in book-entries at all
Depositories. Upon delivery to a successor custodian or as specified by the
court, Custodian will have no further obligations or liabilities under this
Agreement. Thereafter such successor will be the successor custodian under
this Agreement and will be entitled to reasonable compensation for its
services. In the event that securities, funds and other properties remain
in the possession of the Custodian after the date of termination hereof
owing to failure of the Fund to appoint a successor custodian, the
Custodian shall be entitled to compensation as provided in the then-current
fee schedule hereunder for its services during such period as the Custodian
retains possession of such securities, funds and other properties, and the
provisions of this Agreement relating to the duties and obligations of the
Custodian shall remain in full force and effect.
8. NOTICES. Notices, requests, instructions and other writings addressed to
-------
Fund at _______________________, or at such other address as Fund may have
designated to Custodian in writing, will be deemed to have been properly
given to Fund hereunder; and notices, requests, instructions and other
writings addressed to Custodian at its offices at 127 West 10th Street,
Kansas City, Missouri 64105, Attention: Custody Department, or
-29-
<PAGE>
to such other address as it may have designated to Fund in writing, will be
deemed to have been properly given to Custodian hereunder.
9. MULTIPLE PORTFOLIOS. If Fund is comprised of more than one Portfolio:
-------------------
A. Each Portfolio shall be regarded for all purposes hereunder as a
separate party apart from each other Portfolio. Unless the context
otherwise requires, with respect to every transaction covered by this
Agreement, every reference herein to the Fund shall be deemed to
relate solely to the particular Portfolio to which such transaction
relates. Under no circumstances shall the rights, obligations or
remedies with respect to a particular Portfolio constitute a right,
obligation or remedy applicable to any other Portfolio. The use of
this single document to memorialize the separate agreement of each
Portfolio is understood to be for clerical convenience only and shall
not constitute any basis for joining the Portfolios for any reason.
B. Additional Portfolios may be added to this Agreement, provided that
Custodian consents to such addition. Rates or charges for each
additional Portfolio shall be as agreed upon by Custodian and Fund in
writing.
10. MISCELLANEOUS.
-------------
A. This Agreement shall be construed according to, and the rights and
liabilities of the parties hereto shall be governed by, the laws of
the State of Missouri, without reference to the choice of laws
principles thereof.
-30-
<PAGE>
B. All terms and provisions of this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties hereto and
their respective successors and permitted assigns.
C. The representations and warranties and the indemnifications extended
hereunder are intended to and shall continue after and survive the
expiration, termination or cancellation of this Agreement.
D. No provisions of the Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed
by each party hereto.
E. The failure of either party to insist upon the performance of any
terms or conditions of this Agreement or to enforce any rights
resulting from any breach of any of the terms or conditions of this
Agreement, including the payment of damages, shall not be construed as
a continuing or permanent waiver of any such terms, conditions, rights
or privileges, but the same shall continue and remain in full force
and effect as if no such forbearance or waiver had occurred. No
waiver, release or discharge of any party's rights hereunder shall be
effective unless contained in a written instrument signed by the party
sought to be charged.
F. The captions in the 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.
-31-
<PAGE>
G. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall
constitute one and the same instrument.
H. If any part, term or provision of this Agreement is determined by the
courts or any regulatory authority to be illegal, in conflict with any
law or otherwise invalid, the remaining portion or portions shall be
considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the
Agreement did not contain the particular part, term or provision held
to be illegal or invalid.
I. This Agreement may not be assigned by either party hereto without the
prior written consent of the other party.
J. Neither the execution nor performance of this Agreement shall be
deemed to create a partnership or joint venture by and between
Custodian and Fund.
K. Except ad specifically provided herein, this Agreement does not in any
way affect any other agreements entered into among the parties hereto
and any actions taken or omitted by either party hereunder shall not
affect any rights or obligations of the other party hereunder.
-32-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective duly authorized officers.
INVESTORS FIDUCIARY TRUST COMPANY
By:
--------------------------------------
Title:
------------------------------------
e~navigator FUND
By:
------------------------------------
Title:
-33-
<PAGE>
EXHIBIT A
- ---------
INVESTORS FIDUCIARY TRUST COMPANY
AVAILABILITY SCHEDULE BY TRANSACTION TYPE
<TABLE>
<CAPTION>
===============================================================================================================
TRANSACTION DTC PHYSICAL FED
----------- --- -------- ---
- ---------------------------------------------------------------------------------------------------------------
TYPE CREDIT DATE FUNDS TYPE CREDIT DATE FUNDS TYPE CREDIT DATE FUNDS TYPE
---- ----------- ---------- ----------- ---------- ----------- ----------
===============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Calls Puts As Received C or F* As Received C or F*
- ---------------------------------------------------------------------------------------------------------------
Maturities As Received C or F* Mat. Date C or F* Mat. Date F
- ---------------------------------------------------------------------------------------------------------------
Tender Reorgs. As Received C As Received C N/A
- ---------------------------------------------------------------------------------------------------------------
Dividends Paydate C Paydate C N/A
- ---------------------------------------------------------------------------------------------------------------
Floating Rate Int. Paydate C Paydate C N/A
- ---------------------------------------------------------------------------------------------------------------
Floating Rate Int. (No Rate) N/A As Rate C N/A
Received
- ---------------------------------------------------------------------------------------------------------------
Mtg. Backed P&I Paydate C Paydate + 1 C Paydate F
Bus. Day
- ---------------------------------------------------------------------------------------------------------------
Fixed Rate Int. Paydate C Paydate C Paydate F
- ---------------------------------------------------------------------------------------------------------------
Euroclear N/A C Paydate C
===============================================================================================================
</TABLE>
Legend
- ------
C = Clearinghouse Funds
F = Fed Funds
N/A = Not Applicable
* Availability based on how received.
-34-
<PAGE>
FORM OF
-------
TRANSFER AGENCY AGREEMENT
-------------------------
Agreement made as of the ____ day of _____, 1998, between e~navigator
Fund, which has its principal office and place of business at 501 Boylston
Street, Boston, Massachusetts 02116, (the "Fund"), and Reich & Tang Services
L.P., a Delaware limited partnership, having its principal office and place of
business at Three University Plaza, Hackensack, New Jersey 07601 (hereinafter
referred to as the "Transfer Agent").
W I T N E S S E T H
That for and in consideration of the mutual promises hereinafter set forth,
the parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases shall
have the following meanings:
1. "Approved Institution" shall mean an entity so named in a
Certificate. From time to time the Find may amend a previously delivered
Certificate by delivering to the Transfer Agent a Certificate naming an
additional entity or deleting any entity named in a previously delivered
Certificate.
2. "Certificate" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be given to
the Transfer Agent by the Fund which is signed by an Officer, as hereinafter
defined, and actually received by the Transfer Agent.
3. "Custodian" shall mean Investors Fiduciary Trust Company, as
custodian under the terms and conditions of the Custody Agreement between
Investors Fiduciary Trust Company and the Fund, or its successors(s).
4. "Fund Business Day" shall be deemed to be each day on which the
New York Stock Exchange, Inc. is open for trading.
5. "Officer" shall be deemed to be the Fund's Chairman of the Board,
the Fund's President, any Vice President of the Fund, the Fund's Secretary, the
Fund's Treasurer, the Fund's Controller, any Assistant Controller of the Fund,
any Assistant to the Board of Directors of the Fund to execute any Certificate,
instruction, notice or other instrument on behalf of the
<PAGE>
Fund and named in the Certificate annexed hereto as Appendix A, as such
Certificate may be amended from time to time, and any person reasonably believed
by the Transfer Agent to be such a person.
6. "Series" shall mean the various portfolios of the Fund as
described from time to time in the current and effective Prospectus.
