<PAGE> 1
As filed with the Securities and Exchange Commission on June 30, 1999
File No. 333-64981
File No. 811-09025
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. 2 [ X ]
----
Post-Effective Amendment No. [ ]
----
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 2 [ X ]
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NEW COVENANT FUNDS
(Exact Name of Registrant as Specified in Charter)
200 East Twelfth Street
Jeffersonville, Indiana 47130
-----------------------------
(Address of Principal Executive Offices)
(877) 835-4531
--------------
(Registrant's Telephone Number)
Frank K. Bateman, President
New Covenant Funds
200 East Twelfth Street, Suite C
Jeffersonville, Indiana 47130
-----------------------------
(Name and Address of Agent for Service)
Copies to:
Patrick W. D. Turley, Esq. Ms. Sandra L. Adams
Dechert Price & Rhoads First Data Investor Services Group
1775 Eye Street, N.W. 3200 Horizon Drive
Washington, DC 20006-2401 King of Prussia, PA 19406-0903
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
Title of Securities Being Registered: Shares of Beneficial Interest of the New
Covenant Funds.
Registrant has previously registered an indefinite number of shares of
beneficial interest of New Covenant Funds pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended. Registrant will file a Notice
pursuant to Rule 24f-2 within ninety days after its fiscal year end.
Registrant hereby amends this Registration Statement under the Securities Act of
1933, as amended on such date or dates as may be necessary to delay its
effective
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date until Registrant shall file a further amendment which specifically states
that such Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933, as amended, or until such
Registration Statement shall become effective on such date as the Securities and
Exchange Commission, acting pursuant to said Section 8(a), may determine.
[OUTSIDE FRONT COVER]
PROSPECTUS
June 30, 1999
NEW COVENANT FUNDS
New Covenant Growth Fund
New Covenant Income Fund
New Covenant Balanced Growth Fund
New Covenant Balanced Income Fund
200 East Twelfth Street, Suite C
Jeffersonville, IN 47130
The securities described in this prospectus have not been approved or
disapproved by the Securities and Exchange Commission. The Securities and
Exchange Commission has not determined that the information in this prospectus
is accurate or complete nor have they passed on its adequacy. Any representation
to the contrary is a criminal offense.
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CONTENTS
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THE FUNDS 4
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Concise fund-by-fund descriptions are provided on the following pages.
Each description provides the specific Fund objectives, strategies,
risks, suitability and performance. Before investing, make sure that
the Fund's objectives match your own.
A DESCRIPTION OF EACH FUND
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Objectives and Strategies
New Covenant Growth Fund 4
New Covenant Income Fund 5
New Covenant Balanced Growth Fund 7
New Covenant Balanced Income Fund 8
PRINCIPAL RISKS AND INVESTOR SUITABILITY
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PERFORMANCE
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Performance of the Funds 9
Past Performance 9
Bar Chart and Performance Tables 9
FEES AND EXPENSES OF THE FUNDS
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Shareholder Fees 9
Annual Fund Operating Expenses 10
Example 10
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RISK MANAGEMENT 12
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OTHER POLICIES AND RISKS 12
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MANAGEMENT OF THE FUNDS
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The Adviser 13
The Sub-Advisers 13
YOUR INVESTMENT
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Buying Shares 15
Selling Shares 17
Exchange or Transfer of Shares 19
Shareholder Services 20
DISTRIBUTIONS AND TAXES 20
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ADDITIONAL INFORMATION Outside Back Cover
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THE FUNDS
---------
The New Covenant Funds have been organized with participation from the
Presbyterian Church (U.S.A.) Foundation to facilitate responsible financial
management of the investment and endowment assets of the Presbyterian Church
(U.S.A.) and of charitable organizations which are part of or associated with
the Presbyterian Church (U.S.A.). The Foundation is a charitable, religious
organization that supports the mission of the Presbyterian Church (U.S.A.). The
Funds may also serve the investment needs of certain other charitable or
religious organizations, including organizations that are part of a religious
denomination with which the Presbyterian Church (U.S.A.) has a relationship. The
investment needs of other ecumenical and charitable organizations may also be
met. Shares of the Funds may also be purchased by investors other than religious
or charitable organizations. There are currently four separate investment
portfolios, or Funds, in which you may invest.
In addition to each Fund's objectives and strategies, each of the Funds has the
common objective of making investments consistent with social-witness principles
adopted by the General Assembly of the Presbyterian Church (U.S.A). These
principles include, among others, certain limitations on investments in military
contractors, distillers of alcoholic beverages, tobacco companies, gambling
companies or manufacturers of gambling equipment. The Funds may choose to sell
otherwise profitable investments in companies which have been identified as
being in conflict with the established social-witness principles of the
Presbyterian Church (U.S.A.). Beyond these principles, each Fund pursues
different investment objectives and strategies. You should carefully consider
these objectives and strategies before deciding to invest.
A DESCRIPTION OF EACH FUND
---------------------------
NEW COVENANT GROWTH FUND
------------------------
INVESTMENT OBJECTIVE
- ---------------------
The GROWTH FUND'S investment objective is long-term capital
appreciation. Dividend income, if any, will be incidental.
PRINCIPAL STRATEGIES
- ---------------------
Under normal market conditions, at least 80% of the Fund's
assets will be invested in a diversified portfolio of common
stocks of companies that the Fund's portfolio managers believe
have long-term growth potential.
The Fund makes investment decisions consistent with
social-witness principles approved by the General Assembly of
the Presbyterian Church (U.S.A.). Therefore, the Fund may
choose not to
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purchase, sell, or retain investments otherwise consistent
with its investment objective.
The Fund invests in common stocks and other equity securities
of companies of all sizes, domestic and foreign. The Fund
generally invests in larger companies, although it may
purchase companies of any size, including small-size
companies. Up to 40% of the Fund's assets may be invested in
securities of foreign issuers in any country, and in developed
or emerging markets. Foreign securities are selected on a
stock-by-stock basis without regard to any defined allocation
among countries or geographic regions. The Fund may use
options and futures contracts to hedge against unforeseen
changes in currency exchange rates.
The Adviser seeks to enhance performance and reduce market
risk by strategically allocating the Fund's assets among
multiple sub-advisers. The allocation is made based on the
Adviser's desire for balance among differing investment styles
and philosophies offered by the sub-advisers.
In selecting stocks, both domestic and foreign, the portfolio
managers search for stocks that are the best values based on
fundamental and cash-flow analyses. This means that the
portfolio managers believe that the stocks are reasonably
priced and have above-average appreciation potential. The
portfolio managers generally seek to manage risk by
diversifying investments across companies, industries,
countries and investment strategies.
On occasion, up to 20% of the Fund's assets may be invested in
bonds which are rated within the four highest grades assigned
by independent rating agencies, or in unrated equivalents
(investment grade), or in commercial paper within the two
highest rating categories of independent rating agencies.
The remainder of the Fund's assets may be invested in cash or
cash equivalents.
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NEW COVENANT INCOME FUND
------------------------
INVESTMENT OBJECTIVE
- --------------------
The INCOME FUND'S investment objective is a high level of current
income with preservation of capital.
PRINCIPAL STRATEGIES
- --------------------
Under normal market conditions, at least 80% of the Fund's assets will
be invested in a diversified portfolio of bonds and other debt
obligations of varying maturities.
The Fund makes investment decisions consistent with social-witness
principles approved by the General Assembly of the Presbyterian Church
(U.S.A.). Therefore, the Fund may choose not to purchase, sell or
retain investments otherwise consistent with its investment objective.
The Fund invests in corporate and government bonds issued or guaranteed
by the U.S. Government or one of its agencies and, to a lesser extent,
by foreign governments. The Fund may also invest, to a lesser extent,
in mortgage-backed and asset-backed securities. The corporate bonds in
which the Fund invests have been issued by domestic and international
companies that operate in a wide variety of industries.
At least 65% of the Fund's assets will be invested in bonds which are
rated within the four highest grades assigned by independent rating
agencies, and attempts to maintain an overall quality rating of AA or
higher. The Fund may invest in unrated equivalents which may be
considered to be investment grade. The Fund may invest up to 20% of its
assets in bonds that are rated below investment grade.
On occasion, up to 20% of the Fund's assets may be invested in
commercial paper within the two highest rating categories of
independent rating agencies. The Fund may also invest up to 40% of its
assets in the fixed-income securities of foreign issuers in any country
and in developed or emerging markets. Foreign securities are selected
on an individual basis without regard to any defined allocation among
countries or geographic regions.
The Fund's average dollar-weighted maturity is expected to be
approximately 9 years. The Fund may invest in securities of any
maturity, but expects its average maturity to range from 4 years to 12
years. A bond's duration indicates the time it will take an investor to
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recoup his investment. Duration weights all potential cash flows
(principal, interest and reinvestment income) on an expected
present-value basis to determine the "effective life" of a fixed-income
security. Duration is sensitive to interest rates. For example, if
interest rates rise 1%, a bond with a duration of 3 years will go down
3%. Maturity takes into account only the final principal payment to
determine the risk of a particular bond.
Investments for the Fund, both foreign and domestic, will be selected
based on:
- the use of interest-rate and yield-curve analyses. Yield-curve
analysis examines the level of interest rates at different
bond maturities, and the shape of the curve as determined by
Federal Reserve policy, inflation concerns and supply/demand
conditions.
- the use of credit analyses which indicate a security's rating
and potential for appreciation
- use of the above disciplines to invest in high-yield bonds and
fixed-income securities issued by foreign and domestic
governments and companies
The remainder of the Fund's assets may be invested in cash or cash equivalents.
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NEW COVENANT BALANCED GROWTH FUND
---------------------------------
INVESTMENT OBJECTIVE
- --------------------
The BALANCED GROWTH FUND'S investment objective is to produce capital
appreciation with less risk than would be present in a portfolio of
only common stocks.
PRINCIPAL STRATEGIES
- --------------------
To pursue its objective, the Fund invests primarily in shares of the
GROWTH FUND and the INCOME FUND, with a majority of its assets
generally invested in shares of the GROWTH FUND. These are referred to
as the "underlying funds".
Between 45% and 75% of the Fund's assets (with a "neutral" position of
approximately 60%) are invested in shares of the GROWTH FUND, with the
balance of its assets invested in shares of the INCOME FUND.
The Fund will periodically rebalance its investments in the GROWTH FUND
and the INCOME FUND, within the limits described above. In implementing
this rebalancing strategy, past and anticipated future performance of
both Funds is taken into account. The allocation of investments made in
the GROWTH FUND and INCOME FUND varies in response to market
conditions, investment outlooks, and risk/reward characteristics of
equity and fixed-income securities.
The Fund makes investment decisions consistent with social-witness
principles approved by the General Assembly of the Presbyterian Church
(U.S.A.). Therefore, the Fund may choose not to purchase, sell or
retain investments otherwise consistent with its investment objective.
The remainder of the Fund's assets may be invested in cash or cash
equivalents.
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NEW COVENANT BALANCED INCOME FUND
---------------------------------
INVESTMENT OBJECTIVE
- --------------------
The BALANCED INCOME FUND'S investment objective is to produce current
income and long-term growth of capital.
PRINCIPAL STRATEGIES
- --------------------
To pursue its objective, the Fund invests primarily in shares of the
GROWTH FUND and the INCOME FUND, with a majority of its assets
generally invested in shares of the INCOME FUND. These are referred to
as the "underlying funds".
Between 50% and 80% of the Fund's assets (with a "neutral" position of
approximately 65%) are invested in shares of the INCOME FUND, with the
balance of its assets invested in shares of the GROWTH FUND.
The Fund will periodically rebalance its investments in the GROWTH FUND
and the INCOME FUND, within the limits described above. In implementing
this rebalancing strategy, past and anticipated future performance of
both Funds is taken into account. The allocation of investments made in
the GROWTH FUND and INCOME FUND varies in response to market
conditions, investment outlooks, and risk/reward characteristics of
equity and fixed-income securities.
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The Fund makes investment decisions consistent with social-witness
principles approved by the General Assembly of the Presbyterian Church
(U.S.A.). Therefore, the Fund may choose not to purchase, sell or
retain investments otherwise consistent with its investment objective.
The remainder of the Fund's assets may be invested in cash or cash
equivalents.
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PRINCIPAL RISKS AND INVESTOR SUTIABILITY
GROWTH FUND
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PRINCIPAL RISKS
- ---------------
The following are principal risks associated with the GROWTH FUND. A more
complete description of these risks follows this section.
- Stock Market Risk
- Small Company Risk
- Foreign Securities Risk
- Emerging Markets Risk
- Interest Rate Risk
- Credit Risk
- Call Risk
- Options and Futures Risks
INVESTOR SUITABILITY
- ---------------------
The GROWTH FUND may be appropriate for investors who:
- prefer a fund that uses an appreciation-oriented strategy
- can accept the risks of investing in a portfolio of common
stocks
- can tolerate performance which can vary substantially from
year to year
- have a long-term investment horizon
The GROWTH FUND probably will not be suitable for you if you have a short-term
investment horizon, are investing emergency reserve money, are seeking ordinary
dividend and interest income, or find it difficult to deal with an investment
that may go up and down in value.
INCOME FUND
-----------
PRINCIPAL RISKS
- ---------------
The following are principal risks associated with the INCOME FUND. A more
complete description of these risks follows this section.
- Interest Rate Risk
- Credit Risk
- Prepayment Risk
- Call Risk
- Foreign Securities Risk
- Options and Futures Risks
INVESTOR SUITABILITY
- --------------------
The INCOME FUND may be appropriate for investors who:
- Prefer a bond fund that invests in both corporate and U.S.
Government securities
- Desire income to complement a portfolio of more aggressive
investments
- Can tolerate performance which may vary from year to year
- Prefer a relatively conservative investment for income
The INCOME FUND probably will not be suitable for you if you have a short-term
investment horizon, are investing emergency reserve money, or are seeking high
growth or maximum investment return.
BALANCED GROWTH FUND
--------------------
PRINCIPAL RISKS
- ---------------
The following are principal risks associated with the BALANCED GROWTH
FUND. A more complete description of these risks follows this section.
- Stock Market Risk
- Small Company Risk
- Foreign Securities Risk
- Emerging Markets Risk
- Interest Rate Risk
- Credit Risk
- Prepayment Risk
- Call Risk
- Options and Futures Risks
- Rebalancing Risk
INVESTOR SUITABILITY
- --------------------
The BALANCED GROWTH FUND may be appropriate for you if you:
- prefer a balanced investment program which allocates assets
between growth and income portfolios, with an emphasis on growth
- can tolerate the level of risk represented by the common stock
portion of the portfolio allocation
- can tolerate performance which will vary from year to year
- have a longer-term investment horizon
The BALANCED GROWTH FUND probably will not be suitable for you if you have a
short-term investment horizon, are investing emergency reserve money, desire
only income or prefer to avoid an investment that may go up and down in value.
BALANCED INCOME FUND
--------------------
PRINCIPAL RISKS
- ---------------
The following are principal risks associated with the BALANCED INCOME FUND. A
more complete description of these risks follows this section.
- Interest Rate Risk
- Credit Risk
- Call Risk
- Prepayment Risk
- Foreign Securities Risk
- Options and Futures Risks
- Stock Market Risk
- Small Company Risk
- Rebalancing Risk
INVESTOR SUITABILITY
- --------------------
The BALANCED INCOME FUND may be appropriate for you if you:
- prefer a balanced investment program which allocates assets
between growth and income portfolios, with an emphasis on
income
- prefer that half or more of the portfolio be
fixed-income-producing securities
- can tolerate performance which will vary from year to year
- have a longer-term investment horizon
The BALANCED INCOME FUND probably will not be suitable for you if you have a
short-term investment horizon, are investing emergency reserve money, require
only growth or prefer to avoid an investment that may go up and down in value.
DESCRIPTION OF RISKS
- --------------------
All investments involve some type and level of risk. Risk is the possibility
that you will lose money or not make any additional money by investing in the
Funds. The Funds cannot be certain that they will achieve their investment
objectives. An investment in any of the Funds is not a deposit with the Funds'
investment adviser, New Covenant Trust Company, N.A. (the "Adviser") and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Before you invest, please make sure that you have read and
understand the risk factors that apply to the specific Fund in which you are
investing.
For all Funds, there is the risk that the Funds will underperform other similar
mutual funds that do not consider social-witness principles in their investing.
The following are the risks associated with an investment in the Funds.
STOCK MARKET RISK
Stock market risk is the risk that the prices of securities held by a Fund will
fall due to various conditions or circumstances that may be unpredictable. Stock
prices generally fall or stagnate when interest rates rise. Stock prices in
general rise and fall as a result of investors' perceptions of the market as a
whole.
SMALL-COMPANY RISK
Small companies may have limited product lines, markets or financial resources.
Their securities may trade less frequently and in more limited volume than
securities of larger, more established companies. The prices of small-company
stocks tend to rise and fall in value more than other stocks.
FOREIGN-SECURITIES RISK
The performance of a Fund's investments in non-U.S. companies and in companies
operating internationally or in foreign countries will depend principally on
economic conditions in their product markets, the securities markets where their
securities are traded, and on currency exchange rates. These risks are present
because of uncertainty in future exchange rates back into U.S. dollars, and
possible political instability which could affect foreign financial markets and
local economies. There are also risks related to social and economic
developments abroad, as well as risks resulting from the differences between the
regulations to which U.S. and foreign issuers and markets are subject. The
conversion in 1999 of various European currencies into a single "euro" currency
also presents a risk on the timing of interest and principal payments.
EMERGING-MARKETS RISK
Emerging-markets securities bear all foreign securities risks discussed above.
In addition, there are greater risks involved in investing in emerging markets
than in developed foreign markets. Emerging-market countries may have less
developed legal structures and political systems, and the small size of their
securities markets and low trading volumes can make investments illiquid and
more volatile than investments in developed countries.
INTEREST-RATE RISK
Interest-rate risk is the risk that prices for fixed-income securities will fall
as a result of upward changes in interest rates. The market value of bonds
generally declines when interest rates rise. This risk is greater for bonds with
longer maturities.
CREDIT RISK
Credit risk is the risk that an issuer of a fixed-income security may default on
a security by failing to pay interest or principal when due.
CALL RISK
Call risk exists when an issuer may exercise its rights to pay principal on a
bond earlier than scheduled. This typically results when interest rates have
declined, and the Fund will suffer from having to reinvest in lower-yielding
bonds.
PREPAYMENT RISK
Prepayment risk applies when a Fund invests in mortgage-backed securities.
Prepayment risk relates to mortgages being prepaid at a rate different than
projected. The Fund may then be forced to invest the proceeds from prepaid
mortgage-backed securities at lower prevailing rates when interest rates are
falling, or prevented from investing at higher rates if prepayments are slow
when interest rates are rising.
OPTIONS AND FUTURES RISKS
The Funds may use futures and options on futures for hedging purposes only. The
hedging strategy may not be successful if the portfolio manager is unable to
accurately predict movements in the prices of individual securities held by the
Funds or if the strategy does not correlate well with the Fund's investments.
The use of futures and options on futures may produce a loss for the Fund, even
when used only for hedging purposes. The risks associated with options and
futures include possible default by the other party to the transaction,
illiquidity and the risk that the use of options and futures could result in
losses greater than if they had not been used.
PUT AND CALL OPTION RISKS
The value of call options tends to increase or decrease in the same direction as
the price change of the securities underlying them, and the value of put options
tends to increase or decrease in the opposite direction as the price change of
the securities underlying them. However, because these options can be purchased
for a fraction of the cost of the underlying securities, their price changes can
be very large in relation to the amount invested in them. This means that
options are volatile investments. As a result, options are riskier investments
than the securities underlying them.
REBALANCING RISK
The Balanced Growth Fund and the Balanced Income Fund are subject to rebalancing
risk. Rebalancing activities, while undertaken to maintain the Fund's investment
risk-to-reward ratio, may cause the Fund to underperform other funds with
similar investment objectives. For the Balanced Growth Fund, it is possible
after rebalancing from equities into a greater percentage of fixed-income
securities, that equities will outperform fixed-income investments. For the
Balanced Income Fund, it is possible that after rebalancing from fixed-income
securities into a greater percentage of equity securities, that fixed-income
securities will outperform equity investments. The performance of the Balanced
Growth Fund and the Balanced Income Fund depends on the performance of the
underlying funds in which it invests.
10a
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PERFORMANCE
-----------
PERFORMANCE OF THE FUNDS
- ------------------------
Although past performance of a fund is no guarantee of how it will perform in
the future, historical performance may give you some indication of the risks of
investing in a fund. Performance demonstrates how a fund's returns have varied
over time. The Funds are recently organized as registered investment companies
and have no performance history as registered investment companies. Once the
Funds have returns for at least one calendar year as registered investment
companies, the Funds will have bar charts and performance tables showing their
annual returns compared to the returns of benchmark indexes.
PAST PERFORMANCE
- ----------------
Set forth below is certain past performance information for four
privately-managed investment pools that were previously managed by the
Presbyterian Church (U.S.A.) Foundation (the predecessor investment entity to
the Adviser), each of whose assets were transferred to their corresponding Fund
upon the establishment of the Funds. These private pools had investment
objectives and policies in all material respects equivalent to those of the
Funds and were managed subject to the same "manager of managers" investment
style that is utilized by the Funds. These private pools were not subject to the
requirements of the Investment Company Act of 1940 or the Internal Revenue Code
of 1986, the limitations of which might have adversely affected performance
results. The prior performance depicted has been restated to reflect the
imposition of the total estimated expenses of the Funds for their initial fiscal
year rather than the actual expenses of the private pools. Past performance is
not indicative of future results, which may be higher or lower than the
performance shown below.
Bar Chart and Performance Tables
The following bar charts and performance tables provide some indication of the
risks of investing in a Fund by showing changes in the performance of the four
private pools. Annual returns for the private pools are shown for each calendar
year and average annual returns are compared with those of a broad measure of
market performance. Both tables assume reinvestment of dividends and
distributions.
[Insert Bar Chart for Growth Pool]
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-10.4 +23.6 +3.1 +13.5 +0.8 +27.7 +19.5 +19.1 +11.3
</TABLE>
During the nine year period ending December 31, 1998, the highest return for a
quarter was 17.71% for the quarter ended December 31, 1998 and the lowest
return for a quarter was -14.98% for the quarter ended September 30, 1998. The
year to date total return as of June 30, 1999 was ____%.
Performance Table for the Growth Pool
-------------------------------------
Average Annual Total Returns as of December 31, 1998
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<PAGE> 13
<TABLE>
<CAPTION>
One Year Five Years Life of Fund(3)
-------- ---------- ---------------
<S> <C> <C> <C>
Growth Pool(1) +11.28% +15.30% +11.16%
Wilshire 5000 Equity
Index (2) +23.43% +21.78% +16.49%
</TABLE>
(1) The Growth Pool was managed in the same manner that the Growth Fund is
managed.
(2) The Wilshire 5000 Equity Index is an unmanaged index representing over 5,000
companies that are traded on various U.S. securities exchanges.
(3) For the period beginning on September 30, 1989 and ending on December 31,
1998.
[Insert Bar Chart for Income Pool]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
+14.8 +8.8 +15.8 +6.3 +12.3 -5.8 +17.2 +4.1 +9.1 +6.7
</TABLE>
During the ten year period ending December 31, 1998, the highest return for a
quarter was +7.17% for the quarter ended June 30, 1989 and the lowest return
for a quarter was -4.48% for the quarter ended March 31, 1994. The year to date
total return as of June 30, 1999 was _____%.
Performance Table for the Income Pool
-------------------------------------
Average Annual Total Returns as of December 31, 1998
<TABLE>
<CAPTION>
One Year Five Years Ten Years
-------- ---------- ---------
<S> <C> <C> <C>
Income Pool(1) +6.65% +5.98% +8.72%
Lehman Brothers
Government/Corporate
Bond Index(2) +9.47% +7.30% +9.33%
</TABLE>
(1) The Income Pool was managed in the same manner that the Income Fund is
managed.
(2) The Lehman Brothers Government/Corporate Bond Index is an unmanaged index,
generally representative of the fixed-income market.
[Insert Bar Chart for Balanced Growth Pool]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
+18.4% -1.6% +20.3% +3.6% +12.0% -1.9% +22.6% +13.9% +15.4% +10.2%
</TABLE>
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<PAGE> 14
During the ten year period ending December 31, 1998, the highest return for a
quarter was 10.48% for the quarter ended December 31, 1998 and the lowest
return for a quarter was -8.06% for the quarter ended September 30, 1990. The
year to date total return as of June 30, 1999 was _____%.
Performance Table for the Balanced Growth Pool
----------------------------------------------
Average Annual Total Returns as of December 31, 1998
<TABLE>
<CAPTION>
One Year Five Years Ten Years
-------- ---------- ---------
<S> <C> <C> <C>
Balanced Growth Pool(1) +10.21% +11.74% +10.97%
Wilshire 5000 Equity Index +23.43% +21.78% +18.11%
Lehman Brothers
Government/Corporate
Bond Index + 9.47% + 7.30% +9.33%
Balanced Growth
Composite Index (2) +17.85% +15.98% +14.60%
</TABLE>
(1) The Balanced Growth Pool was managed in the same manner that the Balanced
Growth Fund is managed.
(2) The Balanced Growth Composite Index is a composite weighted 60% Wilshire
5000 Equity Index and 40% Lehman Brothers Government/Corporate Bond Index.
[Insert Bart Chart for Balanced Income Pool]
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
+2.0% +19.8% +5.1% +12.8% -3.7% +20.6% +9.8% +12.5% +8.7%
</TABLE>
During the nine year period ending December 31, 1998, the highest return for a
quarter was 7.12% for the quarter ended June 30, 1997 and the lowest return for
a quarter was -4.49% for the quarter ended September 30, 1990. The year to date
total return as of June 30, 1999 was _____%.
Performance Table for the Balanced Income Pool
----------------------------------------------
Average Annual Total Returns as of December 31, 1998
<TABLE>
<CAPTION>
One Year Five Years Life of Fund(3)
-------- ---------- ---------------
<S> <C> <C> <C>
Balanced Income Pool(1) + 8.71% + 9.28% + 9.49%
Lehman Brothers
Government/Corporate
Bond Index + 9.47% + 7.30% + 8.96%
</TABLE>
-13-
<PAGE> 15
<TABLE>
<S> <C> <C> <C>
Wilshire 5000 Equity Index +23.43% +21.78% +16.49%
Balanced Income
Composite Index (2) +14.36% +12.37% +11.59%
</TABLE>
(1) The Balanced Income Pool was managed in the same manner that the Balanced
Income Fund is managed.
(2) The Balanced Income Composite Index is a composite weighted 65% Lehman
Brothers Government/Corporate Bond Index and 35% Wilshire 5000 Equity Index.
(3) For the period beginning on September 30, 1989 and ending on December 31,
1998.
FEES AND EXPENSES OF THE FUNDS
------------------------------
This section describes the fees and expenses that you may pay if you buy and
hold shares of the Funds. Shareholder fees are costs that are charged to you
directly. These fees are not charged on dividend reinvestments or exchanges.
Annual fund operating expenses are deducted from the Funds' assets every year,
so they are paid indirectly by all investors.
The Funds have no sales charge (load).
SHAREHOLDER FEES - ALL FUNDS (fees paid directly from your investment)
- ----------------------------
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)...................None
Maximum Deferred Sales Load (as a
percentage of offering price).........................None
Maximum Sales Load on reinvested dividends
(as a percentage of offering price)...................None
Redemption Fees (1)...................................None
Exchange Fee..........................................None
Maximum Account Fee...................................None
(1) To redeem shares by wire transfer, the Funds' transfer agent charges a fee
of $9.00 for each wire redemption.
ANNUAL FUND OPERATING EXPENSES - ALL FUNDS (expenses that are deducted from Fund
assets)
<TABLE>
<CAPTION>
MANAGEMENT DISTRIBUTION OTHER TOTAL ANNUAL
FUND NAME FEES (12b-1) FEES EXPENSES (2) OPERATING EXPENSES
- ---------- ---------- ---------- ------------ -----------------
<S> <C> <C> <C> <C>
GROWTH FUND 0.99% None 0.10% 1.09%
</TABLE>
-14-
<PAGE> 16
<TABLE>
<S> <C> <C> <C> <C>
INCOME FUND 0.75% None 0.10% 0.85%
BALANCED GROWTH
FUND (1) None None 0.12% 1.11%
BALANCED INCOME
FUND (1) None None 0.12% 1.05%
</TABLE>
(1) The BALANCED FUNDS invest their assets primarily in the GROWTH FUND and the
INCOME FUND. By investing primarily in shares of these Funds, shareholders of
the BALANCED FUNDS indirectly pay a portion of the operating expenses,
management expenses and brokerage costs of the underlying Funds as well as their
own operating expenses. Thus, shareholders of the BALANCED FUNDS may indirectly
pay slightly higher total operating expenses and other costs than they would pay
by directly owning shares of the GROWTH FUND and INCOME FUND. The fees and
expenses included in this table for the two BALANCED FUNDS include both (a)
their own respective fees and expenses, and (b) their respective pro-rata share
of the fees and expenses of the Funds in which each BALANCED FUND invests while
in a "neutral" position. Total fees and expenses to be borne by investors in
either BALANCED FUND will depend on the portion of the Funds' assets invested in
the GROWTH FUND and in the INCOME FUND. The amounts reported in the table are
based on the BALANCED GROWTH FUND'S targeted asset allocation of 60% invested in
the GROWTH FUND and 40% invested in the INCOME FUND, and on the BALANCED INCOME
FUND'S targeted asset allocation of 65% in the INCOME FUND and 35% in the GROWTH
FUND. Within limits, these asset allocations will change. A change in the asset
allocation of either BALANCED FUND could increase or reduce the fees and
expenses actually borne by investors in that Fund.
(2) "Other Expenses" is based on estimated amounts for the first fiscal year.
EXAMPLE
- --------
This example is designed so that you may compare the cost of investing in the
Funds with the cost of investing in other mutual funds. The example assumes
that:
- you invest $10,000 for the time periods indicated;
- you redeem all of your shares at the end of the time periods;
- your investment has a hypothetical 5% return each year;
- all distributions are reinvested; and
- each Fund's operating expenses remain the same.
Because actual return and expenses will be different, the example is for
comparison purposes only. Each Fund's actual performance and expenses may be
higher or lower. Based on the above assumptions, your costs for each Fund would
be:
<TABLE>
<CAPTION>
FUND NAME 1 YEAR 3 YEARS
--------- ------ -------
<S> <C> <C>
GROWTH FUND $111 $347
INCOME FUND $ 87 $271
BALANCED GROWTH FUND $113 $353
BALANCED INCOME FUND $107 $334
</TABLE>
-15-
<PAGE> 17
RISK MANAGEMENT
- ---------------
The GROWTH FUND and the INCOME FUND have a number of non-fundamental policies
and procedures intended to reduce the risks borne by their investors. These
policies and procedures should also reduce the risks borne by investors in the
BALANCED
-17-
<PAGE> 18
FUNDS because they invest exclusively in shares of the GROWTH FUND and
the INCOME FUND.
- Each Fund invests principally in U.S. issuers, but also may
invest in geographically diverse foreign and international
companies. This policy may reduce the effect on the Fund of
adverse events affecting particular nations or regions. If a
Fund holds a position in securities priced in non-U.S.
currency, it may engage in hedging transactions to reduce
currency risk.
- When market conditions threatening a Fund's ability to achieve
its investment objectives appear imminent, the Fund may take
temporary defensive positions designed to reduce risk, even
though these temporary positions are inconsistent with the
Fund's customary strategies. The GROWTH FUND may increase its
bond and cash-equivalent holdings, and the INCOME FUND may
increase its cash-equivalent holdings.
- Within each Fund, each Sub-Adviser pursues the Fund's
objective through its own investment strategy. Since any
investment strategy has its own strengths and weaknesses,
depending on market conditions, the use of multiple strategies
should reduce the effect of changing market conditions on Fund
performance.
OTHER POLICIES AND RISKS
------------------------
Each Fund's investment objective is fundamental, which means that it may not be
changed without a shareholder vote. All investment policies of each Fund which
are not specifically identified as fundamental may be changed by the Board of
Trustees without approval of Fund shareholders.
Each of the Fund's portfolio securities and investment practices offers certain
opportunities and carries various risks. Major investments and risk factors are
outlined in the front of the Prospectus. Below are brief descriptions of other
securities and practices, along with their risks, which apply to the GROWTH FUND
and the INCOME FUND.
SOCIAL-WITNESS PRINCIPLES: Since the Funds have made investing in accordance
with social-witness principles approved by the General Assembly of the
Presbyterian Church (U.S.A.) one of their investment policies, they may choose
not to make, or to divest, investments otherwise consistent with their
individual investment objectives. This means that there is a risk that the Funds
may under-perform other similar mutual funds that do not consider social-witness
principles in their investing.
INVESTMENT TECHNIQUES: To a limited extent, the GROWTH FUND and the INCOME FUND
may engage in securities lending arrangements, enter into repurchase agreements,
and may hold certain derivative securities, principally put and call options,
for hedging purposes. The Funds pursue these activities to reduce volatility,
lower costs, and to seek to marginally increase their investment returns, but
these activities also marginally increase the Funds' risks.
PUT AND CALL OPTIONS: A call or put may be purchased only if, after the
purchase, the value of all call and put options held by a Fund will not exceed
20% of the Fund's total assets.
-18-
<PAGE> 19
WHEN-ISSUED SECURITIES: The Funds may invest in securities prior to their date
of issue. These securities could rise or fall in value by the time they are
actually issued, which may be any time from a few days to over a year.
REPURCHASE AGREEMENTS: The Funds may buy securities with the understanding that
the seller will buy them back with interest at a later date. If the seller is
unable to honor its commitment to repurchase the securities, the Funds could
lose money.
MORTGAGE-BACKED SECURITIES: These securities, which represent interests in pools
of mortgages, may offer attractive yields but generally carry additional risks.
The prices and yields of mortgage-related securities typically assume that the
securities will be redeemed at a given time before maturity. When interest rates
fall substantially, these securities usually are redeemed early because the
underlying mortgages are often prepaid. The Fund would then have to reinvest the
money at a lower rate.
ASSET-BACKED SECURITIES: These securities represent interests in pools of debt
such as credit-card accounts. The principal risks of asset-backed securities are
that on the underlying obligations, payments may be made more slowly, and rates
of default may be higher than expected. In addition, because some of these
securities are new or complex, unanticipated problems may affect their value or
liquidity.
REITS: Equity REITs invest directly in real property, while mortgage REITs
invest in mortgages on real property. REITs may be subject to certain risks
associated with the direct ownership of real estate, including declines in the
value of real estate, risks related to general and local economic conditions,
overbuilding and increased competition, increases in property taxes, and
variations in rental income. Equity REITs may be affected by changes in the
value of the underlying property owned by the trusts, while mortgage REITs may
be affected by the quality of credit extended. REITs may have limited financial
resources, may trade less frequently and in limited volume and may be subject to
more abrupt or erratic price movements than larger-company securities.
INVESTMENT GRADE SECURITIES: There are four categories that are referred to as
investment grade. These are the four highest ratings or categories as defined by
Moody's Investors Service, Inc. and Standard & Poor's Corporation. Securities in
the fourth investment grade are considered to have speculative characteristics.
NON-INVESTMENT GRADE SECURITIES: The INCOME FUND may invest in securities rated
below investment grade. These securities, while generally offering higher yields
than investment grade securities with similar maturities, involve greater risks,
including the possibility of default or bankruptcy. They are regarded as
speculative with respect to the issuer's capacity to pay interest and to repay
principal. The market values of these securities may be more sensitive to
individual corporate developments and changes in economic conditions than
higher-quality securities. In addition, lower-rated securities tend to be less
marketable than higher-quality securities because the market for them may not be
as broad or active. The lack of a liquid secondary market may have an adverse
effect on market price and the Fund's ability to sell particular securities
rated below investment grade.
ILLIQUID SECURITIES: Each Fund may invest up to 15% of its net assets in
illiquid investments. An illiquid investment is a security or other position
that cannot be disposed of quickly in the normal course of business (generally
within seven days). The Funds' percentage limitation on these investments does
not apply to certain restricted securities that are eligible for resale to
qualified institutional purchasers.
-19-
<PAGE> 20
DEFENSIVE INVESTING: The Funds may, from time to time, take temporary defensive
positions that are inconsistent with each Fund's principal investment strategies
in an attempt to respond to adverse market, economic, political or other
conditions. When a Fund takes a temporary defensive position, it may not achieve
its stated investment objective. A principal defensive investment position would
be the purchase of cash equivalents.
YEAR 2000 ISSUES: Like all mutual funds, the Funds' operations depend on the
seamless functioning of computer systems in the financial services industry,
including those of their Adviser (and Sub-Advisers), their custodian, fund
accounting agent, and transfer agent. The failure of computer systems to
properly process data containing dates occurring after December 31, 1999
(because of the method by which dates are encoded) could adversely affect the
handling of securities trades, pricing and account servicing for the Funds. The
Funds' Adviser and other service providers have advised the Funds that they are
taking steps they believe are reasonably designed to address the year 2000
problem. The Funds do not believe that the year 2000 problem will have a
material adverse impact on their operations or on their investors.
INVESTMENTS IN OTHER INVESTMENT COMPANIES: The BALANCED GROWTH FUND and BALANCED
INCOME FUND, by investing primarily in shares of the GROWTH FUND and the INCOME
FUND, indirectly pay a portion of the operating expenses, management expenses
and brokerage costs of such companies as well as their own operating expenses.
Thus, shareholders of the BALANCED GROWTH FUND and BALANCED INCOME FUND may
indirectly pay slightly higher total operating expenses and other costs than
they would pay by owning shares of the underlying funds directly. The GROWTH
FUND and INCOME FUND may invest in shares of other investment companies, subject
to certain provisions of federal securities laws.
MANAGEMENT OF THE FUNDS
-----------------------
THE ADVISER
- ------------
The Funds' investment adviser, New Covenant Trust Company, N.A., 200 East
Twelfth Street, Suite B, Jeffersonville, Indiana 47130, is a national trust bank
which received its federal charter in 1998. Although the Adviser has no prior
experience in managing registered investment companies, it is a subsidiary of
the Presbyterian Church (U.S.A.) Foundation, founded in 1799, which for many
years has administered an investment program for institutions. The Adviser
provides certain investment advisory services that were previously offered by
the Foundation. All members of the Adviser's investment committee also serve on
the Presbyterian Church (U.S.A.) Foundation's investment committee.
The Adviser acts as a "manager of managers" for the Funds and selects and
retains various sub-advisers (the "Sub-Advisers") who manage portions of the
assets of the GROWTH FUND and the INCOME FUND that are allocated to them by the
Adviser. The Sub-Advisers employ portfolio managers to make the day-to-day
investment decisions regarding portfolio holdings of these Funds. The Adviser
oversees the investment activities and performance of the Sub-Advisers and it
maintains an investment committee that assists with this review process.
Under terms of the investment advisory agreements between the Adviser and each
Fund, the Adviser is responsible for formulating each Fund's investment
programs, subject to each Fund's fundamental policies. The GROWTH FUND and the
INCOME FUND pay the Adviser an annual advisory fee, payable monthly, based on
each Fund's average daily net assets. The fee is equal to 0.99% of the average
daily net
-20-
<PAGE> 21
assets in the GROWTH FUND and 0.75% of the average daily net assets in the
INCOME FUND. The advisory fees paid to the Adviser by these Funds is used to pay
the fees of the Sub-Advisers. The Adviser is not paid a management fee for the
BALANCED FUNDS.
The Adviser is responsible for allocating the assets of the GROWTH FUND and the
INCOME FUND among the Sub-Advisers, and for monitoring and evaluating the
investment programs and performance of the Sub-Advisers. The Adviser is also
responsible for periodically rebalancing the investments of the BALANCED FUNDS
between the GROWTH FUND and the INCOME FUND. The Adviser also furnishes
corporate offices, provides office space, services and equipment, and
supervises all matters relating to the Funds' investment activities. The fees
paid to the Sub-Advisers are paid directly by the Adviser and are not a further
expense of the Funds.
The Funds have applied to the Securities and Exchange Commission for an
exemptive order that would permit the Adviser, subject to approval by the Board
of Trustees, to engage and terminate Sub-Advisers without shareholder approval.
There is no assurance that the SEC will grant such exemptive order. In the event
the exemptive relief is granted, shareholders would receive information
regarding all changes in the Sub-Advisers and information about any new
Sub-Advisers selected. While shareholders would not be permitted to vote on the
selection of new Sub-Advisers, they would retain the right to vote on the
continuation of the Adviser.
THE SUB-ADVISERS
- -----------------
Each Sub-Adviser is responsible for the selection and management of portfolio
investments for its segment of a particular Fund on a day-to-day basis, in
accordance with that Fund's investment objectives and policies and under
supervision of the Adviser. Allocation of assets to each Sub-Adviser is at the
discretion of the Adviser. The Sub-Advisers place purchase and sell orders for
portfolio transactions in the Funds, subject to the general oversight of the
Adviser.
The following organizations act as Sub-Advisers to the noted Funds:
SUB-ADVISERS FOR THE GROWTH FUND
- ---------------------------------
WILLIAM BLAIR & COMPANY, L.L.C.
- --------------------------------
William Blair & Company, L.L.C., 222 West Adams Street, Chicago, Illinois 60606,
is a registered investment adviser founded in 1935. The firm serves individual
and institutional clients around the world, providing comprehensive financing,
brokerage, research, and investment advisory services. The firm focuses on
high-quality growth companies that are dominant in their industry and have
unique products, pricing flexibility, strong marketing and high-quality
management. The focus is on stock selection in five growth sectors: specialty
consumer, health care, applied technology, service and light cyclicals.