7. "Shares: shall mean all or any part of each class of the shares
of beneficial interest in the Fund and of any Series of the Fund listed in the
Certificate annexed hereto as Appendix B, as may be amended from time to time,
which from time to time are authorized and/or issued by the Fund.
8. "Prospectus" shall mean the last Fund prospectus actually
received by the Transfer Agent from the Fund with respect to which the Fund has
indicated a registration statement under the Securities Act of 1933 has become
effective, including the Statement of Additional Information incorporated by
reference therein.
9. "Transfer Agent" shall mean Reich & Tang Services L.P., as
transfer agent and dividend disbursing agent under the terms and conditions of
this Agreement, its successor(s) or assign(s).
ARTICLE II
APPOINTMENT OF TRANSFER AGENT
1. The Fund hereby constitutes and appoints the Transfer Agent as
transfer agent of all the Shares of the Fund and as dividend disbursing agent
during the period of this Agreement.
2. The Transfer Agent hereby accepts appointment as transfer agent
and dividend disbursing agent and agrees to perform the duties thereof as
hereinafter set forth.
3. In connection with such appointment, the Fund shall deliver the
following documents to the Transfer Agent:
(a) A certified copy of the Agreement and Declaration of Trust of the
Fund and all amendments thereto;
(b) A certified copy of the By-Laws of the Fund;
(c) A certified copy of a resolution of the Board of Trustees of the
Fund appointing the Transfer Agent and authorizing the execution of this
Transfer Agency Agreement;
-2-
<PAGE>
(d) A Certificate signed by the Secretary of the Fund specifying with
respect to each Series: the number of authorized Shares, the number of
authorized Shares issued, and the number of such authorized Shares issued and
currently outstanding, the names and specimen signatures of the Officers of the
Fund, and the name and address of the legal counsel for the Fund;
(e) Copies of the Fund's Registration Statement, as amended to date,
and the most recently filed Post-Effective Amendment thereto, filed by the Fund
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended, and under the Investment Company Act of 1940, as amended, together with
any applications filed in connection therewith; and
(f) Opinion of counsel for the Fund with respect to the validity of
the authorized and outstanding Shares, whether such Shares are fully paid and
non-assessable and the status of such Shares under the Securities Act of 1933,
as amended, and any other applicable federal law or regulation (i.e., if subject
to registration, that they have been registered and that the Registration
Statement has become effective or, if exempt, the specific grounds therefor).
4. To the extent that the Fund issues certificates to its
shareholders pursuant to its current prospectus, the Fund shall furnish the
Transfer Agent with a sufficient supply of blank Share certificates and from
time to time will renew such supply upon request of the Transfer Agent. Such
blank Share certificates shall be properly signed, by facsimile or otherwise, by
Officers of the Fund authorized by law or by the by-laws to sign Share
certificates, and, if required, shall bear the corporate seal or facsimile
thereof.
ARTICLE III
RECAPITALIZATION OR CAPITAL ADJUSTMENT
1. In the case of any negative stock split, recapitalization or
other capital adjustment requiring a change in the form of Share certificates,
the Transfer Agent will record as issued Share certificates in the new form in
exchange for, or upon transfer of, outstanding Share certificates in the old
form, upon receiving:
(a) A Certificate authorizing the issuance of Share certificates in
the new form; and
(b) An opinion of counsel for the Fund with respect to the validity
of the Shares in the new form and the status of such Shares under the Securities
Act of 1933, as amended, and any other applicable federal law or regulation
(i.e., if subject to registration, that the Shares have been registered and that
the Registration Statement has become effective or, if exempt, the specific
grounds therefor).
-3-
<PAGE>
2. To the extent that the Fund issues certificates to its
shareholders pursuant to its current prospectus, the Fund shall furnish the
Transfer Agent with a sufficient supply of blank Share certificates in the new
form, and from time to time will replenish such supply upon the request of the
Transfer Agent. Such blank Share certificates shall be properly signed by
Officers of the Fund authorized by law or by the by-laws to sign Share
certificates and, if required, shall bear the corporate seal or facsimile
thereof. The Fund agrees to indemnify and exonerate, save and hold the Transfer
Agent harmless, from and against any and all claims or demands that may be
asserted against the Transfer Agent with respect to the genuineness of any Share
certificate supplied to the Transfer Agent pursuant to this section.
ARTICLE IV
ISSUANCE, REDEMPTION, EXCHANGE AND TRANSFER OF SHARES
1. (a) Except as otherwise instructed in writing by the Fund, the
Transfer Agent shall accept with respect to each Fund Business Day, at such
times as are agreed upon from time to time by the Transfer Agent and the Fund,
each (i) purchase order received from a purchaser, or shareholder, whether or
not an Approved Institution, (ii) exchange request involving shares of other
investment companies, if any, listed in the Fund's prospectus, and (iii)
redemption request either received from a shareholder, whether or not an
Approved Institution, or contained in a Certificate, provided, that such
purchase order, exchange request or redemption request, as the case may be, is
reasonably believed by the Transfer Agent to be in conformity with the Fund's
purchase, exchange and redemption procedures as described in the Prospectus.
(b) Except as otherwise instructed in writing by the Fund, the
Transfer Agent shall also accept with respect to each Fund Business Day, at such
times as are agreed upon from time to time by the Transfer Agent and the Fund,
purchase orders, exchange requests and redemption requests contained on a
computer tape consistent in all respects with the Transfer Agent's tape layout
package, as amended from time to time, which is reasonably believed by the
Transfer Agent to be furnished by or on behalf of any Approved Institution.
2. On each Fund Business Day, the Transfer Agent shall, as of the
time at which the Fund computes the net asset value of each Series, record as
issued to, and redeem from, the accounts specified in a purchase order, exchange
request or redemption request which in accordance with the Prospectus is
effective on such Fund Business Day the appropriate number of full and
fractional Shares based on the net asset value per Share of such Series
specified in an advice received on such Fund Business Day from the Fund.
Notwithstanding the foregoing, if a redemption request is for a dollar value of
Shares in excess of the dollar value of uncertificated Shares in the specified
account, the Transfer Agent shall not effect such redemption in whole or in
part, and shall orally advise both the Fund and, if the redemption request was
received on a computer tape, the Approved Institution which supplied such tape,
of such discrepancy.
-4-
<PAGE>
3. The Transfer Agent shall, as of each Fund Business Day specified
in a Certificate or resolution described in paragraph 1 of succeeding Article
VI, effect the reinvestment of a dividend or distribution on Shares of a Series
in Shares of such series, based on the net asset value per Share of such Series
specified in an advice received from the Fund on such Fund Business Day, except
with respect to shareholders as to which the Transfer Agent shall have received
instructions that dividends or distributions are to be paid in cash.
4. On each Fund Business Day, the Transfer Agent shall, as of the
time at which the Fund computes the net asset value of each series, record as
issued to, and redeem from, each account such Shares as may be necessary to
affect the "Rebalancing Transactions" described in the Prospectus.
5. (a) On each Fund Business Day, the Transfer Agent shall supply
the Fund with a statement specifying with respect to the immediately preceding
Fund Business Day: the total number of Shares of each Series (including
fractional Shares) issued and outstanding at the opening of business on such
day; the total number of Shares of each Series, if any, sold on such day
pursuant to preceding paragraph 2 of this Article; the total number of Shares of
each Series, if any, redeemed on such day; the total number of Shares of each
Series, if any, sold on such day pursuant to preceding paragraph 3 of this
Article; and the total number of Shares of each Series issued and outstanding.
On the same day such statement is received by the Fund, the Fund shall confirm
the information contained therein by delivering to the Transfer Agent a
Certificate with respect to the same.
(b) On each Fund Business Day, the Transfer Agent shall forward to
the Custodian on behalf of the Fund, the amounts, if any, received by the
Transfer Agent in respect of Shares sold on such day pursuant to preceding
paragraph 2 of this Article.