John P. Nicholas, Principal of the firm, is portfolio manager for the Fund. Mr.
Nicholas joined the firm in 1972 as a securities analyst. For thirteen years he
provided investment research on several mid-West growth companies and became a
leading analyst of the healthcare industry. In 1985, he joined the investment
management department and is currently one of the department's Senior Portfolio
Managers. Mr. Nicholas has an M.B.A. from Northwestern University Kellogg
Graduate School of Management, a B.B.A. from Loyola University and is a
Chartered Financial Analyst.
-21-
<PAGE> 22
JOHN W. BRISTOL & CO., INC.
- ---------------------------
John W. Bristol & Co., Inc., 233 Broadway, New York, New York 10279, was founded
in 1954 and is the successor to a firm which was organized in 1937 to become
investment adviser to the endowment funds of Princeton University and Swarthmore
College. The firm is owned by its employees and is an independent registered
investment adviser. Activity of the firm centers around tax-exempt portfolios,
with primary emphasis on the management of endowments and foundations.
Robert F. Coviello, Managing Director, is portfolio manager for the Fund. Mr.
Coviello worked for nine years as an analyst with U.S. and Foreign Securities,
New York, New York before joining John W. Bristol in 1983 as a Managing
Director. Mr. Coviello was previously an analyst with Citibank and Lazard
Freres. Mr. Coviello is a graduate of Columbia College, where he currently
serves as a member of its Board of Visitors. He also received an M.B.A. from
Columbia University in 1968.
CAPITAL GUARDIAN TRUST COMPANY
- -------------------------------
Capital Guardian Trust Company, 333 South Hope Street, Los Angeles, California
90071, is a state chartered bank which was founded in 1968. The parent company
is Capital Group International, Inc., which itself is wholly-owned by The
Capital Group Companies, Inc., an employee-owned organization. Capital
Guardian's approach to international investing follows a value-oriented,
research-driven process relying on extensive field research and direct company
contact. This basic fundamental approach is combined with the firm's
macroeconomic and political judgements on the outlook for economies, industries,
currencies and markets. Capital Guardian provides investment management services
to large institutional, corporate and individual clients.
The portion of the Fund's assets allocated to this Sub-Adviser is managed by a
team of portfolio managers, each of which has investment responsibility for a
portion of such assets.
CARL DOMINO ASSOCIATES, L.P.
- -----------------------------
Carl Domino Associates, L.P., 580 Village Boulevard, Suite 225, West Palm Beach,
Florida 33409, is a registered investment adviser founded in 1987. The firm is a
fundamental value investor, building defensive portfolios and providing total
return investment management. The strategy utilized by the firm attempts to
provide downside protection through the selection of stocks paying above-average
cash dividends. Carl Domino Associates, L.P. provides portfolio management
services to corporations, institutions, foundations, unions, public funds and
high net worth individuals.
Paul Scoville, Jr., a Partner of the firm, is portfolio manager for the Fund.
Mr. Scoville joined the firm in 1989 as a Senior Portfolio Manager and became a
Partner in 1992. He has managed mutual funds, pension funds and the assets of
high net worth individuals. Prior to joining Carl Domino, he was a Managing
Director and Senior Portfolio Manager with Criterion Investment Management in
Houston, Texas from 1984 to 1988. While at Criterion, he personally managed
equity funds in excess of $450 million. Mr. Scoville holds an undergraduate
degree from the University of Georgia and a law degree from Emory University.
-22-
<PAGE> 23
LAZARD ASSET MANAGEMENT
- ------------------------
Lazard Asset Management, 30 Rockefeller Plaza, New York, New York 10112, is a
registered investment adviser organized in 1970 and a division of Lazard Freres
& Co., LLC. Lazard Freres & Co., LLC originated in 1848 as a business that
became one of the first global investment banks. The firm provides financial
advisory services in asset management, investment banking, corporate finance and
real estate finance. Investment-management services are also provided by Lazard
Asset Management Limited, based in London, Lazard Japan Asset Management KK,
based in Tokyo, Lazard Asset Management Egypt, based in Cairo and Lazard Asset
Management Pacific Co., based in Sydney, Australia, all of which are controlled
by Lazard Asset Management in New York. Lazard also works closely with Lazard
Freres Gestion based in Paris. Investment research is undertaken on a global
basis utilizing global investment team members worldwide. Other Lazard entities
are located in Milan, Frankfurt, Singapore, Mumbai and Beijing. Lazard began
managing separate-account international equity portfolios in 1985 and global
equity portfolios in 1986.
Herbert W. Gullquist is a co-portfolio manager for the Fund. Mr. Gullquist is
Managing Director and Chief Investment Officer of Lazard Asset Management and a
Vice-Chairman of Lazard Freres & Co. LLC. He has 37 years of investment
experience. Prior to joining Lazard in 1982, Mr. Gullquist served as a General
Partner of Oppenheimer & Company, Inc. and as a Managing Director and the Chief
Investment Officer of Oppenheimer Capital Corp. from 1971 to 1982. He had
previously been Founder, Director and Senior Investment Officer of Stuyvesant
Asset Management from 1969 to 1971. Prior to that, he was with First National
Bank of Chicago as Vice President in charge of the discretionary pension fund
group. He has a B.A. from Northwestern University.
John R. Reinsberg is a co-portfolio manager for the Fund. Mr. Reinsberg has been
Managing Director from 1991 to the present. Mr. Reinsberg is responsible for
international/global equity management and overseeing the day-to-day operations
of Lazard's international equity investment team. He has seventeen years of
investment experience. Prior to joining Lazard in 1991, Mr. Reinsberg served as
Executive Vice President of General Electric Investment Corporation and Trustee
of the General Electric Pension Trust from 1982 to 1991. His other past
affiliations include Jardine Matheson Ltd. (Hong Kong) and Hill & Knowlton, Inc.
Mr. Reinsberg has an M.B.A. from Columbia University and a B.A. from the
University of Pennsylvania.
Michael S. Rome is a co-portfolio manager for the Fund. Mr. Rome has been
Managing Director from 1991 to the present. Mr. Rome is responsible for
U.S./global equity management and overseeing the day-to-day operations of the
U.S. core equity investment team. He has fifteen years of investment experience.
Prior to joining Lazard in 1991, Mr. Rome served as Senior Vice President with
Mark Partners from 1989 to 1990. Previously, Mr. Rome was Vice President of
Goldman, Sachs & Co. from 1982 to 1989. He has an M.B.A. from Cornell University
and a B.A. from the University of Rochester.
SENECA CAPITAL MANAGEMENT
- --------------------------
Seneca Capital Management, 909 Montgomery Street, Suite 500, San Francisco,
California 94133, is a registered investment adviser which was founded in 1989.
The firm conducts intensive fundamental analysis to select companies with strong
and sustainable earnings prospects. Disciplined portfolio construction limits
risk and reduces volatility. Seneca provides investment management services to
foundations, endowments, corporations, public funds and private clients.
-23-
<PAGE> 24
Gail P. Seneca, Ph.D., Chief Investment Officer and Managing Partner, is
portfolio manager for the Fund. Ms. Seneca has over seventeen years of
investment experience. Prior to founding Seneca Capital Management in 1989, Ms.
Seneca served as Senior Vice President of the Asset Management Division of Wells
Fargo Bank from 1987 to 1989, where she managed assets in excess of $10 billion.
Prior to that, Ms. Seneca was Vice President and chief investment strategist for
Chase Lincoln Bank from 1983 to 1987. Ms. Seneca earned a B.A., an M.A. and a
Ph.D. from New York University.
SUB-ADVISERS FOR THE INCOME FUND
- ---------------------------------
STANDISH, AYER & WOOD, INC
- --------------------------
Standish, Ayer & Wood, Inc., One Financial Center, Boston, Massachusetts 02111,
is a registered investment adviser founded in 1933. The firm provides investment
management services for institutions and high net worth individuals. Standish,
Ayer & Wood offers both domestic and global investment management services in
both separate accounts and mutual funds. The firm's approach to fixed-income
management is built on the belief that discovering pockets of inefficiency is
the key to adding value to fixed-income investments. Both fundamental and
quantitative analysis are employed to identify fixed-income opportunities.
Extensive research capabilities have been developed in less widely followed
segments of the fixed-income markets in the belief that there is more to be
gained by identifying securities with initial yield advantage and appreciation
potential than by predicting the direction of interest rates.
Austin C. Smith is Vice President, Treasurer and Director from 1981 to present.
Mr. Smith is portfolio manager for the portion of the Fund's assets invested in
investment-grade bonds. Mr. Smith has twenty-eight years of investment
management experience, with seventeen of those years at Standish. He is a
graduate of Denison University and Indiana University (M.A.) and is also a
Chartered Financial Analyst.
Dolores S. Driscoll is Managing Director and Co-Director of Taxable Bond
Research, from 1974 to the present. Ms. Driscoll is portfolio manager for the
portion of the Fund's assets invested in high-yield bonds. She has twenty-four
years of investment management experience, all at Standish. She is a graduate of
Indiana University and Boston University (M.B.A.) and is also a Chartered
Financial Analyst.
TATTERSALL ADVISORY GROUP, INC.
- -------------------------------
Tattersall Advisory Group, Inc., a wholly-owned subsidiary of First Union Bank,
Charlotte, North Carolina, is located at 6802 Paragon Place, Suite 200,
Richmond, Virginia 23230. Tattersall Advisory Group is a registered investment
adviser founded in 1997. Tattersall Advisory Group was formerly the fixed-income
division of Lowe, Brockenbrough & Tattersall, Inc. The firm employs a
traditional bond management style, using in-house interest-rate analysis,
yield-curve analysis, and extensive sector valuation to identify attractive risk
versus reward opportunities. The firm manages assets for corporate pension
plans, corporate cash and insurance reserves, foundations, endowments,
Taft-Hartley plans and public entities located throughout the country.
Tattersall Advisory Group incorporates a team management approach where the Fund
benefits from the expertise of each investment specialist.
Kevin D. Girts is lead portfolio manager for the Fund. Mr. Girts is Managing
Director of Tattersall Advisory Group (and predecessor corporation) since 1997.
-24-
<PAGE> 25
He was Director, Portfolio Management with Lowe, Brockenbrough & Tattersall,
Inc. (and predecessor corporation) from 1987 to 1997. Previously, Mr. Girts was
Vice President-Investments of Union National Bank from 1981 through 1987. Mr.
Girts holds a B.S. in business and an M.B.A. from West Virginia University.
YOUR INVESTMENT
---------------
BUYING SHARES
- --------------
FOR ASSISTANCE
- ---------------
Most development staff of the Presbyterian Church (U.S.A.) Foundation are
representatives of the Funds' distributor and can assist you in opening an
account. They can be reached (by telephone or by mail) at numerous development
offices throughout the country. For information about the nearest development
office to you, and to speak to a local registered representative of the Funds,
contact the offices of the Foundation at:
Presbyterian Church (U.S.A.) Foundation
200 East Twelfth Street
Jeffersonville, IN 47130
Tel. (877) 835-4531
You may also call or write the distributor for the Funds at:
First Data Distributors, Inc.
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903
(877) 835-4531
- ------------------
PURCHASE AMOUNTS:
- ------------------
MINIMUM INITIAL INVESTMENT FOR EACH FUND: $500
MINIMUM ADDITIONAL INVESTMENTS FOR EACH FUND: $100
- -------------------------------------------------------------------------------
TO OPEN AN ACCOUNT
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
BY MAIL
- -------------------------------------------------------------------------------
[S] [C]
- - Complete the account application form.
- - Mail the application and your check to:
New Covenant Funds
c/o First Data Investor Services Group
3200 Horizon Drive
-25-
<PAGE> 26
P.O. Box 61947
King of Prussia, PA 19406-0150
- - Please make your check payable to the name of the Fund you wish to
invest.
- - Please make sure your check is for at least $500.
- --------------------------------------------------------------------------------
BY WIRE
- --------------------------------------------------------------------------------
- - To make a same-day wire investment, call (877) 835-4531 by 4:00 p.m.
Eastern time. An account number will be assigned to you.
- - Call your bank with instructions to transmit funds to:
Boston Safe Deposit & Trust (BSDT)
ABA#: 011001234
Account#: 020907
Credit: Name of Fund
FBO: (Insert Shareholder name and account number)
- - Your bank may charge a wire fee.
- - Please make sure your wire is for at least $500.
- - Mail your completed application to First Data Investor Services Group at
the address under TO OPEN AN ACCOUNT - By Mail.
- -------------------------------------------------------------------------------
BY AUTOMATIC INVESTMENT
- -------------------------------------------------------------------------------
- - With an initial investment, indicate on your application that you would
like to participate in the Automatic Investment Plan and complete the
appropriate section on the application.
- - Subsequent investments will be drawn from your bank account and invested
into the Fund(s) automatically.
- -------------------------------------------------------------------------------
BY EXCHANGE
- -------------------------------------------------------------------------------
- - Call (877) 835-4531 to request an exchange of shares into another New
Covenant Fund. Your may also exchange your shares into New Covenant Money
Market Fund account, the Cash Account Trust Money Market Portfolio, which
is an unaffiliated, separately managed, money market mutual fund. This
exchange privilege is offered as a convenience to shareholders of New
Covenant Funds. For an exchange into the Cash Account Trust Money Market
Portfolio you must first receive a prospectus. The exchange privilege must
also be selected on your account application form. Shares of the Cash
Account Trust Money Market Portfolio may not be available in all states.
- - No fee or charge will apply for exchanges, but there may be a capital gain
or loss. The exchange privilege is subject to amendment or termination at
any time upon sixty days prior notice.
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<PAGE> 27
- -------------------------------------------------------------------------------
TO ADD TO AN ACCOUNT
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
BY MAIL
- -------------------------------------------------------------------------------
- - Fill out an investment slip from a previous confirmation and write your
account number on your check.
- - Mail the slip and your check to:
New Covenant Funds
c/o First Data Investor Services Group
211 S. Gulph Road
P.O. Box 61947
King of Prussia, PA 19406-0150
- - Please make your check payable to the name of the Fund in which you wish
to invest.
- - Please make sure your check is for at least $100.
- -------------------------------------------------------------------------------
BY WIRE
- -------------------------------------------------------------------------------
- - Call (877) 835-4531. The wire must be received by 4:00 p.m. Eastern time
for same day processing.
- - Call your bank with instructions under TO OPEN AN ACCOUNT - By Wire.
- - Your bank may charge a wire fee.
- - Please make sure your wire is for at least $100.
- -------------------------------------------------------------------------------
BY AUTOMATIC INVESTMENT
- -------------------------------------------------------------------------------
- - If you wish to add the Automatic Investment Plan after your account has
been opened, call (877) 835-4531 to request the form.
- - Complete and return the form along with any other required materials.
- - Subsequent investments will be drawn from your bank account and invested
into the Fund(s) automatically.
- --------------------------------------------------------------------------------
BY EXCHANGE
- --------------------------------------------------------------------------------
- - Call (877) 835-4531 to request an exchange of shares into another New
Covenant Fund. Your may also exchange your shares into New Covenant Money
Market Fund account, the Cash Account Trust Money Market Portfolio, which
is an
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<PAGE> 28
unaffiliated, separately managed, money market mutual fund. This
exchange privilege is offered as a convenience to shareholders of New
Covenant Funds. For an exchange into the Cash Account Trust Money
Market Portfolio you must first receive a prospectus. The exchange
privilege must also be selected on your account application form.
Shares of the Cash Account Trust Money Market Portfolio may not be
available in all states.
- - No fee or charge will apply for exchanges, but there may be a capital gain
or loss. The exchange privilege is subject to amendment or termination at
any time upon sixty days prior notice.
PURCHASE PRICE:
- ----------------
You pay no sales charge to invest in any of the Funds. Shares of the Funds are
sold at the net asset value per share (NAV) next determined after receipt of the
order by First Data Investor Services Group ("Investor Services Group"). The NAV
multiplied by the number of Fund shares you own equals the value of your
investment.
DETERMINATION OF NAV:
- --------------------
The NAV for each Fund is calculated at the close of regular trading hours of the
New York Stock Exchange, which is normally 4:00 p.m. Eastern time. Each Fund
calculates NAV by adding up the total value of the Fund's investments and other
assets, subtracting liabilities, and then dividing that figure by the number of
the Fund's outstanding shares. Each Fund's investments are valued based on
market value, or where market quotations are not readily available on fair value
as determined in good faith by the Funds' Board of Trustees.
TIMING OF PURCHASE REQUESTS:
- ---------------------------
All requests received by Investor Services Group before the close of the New
York Stock Exchange will be executed the same day, at that day's closing share
price. Orders received after the close of the New York Stock Exchange will be
executed the following day, at that day's closing share price. All investments
must be in U.S. dollars. Shares will not be priced and are not available for
purchase or sale on days when the New York Stock Exchange is closed. If the New
York Stock Exchange closes early, the deadlines for purchase orders will be
accelerated to the earlier closing time.
STOCK EXCHANGE CLOSINGS:
- -------------------------
The New York Stock Exchange is typically closed for trading on New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
RIGHTS RESERVED BY THE FUNDS:
- ------------------------------
The Funds reserve the right to:
- reject any purchase order
- suspend the offering of shares
- reject any exchange request
- vary the initial and subsequent investment minimums
- waive the minimum investment requirement for any investor
- redeem shares in any account and return the proceeds to the shareholder
-28-
<PAGE> 29
The Funds will automatically redeem shares if a purchase check is returned for
insufficient funds. The Funds reserve the right to reject any third party check.
However, third party checks issued by the Foundation will be accepted. The Funds
may change or discontinue the exchange privilege, or temporarily suspend this
privilege during unusual market conditions. The Funds reserve the right, in
their sole discretion, to redeem shares in any account and return the proceeds
to the shareholder. The Funds also reserve the right to make a "redemption in
kind" payment in portfolio securities rather than cash if the amount you are
redeeming is large enough to affect fund operations. Large redemptions with
respect to each shareholder are considered the greater of $250,000 or 1% of the
Fund's assets.
THIRD PARTY INVESTMENTS:
- -------------------------
If you invest through a third party (rather than directly), the policies and
fees may be different than those described here. Banks, brokers and financial
advisers may charge transaction fees and set different minimum investments or
limitations on buying or selling shares. You will not be charged fees if you
purchase shares of the Funds through development staff of the Presbyterian
Church (U.S.A) Foundation or the Funds' distributor.
- -------------------------------------------------------------------------------
HOW TO SELL SHARES
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
BY MAIL
- -------------------------------------------------------------------------------
Write a letter of instruction that includes:
- The fund name, your account number, the name(s) in which
the account is registered and the dollar value or number of
shares you wish to sell.
- Include all signatures and any additional documents that
may be required.
- Mail your request to:
New Covenant Funds
c/o First Data Investor Services Group
211 S. Gulph Road
P.O. Box 61947
King of Prussia, PA 19406-0150
- A check will be mailed to the name(s) and address in
which the account is registered.
- -------------------------------------------------------------------------------
BY TELEPHONE
- -------------------------------------------------------------------------------
Call (877) 835-4531 if you have previously selected the telephone redemption
option. Telephone redemptions will not be available for amounts more than
$_______. The proceeds will be paid to the registered owner: (1) by mail at the
address on the account, or (2) by wire to the bank account designated on the
form.
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<PAGE> 30
- -------------------------------------------------------------------------------
BY WIRE
- -------------------------------------------------------------------------------
In the case of redemption proceeds that are wired to a bank, the Funds will
transmit the payment only on days that commercial banks are open for business
and only to the bank and account previously authorized on your application. The
Funds and Investor Services Group will not be responsible for any delays in
wired redemption proceeds due to heavy wire traffic over the Federal Reserve
System. The Funds reserve the right to refuse a wire redemption if it is
believed advisable to do so.
- -------------------------------------------------------------------------------
BY EXCHANGE
- -------------------------------------------------------------------------------
Call (877) 835-4531 to request an exchange of shares into another New
Covenant Fund. Your may also exchange your shares into New Covenant
Money Market Fund account, the Cash Account Trust Money Market
Portfolio, which is an unaffiliated, separately managed, money market
mutual fund. This exchange privilege is offered as a convenience to
shareholders of New Covenant Funds.
- -------------------------------------------------------------------------------
TIMING OF SALE REQUESTS:
- ------------------------
All requests received in good order by Investor Services Group before the close
of the New York Stock Exchange, typically 4:00 p.m. Eastern time, will be
executed the same day, at that day's NAV. Requests received after the close of
the New York Stock Exchange, typically 4:00 p.m. Eastern time, will be executed
the following business day, at that day's NAV. Redemption orders are executed
only on days when the New York Stock Exchange is open for trading. If the New
York Stock Exchange closes early, the deadline for redemption orders will be
accelerated to the earlier closing time.
SELLING RECENTLY PURCHASED SHARES:
- ----------------------------------
Redemption of recently purchased Fund shares that have been paid for by check
may be delayed until there is a reasonable belief that your check has cleared.
This may take up to fifteen calendar days after we receive your check. If you
think you may wish to redeem your newly purchased shares within fifteen calendar
days, you should pay for your shares by federal funds wire transfer.
SIGNATURE GUARANTEES:
- ---------------------
The Funds may require additional documentation or signature guarantees on any
redemption over $10,000, the redemption of corporate, partnership or fiduciary
accounts, or for certain types of transfer requests or account registration
changes. A signature guarantee helps protect against fraud. You can obtain one
from most banks or securities dealers, but not from a notary public. Please call
(877) 835-4531 for information on obtaining a signature guarantee.
-30-
<PAGE> 31
REDEMPTION POLICIES
- -------------------
Payment for redemptions of Fund shares is usually made within one business day,
but not later than seven calendar days after receipt of your redemption request,
unless the check used to purchase the shares has not yet cleared. The Funds may
suspend the right of redemption or postpone the date of payment for more than
seven days during any period when (1) trading on the New York Stock Exchange is
restricted or the New York Stock Exchange is closed for other than customary
weekends and holidays, (2) the SEC has by order permitted such suspension for
the protection of the Funds' shareholders, or (3) an emergency exists making
disposal of portfolio securities or valuation of net assets not reasonably
practicable.
OTHER DOCUMENTS
- ---------------
Additional documents may be required when shares are registered in the name a
corporation, partnership, association, agent, fiduciary, trust, estate or other
organization. For further information, call Investor Services Group toll-free at
(877) 835-4531.
EXCHANGE OR TRANSFER OF SHARES
------------------------------
EXCHANGE PRIVILEGE
- ------------------
You may exchange shares of one of our Funds for shares in another Fund at net
asset value without payment of any fee or charge. You can do this by contacting
Investor Services Group in writing or by telephone. Shareholders who are not
tax-exempt organizations should know that an exchange is considered a sale of
shares of one Fund and the purchase of another Fund. The exchange may result in
gain or loss for Federal income tax purposes. If you wish to use this exchange
privilege, you may elect the service on your account application or by a
signature-guaranteed letter of instruction.
If Investor Services Group receives your exchange instructions in good order in
writing or by telephone (call (877) 835-4531) by the valuation time on any
business day, we will make your exchange on that day.
For an exchange request to be in good order, it must include:
- your name exactly as it appears on your account
- your account number
- the amount to be exchanged
- the names of the Funds from which and to which the exchange is
to be made
TRANSFER OF OWNERSHIP
- ---------------------
You may transfer Fund shares or change the name or form in which your shares are
registered by writing to Investor Services Group. Your letter of instruction
must clearly identify the account number, name(s) and number of shares to be
transferred, and provide a certified tax identification number by way of a
completed new account application or W-9 form, and include the signature(s) of
all registered owners. The signature(s) on the transfer instructions must be
guaranteed.
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<PAGE> 32
SHAREHOLDER SERVICES
--------------------
TELEPHONE INFORMATION
- ---------------------
- Your Account: If you have questions about your account, including
purchases, redemptions and distributions, call
Investor Services Group from Monday
through Friday, 9:00 a.m. to 7:00 p.m., Eastern
time. Call toll-free (877) 835-4531.
- The Funds: If you have questions about the Funds, call the
Funds' telephone representatives, Monday through
Friday, 9:00 a.m. to 5:00 p.m., Eastern time. Call
toll-free (877) 835-4531.
ACCOUNT STATEMENTS
- ------------------
We provide you with these helpful services and information about your account:
- a statement after every transaction;
- an annual account statement reflecting all transactions for
the year;
- tax information which will be mailed by January 31 of each
year, a copy of which will also be filed with the Internal
Revenue Service for taxable investors; and
- financial statements with a summary of portfolio composition
and performance will be mailed at least twice a year.
INTEGRATED VOICE RESPONSE SYSTEM
- --------------------------------
You may obtain access to account information by calling (877) 835-4531. The
System provides share price and price change information for all the Funds and
gives account balances and information on the most recent transactions and
allows sales or exchanges of shares.
ACCOUNT MINIMUM
- ---------------
You must keep at least $500 worth of shares in your account to keep the account
open. If, after giving you thirty days prior written notice, your account value
is still below $500 we may redeem your shares and send you a check for the
redemption proceeds.
TELEPHONE TRANSACTIONS
- ----------------------
To use telephone purchase, redemption and exchange privileges, you must have
selected these services on your original account application or submitted a
subsequent request in writing to add these services to your account. The Funds
and Investor Services Group reserve the right to refuse any telephone
transaction when
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<PAGE> 33
they are unable to confirm to their satisfaction that a caller is the account
owner or a person preauthorized by the account owner. Investor Services Group
has established security procedures to prevent unauthorized account access. The
telephone transaction privilege may be suspended, limited, modified or
terminated at any time without prior notice by the Funds or Investor Services
Group. Neither the Funds nor any of its service contractors will be liable for
any loss or expense in acting upon telephone instructions that are reasonably
believed to be genuine.
AUTOMATIC INVESTMENT PLAN
- -------------------------
Once an account has been opened with a minimum investment of $500, you can make
additional purchases of shares of the Funds with the automatic withdrawal of
monies from your bank account. Amounts may be withdrawn from your bank account
on a monthly or quarterly basis in minimum amounts of $50.
SYSTEMATIC WITHDRAWAL PLAN
- --------------------------
Once you have established an account with $5,000 or more, you may automatically
receive funds from your account on a monthly, quarterly or semi-annual basis
(minimum of $50). Call (877) 835-4531 to request a form to start the Systematic
Withdrawal Plan.
DISTRIBUTIONS AND TAXES
-----------------------
DISTRIBUTIONS
- -------------
The Funds pass along to your account your share of investment earnings in the
form of dividends and distributions. Fund dividends are the net interest and
dividends earned on investments after Fund expenses. The Funds will at least
annually declare and pay dividends from their net investment income and
distribute any net capital gains obtained through Fund investment transactions.
Interest and dividend payments will normally be distributed as income dividends
on a quarterly basis for each of the Funds.
Unless you elect otherwise on your application, all dividends and distributions
paid by a Fund will be reinvested in additional shares of that Fund. They will
be credited to your account in that Fund at the same NAV per share as would
apply to cash purchases on the applicable dividend payment date. Unless you are
a tax-exempt organization, all distributions a Fund pays to you will be taxable
when paid, regardless of whether they are taken in cash or reinvested in shares
of the Fund. To change your dividend election, you must notify Investor Services
Group in writing at least fifteen days prior to the applicable dividend record
date.
TAXES
- -----
Each Fund intends to qualify as a regulated investment company. This status
exempts the Funds from paying federal income tax on the income or capital gains
it distributes to its shareholders.
Unless you are a tax-exempt organization, your investment in the Funds will be
subject to the following tax consequences:
- Dividends from net investment income and distributions from
short-term capital gains are taxable as ordinary income
- Distributions from capital gains are taxable as capital gain,
which may be taxed at different rates depending on the length
of time
-33-
<PAGE> 34
the Fund held those assets
- Dividends and distributions may also be subject to state and
local taxes
- Certain dividends paid to you in January will be taxable as if
they had been paid the previous December
If you are subject to tax, after the end of each calendar year you will receive
a statement (Form 1099) of the federal income tax status of each Fund's
dividends and other distributions paid to you during the year. You should keep
all of your Fund statements for accurate tax-accounting purposes.
If you are subject to tax (are not a tax-exempt organization), and you purchase
shares shortly before a record date for a dividend or distribution, a portion of
your investment will be returned as a taxable distribution.
You must provide the Funds with your correct taxpayer identification number and
certify that you are not subject to backup withholding. If you do not, the Funds
by law are required to withhold 31% of your taxable distributions and
redemptions.
You should consult your tax adviser concerning state or local taxation of such
dividends, and the federal, state and local taxation of capital gains
distributions.
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<PAGE> 35
[OUTSIDE BACK COVER]
- ----------------------
ADDITIONAL INFORMATION
- ----------------------
Annual/Semi-Annual Report to Shareholders:
These reports include financial statements and a
complete listing of the portfolio of investments for each Fund.
Statement of Additional Information (SAI): The SAI contains more detailed
information on all aspects of the Funds. It has been filed with the Securities
and Exchange Commission and is incorporated by reference.
To request a free copy of the current annual/semi-annual Report, SAI, or to
request other information about the Funds, please write or call:
Presbyterian Church (U.S.A.) Foundation
200 East Twelfth Street
Jeffersonville, IN 47130
(877) 835-4531
You may visit the Securities and Exchange Commission's
Internet website (www.sec.gov) to view reports and other
information about the Funds.
In addition, this information may be obtained in person at the SEC's Public
Reference Room in Washington, DC (telephone 800-SEC-0330) or by mail by sending
your request, along with a duplicating fee, to the SEC's Public Reference
Section, Washington, DC 20549-6009
SEC file #811-09025
-35-
<PAGE> 36
[COVER PAGE]
STATEMENT OF ADDITIONAL INFORMATION
June 30, 1999
NEW COVENANT FUNDS
New Covenant Growth Fund
New Covenant Income Fund
New Covenant Balanced Growth Fund
New Covenant Balanced Income Fund
200 East Twelfth Street
Jeffersonville, Indiana 47130
(800) 868-6127
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Funds' Prospectus dated June 30, 1999, and is
incorporated by reference in its entirety into the Prospectus. You may obtain a
Prospectus without charge by calling (877) 835-4531.
-36-
<PAGE> 37
CONTENTS
Page
History of the Funds......................................................... 3
Description of Investments and Risks......................................... 3
Investment Restrictions......................................................17
Portfolio Turnover...........................................................18
Management of the Funds......................................................19
Other Service Providers......................................................21
Brokerage....................................................................22
General Information..........................................................22
Purchases, Redemptions and Pricing of Shares.................................23
Taxation of the Funds........................................................24
Calculation of Performance Data..............................................28
Financial Statements.........................................................30
Appendix A - Description of Securities Ratings...............................31
-37-
<PAGE> 38
HISTORY OF THE FUNDS
New Covenant Funds (the "Trust") is a Delaware business trust organized pursuant
to a Trust Instrument dated September 30, 1998. The Trust is organized to offer
separate series of shares and currently offers four separate series: New
Covenant Growth Fund ("Growth Fund"), New Covenant Income Fund ("Income Fund"),
New Covenant Balanced Growth Fund ("Balanced Growth Fund") and New Covenant
Balanced Income Fund ("Balanced Income Fund"). Currently, there is one class of
shares issued by the Trust. The Board of Trustees may issue additional classes
of shares or series at any time without prior approval of the shareholders. The
Balanced Growth Fund and Balanced Income Fund may also be referred to as the
"Balanced Funds."
The Funds are classified as open-end, management investment companies. The Funds
are diversified, which means that, with respect to 75% of its total assets, a
Fund will not invest more than 5% of its assets in the securities of any single
issuer. The Balanced Funds are diversified by virtue of the fact that the
underlying funds in which they invest (Growth Fund and Income Fund) are
diversified.
DESCRIPTION OF INVESTMENTS AND RISKS
Shareholders should understand that all investments involve risk and there can
be no guarantee against loss resulting from an investment in the Funds. Unless
otherwise indicated, all percentage limitations governing the investments of the
Funds apply only at the time of transaction.
The following supplements and should be read in conjunction with sections of the
Funds' Prospectus entitled "Investment Objective", "Principal Strategies",
"Principal Risks and Investor Suitability", and "Other Policies and Risks." The
investment practices described below, which apply to the Growth Fund and the
Income Fund, are not fundamental and may be changed by the Board of Trustees
without approval of the shareholders.
New Covenant Trust Company, N.A. (the "Adviser") acts as a manager of managers
for the Funds and selects and retains various sub-advisers. The sub-advisers
employ portfolio managers to make the day-to-day investment decisions regarding
portfolio holdings of the Funds.
FORWARD COMMITMENTS, WHEN-ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS
The Growth Fund and the Income Fund may purchase or sell securities on a
when-issued or delayed-delivery basis and make contracts to purchase or sell
securities for a fixed price at a future date beyond customary settlement time.
Debt securities are often issued on this basis. No income will accrue on
securities purchased on a when-issued or delayed-delivery basis until the
securities are delivered. The Funds will establish a segregated account in which
it will maintain cash and U.S. Government securities or other high-grade debt
obligations at least equal in value to commitments for when-issued securities.
Securities purchased or sold on a when-issued, delayed-delivery or
forward-commitment basis involve a risk of loss if the value of the security to
be purchased declines prior to settlement date. Although the Funds would
generally purchase securities on a when-issued, delayed-delivery or a
forward-commitment basis with the intention of acquiring the securities, the
Funds may dispose of such securities prior to settlement if the Adviser deems it
appropriate to do so.
The Funds may dispose of or renegotiate a when-issued or forward commitment. The
Funds will normally realize a capital gain or loss in connection with these
transactions. For purposes of determining the Income Fund's average
dollar-weighted maturity, the maturity of when-issued or forward-commitment
securities will be calculated from the commitment date.
When the Funds purchase securities on a when-issued, delayed-delivery or
forward-commitment basis, the Funds' custodian will maintain in a segregated
account cash, U.S. Government securities or other high-grade liquid debt
obligations having a value (determined daily) at least equal to the amount of
the Funds' purchase commitments. In the case of a forward-commitment to sell
portfolio securities, the
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<PAGE> 39
custodian will hold the portfolio securities in a segregated account while the
commitment is outstanding. These procedures are designed to ensure that the
Funds will maintain sufficient assets at all times to cover their obligations
under when-issued purchases, forward-commitments and delayed-delivery
transactions.
HIGH YIELD/HIGH RISK SECURITIES
The Income Fund may invest a limited amount of assets in debt securities which
are rated below investment grade (hereinafter referred to as "lower-rated
securities") or which are unrated but deemed equivalent to those rated below
investment grade by the portfolio managers. The lower the ratings of such debt
securities, the greater their risks. These debt instruments generally offer a
higher current yield than that available from higher-grade issues, and typically
involve greater risk. The yields on high-yield/high-risk bonds will fluctuate
over time. In general, prices of all bonds rise when interest rates fall and
fall when interest rates rise. While less sensitive to changing interest rates
than investment-grade debt, lower-rated securities are especially subject to
adverse changes in general economic conditions and to changes in the financial
condition of their issuers. During periods of economic downturn or rising
interest rates, issuers of these instruments may experience financial stress
that could adversely affect their ability to make payments of principal and
interest, and increase the possibility of default.
Adverse publicity and investor perceptions, whether or not based on fundamental
analysis, may also decrease the values and liquidity of these securities,
especially in a market characterized by only a small amount of trading and with
relatively few participants. These factors can also limit the Fund's ability to
obtain accurate market quotations for these securities, making it more difficult
to determine the Fund's net asset value.
In cases where market quotations are not available, lower-rated securities are
valued using guidelines established by the Fund's Board of Trustees. Perceived
credit quality in this market can change suddenly and unexpectedly, and may not
fully reflect the actual risk posed by a particular lower-rated or unrated
security.
VARIABLE AND FLOATING RATE INSTRUMENTS
With respect to variable and floating-rate instruments that may be acquired by
the Income Fund, the portfolio managers will consider the earning power, cash
flows and other liquidity ratios of the issuers and guarantors of such
instruments and, if the instruments are subject to demand features, will monitor
their financial status to meet payment on demand. Where necessary to ensure that
a variable or floating-rate instrument meets the Fund's quality requirements,
the issuer's obligation to pay the principal of the instrument will be backed by
an unconditional bank letter or line of credit, guarantee or commitment to lend.
FUTURES CONTRACTS
The Funds may each enter into financial futures contracts. Such contracts may
either be based on indexes of particular groups or varieties of securities
("Index Futures Contracts"), or be for the purchase or sale of debt obligations
("Debt Futures Contracts"). Such futures contracts are traded on exchanges
licensed and regulated by the Commodity Futures Trading Commission. The Funds
enter into futures contracts to gain a degree of protection against anticipated
changes in interest rates that would otherwise have an adverse effect upon the
economic interests of the Funds. However, the costs of and possible losses from
futures transactions will reduce a Fund's yield from interest on its holdings of
debt securities. Income from futures transactions constitutes taxable gain.
For the Funds, the custodian places cash, U.S. government securities and other
high-grade debt obligations into a segregated account in an amount equal to the
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<PAGE> 40
value of the total assets committed to the consummation of futures positions. If
the value of the securities placed in the segregated account declines,
additional cash or securities are required to be placed in the account on a
daily basis so that the value of the account equals the amount of the Funds'
commitments with respect to such contracts. Alternatively, the Funds may cover
such positions by purchasing offsetting positions, or covering such positions
partly with cash, U.S. government securities and other high-grade debt
obligations, and partly with offsetting positions.
A Debt Futures Contract is a binding contractual commitment that, if held to
maturity, requires the Fund to make or accept delivery, during a particular
month, of obligations having a standardized face value and rate of return. By
purchasing a Debt Futures Contract, the Fund legally obligates itself to accept
delivery of the underlying security and to pay the agreed price; by selling a
Debt Futures Contract it legally obligates itself to make delivery of the
security against payment of the agreed price. However, positions taken in the
futures markets are normally not held to maturity. Instead they are liquidated
through offsetting transactions which may result in a profit or loss. While Debt
Futures Contract positions taken by the Fund are usually liquidated in this
manner, the Fund may instead make or take delivery of the underlying securities
whenever it appears economically advantageous.
A clearing corporation, associated with the exchange on which futures contracts
are traded, assumes responsibility for close-outs of such contracts and
guarantees that the sale or purchase, if still open, is performed on settlement
date.
By entering into futures contracts, the Funds seek to establish more certainly
than would otherwise be possible the effective rate of return on its portfolio
securities. The Funds may, for example, take a "short" position in the futures
market by selling a Debt Futures Contract for future delivery of securities held
by the Fund in order to hedge against an anticipated rise in interest rates that
would adversely affect the value of such securities. Or it might sell an Index
Futures Contract based on a group of securities whose price trends show a
significant correlation with those of securities held by a Fund. When hedging of
this character is successful, any depreciation in the value of portfolio
securities is substantially offset by appreciation in the value of the futures
position. On other occasions the Fund may take a "long" position by purchasing
futures contracts. This is done when a Fund is not fully invested or expects to
receive substantial proceeds from the sale of portfolio securities or of Fund
shares, and anticipates the future purchase of particular securities but expects
the rate of return then available in the securities markets to be less favorable
than rates that are currently available in the futures markets. The Funds expect
that, in the normal course, securities will be purchased upon termination of a
long futures position, but under unusual market conditions, a long futures
position may be terminated without a corresponding purchase of securities.
Debt Futures Contracts currently involve only taxable obligations and do not
encompass municipal securities. The value of Debt Futures Contracts on taxable
securities, as well as Index Futures Contracts, may not vary in direct
proportion with the value of the Fund's securities, limiting the ability of the
Fund to hedge effectively against interest-rate risk.
The investment restriction concerning futures contracts does not specify the
types of index-based futures contracts into which the Fund may enter because it
is impossible to foresee what particular indexes may be developed and traded or
may prove useful to the Fund in implementing their overall risk-management
strategies. For example, price trends for a particular index-based futures
contract may show a significant correlation with price trends in the securities
held by the Fund, even though the securities comprising the index are not
necessarily identical to those
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held by the Fund. In any event, the Fund would not enter into a particular
index-based futures contract unless the portfolio managers determined that such
a correlation existed.
Index Futures Contracts and Debt Futures Contracts currently are traded actively
on the Chicago Board of Trade and the International Monetary Market at the
Chicago Mercantile Exchange.
SEGREGATED ACCOUNTS
The Funds may be required to segregate assets (such as cash, U.S. Government
securities and other high-grade debt obligations or other highly liquid equity
securities) or otherwise provide coverage consistent with applicable regulatory
policies. This would be in respect to each Fund's permissible obligations under
the call and put options it writes, the forward foreign currency exchange
contracts it enters into and the futures contracts it enters into.
OPTIONS ON FUTURES CONTRACTS
To attempt to gain additional protection against the effects of interest-rate
fluctuations, the Funds may purchase and write (sell) put and call options on
futures contracts that are traded on a U.S. exchange or board of trade and enter
into related closing transactions. There can be no assurance that such closing
transactions will be available at all times. In return for the premium paid,
such an option gives the purchaser the right to assume a position in a futures
contract at any time during the option period for a specified exercise price.
The Fund may purchase put options on futures contracts in lieu of, and for the
same purpose as, sale of a futures contract. It also may purchase such put
options in order to hedge a long position in the underlying futures contract.
The purchase of call options on futures contracts is intended to serve the same
purpose as actual purchase of the futures contracts. The Fund may purchase call
options on futures contracts in anticipation of a market advance when it is not
fully invested.