6. In connection with each purchase, each exchange and each
redemption of Shares, the Transfer Agent shall send such statements as are
described in the Prospectus. If the Prospectus indicates that certificates for
Shares are available, and if specifically requested in writing by any
shareholder, or if otherwise required hereunder, the Transfer Agent will
countersign, issue and mail by not less than first class insured mail, to such
shareholder at the address set forth in the records of the Transfer Agent, a
Share certificate for any full Shares requested.
7. As of each Fund Business Day, the Transfer Agent shall furnish
the Custodian with an advice setting forth the number and dollar amount of
Shares to be redeemed on such Fund Business Day in accordance with paragraph 2
of this Article.
8. Upon receipt of moneys paid to it by the Custodian in connection
with a redemption of Shares, the Transfer Agent shall cancel the redeemed Shares
and after making appropriate deduction for any withholding of taxes required of
it by applicable law (a) in the case of a redemption of Shares pursuant to a
redemption described in preceding paragraph 1(a) of this
-5-
<PAGE>
Article, make payment in accordance with the Fund's redemption and payment
procedures described in the Prospectus, and (b) in the case of a redemption of
Shares pursuant to a computer tape described in preceding paragraph 1(b) of the
Article, make payment by directing a federal funds wire order to the account
previously designated by the Approved Institution specified in said computer
tape.
9. The Transfer Agent shall not accept any purchase order for Shares
after it has received from an Officer of the Fund or from an appropriate federal
or state authority written notification that the sales of the Shares has been
suspended or discontinued, and the Transfer Agent shall be entitled to rely upon
such written notification.
10. Upon the issuance of any Shares in accordance with this Agreement
the Transfer Agent shall not be responsible for the payment of any original
issue or other taxes required to be paid by the Fund in connection with such
issuance of any Shares.
11. Shares which are subject to restriction on transfer or redemption
(including, without limitation, Shares acquired pursuant to a restrictive
investment representation, Shares held by controlling persons, Shares subject to
shareholder's agreements, etc.), other than the general restrictions on the
transferability of the shares described in the Prospectus, must be certificated
(in Share certificate form) and must be stamped on the face thereof with a
legend describing the extent and conditions of the restriction or referring to
the source of such restriction, and shall be so certificated and so legended by
the Transfer Agent only if the Fund so directs in a Certificate. Legended
Shares may not be transferred or redeemed except upon receipt by the Transfer
Agent of an opinion of counsel for the Fund stating that such transfer or
redemption is in accordance with applicable law, and may be properly effected.
The Transfer Agent shall be entitled to rely upon such opinion and shall be
indemnified by the Fund for any transfer or redemption made in reliance upon any
such opinion.
12. (a) Except as otherwise provided in sub-paragraph (b) of this
paragraph and in paragraph 13 of this Article, Shares will be transferred,
exchanged or redeemed upon presentation to the Transfer Agent of Share
certificates, upon receipt of telephone redemption requests where such requests
are authorized in the subscription order form or in a subsequent written
authorization or upon receipt of instructions [properly endorsed for transfer,
exchange or redemption, and bearing satisfactory evidence of the payment of
stock transfer taxes]. In the case of small estates, where no administration is
contemplated, the Transfer Agent may, when furnished with an appropriate surety
bond, and without further approval of the Fund, transfer, exchange or redeem
Shares registered in the name of a decedent where the current market value of
the Shares being transferred does not exceed such amount as may from time to
time be prescribed by various states. The Transfer Agent reserves the right to
refuse to transfer, exchange or redeem Shares until it is satisfied that the
endorsement on the stock certificate or instructions is valid and genuine, and
for that purpose it will require, unless otherwise instructed by an authorized
Officer of the Fund, a guarantee of signature by an eligible guarantor
institution (which includes a domestic bank, a domestic credit union, a member
bank of the Federal Reserve
-6-
<PAGE>
System or a member firm of a national securities exchange) pursuant to the
Transfer Agent's standards and procedures. The Transfer Agent also reserves the
right to refuse the transfer, exchange or redemption of Shares until it is
satisfied that the requested transfer or redemption is legally authorized, and
it shall incur no liability for the refusal, in good faith, to make transfers,
exchanges or redemptions which the Transfer Agent, in its judgment, deems
improper or unauthorized, or until it is satisfied that there is no basis to any
claims adverse to such transfer, exchange or redemption. The Transfer Agent may,
in effecting transfers, exchanges and redemptions of Shares, rely upon those
provisions of the Uniform Act for the Simplification of Fiduciary Security
Transfers or the Uniform Commercial Code, as the same may be amended from time
to time, applicable to the transfer of securities, and the Fund shall indemnify
the Transfer Agent for any act done or omitted by it in good faith in reliance
upon such laws except where such laws conflict with the Securities Act of 1933,
the Securities Exchange Act of 1934 or the Investment Company Act of 1940.
(b) Notwithstanding the foregoing or any other provisions contained
in this Agreement to the contrary, the Transfer Agent shall be fully protected
by the Fund in not requiring any instruments, documents, assurances,
endorsements or guarantees, including, without limitation, any signature
guarantees, in connection with a redemption, or transfer, of Shares whenever the
Transfer Agent reasonably believes that requiring the same would be inconsistent
with the transfer and redemption procedures as described in the Prospectus.
13. Notwithstanding any provision contained in this Agreement to the
contrary, the Transfer Agent shall not be required or expected to require, as a
condition to any transfer, or any exchange or redemption of any Shares pursuant
to a computer tape described in this Article, any documents, including, without
limitation, any documents of the kind described in sub-paragraph (a) of
paragraph 12 of this Article, to evidence the authority of the person requesting
the transfer or redemption and/or the payment of any stock transfer taxes, and
shall be fully protected in acting in accordance with the applicable provisions
of this Article, provided the Transfer Agent acts in accordance with such
reasonable security procedures with respect to the acceptance of computer tapes
as the Fund and the Transfer Agent may from time to time jointly establish.
14. (a) As used in this Agreement, the terms "computer tape" and
"computer tape reasonably believed by the Transfer Agent to be furnished by an
Approved Institution", shall include any tapes generated by the Transfer Agent
to reflect information believed by the Transfer Agent to have been inputted by
an Approved Institution, via a remote terminal or other similar link, into a
data processing, storage, or collection system, or similar system (the
"System"), located on the Transfer Agent's premises. For purposes of paragraph
1 of this Article, such a computer tape shall be deemed to have been furnished
at such times as are agreed upon from time to time by the Transfer Agent and
Fund only at such times as are agreed upon from time to time by the Transfer
Agent and the Fund.
-7-
<PAGE>
(b) Nothing contained in this Agreement shall constitute any
agreement or representation by the Transfer Agent to permit, or to agree to
permit, any Approved Institution to input information into a System.
ARTICLE V
DIVIDENDS AND DISTRIBUTIONS
1. The Fund shall furnish to the Transfer Agent a copy of a
resolution of its Board of Trustees, certified by the Secretary or any Assistant
Secretary, either (i) setting forth with respect to a Series the date of the
declaration of a dividend or distribution, the date of accrual or payment, as
the case may be, thereof, the record date as of which Shareholders entitled to
payment, or accrual, as the case may be, shall be determined, the amount per
Share of such dividend or distribution, the payment date on which all previously
accrued and unpaid dividends are to be paid, and the total amount, if any,
payable to the Transfer Agent on such payment date, or (ii) authorizing the
declaration of dividends and distributions on a daily or other periodic basis
and authorizing the Transfer Agent to rely on a Certificate setting forth the
information described in subsection (i) of this paragraph.