The Fund may write (sell) a call option an a futures contract in order to hedge
against a decline in the price of the index or debt securities underlying the
futures contract. If the price of the futures contract at expiration is below
the exercise price, the Fund would retain the option premium, which would
offset, in part, any decline in the value of its portfolio securities.
The writing (selling) of put options on futures contracts is similar to purchase
of the futures contracts, except that, if market price declines, the Fund would
pay more than the current market price for the underlying securities or index
units. The net cost to the Fund would be reduced, however, by the premium
received on sale of the puts, less any transaction costs.
COVERED CALL OPTIONS
The Funds may write (sell) covered call options on their portfolio securities in
an attempt to enhance investment performance. No more than 20% of a Fund's net
assets may be subject to covered options.
When the Fund writes (sells) a covered call option, it gives the purchaser of
the option the right to buy the underlying security at the price specified in
the option (the "exercise price") at any time during the option period,
generally ranging up to nine months. If the option expires unexercised, the Fund
will realize gain to the extent of the amount received for the option (the
"premium") less any commission paid. If the option is exercised, a decision over
which the Fund has no control, the Fund must sell the underlying security to the
option holder at the exercise price. By writing a covered option, the Fund
forgoes, in
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exchange for the premium less the commission ("net premium"), the opportunity to
profit during the option period from an increase in the market value of the
underlying security above the exercise price.
When the Fund sells an option, an amount equal to the net premium received by
the Fund is included in the liability section of the Fund's Statement of Assets
and Liabilities as a deferred credit. The amount of the deferred credit will be
subsequently marked-to-market to reflect the current market value of the option
written. The current market value of a traded option is the last sale price or,
in the absence of a sale, the mean between the closing bid and asked price. If
an option expires on its stipulated expiration date or if the Fund enters into a
closing purchase transaction (i.e., the Fund terminates its obligation as the
writer of the option by purchasing a call option on the same security with the
same exercise price and expiration date as the option previously written), the
Fund will realize a gain (or loss if the cost of a closing purchase transaction
exceeds the net premium received when the option was sold) and the deferred
credit related to such option will be eliminated. If an option is exercised, the
Fund will realize a long-term or short-term gain or loss from sale of the
underlying security, and proceeds of the sale will be increased by the net
premium originally received. The writing of covered options may be deemed to
involve pledge of the securities against which the option is being written.
Securities against which options are written will be segregated on the books of
the Fund's custodian.
RISKS OF FUTURES AND OPTIONS INVESTMENTS
A Fund will incur brokerage fees in connection with its futures and options
transactions, and it will be required to segregate Funds for the benefit of
brokers as margin to guarantee performance of its futures and options contracts.
In addition, while such contracts will be entered into to reduce certain risks,
trading in these contracts entails certain other risks. Thus, while a Fund may
benefit from the use of futures contracts and related options, unanticipated
changes in interest rates may result in a poorer overall performance for that
Fund than if it had not entered into any such contracts. Additionally, the
skills required to invest successfully in futures and options may differ from
skills required for managing other assets in a Fund's portfolio.
The Funds may engage in over-the-counter options transactions with
broker-dealers who make markets in these options. The portfolio managers will
consider risk factors such as their creditworthiness when determining a
broker-dealer with which to engage in options transactions. The ability to
terminate over-the-counter option positions is more limited than with
exchange-traded option positions because the predominant market is the issuing
broker rather than an exchange, and may involve the risk that broker-dealers
participating in such transactions will not fulfill their obligations. Certain
over-the-counter options may be deemed to be illiquid securities and may not be
readily marketable. The portfolio managers will monitor the creditworthiness of
dealers with which the Funds enter into such options transactions under the
general supervision of the Funds' Trustees.
PURCHASING CALL OPTIONS
The Funds may purchase call options to the extent that premiums paid by the Fund
do not aggregate more than 20% of the Fund's total assets. When a Fund purchases
a call option, in return for a premium paid by a Fund to the writer of the
option, the Fund obtains the right to buy the security underlying the option at
a specified exercise price at any time during the term of the option. The writer
of the call option, who receives the premium upon writing the option, has the
obligation, upon exercise of the option, to deliver the underlying security
against payment of the exercise price. The advantage of purchasing call options
is that the Funds may alter portfolio characteristics and modify portfolio
maturities
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without incurring the cost associated with those transactions. The Funds may,
following purchase of a call option, liquidate its position by effecting a
closing sale transaction. This is accomplished by selling an option of the same
series as the option previously purchased. The Funds will realize a profit from
a closing sale transaction if the price received on the transaction is more than
the premium paid (less any commissions) to purchase the original call option;
the Funds will realize a loss from a closing sale transaction if the price
received on the transaction is less than the premium paid (less any commissions)
to purchase the original call option.
Although the Funds will generally purchase only those call options for which
there appears to be an active secondary market, there is no assurance that a
liquid secondary market on an exchange will exist for any particular option, or
at any particular time, and for some options no secondary market on an exchange
may exist. In such event, it may not be possible to effect closing transactions
in particular options, with the result that the Fund would have to exercise its
options in order to realize any profit and would incur brokerage commissions
upon the exercise of such options and upon the subsequent disposition of the
underlying securities acquired through exercise of such options. Further, unless
the price of the underlying security changes sufficiently, a call option
purchased by the Funds may expire without any value to the Funds, in which event
the Funds would realize a capital loss that would be characterized as short-term
unless the option was held for more than one year.
PURCHASING PUT OPTIONS
The Funds may invest up to 20% of their total assets in the purchase of put
options. The Funds will, at all times during which it holds a put option, own
the security covered by such option. The purchase of the put on substantially
identical securities held will constitute a short sale for tax purposes, the
effect of which is to create short-term capital gain on sale of the security and
to suspend running of its holding period (and treat it as commencing on the date
of the closing of the short sale) or that of a security acquired to cover the
same if, at the time the put was acquired, the security had not been held for
more than one year.
A put option purchased by the Funds gives it the right to sell one of its
securities for an agreed-upon price up to an agreed date. The Funds may purchase
put options in order to protect against a decline in the market value of the
underlying security below the exercise price less the premium paid for the
option ("protective puts"). The ability to purchase put options will allow the
Funds to protect unrealized gains in an appreciated security in their portfolios
without actually selling the security. If the security does not drop in value,
the Funds will lose the value of the premium paid. The Funds may sell a put
option which it has previously purchased prior to sale of the securities
underlying such option. Such sale will result in a net gain or loss depending
upon whether the amount received on the sale is more or less than the premium
and other transaction costs paid on the put option which is sold.
The Funds may sell a put option purchased on individual portfolio securities.
Additionally, the Funds may enter into closing sale transactions. A closing sale
transaction is one in which the Funds, when it is the holder of an outstanding
option, liquidates its position by selling an option of the same series as the
option previously purchased.
WRITING PUT OPTIONS
The Funds may also write put options on a secured basis, which means that the
Funds will maintain, in a segregated account with its custodian, cash or U.S.
Government securities in an amount not less than the exercise price of the
option at all times during the option period. The amount of cash or U.S.
Government
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securities held in the segregated account will be adjusted on a daily
basis to reflect changes in the market value of the securities covered by the
put options written by the Funds. Secured put options will generally be written
in circumstances where the portfolio managers wish to purchase the underlying
security for the Fund's portfolio at a price lower than the current market price
of the security. In such event, the Funds would write a secured put option at an
exercise price which, reduced by the premium received on the option, reflects
the lower price it is willing to pay. With regard to the writing of put options,
the Funds will limit the aggregate value of the obligations underlying such put
options to 20% of their total net assets.
Following the writing of a put option, the Funds may wish to terminate the
obligation to buy the security underlying the option by effecting a closing
purchase transaction. This is accomplished by buying an option of the same
series as the option previously written. The Funds may not, however, effect such
a closing transaction after it has been notified of the exercise of the option.
LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
The Funds will not engage in transactions in futures contracts or related
options for speculation but only as a hedge against changes resulting from
market conditions in the values of debt securities held in its portfolio or
which it intends to purchase and where the transactions are appropriate to the
reduction of the Funds' risks. The Trustees have adopted policies (which are not
fundamental and may be modified by the Trustees without a shareholder vote)
that, immediately after the purchase for a Fund of a futures contract or a
related option, the value of the aggregate initial margin deposits with respect
to all futures contracts (both for receipt and delivery), and premiums paid on
related options entered into on behalf of the Fund, will not exceed 5% of the
fair market value of the Fund's total assets. Additionally, the value of the
aggregate premiums paid for all put and call options held by a Fund will not
exceed 20% of its net assets. Futures contracts and put options written (sold)
by a Fund will be offset by assets of the Fund held in a segregated account in
an amount sufficient to satisfy obligations under such contracts and options.
FOREIGN SECURITIES
The Funds may invest up to 40% of their total assets in foreign securities. The
Funds may invest without limit in U.S. dollar denominated foreign securities.
The Income Fund may invest up to 40% of its assets in foreign bonds denominated
in foreign currencies. No more than 20% of a Fund's total assets will be
represented by a given foreign currency.
Investors should recognize that investing in foreign securities involves certain
special considerations, including those set forth below, which are not typically
associated with investing in U.S. securities and which may favorably or
unfavorably affect the Funds' performance. As foreign companies are not
generally subject to uniform accounting, auditing and financial reporting
standards, practices and requirements comparable to those applicable to domestic
companies, there may be less publicly available information about a foreign
company than about a domestic company. Many foreign securities markets, while
growing in volume of trading activity, have substantially less volume than the
U.S. market, and securities of some foreign issuers are less liquid and more
volatile than securities of domestic issuers. Similarly, volume and liquidity in
most foreign bond markets is less than in the U.S. and, at times, volatility of
price can be greater than in the U.S. Fixed commissions on some foreign
securities exchanges and bid-to-asked spreads in foreign bond markets are
generally higher than commissions and bid-to-asked spreads in U.S. markets,
although the Funds will endeavor to achieve the most favorable net results on
their portfolio transactions. There is generally less government supervision and
regulation of securities exchanges, brokers and listed companies than in the
U.S. It may be more
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difficult for the Funds' agents to keep currently informed about corporate
actions that may affect the prices of portfolio securities. Communications
between the U.S. and foreign countries may be less reliable than within the
U.S., thus increasing the risk of delayed settlements of portfolio transactions
or loss of certificates for portfolio securities. Payment for securities without
delivery may be required in certain foreign markets. In addition, with respect
to certain foreign countries, there is the possibility of expropriation or
confiscatory taxation, political or social instability, or diplomatic
developments that could affect U.S. investments in those countries. Investments
in foreign securities may also entail certain risks such as possible currency
blockages or transfer restrictions, and the difficulty of enforcing rights in
other countries. Moreover, individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross national
product, rate of inflation, capital reinvestment, resource self-sufficiency and
balance of payments position. Further, to the extent investments in foreign
securities involve currencies of foreign countries, the Funds may be affected
favorably or unfavorably by changes in currency rates and in exchange-control
regulations, and may incur costs in connection with conversion between
currencies.
Investments in companies domiciled in developing countries may be subject to
potentially greater risks than investments in developed countries. The
possibility of revolution and the dependence on foreign economic assistance may
be greater in these countries than in developed countries. Each Fund seeks to
mitigate the risks associated with these considerations through diversification
and active professional management.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Funds may enter into forward foreign-currency exchange contracts in
connection with its investments in foreign securities. A forward
foreign-currency exchange contract ("forward contract") involves an obligation
to purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. These contracts are traded in the
interbank market conducted directly between currency traders (usually large
commercial banks) and their customers. A forward contract generally has no
deposit requirement, and no commissions are charged at any stage for trades.
The maturity date of a forward contract may be any fixed number of days from the
date of the contract agreed upon by the parties, rather than a predetermined
date in a given month, and forward contracts may be in any amount agreed upon by
the parties rather than predetermined amounts. Also, forward contracts are
traded directly between banks or currency dealers so that no intermediary is
required. A forward contract generally requires no margin or other deposit.
Closing transactions with respect to forward contracts are effected with the
currency trader who is a party to the original forward contract.
The Funds may enter into foreign-currency futures contracts in several
circumstances. First, when a Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, or when a Fund anticipates
the receipt in a foreign currency of interest and dividend payments on such a
security which it holds, the Fund may desire to "lock in" the U.S. dollar price
of the security or the U.S. dollar equivalent of such interest and dividend
payments, as the case may be. By entering into a forward contract for the
purchase or sale, for a fixed amount of U.S. dollars, of the amount of foreign
currency involved in the underlying transaction, the Fund will attempt to
protect itself against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and the applicable foreign currency during
the period between the date on which the security is purchased or sold, or on
which the dividend payment is declared, and the date on which such payments are
made or received.
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The Funds' activities involving forward contracts may be limited by the
requirements of Subchapter M of the Internal Revenue Code for qualification as a
regulated investment company.
REPURCHASE AGREEMENTS
The Funds may enter into repurchase agreements with any member bank of the
Federal Reserve System and any broker-dealer which is recognized as a reporting
government securities dealer, whose creditworthiness has been determined by the
Adviser. A repurchase agreement, which provides a means for the Funds to earn
income on monies for periods as short as overnight, is an arrangement under
which the purchaser (i.e., the Fund) acquires a security ("Obligation") and the
seller agrees, at the time of sale, to repurchase the Obligation at a specified
time and price. The repurchase price may be higher than the purchase price, the
difference being income to the Funds, or the purchase and repurchase prices may
be the same, with interest at a stated rate due to the Funds at the time of
repurchase. In either case, the income to the Funds is unrelated to the
interest-rate on the Obligation itself. For purposes of the Investment Company
Act of 1940, as amended, a repurchase agreement is deemed to be a loan to the
seller of the Obligation and is therefore covered by the Funds' investment
restrictions applicable to loans. Each repurchase agreement entered into by the
Funds requires that if the market value of the Obligation becomes less than the
repurchase price (including interest), the Funds will direct the seller of the
Obligation, on a daily basis, to deliver additional securities so that the
market value of all securities subject to the repurchase agreement will equal or
exceed the repurchase price. In the event that the Funds are unsuccessful in
seeking to enforce the contractual obligation to deliver additional securities,
and the seller defaults on its obligation to repurchase, the Funds bear the risk
of any drop in market value of the Obligation(s). In the event that bankruptcy
or insolvency proceedings were commenced with respect to a bank or broker-dealer
before its repurchase of the Obligation, the Funds might encounter delay and
incur costs before being able to sell the security. Delays may involve loss of
interest or decline in price of the Obligation. In the case of repurchase
agreements, it is not clear whether a court would consider a repurchase
agreement as being owned by the particular Funds or as being collateral for a
loan by the Funds. If a court were to characterize the transaction as a loan and
the Funds had not perfected a security interest in the Obligation, the Funds
could be required to return the Obligation to the bank's estate and be treated
as an unsecured creditor. As an unsecured creditor, the Funds would be at risk
of losing some or all of the principal and income involved in that transaction.
The portfolio managers seek to minimize the risk of loss through repurchase
agreements by analyzing the creditworthiness of the obligor, in this case the
seller of the Obligations.
Securities subject to a repurchase agreement are held in a segregated account
and the amount of such securities is adjusted on a daily basis so as to provide
a market value at least equal to the repurchase price. The Funds may not invest
more than 15% of their net assets in repurchase agreements maturing in more than
seven days.
REVERSE REPURCHASE AGREEMENTS
Each Fund may obtain funds for temporary defensive purposes by entering into
reverse repurchase agreements with banks and broker-dealers. Reverse repurchase
agreements involve sales by a Fund of portfolio assets concurrently with an
agreement by that Fund to repurchase the same assets at a later date at a fixed
price. During the reverse repurchase agreement period, the Fund continues to
receive principal and interest payments on these securities. During the time a
reverse repurchase agreement is outstanding, the Fund will maintain a segregated
custodial account consisting of cash, U.S. Government securities or other
high-grade liquid debt obligations having a value at least equal to the
repurchase
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price, plus accrued interest, subject to the agreement. Reverse repurchase
agreements involve the risk that the market value of the securities sold by the
Fund may decline below the price of the securities the Fund is obligated to
repurchase. Reverse repurchase agreements are considered borrowings by the Fund,
and as such are subject to the investment limitations discussed in the section
entitled "Borrowing."
SECURITIES LENDING
To increase return on portfolio securities, the Growth Fund and the Income Fund
may lend their portfolio securities on a short-term basis to banks,
broker-dealers and other institutional investors pursuant to agreements
requiring that the loans be continuously secured by collateral equal at all
times in value to at least the market value of the securities loaned. Collateral
will consist of U.S. Government securities, cash equivalents or irrevocable
letters of credit. The Funds will not lend portfolio securities in excess of
one-third of the value of their respective total assets, including collateral
received from such loans. There may be risks of delay in receiving additional
collateral or in recovering the securities loaned or even a loss of rights in
the collateral should the borrower of the securities fail financially. In
determining whether to lend securities, the Funds consider all relevant factors
and circumstances, including creditworthiness of the borrower.
SECURITIES OF OTHER INVESTMENT COMPANIES The Balanced Funds invest primarily in
shares of the Growth Fund and the Income Fund. The Growth Fund and the Income
Fund have adopted a policy by which they may invest in securities issued by
other investment companies within the limitations of the Investment Company Act
of 1940, as amended, which permits them to acquire securities of registered
open-end investment companies except pursuant to Section 12(d)(1)(F) and Section
12(d)(1)(G). As a shareholder of another investment company, the Balanced Funds
would bear along with other shareholders its pro rata portion of the investment
company's expenses, including advisory fees.
As described in the Prospectus, the Balanced Funds invest primarily in the
shares of the Growth Fund and the Income Fund. The Balanced Funds believe that
this diversification offers the opportunity to benefit from a variety of
investment approaches and strategies employed by experienced investment
professionals.
MORTGAGE-BACKED SECURITIES AND MORTGAGE PASS-THROUGH SECURITIES The Income Fund
may invest in mortgage-backed securities, which are interests in pools of
mortgage loans, including mortgage loans made by savings and loan institutions,
mortgage bankers, commercial banks and others. The Fund also invests in
mortgage-backed securities guaranteed primarily by the Government National
Mortgage Association. Pools of mortgage loans are assembled as securities for
sale to investors by various governmental, government-related and private
organizations as further described below. The Fund may also invest in debt
securities that are secured with collateral consisting of mortgage-backed
securities (see "Collateralized Mortgage Obligations"), and in other types of
mortgage-related securities.
A decline in interest rates may lead to a faster rate of repayment of the
underlying mortgages, and expose the Fund to a lower rate of return upon
reinvestment. To the extent that such mortgage-backed securities are held by the
Fund, the prepayment right will tend to limit to some degree the increase in net
asset value of the Fund because the value of the mortgage-backed securities held
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by the Fund may not appreciate as rapidly as the price of non-callable debt
securities.
When interest rates rise, mortgage prepayment rates decline, thus lengthening
the life of a mortgage-related security and increasing the price volatility of
that security, affecting the price volatility of the Fund's shares.
Interests in pools of mortgage-backed securities differ from other forms of debt
securities, which normally provide for periodic payment of interest in fixed
amounts, with principal payments at maturity or specified call dates. Instead,
these securities provide a monthly payment that consists of both interest and
principal payments. In effect, these payments are a "pass-through" of the
monthly payments made by the individual borrowers on their mortgage loans, net
of any fees paid to the issuer or guarantor of such securities. Additional
payments are caused by repayments of principal resulting from sale of the
underlying property, refinancing or foreclosure, net of fees or costs which may
be incurred. Some mortgage-related securities (such as securities issued by the
Government National Mortgage Association) are described as "modified
pass-through." These securities entitle the holder to receive all interest and
principal payments owed on the mortgage pool, net of certain fees, at scheduled
payment dates regardless of whether or not the mortgagor actually makes the
payment.
The principal governmental guarantor of mortgage-related securities is the
Government National Mortgage Association ("GNMA"). GNMA is a wholly-owned U.S.
Government corporation within the Department of Housing and Urban Development.
GNMA is authorized to guarantee, with the full faith and credit of the U.S.
Government, timely payment of principal and interest on securities issued by
institutions approved by GNMA (such as savings and loan institutions, commercial
banks and mortgage bankers) and backed by pools of FHA-insured or VA-guaranteed
mortgages. These guarantees, however, do not apply to the market value or yield
of mortgage-backed securities or to the value of the Fund's shares. Also, GNMA
securities often are purchased at a premium over the maturity value of the
underlying mortgages. This premium is not guaranteed and will be lost if
prepayment occurs.
Government-related guarantors (i.e., not backed by the full faith and credit of
the U.S. Government) include the Federal National Mortgage Association ("FNMA")
and the Federal Home Loan Mortgage Corporation ("FHLMC"). FNMA is a
government-sponsored corporation owned entirely by private stockholders. It is
subject to general regulation by the Secretary of Housing and Urban Development.
FNMA purchases conventional (i.e., not insured or guaranteed by any government
agency) mortgages from a list of approved seller/servicers which include state
and federally-chartered savings and loan associations, mutual savings banks,
commercial banks and credit unions and mortgage bankers. Pass-through securities
issued by FNMA are guaranteed as to timely payment of principal and interest by
FNMA but are not backed by the full faith and credit of the U.S. Government.
FHLMC is a corporate instrumentality of the U.S. Government and was created by
Congress in 1970 for the purpose of increasing the availability of mortgage
credit for residential housing. FHLMC stock is owned by twelve Federal Home Loan
Banks. FHLMC issues Participation Certificates ("PCs") which represent interests
in conventional mortgages from FHLMC's national portfolio. FHLMC guarantees the
timely payment of interest and ultimate collection of principal, but PCs are not
backed by the full faith and credit of the U.S. Government.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional mortgage loans. Such issuers may, in
addition, be the originators and/or servicers of the underlying mortgage loans
as well as the
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guarantors of the mortgage-related securities. Pools created by such
non-governmental issuers generally offer a higher rate of interest than
government and government-related pools because there are no direct or indirect
government or agency guarantees of payments. However, timely payment of interest
and principal of these pools may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance and
letters of credit. The insurance and guarantees are issued by governmental
entities, private insurers and the mortgage poolers. Such insurance and
guarantees and the creditworthiness of the issuers thereof will be considered in
determining whether a mortgage-related security meets the Fund's investment
quality standards. There can be no assurance that the private insurers or
guarantors can meet their obligations under the insurance policies or guarantee
arrangements. The Fund may buy mortgage-related securities without insurance or
guarantees, if through an examination of the loan experience and practices of
the originators/servicers and poolers, the portfolio managers determine that
they meet the Fund's quality standards. Although the market for such securities
is becoming increasingly liquid, securities issued by certain private
organizations may not be readily marketable.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS")
The Income Fund may invest in CMOs which are hybrids between mortgage-backed
bonds and mortgage pass-through securities. Similar to a bond, interest and
prepaid principal are paid, in most cases, semiannually. CMOs may be
collateralized by whole mortgage loans, but are more typically collateralized by
portfolios of mortgage pass-through securities guaranteed by GNMA, FHLMC, or
FNMA, and their income streams.
CMOs are structured into multiple classes, each bearing a different stated
maturity. Actual maturity and average life will depend upon the prepayment
experience of the collateral. CMOs provide for a modified form of call
protection through a de facto breakdown of the underlying pool of mortgages
according to how quickly the loans are repaid. Monthly payment of principal
received from the pool of underlying mortgages, including prepayments, is first
returned to investors holding the shortest maturity class. Investors holding the
longer maturity classes receive principal only after the first class has been
retired. An investor is partially guarded against a sooner-than-desired return
of principal because of the sequential payments.
In a typical CMO transaction, a corporation issues multiple series, (e.g., A, B,
C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering are used to purchase
mortgages or mortgage pass-through certificates ("Collateral"). The Collateral
is pledged to a third party trustee as security for the Bonds. Principal and
interest payments from the Collateral are used to pay principal on the Bonds in
the order A, B, C, Z. The Series A, B, and C Bonds all bear current interest.
Interest on the Series Z Bond is accrued and added to principal and a like
amount is paid as principal on the Series A, B, or C Bonds currently being paid
off. When the Series A, B, and C Bonds are paid in full, interest and principal
on the Series Z Bond begins to be paid currently. With some CMOs, the issuer
serves as a conduit to allow loan originators (primarily builders or savings and
loan associations) to borrow against their loan portfolios.
OTHER ASSET-BACKED SECURITIES
The Income Fund may also invest in other asset-backed securities. The
securitization techniques used to develop mortgage-backed securities are now
being applied to a broad range of assets. Through the use of trusts and
special-purpose corporations, various types of assets, including automobile
loans, computer leases and credit-card receivables, are being securitized in
pass-through structures similar to the mortgage pass-through structures
described above or in a structure similar to the CMO structure. The Income Fund
may invest in these and other types of asset-backed securities that may be
developed in the future. In general, the
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collateral supporting these securities is of shorter maturity than mortgage
loans and is less likely to experience substantial prepayments with
interest-rate fluctuations.
Several types of asset-backed securities have already been offered to investors,
including Certificates of Automobile Receivables(SM) ("CARS(SM)"). CARS(SM)
represent undivided fractional interests in a trust ("Trust") whose assets
consist of a pool of motor vehicle retail installment-sales contracts and
security interests in the vehicles securing the contracts. Payments of principal
and interest on CARSSM are passed through monthly to certificate holders, and
are guaranteed up to certain amounts and for a certain time period by a letter
of credit issued by a financial institution unaffiliated with the trustee or
originator of the Trust. An investor's return on CARSSM may be affected by early
prepayment of principal on the underlying vehicle sales contracts. If the letter
of credit is exhausted, the Trust may be prevented from realizing the full
amount due on a sales contract because of state law requirements and
restrictions relating to foreclosure sales of vehicles and the obtaining of
deficiency judgments following such sales or because of depreciation, damage or
loss of a vehicle, the application of federal and state bankruptcy and
insolvency laws, or other factors. As a result, certificate holders may
experience delays in payments or losses if the letter of credit is exhausted.
Asset-backed securities present certain risks that are not presented by
mortgage-backed securities. Primarily, these securities may not have the benefit
of any security interest in the related assets. Credit-card receivables are
generally unsecured and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing the
balance due. There is the possibility that recoveries on repossessed collateral
may not, in some cases, be available to support payments on these securities.
Asset-backed securities are often backed by a pool of assets representing the
obligations of a number of different parties. To lessen the effect of failures
by obligors on underlying assets to make payments, the securities may contain
elements of credit support which fall into two categories: (i) liquidity
protection, and (ii) protection against losses resulting from ultimate default
by an obligor on the underlying assets. Liquidity protection refers to the
provision of advances, generally by the entity administering the pool of assets,
to ensure that the receipt of payments on the underlying pool occurs in a timely
fashion. Protection against losses results from payment of the insurance
obligations on at least a portion of the assets in the pool. This protection may
be provided through guarantees, policies or letters of credit obtained by the
issuer or sponsor from third parties, through various means of structuring the
transaction or through a combination of such approaches. The Fund will not pay
any additional or separate fees for credit support. The degree of credit support
provided for each issue is generally based on historical information reflecting
the level of credit risk associated with the underlying assets. Delinquency or
loss in excess of that anticipated or failure of the credit support could
adversely affect the return on an investment in such a security.
The Fund may also invest in residual interests in asset-backed securities. In
the case of asset-backed securities issued in a pass-through structure, the cash
flow generated by the underlying assets is applied to make required payments on
the securities and to pay related administrative expenses. The residual in an
asset-backed security pass-through structure represents the interest in any
excess cash flow remaining after making the foregoing payments. The amount of
residual cash flow resulting from a particular issue of asset-backed securities
will depend on, among other things, characteristics of the underlying assets,
coupon rates on the securities, prevailing interest rates, administrative
expenses and actual
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prepayment experience on the underlying assets. Asset-backed security residuals
not registered under the Securities Act of 1933 may be subject to certain
restrictions on transferability. In addition, there may be no liquid market for
such securities.
The availability of asset-backed securities may be affected by legislative or
regulatory developments. It is possible that such developments may require the
Fund to dispose of any existing holdings of such securities.
ZERO COUPON SECURITIES
The Income Fund may invest in zero coupon securities, which pay no cash income
and are sold at substantial discounts from their value at maturity. When held to
maturity, their entire income, which consists of accretion of discount, comes
from the difference between the issue price and their value at maturity. Zero
coupon securities are subject to greater market-value fluctuations from changing
interest rates than debt obligations of comparable maturities which make current
distributions of interest (cash). Zero coupon securities which are convertible
into common stock offer the opportunity for capital appreciation as increases
(or decreases) in market value of such securities closely follow movements in
the market value of the underlying common stock. Zero coupon convertible
securities generally are expected to be less volatile than the underlying common
stocks, as they usually are issued with maturities of 15 years or less and are
issued with options and/or redemption features, exercisable by the holder of the
obligation, entitling the holder to redeem the obligation and receive a defined
cash payment.
Zero coupon securities include securities issued directly by the U.S. Treasury,
and U.S. Treasury bonds or notes and their unmatured interest coupons and
receipts for their underlying principal ("coupons") which have been separated by
their holder, typically a custodian bank or investment brokerage firm. A holder
will separate the interest coupons from the underlying principal (the "corpus")
of the U.S. Treasury security. A number of securities firms and banks have
stripped the interest coupons and receipts and then resold them in custodial
receipt programs with a number of different names, including "Treasury Income
Growth Receipts" (TIGRS(TM)) and Certificate of Accrual on Treasuries
(CATS(TM)). The underlying U.S. Treasury bonds and notes themselves are held in
book-entry form at the Federal Reserve Bank or, in the case of bearer securities
(i.e., unregistered securities which are owned ostensibly by the bearer or
holder thereof), in trust on behalf of the owners thereof. Counsel to the
underwriters of these certificates or other evidences of ownership of the U.S.
Treasury securities have stated that, for federal tax and securities purposes,
in their opinion purchasers of such certificates, such as the Fund, most likely
will be deemed the beneficial holder of the underlying U.S. Government
securities. The Fund understands that the staff of the SEC no longer considers
such privately stripped obligations to be U.S. Government securities, as defined
in the Investment Company Act of 1940; therefore, the Fund intends to adhere to
this staff position and will not treat such privately stripped obligations to be
U.S. Government securities for the purpose of determining if the Fund is
"diversified" under the 1940 Act.
The U.S. Treasury has facilitated transfers of ownership of zero coupon
securities by accounting separately for the beneficial ownership of particular
interest coupon and corpus payments on Treasury securities through the Federal
Reserve book-entry record-keeping system. The Federal Reserve program as
established by the Treasury Department is known as "STRIPS" or "Separate Trading
of Registered Interest and Principal of Securities." Under the STRIPS program,
the Fund will be able to have its beneficial ownership of zero coupon securities
recorded directly in the book-entry record-keeping system in lieu of having to
hold certificates or other evidences of ownership of the underlying U.S.
Treasury securities.
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<PAGE> 52
When U.S. Treasury obligations have been stripped of their unmatured interest
coupons by the holder, the principal or principal is sold at a deep discount
because the buyer receives only the right to receive a future fixed payment on
the security and does not receive any rights to periodic interest (cash)
payments. Once stripped or separated, the principal and coupons may be sold
separately. Typically, the coupons are sold separately or grouped with other
coupons with like maturity dates and sold bundled in such form. Purchasers of
stripped obligations acquire, in effect, discount obligations that are
economically identical to the zero coupon securities that the Treasury sells
itself.
RESETS
The interest rates paid on the Adjustable Rate Mortgages (ARMs) and CMOs in
which the Income Fund may invest generally are readjusted at intervals of one
year or less to an increment over some predetermined interest-rate index. There
are three main categories of indexes: those based on U.S. Treasury securities;
those derived from a calculated measure such as a cost-of-funds index; or a
moving average of mortgage rates.
CAPS AND FLOORS
The underlying mortgages which collateralize the ARMS and CMOs in which the
Income Fund invests will frequently have caps and floors that limit the maximum
amount by which the loan rate to the residential borrower may change up or down
(1) per reset or adjustment interval and (2) over the life of the loan. Some
residential mortgage loans restrict periodic adjustments by limiting changes in
the borrower's monthly principal and interest payments rather than by limiting
interest-rate changes. These payment caps may result in negative amortization.
STRIPPED MORTGAGE-BACKED SECURITIES
The Income Fund may also invest in stripped mortgage-backed securities, which
are derivative multi-class mortgage securities. The stripped mortgage-backed
securities in which the Fund may invest will only be issued or guaranteed by the
U.S. Government, its agencies or instrumentalities. Stripped mortgage-backed
securities have greater market volatility than other types of mortgage
securities in which the Fund may invest.
Stripped mortgage-backed securities are usually structured with two classes that
receive different proportions of the interest and principal distributions on a
pool of mortgage assets. A common type of stripped mortgage-backed security will
have one class receiving some of the interest and most of the principal from the
mortgage assets, while the other class will receive most of the interest and the
remainder of the principal. In the most extreme case, one class will receive all
of the interest (the interest-only or "IO" class), while the other class will
receive all of the principal (the principal-only or "PO" class). The yield to
maturity on an IO class is extremely sensitive not only to changes in prevailing
interest rates but also to the rate of principal payments (including
prepayments) on the related underlying mortgage assets. A rapid rate of
principal payments may have a material adverse effect on the yield to maturity
of any such IOs held by the Fund. If the underlying mortgage assets experience
greater than anticipated prepayments of principal, the Fund may fail to recoup
fully its initial investment in these IO securities even if the securities are
rated in the highest rating categories, AAA or Aaa, by S&P or Moody's,
respectively.
Stripped mortgage-backed securities are purchased and sold by institutional
investors through several investment banking firms acting as brokers or dealers.
The staff of the U.S. Securities and Exchange Commission has indicated that it
views such securities as illiquid. The Fund's investment in stripped mortgage
securities will be treated as illiquid and will, together with any other
illiquid investments, not exceed 15% of the Fund's net assets.
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<PAGE> 53
RISKS OF MORTGAGE-BACKED SECURITIES
Mortgage-backed securities differ from conventional bonds in that principal is
paid back over the life of the mortgage security rather than at maturity. As a
result, the holder of mortgage-backed securities (i.e., the Income Fund)
receives monthly scheduled payments of principal and interest, and may receive
unscheduled principal payments representing prepayments on the underlying
mortgages. When the holder reinvests the payments and any unscheduled
prepayments of principal it receives, it may receive a rate of interest that is
lower than the rate on the existing mortgage securities. For this reason,
mortgage-backed securities may be less effective than other types of U.S.
Government securities as a means of "locking in" long-term interest rates.
A decline in interest rates may lead to a faster rate of repayment of the
underlying mortgages and expose the Fund to a lower rate of return upon
reinvestment. To the extent that such mortgage-backed securities are held by the
Fund, the prepayment right of mortgagors may decrease or limit the increase in
net asset value of the Fund because the value of the mortgage-backed securities
held by the Fund may decline more than, or may not appreciate as much as, the
price of noncallable debt securities. To the extent market interest rates
increase beyond the applicable cap or maximum rate on a mortgage security, the
market value of the mortgage-backed security would likely decline to the same
extent as a conventional fixed-rate security.
In addition, to the extent mortgage-backed securities are purchased at a
premium, mortgage foreclosures and unscheduled principal prepayments may result
in some loss of the holder's principal investment to the extent of the premium
paid. On the other hand, if mortgage-backed securities are purchased at a
discount, both a scheduled payment of principal and an unscheduled prepayment of
principal will increase current and total returns and will accelerate the
recognition of income which, when distributed to taxable shareholders, will be
taxable as ordinary income.
The Fund may also invest in pass-through certificates issued by non-governmental
issuers. Pools of conventional residential mortgage loans created by such
issuers generally offer a higher rate of interest than government and
government-related pools because there are no direct or indirect government
guarantees of payment. Timely payment of interest and principal of these pools
is, however, generally supported by various forms of insurance or guarantees,
including individual loan, title, pool and hazard insurance. The insurance and
guarantees are issued by government entities, private insurance and the mortgage
poolers. Such insurance and guarantees and the creditworthiness of the issuers
thereof will be considered in determining whether a mortgage-related security
meets the Fund's quality standards. The Fund may buy mortgage-related securities
without insurance or guarantees if through an examination of the loan experience
and practices of the poolers, the portfolio managers determine that the
securities meet the Fund's quality standards.
With respect to pass-through mortgage pools issued by non-governmental issuers,
there can be no assurance that the private insurers associated with such
securities can meet their obligations under the policies. Although the market
for such non-governmental issued or guaranteed mortgage securities is becoming
increasingly liquid, securities issued by certain private organizations may not
be readily marketable. The purchase of such securities is subject to the Fund's
limit with respect to investment in illiquid securities.
OTHER MORTGAGE-BACKED SECURITIES
The portfolio managers expect that governmental, government-related or private
entities may create mortgage loan pools and other mortgage-related securities
offering mortgage pass-through and mortgage-collateralized investments in
addition to those
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described above. The mortgages underlying these securities may include
alternative mortgage instruments, that is, mortgage instruments the principal or
interest payments of which may vary or the terms to maturity of which may differ
from customary long-term fixed-rate mortgages. As new types of mortgage-related
securities are developed and offered to investors, the portfolio managers will,
consistent with the Income Fund's investment objectives, policies and quality
standards, consider making investments in such new types of mortgage-related
securities. The Fund will not invest in any new types of mortgage-related
securities without prior disclosure to shareholders of the Fund.
RULE 144A SECURITIES
The Funds may purchase securities which are not registered under the Securities
Act but which can be sold to "qualified institutional buyers" in accordance with
Rule 144A under the Securities Act. In some cases, such securities are
classified as "illiquid securities", however, any such security will not be
considered illiquid so long as it is determined by the Adviser, under guidelines
approved by the Board of Trustees, that an adequate trading market exists for
that security. This investment practice could have the effect of increasing the
level of illiquidity in Fund during any period that qualified institutional
buyers become uninterested in purchasing these restricted securities.
ILLIQUID SECURITIES
The Funds will not invest more than 15% of the value of their net assets in
securities that are illiquid because of restrictions on transferability or other
reasons. Repurchase agreements with deemed maturities in excess of seven days
and securities that are not registered under the Securities Act of 1933, as
amended, but that may be purchased by institutional buyers pursuant to Rule 144A
are subject to this 15% limit (unless such securities are variable-amount
master- demand notes with maturities of nine months or less or unless the Board
determines that a liquid trading market exists).
CONVERTIBLE SECURITIES
Common stock occupies the most junior position in a company's capital structure.
Convertible securities entitle the holder to exchange those securities for a
specified number of shares of common stock, usually of the same company, at
specified prices within a certain period of time and to receive interest or
dividends until the holder elects to convert. The provisions of any convertible
security determine its ranking in a company's capital structure. In the case of
subordinated convertible debentures, the holder's claims on assets and earnings
are subordinated to the claims of other creditors, but are senior to the claims
of preferred and common shareholders. In the case of preferred stock and
convertible preferred stock, the holder's claims on assets and earnings are
subordinated to the claims of all creditors but are senior to the claims of
common shareholders.
SWAPS
To help enhance the value of its portfolio or manage its exposure to different
types of investments, the Income Fund may enter into interest-rate, currency and
mortgage-swap agreements and may purchase and sell interest-rate "caps",
"floors" and "collars". The potential loss from investing in swap agreements is
much greater than the amount initially invested. This would protect the Fund
from a decline in the value of the underlying security due to rising rates, but
would also limit its ability to benefit from falling interest rates. The Fund
will enter into interest-rate swaps only on a net basis (i.e. the two payment
streams will be netted out, with the Fund receiving or paying as the case may
be, only the net amount of the two payments). The net amount of the excess, if
any, of the Fund's obligations over its entitlements with respect to each
interest-rate swap will be accrued on a daily basis and an amount of cash or
liquid high-grade debt securities having an aggregate value at least equal to
the accrued excess will be maintained in a segregated account by the Fund's
custodian bank. Interest-rate
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<PAGE> 55
swaps do not involve the delivery of securities or other underlying assets or
principal. Thus, if the other party to an interest-rate swap defaults, the
Fund's risk of loss consists of the net amount of interest payments that the
Fund is contractually entitled to receive.
In a cap or floor, one party agrees, usually in return for a fee, to make
payments under particular circumstances. For example, the purchaser of an
interest-rate cap has the right to receive payments to the extent a specified
interest-rate exceeds an agreed-upon level; the purchaser of an interest-rate
floor has the right to receive payments to the extent a specified interest-rate
falls below an agreed-upon level. A collar entitles the purchaser to receive
payments to the extent a specified interest rate falls outside an agreed-upon
range.
Swap agreements may involve leverage and may be highly volatile; depending on
how they are used, they may have a considerable impact on a Fund's performance.
Swap agreements involve risks depending upon the other party's creditworthiness
and ability to perform, as judged by the portfolio managers, as well as the
Fund's ability to terminate its swap agreements or reduce its exposure through
offsetting transactions.
REITS
Each Fund may invest up to 10% of its net assets in real estate investment
trusts ("REITs"). Equity REITs invest directly in real property while mortgage
REITs invest in mortgages on real property. REITs may be subject to certain
risks associated with the direct ownership of real estate, including declines in
the value of real estate, risks related to general and local economic
conditions, overbuilding and increased competition, increases in property taxes
and operating expenses, and variations in rental income. Generally, increases in
interest rates will decrease the value of high-yielding securities and increase
the costs of obtaining financing, which could decrease the value of a REIT's
investments. In addition, equity REITs may be affected by changes in the value
of the underlying property owned by the REITs, while mortgage REITs may be
affected by the quality of credit extended. Equity and mortgage REITs are
dependent upon management skill, and are subject to the risks of financing
projects. REITs are also subject to heavy cash flow dependency, defaults by
borrowers and self-liquidation.