2. Upon the payment date specified in such Certificate or
resolution, as the case may be, the Fund shall, in the case of a dividend or
distribution payable in whole or in part in Shares, cause the Custodian to pay
to the Transfer Agent an amount of cash, if any, sufficient for the Transfer
Agent to make the payment, if any, specified in such Certificate or resolution,
as the case may be, to the Shareholders of record as of such payment date as to
which the Transfer Agent has received instructions that dividends or
distributions are to be paid in cash. The Transfer Agent will, upon receipt of
any such cash, make payment of such cash dividends or distributions to the
Shareholders of record as of the record date by: (i) mailing a check, payable to
the registered shareholder, to the address of record or dividend mailing
address, or (ii) wiring such amounts to the accounts previously designated by an
Approved Institution, as the case may be. All amounts paid to the Transfer Agent
by the Custodian pursuant to this paragraph shall be deposited in an interest-
bearing account at [Investors Fiduciary Trust Company] for the benefit of the
Fund pending the clearance of dividend checks or wire payments. Transfer Agent
shall cause the interest, if any, earned on such account to be paid to the
Custodian for the benefit of the Fund no less frequently than quarterly. The
Transfer Agent shall not be liable for any improper payments made in accordance
with a Certificate or resolution described in the preceding paragraph. If the
Transfer Agent shall not receive from the Custodian sufficient cash to make
payment of any cash dividend or distribution to all shareholders of the Fund as
of the record date, the Transfer Agent shall, upon notifying the Fund, withhold
payment to all shareholders of record as of the record date until sufficient
cash is provided to the Transfer Agent.
3. It is understood that the Transfer Agent shall in no way be
responsible for the determination of the rate or form of dividends or capital
gain distributions due to the shareholders.
-8-
<PAGE>
4. It is understood that the Transfer Agent shall file such
appropriate information returns concerning the payment of dividends and capital
gain distributions with the proper federal, state and local authorities as are
required by law to be filed by the Fund but shall in no way be responsible for
the collection or withholding of taxes due on such dividends or distributions
due to shareholders, except and only to the extent, required of it by applicable
law.
ARTICLE VI
CONCERNING THE FUND
1. The Fund shall promptly deliver to the Transfer Agent written
notice of any change in the Officers authorized to sign Share certificates,
Certificates, notifications or requests, together with a specimen signature of
each new Officer. In the event any Officer who shall have signed manually or
whose facsimile signature shall have been affixed to blank Share certificates
shall die, resign or be removed prior to issuance of such Share certificates,
the Transfer Agent may record as issued such Share certificates of the Fund
notwithstanding such death, resignation or removal, and the Fund shall promptly
deliver to the Transfer Agent such approval, adoption or ratification as may be
required by law.
2. Each copy of the Agreement and Declaration of Trust of the Fund
and copies of all amendments thereto shall be certified by the Secretary of
State (or other appropriate official) of the state of organization, and if such
Agreement and Declaration of Trust and/or amendments are required by law also to
be filed with a county or other officer or official body, a certificate of such
filing shall be filed with a certified copy submitted to the Transfer Agent.
Each copy of the By-Laws and copies of all amendments thereto, and copies of
resolutions of the Board of Trustees of the Fund, shall be certified by the
Secretary of the Fund under the corporate seal.
3. It shall be the sole responsibility of the Fund to deliver to the
Transfer Agent the Fund's currently effective Prospectus.
ARTICLE VII
CONCERNING THE TRANSFER AGENT
1. The Transfer Agent shall not be liable and shall be fully
protected in acting upon any computer tape, writing or document reasonably
believed by it to be genuine and to have been signed or made by the proper
person or persons and shall not be held to have any notice of any change or
authority of any person until receipt of written notice thereof from the Fund or
such person. It shall also be protected in processing Share certificates which
it reasonably believes to bear the proper manual or facsimile signatures of the
Officers of the Fund and the proper countersignature of the Transfer Agent.
-9-
<PAGE>
2. The Transfer Agent may establish such additional procedures,
rules and regulations governing the transfer or registration of certificates of
stock as it may deem advisable and consistent with such rules and regulations
generally adopted by bank transfer agents.
3. The Transfer Agent shall keep such records as are specified in
Appendix C hereto in the form and manner, and for such period, as it may deem
advisable but not inconsistent with the rules and regulations of appropriate
government authorities, in particular Rules 31a-2 and 31a-3 under the federal
Investment Company Act of 1940 as amended from time to time. The Transfer Agent
may deliver to the Fund from time to time at its discretion, for safekeeping or
disposition by the Fund in accordance with law, such records, papers, Share
certificates which have been canceled in transfer, exchange or redemption, or
other documents accumulated in the execution of its duties as such Transfer
Agent, as the Transfer Agent may deem expedient, other than those which the
Transfer Agent is itself required to maintain pursuant to applicable laws and
regulations, and the Fund shall assume all responsibility for any failure
thereafter to produce any record, paper, canceled Share certificate, or other
document so returned, if and when required. The records specified in Appendix C
hereto maintained by the Transfer Agent pursuant to this paragraph 3 shall be
considered to be the property of the Fund, shall be made available upon request
for inspection by the officers, employees, and auditors of the Fund, and records
shall be delivered to the Fund upon request and in any event upon the date of
termination of this Agreement, as specified in Article IX of this Agreement, in
the form and manner kept by the Transfer Agent on such date of termination or
such earlier date as may be requested by the Fund.
4. The Transfer Agent may employ agents or attorneys-in-fact at the
expense of the Fund, and shall not be liable for any loss or expense arising out
of, or in connection with, the actions or omissions to act of its agents or
attorneys-in-fact so long as the Transfer Agent acts in good faith and without
negligence or willful misconduct in connection with the selection of such agents
or attorneys-in-fact.
5. The Transfer Agent shall not be liable for any loss or damage,
including counsel fees, resulting from its actions or omissions to act or
otherwise, except for any loss or damage arising out of its own failure to act
in good faith, negligence or willful misconduct.
6. The Fund shall indemnify and exonerate, save and hold harmless
the Transfer Agent from and against any and all claims (whether with or without
basis in fact or law), demands, expenses (including attorney's fees) and
liabilities of any and every nature which the Transfer Agent may sustain or
incur on which may be asserted against the Transfer Agent by any person by
reason of or as a result of any action taken or omitted to be taken by the
Transfer Agent in good faith and without negligence or willful misconduct or in
reliance upon (i) any provision of this Agreement; (ii) the Prospectus; (iii)
any instruction or order including, without limitation, any computer tape
reasonably believed by the Transfer Agent to have been received from an Approved
Institution; (iv) any instrument, order or Share certificate reasonably believed
by it to be genuine and to be signed, countersigned or executed by any duly
authorized Officer of
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<PAGE>
the Fund; (v) any Certificate or other instructions of an Officer; or (vi) any
opinion of legal counsel for the Fund or the Transfer Agent. The Fund shall
indemnify and exonerate, save and hold the Transfer Agent harmless from and
against any and all claims (whether with or without basis in fact or law),
demands, expenses (including attorney's fees) and liabilities of any and every
nature which the Transfer Agent may sustain or incur or which may be asserted
against the Transfer Agent by and person by reason of or as a result of any
action taken or omitted to be taken by the Transfer Agent in good faith and
without negligence or willful misconduct in connection with its appointment or
in reliance upon any law, act, regulation or any interpretation of the same even
though such law, act or regulation may thereafter have been altered, changed,
amended or repealed.
7. Specifically, but not by way of limitation, the Fund shall
indemnify and exonerate, save and hold the Transfer Agent harmless from and
against any and all claims (whether with or without basis in fact or law),
demands, expenses (including attorney's fees) and liabilities of any and every
nature which the Transfer Agent may sustain or incur or which may be asserted
against the Transfer Agent by any person in connection with the Transfer Agent's
capacity and authorization to record as issued Shares and the form and amount of
authorized Shares.