BORROWING
Each Fund has a fundamental policy that it may not borrow money, except that it
may (1) borrow money from banks for temporary or emergency purposes and not for
leveraging or investment and (2) enter into reverse repurchase agreements for
any purpose, so long as the aggregate amount of borrowings and reverse
repurchase agreements does not exceed one-third of the Fund's total assets less
liabilities (other than borrowings). No Fund will purchase securities while
borrowings in excess of 5% of its total assets are outstanding.
OTHER INVESTMENTS
Subject to prior disclosure to shareholders, the Board of Trustees may, in the
future, authorize the Income Fund to invest in securities other than those
listed here and in the prospectus, provided that such investment would be
consistent with the Fund's investment objective and that it would not violate
any fundamental investment policies or restrictions applicable to the Fund.
TEMPORARY DEFENSIVE PURPOSES
For temporary defensive purposes, the Funds may invest without limit in
high-quality money-market securities. The Funds may also, for temporary
defensive purposes, invest in shares of no-load, open-end money-market funds.
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<PAGE> 56
INVESTMENT RESTRICTIONS
FUNDAMENTAL INVESTMENT RESTRICTIONS
The following investment restrictions are considered fundamental which means
that they may only be changed by the vote of a majority of a Fund's outstanding
shares, which as used herein and in the Prospectus, means the lesser of: (1) 67%
of such Fund's outstanding shares present at a meeting, if the holders of more
than 50% of the outstanding shares are present in person or by proxy, or (2)
more than 50% of such Fund's outstanding shares. The percentage restrictions
described below are applicable only at the time of investment and require no
action by the Funds as a result of subsequent changes in value of the
investments or the size of the Fund.
RESTRICTIONS APPLICABLE TO ALL FUNDS:
The Funds may not:
1. Purchase securities which would cause more than 25% of the value of the
Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in
the same industry. For purposes of this limitation, U.S. government
securities are not considered members of any industry.
2. Borrow money or issue senior securities as defined in the 1940 Act except
that (a) the Funds may borrow money in an amount not exceeding one-third of
the Fund's total assets at the time of such borrowings, and (b) the Fund
may issue multiple classes of shares. The purchase or sale of futures
contracts and related options shall not be considered to involve the
borrowing of money or the issuance of shares of senior securities.
3. With respect to 75% of the Fund's total assets, purchase securities of any
one issuer (other than securities issued or guaranteed by the U.S.
government and its instrumentalities) if, as a result, (a) more than 5% of
the Fund's total assets would be invested in the securities of that issuer,
or (b) the Fund would hold more than 10% of the outstanding voting
securities of that issuer. This restriction shall not apply to shares of
the Balanced Funds.
4. Make loans or lend securities, if as a result thereof, more than 50% of
the Fund's total assets would be subject to all such loans. For purposes
of this limitation debt instruments and repurchase agreements shall not
be treated as loans.
5. Purchase or sell real estate unless acquired as a result of ownership of
securities or other instruments (but this shall not prevent the Funds from
investing in REITS, securities or other instruments backed by real estate,
including mortgage loans, or securities of companies that engage in real
estate business or invest or deal in real estate or interests therein).
6. Underwrite securities issued by any other person, except to the extent that
the purchase of securities and later disposition of such securities in
accordance with the Funds' investment program may be deemed an
underwriting.
7. Purchase or sell commodities except that the Fund may enter into futures
contracts and related options, forward investing contracts and other
similar instruments.
The Funds have adopted the following non-fundamental restrictions. These
non-fundamental restrictions may be changed without shareholder approval, in
compliance with applicable law and regulatory policy.
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1. The Funds shall not invest in companies for purposes of exercising control
or management.
2. The Funds shall not purchase securities on margin, except that the Funds
may obtain such short-term credits as are necessary for the clearance of
transactions and provided that margin payments in connection with futures
contracts and options shall not constitute purchasing securities on margin.
3. The Funds shall not sell securities short, unless it owns or has the right
to obtain securities equivalent in kind and amount to the securities sold
short, and provided that transactions in futures contracts and options are
not deemed to constitute selling short.
4. The Funds shall not purchase any security while borrowings representing
more than 5% of the Fund's total assets are outstanding (investment in
repurchase agreements will not be considered to be loans for purposes of
this restriction).
5. The Funds will invest no more than 15% of the value of their net assets in
illiquid securities, including repurchase agreements with remaining
maturities in excess of seven days, time deposits with maturities in excess
of seven days and other securities which are not readily marketable.
PORTFOLIO TURNOVER
The higher the portfolio turnover, the higher the overall brokerage commissions,
dealer mark-ups and mark-downs, and other direct transaction costs incurred. The
Funds' portfolio managers do take these costs into account, since they affect
overall investment performance.
Although we cannot accurately predict the Funds' annual turnover rates, it is
estimated that annual turnover rates will not exceed, assuming normal market
conditions, approximately 80% for the Growth Fund, 60% for the Income Fund and
an intermediate (but different) percentage for each of the two Balanced Funds. A
100% annual turnover rate would occur if all of a Fund's securities were
replaced one time during a one-year period.
MANAGEMENT OF THE FUNDS
THE BOARD OF TRUSTEES
The operations of each Fund are under the direction of a Board of Trustees. The
Board establishes each Fund's policies and oversees and reviews the management
of each Fund. The Board meets regularly to review the activities of the
officers, who are responsible for day-to-day operations of the Funds. The Board
reviews the various services provided by the Adviser to ensure that each Fund's
general investment policies and programs are being carried out and
administrative services are being provided to the Funds in a satisfactory
manner.
The Trustees and executive officers of the Funds and their principal
occupations during the past five years are set forth below. An asterisk
indicates a trustee who may be deemed to be an "interested person" of the Funds
(as that term is defined in the 1940 Act).
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<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATION
NAME AND AGE WITH THE FUNDS DURING PAST FIVE YEARS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
*Cynthia S. Gooch/66 Trustee Retired; prior thereto, Office Administrator,
2667 Eastwood Drive Edward D. Jones & Co., an investment firm located
Wooster, Ohio 44691-2592 in Ashland, Ohio; serves as a Trustee of the
Presbyterian Church (U.S.A.) Foundation (1997 to
present)
Gail C. Duree/52 Trustee Investment Consultant, Montview Boulevard
6015 E. 17th Avenue Parkway Presbyterian Church (1994 to present), Logan
Denver, Colorado 80220-1522 School (1996 to present), Women's Foundation of
Colorado (1995 to present); Trustee, Presbyterian
Church (U.S.A.) Foundation (1991 to 1997)
Michael F. Ryan/53 Trustee Vice President, Irwin Financial Corp. (1996 to
2502 Washington Street present);President, Irwin Union Bank (1981 to
Columbus, IN 47201 1995)
Rev. Donald B. Register /62 Trustee Pastor, Sixth-Grace Presbyterian
312 S. Ridgeland Avenue Church, Chicago, IL 60616, from 1988 to present
Oak Park, IL 60302
*Frank K. Bateman/59 Chairman of the Attorney, Gerber & Bateman, P.A., Santa Fe, NM
P.O. Box 10106 Board, President and Potter, Mills & Bateman, P.A., Santa Fe, NM;
Santa Fe, NM 87504 and Trustee Trustee, Presbyterian Church (U.S.A.) Foundation
(1995 to present)
Deborah Ann Potter/45 Secretary Compliance Manager, First Data Investor Services
First Data Investor Services Group Group, Inc. (1998 to present); Senior Fund
3200 Horizon Drive Administrator, FPS Services Inc. (1994 to 1998,
King of Prussia, PA 19406 when FPS was acquired by First Data)
Lynne M. Cannon/43 Treasurer Vice President of Client Services, First Data
First Data Investor Services Group Investor Services Group, Inc. (1998 to present);
3200 Horizon Drive Senior Vice President, FPS Services (1995 to 1998
King of Prussia, PA 19406 when FPS was acquired by First Data); prior
thereto, Vice President of Mutual Funds,
Independence Capital Management, Inc. (1992 to
1995)
</TABLE>
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<PAGE> 59
No officer or employee of the Adviser receives any compensation from the Funds
for serving as an officer or Trustee of the Funds. The Funds do not compensate
the officers or Trustees of the Trust for the services they provide to the
Funds. The Funds do reimburse officers and Trustees of the Trust for expenses
incurred in providing their services to the Trust.
THE INVESTMENT ADVISER
To assist the Trustees and officers in carrying out their duties and
responsibilities, the Funds have employed New Covenant Trust Company, N.A. as
their investment adviser. Although the Adviser has no prior experience in
managing registered investment companies, it is a subsidiary of the Presbyterian
Church (U.S.A.) Foundation, which for many years has administered an investment
program for institutions.
The Funds and the Adviser have entered into an Investment Advisory Agreement
with respect to each Fund which is renewable annually by the Board of Trustees
or by votes of a majority of each Fund's outstanding voting securities. The
Agreement is for an initial term of one year. The Agreement will continue in
effect from year to year thereafter only if such continuance is approved
annually by either the Board of Trustees or by a vote of a majority of the
outstanding voting securities of the respective Fund, and in either case by the
vote of a majority of the Trustees who are not parties to the Agreements or
"interested persons" of any party to the Agreements, voting in person at a
meeting called for the purpose of voting on such approvals. The Agreement may be
terminated at any time without penalty by the Board of Trustees of a Fund, by
votes of the shareholders or by the Adviser, upon sixty days written notice. The
Agreement terminates automatically if assigned.
For providing investment advisory services and assuming certain Fund expenses,
the Growth Fund pays the Adviser a monthly fee at the annual rate of 0.99% of
the value of the Growth Fund's average daily net assets and the Income Fund pays
the Adviser a monthly fee at the annual rate of 0.75% of the value of the Income
Fund's average daily net assets. The advisory fees received by the Adviser are
used to pay the fees of the Sub-Advisers. The Adviser does not receive advisory
fees for the Balanced Funds.
In addition to managing the investments, the Adviser also makes
recommendations with respect to other aspects and affairs of the Funds. The
Adviser also furnishes the Funds with certain administrative services, office
space and equipment. All other expenses incurred in the operation of the Funds
are borne by the respective Funds.
AUTHORITY TO ACT AS INVESTMENT ADVISER
Banking laws and regulations currently
prohibit a bank holding company registered under the Bank Holding Company Act of
1956, as amended, or any bank or non-bank affiliate thereof from sponsoring,
organizing, controlling, or distributing the shares of a registered, open-end
investment company continuously engaged in the issuance of its shares, and
prohibit banks generally from issuing, underwriting, selling, or distributing
securities such as shares of the Funds, but do not prohibit such a bank holding
company or its affiliates or banks generally from acting as investment adviser,
transfer agent or custodian to such an investment company or from purchasing
shares of such a company as agent for and upon the order of customers. Should
legislative, judicial or administrative action prohibit or restrict the
activities of such companies in connection with their services to the Funds, the
Funds might be required to alter materially or discontinue its arrangements with
such companies and change its method of operation. It is anticipated, however,
that any resulting change in the Funds' method of operation
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would not affect a Fund's net asset value per share or result in financial
losses to any shareholder.
THE SUB-ADVISERS
The Adviser has entered into Sub-Advisory Agreements with eight Sub-Advisers to
assist in the selection and management of each Fund's investment securities. It
is the responsibility of the Sub-Advisers, under the direction of the Adviser,
to make day-to-day investment decisions for the Funds. The Sub-Advisers also
place purchase and sell orders for portfolio transactions of the Funds
consistent with social-witness principles adopted by the General Assembly of the
Presbyterian Church (U.S.A.) and in accordance with each Fund's investment
objectives and policies.
The Adviser pays each Sub-Adviser a quarterly fee for their services in managing
assets of the Funds. Such fees are based on the annual rates noted below. The
Adviser pays the Sub-Advisers' fees directly from its own advisory fees. The
Sub-Advisory fees are based on the assets of a Fund to which a Sub-Adviser is
responsible for making investment decisions. The Adviser allocates the portion
of each Fund's assets for which a Sub-Adviser will make investment decisions.
Reallocations may be made at any time at the Adviser's discretion.
<TABLE>
<CAPTION>
ANNUAL SUB-ADVISORY
FEE AS A PERCENTAGE OF
NAME OF SUB-ADVISER FUND NAME ASSETS MANAGED
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. William Blair & Company, LLC Growth Fund 0.55% of the average daily net assets
2. John W. Bristol & Co., Inc. Growth Fund 0.50% of the first $10 million; 0.40% of
the next $10 million; 0.30% of the next
$10 million; and 0.20% on assets over $30
million
3. Capital Guardian Trust Company Growth Fund 0.75% of the first $25 million; 0.60% of
the next $25 million and 0.425% on assets
over $50 million (less 10% eleemosynary
discount)
4. Carl Domino & Associates, L.P. Growth Fund 1.00% of the first $1 million; 0.75% of
the next $2 million; 0.50% of the next
$47 million; 0.35% of the next $25
million; and 0.25% on assets over $75
million (less 10% eleemosynary discount)
5. Lazard Asset Management Growth Fund Domestic Portion:
</TABLE>
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<PAGE> 61
<TABLE>
<S> <C> <C>
0.50% of the first $35 million and 0.25% on
assets over $35 million (less 20%
eleemosynary discount) International
Portion: 0.75% of assets (less 20%
eleemosynary discount)
6. Seneca Capital Management Growth Fund 1.00% of the first $5 million; 0.80% of
the next $10 million; 0.50% of the next
$35 million (less 10% eleemosynary
discount); and 0.35% over $50 million
(flat fee over $50 million)
7. Standish, Ayer & Wood, Inc. Income Fund Domestic Portion:
0.40% of the first $10 million; 0.25% of the
next $90 million; 0.20% of the next $100
million; 0.18% of the next $100 million;
0.15% of the next $200 million; and 0.12% of
assets over $500 million.
Global High-Yield Portion:
0.50% of assets managed.
8. Tattersall Advisory Group, Inc. Income Fund 0.25% of the first $50 million; 0.125% of
the next $50 million and 0.10% of assets
over $100 million.
</TABLE>
Continuance of the Sub-Advisory Agreements, after the first year, must be
specifically approved at least annually (i) by vote of the Trustees or by vote
of the shareholders of the Funds, and (ii) by vote of a majority of the Trustees
who are not parties to the Sub-Advisory Agreements or "interested persons" of
any part thereto, cast in person at a meeting called for the purpose of voting
on such approval. The Sub-Advisory Agreements will terminate if assigned, and
are terminable at any time without penalty by the Sub-Adviser or by the Trustees
of the Funds, or by a majority of the outstanding shares of the Funds, on 60
days' written notice to the Adviser and the Sub-Advisers.
The Funds have applied to the SEC for an exemptive order that would permit the
Adviser, subject to approval by the Board of Trustees, to engage and terminate
Sub-Advisers without shareholder approval. There is no assurance that the SEC
will grant such exemptive order.
EXPENSES
Each Fund pays all expenses not assumed by the Adviser, including, but not
limited to: Trustees' expenses, audit fees, legal fees, interest expenses,
brokerage commissions, registration and notification of shares for sale with the
SEC and with various state securities commissions, taxes, cost of insurance,
fees of the Funds' administrator, custodian, transfer agent or other service
providers, costs of obtaining quotations of portfolio securities and the pricing
of Fund shares.
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<PAGE> 62
OTHER SERVICE PROVIDERS
DISTRIBUTOR
First Data Distributors, Inc., ("FDDI") 4400 Computer Drive, Westborough, MA
01581, is the distributor of the Funds' shares. FDDI serves as the distributor
for each Fund pursuant to a Distribution Agreement. The Agreement is for an
initial two year term and is renewable annually thereafter. The Agreement is
terminable without penalty on sixty days written notice, by the Board of
Trustees, by vote of a majority of the outstanding voting securities of the
Fund, or by the Distributor. The Agreement will also terminate automatically in
the event of its assignment. The Funds do not pay any fees to FDDI in its
capacity as distributor. FDDI may enter into agreements with affiliates of the
Adviser in connection with distribution.
TRANSFER AGENT
First Data Investor Services Group, Inc. ("Investor Services Group"), a
wholly-owned subsidiary of First Data Corporation, which has its principal
business address at 3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA
19406, provides transfer agency and dividend disbursing agent services for the
Funds. As part of these services, Investor Services Group will maintain records
pertaining to the sale, redemption, and transfer of Fund shares and will
distribute each Fund's cash dividends to shareholders. For such services, each
Fund will pay Investor Services Group fees which management believes are
comparable to fees charged by others who perform such transfer agency services.
ADMINISTRATIVE SERVICES
Investor Services Group also serves as the Administrator for the Funds. The
services include the day-to-day administration of matters necessary to each
Fund's operations, maintenance of records and the books of the Trust,
preparation of reports, and compliance monitoring of its activities. For
providing administrative services to the Funds, Investor Services Group will
receive from each Fund a fee, computed daily and paid monthly, at the annual
rate of 0.15% of the first $50 million of combined average daily net assets of
the Funds, 0.10% of the next $50 million of combined average daily net assets,
and 0.05% of combined average daily net assets in excess of $100 million. The
maximum annual fee for the four Funds will not exceed $250,000.
ACCOUNTING SERVICES
State Street Bank & Trust Co., 1776 Heritage Drive, North Quincy, MA 02171
provides fund accounting services including the calculation of each Fund's net
asset value in accordance with the provisions of the Funds' current prospectus.
CUSTODIAN
State Street Bank & Trust Co. also serves as custodian for the Funds pursuant to
a Custodian Agreement. As custodian, State Street holds or arranges for the
holding of all portfolio securities and other assets of the Funds.
INDEPENDENT AUDITORS
The accounting firm of Ernst & Young, LLP, Two Commerce Square, 2001 Market
Street, Suite 4000, Philadelphia, PA 19103, has been designated as independent
auditors for each Fund. Ernst & Young, LLP performs annual audits of each Fund
and is periodically called upon to provide accounting and tax advice.
LEGAL COUNSEL
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<PAGE> 63
Dechert Price & Rhoads, 1775 Eye Street, N.W., Washington, DC 20006 serves as
legal counsel for the Trust.
BROKERAGE
The Adviser and Sub-Advisers, in effecting the purchases and sales of portfolio
securities for the account of the Funds, will seek execution of trades either,
(1) at the most favorable and competitive rate of commission charged by any
broker, dealer or member of an exchange, or (2) at a higher rate of commission
charged, if reasonable in relation to brokerage and research services provided
to the Trust or the Adviser or Sub-Adviser by such member, broker or dealer.
Such services may include, but are not limited to, information as to the
availability of securities for purchase or sale and statistical or factual
information or opinions pertaining to investments. The Adviser or Sub-Advisers
may use research and services provided to it by brokers and dealers in servicing
all its clients. Fund orders may be placed with an affiliated broker-dealer.
Portfolio orders will be placed with an affiliated broker-dealer only where the
price being charged and the services being provided compare favorably with those
charged to the Funds by non-affiliated broker-dealers. Over-the-counter
transactions are usually placed with a principal market-maker unless a better
net security price is obtainable elsewhere.
GENERAL INFORMATION
SHARES OF BENEFICIAL INTEREST
The Trust Instrument authorizes the issuance of an unlimited number of shares
for each of the Funds, and each share has a par value of $0.001 per share. There
are no conversion or preemptive rights in connection with any shares of the
Funds, nor are there cumulative voting rights with respect to the shares of any
of the Funds. Each of a Fund's shares has equal voting rights. Each issued and
outstanding share of each Fund is entitled to participate equally in dividends
and distributions declared by such Fund and in the net assets of such Fund upon
liquidation or dissolution remaining after satisfaction of outstanding
liabilities.
All issued and outstanding shares of each Fund will be fully paid and
non-assessable and will be redeemable at net asset value per share. The
interests of shareholders in the Funds will not be evidenced by a certificate or
certificates representing shares of a Fund.
The Board of Trustees has authority, without necessity of a shareholder vote, to
create any number of new series or classes. The Trustees have authorized one
class of shares to be issued currently.
PURCHASES, REDEMPTIONS, AND PRICING OF SHARES
NET ASSET VALUE
Shares of each Fund are purchased at net asset value. The net asset value per
share of each Fund is calculated by adding the value of securities and other
assets of that Fund, subtracting liabilities and dividing by the number of its
outstanding shares. Each Fund's share price will be determined at the close of
regular trading hours of the New York Stock Exchange, normally 4:00 p.m. Eastern
Time. Orders received by the transfer agent after 4:00 p.m. will be confirmed at
the next business day's price.
VALUATION
Each Fund's securities are valued based on market value or, where market
quotations are not readily available, based on fair value as determined in good
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<PAGE> 64
faith by the Trust's Board of Trustees. Certain securities may be valued by an
independent pricing service approved by the Board of Trustees.