8. Notwithstanding the foregoing, the Transfer Agent shall be liable
to the Fund with respect to any redemption check which the Transfer Agent pays
on which the signature of the drawer is forged, but only to the extent of the
lesser of (a) the amount of such redemption check minus $2,500.00 and (b) the
amount of insurance proceeds received by the Transfer Agent with respect to such
redemption check, and only if, and for so long as each of the following
conditions is satisfied: (i) insurance with respect to Fund redemption checks is
maintained by the Transfer Agent, and (ii) the Fund pays to the Transfer Agent
monthly the amount which the Transfer Agent determines to be the Fund's pro rata
share of the cost of such insurance coverage. The Fund agrees that the insurance
may be discontinued or canceled without any prior notice, and that the Transfer
Agent shall at all times have the absolute right, without any prior notice to
the Fund, to cease to maintain such insurance, and the Transfer Agent agrees to
notify the Fund promptly upon canceling or discontinuing any such insurance or
upon learning of any such cancellation or discontinuance. In the event such
insurance is not maintained, or in the event the Fund does not pay monthly to
the Transfer Agent the amount which the Transfer Agent determines to be the
Fund's pro rata share of the cost of such insurance coverage, the Transfer Agent
shall not be liable for any loss or damage; including counsel fees, resulting
from its paying or not paying any redemption check, unless such loss or damage
arises out of the Transfer Agent's failure to use good faith, negligence or
willful misconduct.
9. At any time the Transfer Agent may apply to an Officer of the
Fund for written instructions with respect to any matter arising in connection
with the Transfer Agent's duties and obligations under this Agreement, and the
Transfer Agent shall not be liable for any action taken or permitted by it in
good faith in accordance with such written instructions. Such application by the
Transfer Agent for written instructions from an Officer of the Fund may, at the
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<PAGE>
option of the Transfer Agent, set forth in writing any action proposed to be
taken or omitted by the Transfer Agent with respect to its duties or obligations
under this Agreement and the date on and/or after which such action shall be
taken, and the Transfer Agent shall not be liable for any action taken or
omitted in accordance with a proposal included in any such application on or
after the date specified therein unless, prior to taking or omitting any such
action, the Transfer Agent has received written instructions in response to such
application specifying the action to be taken or omitted. The Transfer Agent may
consult counsel to the Fund, or its own counsel, at the expense of the Fund and
shall be fully protected with respect to anything done or omitted by it in good
faith in accordance with the advice or opinion of counsel to the Fund or its own
counsel.
10. When mail is used for delivery of non-negotiable Share
certificates, the value of which does not exceed the limits of the Transfer
Agent's Blanket Bond, the Transfer Agent shall send such non-negotiable Share
certificates by first class mail, and such deliveries will be covered while in
transit by the Transfer Agent's Blanket Bond. Non-negotiable Share certificates,
the value of which exceed the limits of the Transfer Agent's Blanket Bond, will
be sent by insured registered mail. Negotiable Share certificates will be sent
by insured registered mail. The Transfer Agent shall advise the Fund of any
Share certificates returned as undelivered after being mailed as herein provided
for.
11. To the extent that the Fund issues certificates to its
shareholders pursuant to its current prospectus, the Transfer Agent may issue
new Share certificates in place of Share certificates represented to have been
lost, stolen, or destroyed upon receiving instructions in writing from an
Officer and indemnity satisfactory to the Transfer Agent. Such instructions from
the Fund shall be in such form as approved by the Board of Trustees of the Fund
in accordance with the provisions of law or of the By-Laws of the Fund governing
such matters. If the Transfer Agent receives written notification from the owner
of the lost, destroyed or stolen Share certificate within a reasonable time
after he has notice of it, the Transfer Agent shall promptly notify the Fund and
shall act pursuant to written instructions signed by an Officer. If the Fund
receives such written notification from the owner of the lost, destroyed or
stolen Share certificate within a reasonable time after he has notice of it, the
Fund shall promptly notify the Transfer Agent and the Transfer Agent shall
promptly notify the Transfer Agent and the Transfer Agent shall act pursuant to
written instructions any act done or omitted by it pursuant to the written
instructions described herein. The Transfer Agent may issue new Share
certificates in exchange for, and upon surrender of, mutilated Share
certificates.
12. The Transfer Agent will issue and mail subscription warrants for
Shares of capital stock, Shares representing stock dividends, exchange or
splits, or act as conversion agent upon receiving written instructions from an
Officer and such other documents as the Transfer Agent may deem necessary.
13. The Transfer Agent will supply shareholder lists to the Fund from
time to time upon receiving a request therefore from an Officer of the Fund.
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<PAGE>
14. In the case of any requests or demands for the inspection of
the shareholder records of the Fund, the Transfer Agent will endeavor to notify
the Fund and to secure instructions from an Officer as to such inspection. The
Transfer Agent reserves the right, however, to exhibit the Shareholder records
to any person whenever it receives an opinion from its counsel that there is a
reasonable likelihood that the Transfer Agent will be held liable for the
failure to exhibit the shareholder records to such person.
15. At the request of any Officer, the Transfer Agent will address
and mail such appropriate notices to shareholders as the Fund may direct.
16. Notwithstanding any of the foregoing provisions of this
Agreement, the Transfer Agent shall be under no duty or obligation to inquire
into, and shall not be liable for:
(a) The legality of the issue or sale of any Shares, the sufficiency
of the amount to be received therefor, or the authority of the Approved
Institution or of the Fund, as the case may be, to request such sale or
issuance;
(b) The legality of a transfer of Shares or of a redemption of any
Shares, the propriety of the amount to be paid therefor, or the authority of the
Approved Institution or of the Fund, as the case may be, to request such
transfer or redemption;
(c) The legality of the declaration of any dividend by the Fund, or
the legality of the issue of any Shares in payment of any stock dividend; or
(d) The legality of any recapitalization or readjustment of the
Shares.
17. The Transfer Agent shall be entitled to receive and the Fund
hereby agrees to pay to the Transfer Agent for its performance hereunder,
including its performance of the duties and functions set forth in Appendix C
hereto, (i) its reasonable out-of-pocket expenses (including legal expenses and
attorney's fees) incurred in connection with this Agreement and its performance
hereunder and (ii) such compensation as may be agreed upon in writing from time
to time by the Transfer Agent and the Fund.
18. The Transfer Agent shall have no duties or responsibilities
whatsoever except such duties and responsibilities as are specifically set forth
in this Agreement, and no covenant or obligation shall be implied in this
Agreement against the Transfer Agent.
ARTICLE VIII
TERMINATION
Either of the parties hereto may terminate this Agreement by giving to
the other party a notice in writing specifying the date of such termination,
which shall be not less than 90
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<PAGE>
days after the date of receipt of such notice. In the event such notice is given
by the Fund, it shall be accompanied by a copy of a resolution of the Board of
Trustees of the Fund, certified by the Secretary or Assistant Secretary,
electing to terminate this Agreement and designating a successor transfer agent
or transfer agents. In the event such notice is given by the Transfer Agent, the
Fund shall, on or before the termination date, deliver to the Transfer Agent a
copy of a resolution of its Board of Trustees certified by the Secretary or any
Assistant Secretary designating a successor transfer agent. If the Fund fails to
designate a successor transfer agent, the Fund shall, upon the date specified in
the notice of termination of this Agreement and delivery of the records
maintained hereunder, be deemed to be its own transfer agent and the Transfer
Agent shall thereby be relieved of all duties and responsibilities pursuant to
this Agreement.
ARTICLE IX
MISCELLANEOUS
1. The Fund agrees that, prior to effecting any change in the
Prospectus which would increase or alter the duties and obligations of the
Transfer Agent hereunder, it shall advise the Transfer Agent of such proposed
change at least 30 days prior to the intended date of the same, and shall
proceed with such change only if it shall have received the written consent of
the Transfer Agent thereto.
2. Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Fund shall be sufficiently given if
addressed to the Fund and mailed or delivered to it at its office at the address
first above written, or at such other place as the Fund may from time to time
designate in writing.
3. Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Transfer Agent shall be sufficiently given
if addressed to the Transfer Agent and mailed or delivered to it at its office
as indicated on page 1 of this Agreement or at such other place as the Transfer
Agent may from time to time designate in writing.
4. This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties with the formality of
this Agreement, and, except for an amendment to Appendix B or Appendix C hereto,
authorized or approved by a resolution of the Board of Trustees of the Fund.
5. This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns; provided, however,
that this Agreement shall not be assignable by either party without the written
consent of the other party.
6. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
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<PAGE>
7. This Agreement may be executed in any number of counterparts each
of which shall be deemed to be an original; but such counterparts shall,
together, constitute only one instrument.
8. The provisions of this Agreement are intended to benefit only the
Transfer Agent and the Fund, and no rights shall be granted to any other person
by virtue of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
Attest:
e~NAVIGATOR FUND
By:
- ----------------------------- -----------------------------
Attest: REICH & TANG SERVICES L.P.
By Reich & Tang Asset Management, Inc.
as General Partner
- -----------------------------
By:
-----------------------------
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<PAGE>
e~navigator Fund
FORM OF
Service Agreement
AGREEMENT made this ___ day of ______, 1998 by and between e~navigator
Fund, a Massachusetts business trust (the "Fund"), and Interactive Financial
Solutions, Inc., a Massachusetts corporation (the "Servicing Agent").
WITNESSETH:
WHEREAS, the Fund and the Servicing Agent wish to enter into an agreement
setting forth the terms upon which the Servicing Agent will provide, or arrange
with other parties for the provision of, certain services for the Fund;
NOW THEREFORE, in consideration of the premises and covenants hereinafter
contained, the parties agree as follows:
1.(a) The Servicing Agent agrees to provide, or arrange with other parties
for the provision of, certain Electronic Services (as defined in Section 2
hereof) to the Fund. The Servicing Agent shall, except to the extent expressly
provided or authorized in writing, have no authority to act for or represent the
Fund in any way or otherwise be deemed an agent of the Fund.
(b) The Fund expressly agrees that the Servicing Agent may delegate any
or all of its responsibilities hereunder with respect to the provision of
Electronic Services to one or more other parties (each such party, a "Servicing
Sub-Agent") selected by the Servicing Agent. Any Servicing Sub-Agent may (but
need not) be affiliated with the Servicing Agent.
2. As used in this Agreement, "Electronic Services" means all software
and technical services necessary to provide and support the following:
(a) a cash management account (the "Money Management Account") to be
used either in conjunction with the "e~navigator Financial Organizer" or
directly by Fund customers (each, an "e~navigator Customer");
(b) paper checkwriting;
(c) automatic transfers of cash between the Fund and brokerage
accounts;
<PAGE>
(d) direct deposits into and withdrawals from each e~navigator
Customer's Money Management Account;
(e) an electronic or telephonic bill pay program, under which the
Servicing Agent agrees to execute the delivery of all bill payments as
instructed by each e~navigator Customer, unless one or more of the following
conditions occurs: (i) erroneous or incomplete information is provided by the
e~navigator Customer, (ii) insufficient funds are available in the Money
Management Account; (iii) a payee cannot or will not accept a payment delivered
by the bill pay service; (iv) the e~navigator Customer does not follow the
operating instructions (which will be provided to each e~navigator Customer);
(f) debit card for purchase and ATM use;
(g) electronic fund transfers from each e~navigator Customer's Money
Management Account;
(h) expense category coding (of paper checkwriting or electronic bill-
pay); and
(i) provision of the following information available through
e~navigator Financial Organizer to e~navigator Customers: Money Management
Account balances, electronic bill paying activity, money market
activity/statement data, check activity and debit card activity;
(j) a comprehensive annual summary that will provide e~navigator
Customers with a summary of their brokerage activity, a detailed summary of
their check activity by expense category, as well as listing of debit card
activity, sorted by merchant types; and
(k) such other services as the Fund and the Servicing Agent may
mutually agree upon.
3. All activities undertaken by the Servicing Agent or any Servicing Sub-
Agent pursuant to this Agreement shall at all times be subject to the
supervision and control of the Board of Trustees of the Fund, any duly
constituted committee thereof or any officer of the Fund acting pursuant to like
authority.
4. The services to be provided by the Servicing Agent or any Servicing
Sub-Agent hereunder are not to be deemed exclusive and the Servicing Agent and
each Servicing Sub-Agent shall be free to render similar services to others, so
long as the services provided hereunder are not impaired thereby.
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<PAGE>
5. As full compensation for all services rendered, facilities furnished
and expenses borne by the Servicing Agent hereunder, the Fund shall pay the
Servicing Agent compensation at the annual rate of 5.00% of the Fund's average
daily net assets. Such compensation shall be payable monthly in arrears or at
such other intervals, not less frequently than quarterly, as the Board of
Trustees of the Fund may from time to time determine and specify in writing to
the Servicing Agent. The Servicing Agent hereby acknowledges that the Fund's
obligation to pay such compensation is binding only on the assets and property
belonging to the Fund.
6. It is understood that any of the shareholders, trustees, officers,
employees and agents of the Fund may be a shareholder, director, officer,
employee or agent of, or be otherwise interested in, the Servicing Agent, any
affiliated person of the Servicing Agent, any organization in which the
Servicing Agent may have an interest or any organization which may have an
interest in the Servicing Agent; that the Servicing Agent, any such affiliated
person or any such organization may have an interest in the Fund; and that the
existence of any such dual interest shall not affect the validity hereof or of
any transactions hereunder except as otherwise provided in the agreement and
declaration of trust of the Fund, the articles of organization of the Servicing
Agent or specific provisions of applicable law.
7. This Agreement shall become effective as of the date of its execution,
and
(a) this Agreement may at any time be terminated on sixty days'
written notice to the Servicing Agent either by vote of the Board of
Trustees of the Fund or by vote of a majority of the outstanding voting
securities of the Fund; and
(b) this Agreement may be terminated by the Servicing Agent on ninety
days' written notice to the Fund.
Termination of this Agreement pursuant to this section 7 shall be without
the payment of any penalty.
8. Use of "e~navigator." The Servicing Agent has a proprietary interest
---------------------
in the phrase "e~navigator," which may be used by the Fund only with the consent
of the Servicing Agent. The Servicing Agent consents to the use by the Fund of
the name "e~navigator Fund" or any other name embodying the phrase
"e~navigator," in such forms as the Servicing Agent shall in writing approve,
but only on condition and so long as (i) this Agreement shall remain in full
force and (ii) the Fund shall fully perform, fulfill and comply with all
provisions of this Agreement expressed herein to be performed, fulfilled or
complied with by it. No such name shall be used by the Fund at any time or in
any place or for any purpose or under any conditions except as in this section
provided. The foregoing authorization by the Servicing Agent to the Fund to use
said phrase as part of a business or name is not exclusive of the rights of the
Servicing Agent itself to use, or to authorize others to use, the same; the Fund
acknowledges and agrees that as between the Servicing Agent and the Fund, the
Servicing Agent has the exclusive right so to use, or authorize others to use,
said phrase, and the Fund agrees to take such action as
-3-
<PAGE>
may reasonably be requested by the Servicing Agent to give full effect to the
provisions of this section (including, without limitation, consenting to such
use of said phrase). Without limiting the generality of the foregoing, the Fund
agrees that, upon any termination of this Agreement by either party or upon the
violation of any of its provisions by the Fund, the Fund will, at the request of
the Servicing Agent made within six months after the Servicing Agent has
knowledge of such termination or violation, use its best efforts to change the
name of the Fund so as to eliminate all reference, if any, to the phrase
"e~navigator" and will not thereafter transact any business in a name containing
the phrase "e~navigator" in any form or combination whatsoever, or designate
itself as the same entity as or successor to an entity of such name, or
otherwise use the phrase "e~navigator" or any other reference to the Servicing
Agent. Such covenants on the part of the Fund shall be binding upon it, its
trustees, officers, shareholders and creditors and all other persons claiming
under or through it.
9. This Agreement may not be amended without the consent of each of the
parties.
10. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Servicing Agent, or reckless disregard of its obligations and
duties hereunder, the Servicing Agent shall not be subject to any liability to
the Fund, to any shareholder of the Fund or to any other person, firm or
organization, for any act or omission in the course of, or connected with,
rendering services hereunder.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
e~navigator Fund Interactive Financial Solutions, Inc.
By_________________________ By____________________________
[ ] [ ]
Senior Vice President Senior Vice President
NOTICE
A copy of the Agreement and Declaration of Trust establishing e~navigator
Fund (the "Fund") is on file with the Secretary of The Commonwealth of
Massachusetts, and notice is hereby given that this Agreement is executed on
behalf of the Fund by officers of the Fund as officers and not individually and
that the obligations of or arising out of this Agreement are not binding upon
any of the trustees, officers or shareholders individually but are binding only
upon the assets and property belonging to the Fund.
-5-
<PAGE>
FORM OF
ADMINISTRATIVE SERVICES AGREEMENT
e~navigator Fund
(the "Fund")
DATE
Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, NY 10020
Gentlemen:
We herewith confirm our agreement with you as follows:
1. We engage in the business of investing and reinvesting our assets in
securities of the type, and in accordance with the limitations, specified in our
Agreement and Declaration of Trust, By-Laws and Registration Statement filed
with the Securities and Exchange Commission under the Investment Company Act of
1940 (the "1940 Act") and the Securities Act of 1933, including the Prospectus
forming a part thereof (the Registration Statement"), all as from time to time
in effect, and in such manner and to such extent as may from time to time be
authorized by our Board of Trustees. We enclose copies of the documents listed
above and will furnish you such amendments thereto as may be made from time to
time.
2. (a) We hereby employ you as our administrator (the "Administrator")
of e~navigator Fund (the "Fund") to provide all management and administrative
services reasonably necessary for our operation under applicable provisions of
federal and state law, including personnel to serve as officers of the Fund.
The services to be provided by you shall include but not be limited to those
enumerated on Exhibit A hereto. The personnel providing these services may be
your employees or employees of your affiliates or of other organizations. The
execution of your duties hereunder is subject to the general oversight of our
Board of Trustees. You shall also make periodic reports to the Fund's Board of
Trustees on the performance of your obligations under this Agreement, in the
form and content as we may reasonable request.
(b) It is understood that you will from time to time employ, subcontract
with or otherwise associate yourself with, entirely at your expense, such
persons as you believe to be particularly fitted to assist you in the execution
of your duties hereunder.
3. We will expect of you, and you will give us the benefit of, your best
judgment and efforts in rendering these services to us, and we agree as an
inducement to your undertaking these services that you will not be liable
hereunder for any mistake of judgment or for any other cause beyond your
control, provided that nothing herein shall protect you against any liability to
us or to our security holders by reason of willful misfeasance, bad faith or
negligence in the performance of
<PAGE>
your duties hereunder, or by reason of your reckless disregard of your
obligations and duties hereunder.
4. In consideration of the foregoing we will pay you a fee equal to .05
of 1% per annum of the average daily net assets of the Cortland General Money
Market Fund (the "Portfolio") up to $150 million plus .03 of 1% per annum of the
average daily net assets of the Portfolio in excess of $150 million up to $400
million plus .02 of 1% per annum of the average daily net assets of the
Portfolio in excess of $400 million. Your fee will be accrued by us daily, and
will be payable on the last day of each calendar month for services performed
hereunder during that month or on such other schedule as you may agree in
writing. You may waive your right to any fee to which you are entitled
hereunder, provided such waiver is delivered to us in writing.
We have entered into a custody agreement directly with Investors
Fiduciary Trust Company (the "Custody Agreement"). The fee schedule included
with the Custody Agreement includes an asset based fee for Investment Accounting
& Custody services which are assessed on a complex wide basis among all of the
mutual funds sponsored or administered by you. All of the other costs included
on such fee schedule represent individual transaction charges assessable
directly to the account of the Fund. You agree to allocate a portion of the
aforementioned asset based charge to us as follows:
1/3 of the asset based fee will be allocated to Custody services, while the
remaining 2/3 is attributable to Investment Accounting services. The charge
for custody services will be allocated to the Fund in the proportion of the
Fund's average net asset value of all of the funds in the complex. Our
allocable portion of Investment Accounting services expense will be borne
by you, as such services are covered under the provisions of this
Agreement. All other charges assessable under the fee schedule will be
assessed directly to us, insofar as they represent charges for custody
and/or cash management related transactions of the Fund.
5. This Agreement will become effective on the date hereof and shall
continue in effect until ____________________, and thereafter for successive
twelve-month periods (computed from each _________), provided that such
continuation is specifically approved at least annually by our Board of Trustees
and by a majority of those of our trustees who are neither party to this
Agreement nor, other than by their services as trustees of the Fund, interested
persons, as defined in the 1940 Act, of any such person who is party to this
Agreement. This Agreement may be terminated at any time, without the payment of
any penalty, by vote of a majority of our outstanding voting securities, as
defined in the 1940 Act, or by a vote of a majority of our entire Board of
Trustees, on a sixty days' written notice to you, or by you in sixty days'
written notice to us.
6. This Agreement may not be transferred, assigned, sold or in any manner
hypothecated or pledged by you and this Agreement shall terminate automatically
in the event of any such transfer, assignment, sale, hypothecation or pledge by
you. The terms "transfer", "assignment" and "sale" as used in this paragraph
shall have the meanings ascribed thereto by the 1940 Act and in applicable rules
or regulations of the Securities and Exchange Commission.
-2-
<PAGE>
7. Except to the extent necessary to perform your obligations hereunder,
nothing herein shall be deemed to limit or restrict your right, or the right of
any of your officers, directors, partners or employees who may also be a
director, officer or employee of ours, or of a person affiliated with us, as
defined in the 1940 Act, to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of a
similar or dissimilar nature, or to render services of any kind to any other
corporation, firm, individual or association.
8. This Agreement shall be construed in accordance with the laws of the
State of New York and the applicable provisions of the 1940 Act, as amended.
9. Any notice or other communication required to be given pursuant to this
Agreement shall be deemed to have been given if delivered or sent by registered
or certified mail, return receipt requested, (1) to the Administrator at 600
Fifth Avenue, New York, New York 10020, Attention: Bernadette N. Finn or (2) to
the Fund,_______________________________________________
10. The books and records pertaining to the Fund which are in the possession
of the Administrator shall be the property of the Fund. Such books and records
shall be prepared and maintained as required by the 1940 Act and other
applicable securities laws and rules and regulations. The Fund, or the Fund's
authorized representatives, shall have access to such books and records at all
times during the Administrator's normal business hours. Upon the reasonable
request of the Fund, copies of any such books and records shall be provided by
the Administrator to the Fund or the Fund's authorized representatives at the
Fund's expense.
11. You agree on behalf of yourself and your employees to treat
confidentially all records and other information relative to the Fund and its
prior, present or potential Shareholders, except when, after prior notification
to and approval in writing by the Fund which approval shall not be unreasonably
withheld and may not be withheld where you may be exposed to civil or criminal
contempt proceedings for failure to comply, you are requested to divulge such
information by duly constituted authorities, or when so requested by the Fund.
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<PAGE>
If the foregoing is in accordance with your understanding, will you kindly so
indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
By:
---------------------------
ACCEPTED:
REICH & TANG ASSET MANAGEMENT L.P.
By: REICH & TANG ASSET MANAGEMENT, INC., General Partner
By:
----------------------------------------
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<PAGE>
EXHIBIT A
SERVICES OF ADMINISTRATOR/ACCOUNTING
Accounting Functions:
- ---------------------
Journalize the Portfolio's daily investment, capital share and income and
expense activities
Reconcile cash, investment balances and securities positions of the Fund and the
Portfolio with the custodian on a monthly basis.
Post to and prepare the Statement of Assets and Liabilities and the Statement of
Operations for the Fund
Calculate various contractual expenses
Calculate daily expense accruals based upon pre-authorized budgets developed by
Fund management and Administrator and notify Fund management of any proposed
adjustments
Control and process all disbursements from the Fund and execute such
disbursements upon instructions of an Authorized Person
Calculate capital gains and losses, if any
Calculate the amount of dividend distribution for the Fund
Calculate the net income for the Fund
Compute the Fund yield, total return, expense ratios, portfolio turnover rate
and portfolio average dollar-weighted maturity
Compute the daily net asset value of the Fund
Input Fund Information nightly into NASDAQ
Calculate daily the deviation, if any, between marked-to-market and amortized
cost of the Portfolio's shares
-5-
<PAGE>
Recordkeeping and Regulatory Functions:
- ---------------------------------------
Prepare for execution and file the Fund's Federal, state and excise tax returns
Prepare and file the Fund's Semi-Annual Reports with the SEC on Form N-SAR
Prepare and file with the SEC the Fund's annual and semi-annual reports
Assist with the preparation of registration statements on Form N-1A and other
filings relating to the registration of shares
Monitor the Fund's status as a regulated investment company under Sub-chapter M
of the Internal Revenue Code
Maintain the Fund's fidelity bond as required by the 1940 Act
Determine the amount of annual ordinary income and capital gain distributions to
Shareholders which is necessary to avoid Federal excise tax
Prepare and file Form 24f-2 notices
Take all appropriate actions necessary to maintain and renew state
registration of the Shares
Keep the following records with respect to the Fund and the Portfolio:
All books and records with respect to the books of account
Records of securities transactions
Assist in year end audit with the Fund's Independent Auditors
Prepare reports for the Board of Trustees' Meetings, including reports for
contract renewal and audit committee meetings
Conduct and manage Board of Trustees' meetings
Review and comment on Minutes of the Board of Trustees' meetings as drafted by
Fund counsel.
-6-
<PAGE>
FORM OF OPINION
September __, 1998
e~navigator Funds
501 Boylston Street
Boston, Massachusetts 02116
Ladies and Gentlemen:
We are furnishing this opinion in connection with the proposed offer and
sale by e~navigator Fund, a Massachusetts business trust (the "Trust"), of
shares of beneficial interest of its Original series (the "Shares") pursuant to
a registration statement on Form N-1A (the "Registration Statement") under the
Securities Act of 1933, as amended.
We are familiar with the action taken by the Trustees of the Trust to
authorize the issuance of the Shares. We have examined the Trust's By-Laws and
its Agreement and Declaration of Trust on file in the office of the Secretary of
The Commonwealth of Massachusetts and such other documents as we deem necessary
for the purposes of this opinion.
We assume that upon sale of the Shares the Trust will receive the net asset
value thereof.
Based upon the foregoing, we are of the opinion that the Trust is
authorized to issue an unlimited number of Shares, and that, when the Shares are
issued and sold, they will be validly issued, fully paid and nonassessable by
the Trust.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Agreement and Declaration of Trust disclaims shareholder liability
for acts or obligations of the Trust and requires that notice of such disclaimer
be given in each agreement, obligation or instrument entered into or executed by
the Trust or the Trustees. The Agreement and Declaration of Trust provides for
indemnification out of the property of the particular series of shares for all
loss and expense of
<PAGE>
e~navigator Funds -2- September __, 1998
any shareholder of that series held personally liable solely by reason of his or
her having been a shareholder of that series. Thus, the risk of shareholder
liability is limited to circumstances in which that series itself would be
unable to meet its obligations.
We consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
Ropes & Gray
<PAGE>
e~navigator Fund
----------------
Form of
--------
PRINCIPAL UNDERWRITER'S SERVICE PLAN
This Plan (the "Plan") constitutes the Principal Underwriter's Service
Plan relating to shares of e~navigator Fund, a Massachusetts business trust (the
"Trust").
Section 1. Service Fee. Subject to the limitation set forth in Section 2,
-----------
the Trust will pay to New England Securities Corporation, a Massachusetts
corporation which acts as the Principal Distributor of the Trust's shares, or
such other entity as shall from time to time act as the Principal Underwriter of
the Trust's shares (the "Distributor"), a fee (the "Service Fee") for the
expenses borne by the Distributor in connection with the provision of personal
services provided to investors in shares of the Trust and/or the maintenance of
shareholder accounts, at an annual rate not to exceed 0.25% of the Trust's
average daily net assets, as compensation for the Distributor's services as
principal underwriter of the shares of the Trust. Subject to such limit and
subject to the provisions of Section 6 hereof, the Service Fee shall be as
approved from time to time by (a) the Trustees of the Trust and (b) the
Independent Trustees of the Trust. The Service Fee shall be accrued daily and
paid monthly or at such other intervals as the Trustees shall determine. All
payments under this Section 1 are intended to qualify as "service fees" as
defined in Conduct Rule 2830 of the National Association of Securities Dealers,
Inc. (or any successor provision) as in effect from time to time.
Section 2. In no event shall the Trust pay to the Distributor any Service
Fee under this Plan unless and until the Trust no longer invests all of its
investible assets solely in shares of the Cortland General Money Market Fund of
Cortland Trust, Inc.
Section 3. This Plan shall continue in effect for a period of more than
one year after [ ], 1998 only so long as such continuance is
specifically approved at least annually by votes of the majority (or whatever
other percentage may, from time to time, be required by Section 12(b) of the
Investment Company Act of 1940 (the "Act") or the rules and regulations
thereunder) of both (a) the Trustees of the Trust, and (b) the Independent
Trustees of the Trust, cast in person at a meeting called for the purpose of
voting on this Plan.
Section 4. Any person authorized to direct the disposition of monies paid
or payable by the Trust pursuant to this Plan or any related agreement shall
provide to the Trustees of the Trust, and the Trustees shall review, at least
quarterly, a written report of the amounts so expended and the purposes for
which such expenditures were made.
Section 5. This Plan may be terminated at any time by vote of a majority
of the Independent Trustees, or by vote of a majority of the outstanding shares
of the Trust.
<PAGE>
Section 6. All agreements with any person relating to implementation of
this Plan shall be in writing, and any agreement related to this Plan shall
provide:
A. That such agreement may be terminated at any time, without payment
of any penalty, by vote of a majority of the Independent Trustees
or by vote of a majority of the outstanding shares of the Trust,
on not more than 60 days' written notice to any other party to the
agreement; and
B. That such agreement shall terminate automatically in the event of
its assignment.
Section 7. This Plan may not be amended to increase materially the amount
of expenses permitted pursuant to Section 1 hereof without approval by a vote of
at least a majority of the outstanding shares of the Trust, and all material
amendments of this Plan shall be approved in the manner provided for
continuation of this Plan in Section 3.
Section 8. As used in this Plan, (a) the term "Independent Trustees"
shall mean those Trustees of the Trust who are not interested persons of the
Trust, and have no direct or indirect financial interest in the operation of
this Plan or any agreements related to it, (b) the terms "assignment" and
"interested person" shall have the respective meanings specified in the Act and
the rules and regulations thereunder and (c) the term "majority of the
outstanding shares of the Trust" shall mean the lesser of the 67% or the 50%
voting requirements specified in clauses (A) and (B), respectively, of the third
sentence of Section 2(a)(42) of the Act, all subject to such exemptions as may
be granted by the Securities and Exchange Commission.
-2-