Equity securities which are traded in the over-the-counter market only, but
which are not included in the NASDAQ National Market System, will be valued at
the mean between the last preceding bid and asked prices. Valuations may also be
obtained from pricing services when such prices are believed to reflect fair
market value. Securities with a remaining maturity of sixty days or less are
valued at amortized cost, which approximates market value. Short-term notes are
valued at cost. Corporate bonds, municipal bonds, receivables and portfolio
securities not currently quoted as indicated above, and other assets will be
valued at fair value as determined in good faith by the Board of Trustees.
The Funds translate prices for investments quoted in foreign currencies into
U.S. dollars at current exchange rates. As a result, changes in the value of
those currencies in relation to the U.S. dollar may affect the Funds' NAV.
Because foreign markets may be open at different times than the New York Stock
Exchange, the value of the Funds' shares may change on days when shareholders
are not able to buy or sell them. If events materially affecting the values of
the Funds' foreign investments occur between the close of foreign markets and
the close of regular trading on the New York Stock Exchange, these investments
will be valued at their fair value.
REDEMPTIONS IN KIND
The Funds reserve the right to pay redemptions in kind with portfolio securities
in lieu of cash. In accordance with its election pursuant to Rule 18f-1 under
the 1940 Act, the Funds may limit the amount of redemption proceeds paid in
cash. The Funds may, under unusual circumstances, limit redemptions in cash with
respect to each shareholder during any ninety-day period to the lesser of (i)
$250,000 or (ii) 1% of the net asset value of the Fund at the beginning of such
period. In the case of requests for redemptions in excess of such amount, the
Board of Trustees reserves the right to make payments in whole or in part in
securities or other assets in case of an emergency, or any time a cash
distribution would impair the liquidity of the Funds to the detriment of the
existing shareholders. If the recipient sold such securities, a brokerage charge
might be incurred.
SUSPENSION OF REDEMPTIONS
The right of redemption may be suspended or the date of payment postponed during
(a) any period when the New York Stock Exchange is closed (other than customary
weekend and holiday closings) or trading on the New York Stock Exchange is
restricted, (b) any period in which an emergency exists as determined by the SEC
so that disposal of the Funds' investments or determination of its net asset
values is not reasonably practicable, or (c) such other periods as the SEC by
order may permit to protect the Funds' shareholders.
EXCHANGE OF SHARES
An exchange is effected by redemption of shares of one Fund and the issuance of
shares of another Fund, and only with delivery of the current Prospectus. With
respect to an exchange among the Funds, a capital gain or loss for Federal
income tax purposes will be realized upon the exchange, depending upon the cost,
other basis of the shares redeemed, and the tax status of the shareholder. The
exchange privilege is not designed for use in connection with short-term trading
or market-timing strategies. The exchange privilege may be terminated or
suspended or its terms changed at any time, subject to 60 days' prior notice.
TELEPHONE INSTRUCTIONS
Neither the Funds nor any of their service providers will be liable for any loss
or expense in acting upon telephone instructions that are reasonably believed to
be genuine. In attempting to confirm that telephone instructions are genuine,
the
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<PAGE> 65
Funds will use procedures that are considered reasonable. Shareholders assume
the risk to the full extent of their accounts that telephone requests may be
unauthorized. To the extent that a Fund fails to use reasonable procedures to
verify the genuineness of telephone instructions, it and/or its service
contractors may be liable for any such instructions that prove to be fraudulent
or unauthorized. All telephone conversations with Investor Services Group will
be recorded.
AUTOMATIC INVESTING
A shareholder may authorize automatic investing through automatic withdrawals
from his/her bank account on a regular basis. Minimum investments must be for at
least $50.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders who purchase or already own $5,000 or more of any Fund's shares,
valued at the net asset value, and who wish to receive periodic payments from
their account(s) may establish a Systematic Withdrawal Plan by completing an
application provided for this purpose. If you participate in this plan, you will
receive monthly, quarterly or annual checks in the amount designated. The
minimum withdrawal is $50. The amount of withdrawal may be changed at any time.
Dividends and capital gains distributions on a Fund's shares in the Plan are
automatically reinvested in additional shares at net asset value. Payments are
made from proceeds derived from the redemption of Fund shares owned by the
planholder. With respect to the Funds, the redemption of shares may result in a
gain or loss that is reportable by the investor on their income tax return, if
the investor is a taxable entity.
Redemptions required for payments may reduce or use up the planholder's
investment, depending upon the size and frequency of withdrawal payments and
market fluctuations. Accordingly, Plan payments cannot be considered as yield or
income on the investment.
Investor Services Group, as agent for the shareholder, may charge for services
rendered beyond those normally assumed by the Funds. No such charge is currently
assessed, but such a charge may be instituted by Investor Services Group upon
notice in writing to shareholders. This Plan may be terminated at any time
without penalty upon written notice by the shareholder, by the Funds, or by
Investor Services Group.
INTEGRATED VOICE RESPONSE (IVR) SYSTEM
Shareholders in the Funds can obtain toll-free access to account information, as
well as certain transactions, by calling (877) 835-4531. IVR provides share
price, price change, account balances and history (i.e., last transaction,
latest dividend distribution, redemptions by check during the last three
months); and allows sales or exchanges of shares.
TAXATION OF THE FUNDS
Set forth below is a discussion of certain U.S. federal income tax issues
concerning the Funds and the purchase, ownership, and disposition of Fund
shares. This discussion does not purport to be complete or to deal with all
aspects of federal income taxation that may be relevant to shareholders in light
of their particular circumstances. This discussion is based upon present
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the
regulations promulgated thereunder, and judicial and administrative ruling
authorities, all of which are subject to change, which change may be
retroactive. Prospective investors should consult their own tax Advisers with
regard to the federal tax consequences of the purchase, ownership, or
disposition of Fund shares, as well as
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the tax consequences arising under the laws of any state, foreign country, or
other taxing jurisdiction. Unless otherwise noted, references to "the Fund"
apply to each of the four Funds discussed herein.
TAX STATUS OF THE FUNDS
Each Fund intends to be taxed as a regulated investment company under Subchapter
M of the Code. Accordingly, each Fund must, among other things, (a) derive in
each taxable year at least 90% of its gross income from dividends, interest,
payments with respect to certain securities loans, and gains from the sale or
other disposition of stock, securities or foreign currencies, or other income
derived with respect to its business of investing in such stock, securities or
currencies; and (b) diversify its holdings so that, at the end of each fiscal
quarter, (i) at least 50% of the value of each Fund's total assets is
represented by cash and cash items, U.S. Government securities, the securities
of other regulated investment companies and other securities, with such other
securities limited, in respect of any one issuer, to an amount not greater than
5% of the value of the Fund's total assets and 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its total
assets is invested in the securities of any one issuer (other than U.S.
Government securities and the securities of other regulated investment
companies).
As a regulated investment company, the Fund generally is not subject to U.S.
federal income tax on income and gains that it distributes to shareholders, if
at least 90% of the Fund's investment company taxable income (which includes,
among other items, dividends, interest and the excess of any net short-term
capital gains over net long-term capital losses) for the taxable year is
distributed. Each Fund intends to distribute substantially all of such income.
Amounts not distributed on a timely basis in accordance with a calendar year
distribution requirement are subject to a nondeductible 4% excise tax at the
Fund level. To avoid the tax, each Fund must distribute during each calendar
year an amount equal to the sum of (1) at least 98% of its ordinary income (not
taking into account any capital gains or losses) for the calendar year, (2) at
least 98% of its capital gains in excess of its capital losses (adjusted for
certain ordinary losses) for a one-year period generally ending on October 31 of
the calendar year, and (3) all ordinary income and capital gains for previous
years that were not distributed during such years. To avoid application of the
excise tax, each Fund intends to make distributions in accordance with the
calendar year distribution requirement.
A distribution will be treated as paid on December 31 of a calendar year if it
is declared by the Fund in October, November or December of that year with a
record date in such a month and paid by the Fund during January of the following
year. Such distributions will be taxable to shareholders in the calendar year in
which the distributions are declared, rather than the calendar year in which the
distributions are received.
FUND INVESTMENTS
MARKET DISCOUNT. If the Fund purchases a debt security at a price lower than the
stated redemption price of such debt security, the excess of the stated
redemption price over the purchase price is "market discount". If the amount of
market discount is more than a de minimis amount, a portion of such market
discount must be included as ordinary income (not capital gain) by the Fund in
each taxable year in which the Fund owns an interest in such debt security and
receives a principal payment on it. In particular, the Fund will be required to
allocate that principal payment first to the portion of the market discount on
the debt security that has accrued but has not previously been includable in
income. In general, the amount of market discount that must be included for each
period is equal to the lesser of
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(i) the amount of market discount accruing during such period (plus any accrued
market discount for prior periods not previously taken into account) or (ii) the
amount of the principal payment with respect to such period. Generally, market
discount accrues on a daily basis for each day the debt security is held by the
Fund at a constant rate over the time remaining to the debt security's maturity
or, at the election of the Fund, at a constant yield to maturity which takes
into account the semi-annual compounding of interest. Gain realized on the
disposition of a market discount obligation must be recognized as ordinary
interest income (not capital gain) to the extent of the "accrued market
discount."
ORIGINAL ISSUE DISCOUNT. Certain debt securities acquired by the Fund may be
treated as debt securities that were originally issued at a discount. Very
generally, original issue discount is defined as the difference between the
price at which a security was issued and its stated redemption price at
maturity. Although no cash income on account of such discount is actually
received by the Fund, original issue discount that accrues on a debt security in
a given year generally is treated for federal income tax purposes as interest
and, therefore, such income would be subject to the distribution requirements
applicable to regulated investment companies. Some debt securities may be
purchased by the Fund at a discount that exceeds the original issue discount on
such debt securities, if any. This additional discount represents market
discount for federal income tax purposes (see above).
OPTIONS, FUTURES AND FORWARD CONTRACTS. Any regulated futures contracts and
certain options (namely, non-equity options and dealer equity options) in which
the Fund may invest may be "section 1256 contracts." Gains (or losses) on these
contracts generally are considered to be 60% long-term and 40% short-term
capital gains or losses. Also section 1256 contracts held by the Fund at the end
of each taxable year (and on certain other dates prescribed in the Code) are
"marked to market", with the result that unrealized gains or losses are treated
as though they were realized.
Transactions in options, futures and forward contracts undertaken by the Fund
may result in "straddles" for federal income tax purposes. The straddle rules
may affect the character of gains (or losses) realized by the Fund, and losses
realized by the Fund on positions that are part of a straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which the losses are realized. In
addition, certain carrying charges (including interest expense) associated with
positions in a straddle may be required to be capitalized rather than deducted
currently. Certain elections that the Fund may make with respect to its straddle
positions may also affect the amount, character and timing of the recognition of
gains or losses from the affected positions.
Because only a few regulations implementing the straddle rules have been
promulgated, the consequences of such transactions to the Fund are not entirely
clear. The straddle rules may increase the amount of short-term capital gain
realized by the Fund, which is taxed as ordinary income when distributed to
taxable shareholders. Because application of the straddle rules may affect the
character of gains or losses, defer losses and/or accelerate the recognition of
gains or losses from the affected straddle positions, the amount which must be
distributed to shareholders as ordinary income or long-term capital gain may be
increased or decreased substantially as compared to a fund that did not engage
in such transactions.
CONSTRUCTIVE SALES. Under certain circumstances, the Fund may recognize gain
from a constructive sale of an "appreciated financial position" it holds if it
enters into a short sale, forward contract or other transaction that
substantially reduces the risk of loss with respect to the appreciated position.
In that event,
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the Fund would be treated as if it had sold and immediately repurchased the
property and would be taxed on any gain (but not loss) from the constructive
sale. The character of gain from a constructive sale would depend upon the
Fund's holding period in the property. Loss from a constructive sale would be
recognized when the property was subsequently disposed of, and its character
would depend on the Fund's holding period and the application of various loss
deferral provisions of the Code. Constructive sale treatment does not apply to
transactions closed in the 90-day period ending with the 30th day after the
close of the taxable year, if certain conditions are met.
SECTION 988 GAINS OR LOSSES. Gains or losses attributable to fluctuations in
exchange rates which occur between the time the Fund accrues income or other
receivables or accrues expenses or other liabilities denominated in a foreign
currency and the time the Fund actually collects such receivables or pays such
liabilities generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of some investments, including debt securities and
certain forward contracts denominated in a foreign currency, gains or losses
attributable to fluctuations in the value of the foreign currency between the
acquisition and disposition of the position also are treated as ordinary gain or
loss. These gains and losses, referred to under the Code as "section 988" gains
or losses, increase or decrease the amount of the Fund's investment company
taxable income available to be distributed to its shareholders as ordinary
income. If section 988 losses exceed other investment company taxable income
during a taxable year, the Fund would not be able to make any ordinary dividend
distributions, or distributions made before the losses were realized would be
re-characterized as a return of capital to shareholders, rather than as an
ordinary dividend, reducing each shareholder's basis in his or her Fund shares.
PASSIVE FOREIGN INVESTMENT COMPANIES. The Fund may invest in shares of foreign
corporations that may be classified under the Code as passive foreign investment
companies ("PFICs"). In general, a foreign corporation is classified as a PFIC
if at least one-half of its assets constitute investment-type assets, or 75% or
more of its gross income is investment-type income. If the Fund receives a
so-called "excess distribution" with respect to PFIC stock, the Fund itself may
be subject to a tax on a portion of the excess distribution, whether or not the
corresponding income is distributed by the Fund to shareholders. In general,
under the PFIC rules, an excess distribution is treated as having been realized
ratably over the period during which the Fund held the PFIC shares. The Fund
will itself be subject to tax on the portion, if any, of an excess distribution
that is so allocated to prior Fund taxable years and an interest factor will be
added to the tax, as if the tax had been payable in such prior taxable years.
Certain distributions from a PFIC as well as gain from the sale of PFIC shares
are treated as excess distributions. Excess distributions are characterized as
ordinary income even though, absent application of the PFIC rules, certain
excess distributions might have been classified as capital gain.
The Fund may be eligible to elect alternative tax treatment with respect to PFIC
shares. Under an election that currently is available in some circumstances, the
Fund would be required to include in its gross income its share of the earnings
of a PFIC on a current basis, regardless of whether distributions were received
from the PFIC in a given year. If this election were made, the special rules,
discussed above, relating to the taxation of excess distributions would not
apply. In addition, another election would involve marking to market the Fund's
PFIC shares at the end of each taxable year, with the result that unrealized
gains would be treated as though they were realized and reported as ordinary
income. Any mark-to-market losses and any loss from an actual disposition of
PFIC shares would be deductible as ordinary losses to the extent of any net
mark-to-market gains included in income in prior years.
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DISTRIBUTIONS
Distributions of investment company taxable income are taxable to a U.S.
shareholder as ordinary income, whether paid in cash or shares. Dividends paid
by the Fund to a corporate shareholder, to the extent such dividends are
attributable to dividends received by the Fund from U.S. corporations, may,
subject to limitation, be eligible for the dividends received deduction.
However, the alternative minimum tax applicable to corporations may reduce the
value of the dividends received deduction.
The excess of net long-term capital gains over the short-term capital losses
realized and distributed by the Fund, whether paid in cash or reinvested in Fund
shares, will generally be taxable to shareholders as long-term gain, regardless
of how long a shareholder has held Fund shares. Net capital gains from assets
held for one year or less will be taxed as ordinary income.
Shareholders will be notified annually as to the U.S. federal tax status of
distributions, and shareholders receiving distributions in the form of newly
issued shares will receive a report as to the net asset value of the shares
received.
If the net asset value of shares is reduced below a shareholder's cost as a
result of a distribution by the Fund, such distribution generally will be
taxable even though it represents a return of invested capital. Investors should
be careful to consider the tax implications of buying shares of the Fund just
prior to a distribution. The price of shares purchased at this time will include
the amount of the forthcoming distribution, but the distribution will generally
be taxable to the shareholder.
DISPOSITIONS
Upon a redemption, sale or exchange of shares of the Fund, a shareholder will
realize a taxable gain or loss depending upon his or her basis in the shares. A
gain or loss will be treated as capital gain or loss if the shares are capital
assets in the shareholder's hands, and the rate of tax will depend upon the
shareholder's holding period for the shares. Any loss realized on a redemption,
sale or exchange will be disallowed to the extent the shares disposed of are
replaced (including through reinvestment of dividends) within a period of 61
days, beginning 30 days before and ending 30 days after the shares are disposed
of. In such a case the basis of the shares acquired will be adjusted to reflect
the disallowed loss. If a shareholder holds Fund shares for six months or less
and during that period receives a distribution taxable to the shareholder as
long-term capital gain, any loss realized on the sale of such shares during such
six-month period would be a long-term loss to the extent of such distribution.
BACKUP WITHHOLDING
The Fund generally will be required to withhold federal income tax at a rate of
31% ("backup withholding") from dividends paid, capital gain distributions, and
redemption proceeds to shareholders if (1) the shareholder fails to furnish the
Fund with the shareholder's correct taxpayer identification number or social
security number, (2) the IRS notifies the shareholder or the Fund that the
shareholder has failed to report properly certain interest and dividend income
to the IRS and to respond to notices to that effect, or (3) when required to do
so, the shareholder fails to certify that he or she is not subject to backup
withholding. Any amounts withheld may be credited against the shareholder's
federal income tax liability.
OTHER TAXATION
Distributions may be subject to additional state, local and foreign taxes,
depending on each shareholder's particular situation. Non-U.S. shareholders may
be
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<PAGE> 70
subject to U.S. tax rules that differ significantly from those summarized above,
including the likelihood that ordinary income dividends to them would be subject
to withholding of U.S. tax at a rate of 30% (or a lower treaty rate, if
applicable).
CALCULATION OF PERFORMANCE DATA
From time to time, the Funds advertise their various respective performance
measures, such as: 30-day yield and average annual total return. Performance
will vary and the results shown herein and in the Funds' Prospectus are
historical information and will not be representative of future results. Factors
affecting the Funds' performance include general market conditions, operating
expenses, and portfolio management. No adjustment has been made for taxes, if
any, payable on dividends and distributions.
TOTAL PERCENTAGE INCREASE
Total percentage increase is calculated for the specified periods of time by
assuming a hypothetical investment of $1,000 in a Fund's shares. Each dividend
or other distribution is treated as having been reinvested at net asset value on
the payment date. The percentage increases stated are the percent that an
original investment would have increased during the applicable period.
AVERAGE ANNUAL TOTAL RETURN
The Funds compute their average annual total returns by determining the average
annual compounded rates of return during specified periods that equate the
initial amount invested to the ending redeemable value of such investment. This
is done by dividing the ending redeemable value of a hypothetical $1,000 initial
payment by $1,000 and raising the quotient to a power equal to one divided by
the number of years (or fractional portion thereof) covered by the computation
and subtracting one from the result. This calculation can be expressed as
follows:
l/n
[ERV]
Average Annual Total Return= ----- -l
[ P ]
Where: ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical $1,000
payment made at the beginning of the period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in
terms of years.
The Funds that compute their aggregate total returns over a specified period do
so by determining the aggregate compounded rate of return during such specified
period that likewise equates over a specified period the initial amount invested
to the ending redeemable value of such investment. The formula for calculating
aggregate total return is as follows:
[ERV - P]
Aggregate Total Return= ---------
P
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<PAGE> 71
Where: ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical $1,000
payment made at the beginning of the period.
P = hypothetical initial payment of $1,000.
The calculations of average annual total return and aggregate total return
assume the reinvestment of all dividends and capital gain distributions on the
payment dates during the period. The ending redeemable value (variable "ERV" in
each formula) is determined by assuming complete redemption of the hypothetical
investment and the deduction of all nonrecurring charges at the end of the
period covered by the computations. Such calculations are not indicative of
future results and do not take into account Federal, state and local taxes, if
any, that shareholders must pay on a current basis.
Since performance will fluctuate, performance data for the Fund should not be
used to compare an investment in a Fund's shares with bank deposits, savings
accounts and similar investment alternatives which often provide an agreed or
guaranteed fixed yield for a stated period of time. Shareholders should remember
that performance is generally a function of the kind and quality of the
instruments held in a portfolio, portfolio maturity, operating expenses and
market conditions.
30-DAY YIELD CALCULATIONS
The Income Fund may calculate a 30-day yield by dividing the net investment
income per share (as described below) earned by the Fund during a 30-day (or one
month) period by the maximum offering price per share on the last day of the
period. The result is then annualized on a semi-annual basis by adding one to
the quotient, raising the sum to the power of six, subtracting one from the
result and then doubling the difference. The Fund's net investment income per
share earned during the period is based on the average daily number of shares
outstanding during the period entitled to receive dividends and includes
dividends and interest earned during the period minus expenses accrued for the
period, net of reimbursements. This calculation can be expressed as follows:
YIELD = 2 [( a - b + 1)6 - 1]
-------
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends.
d = maximum offering price per share on the last day
of the period.
For the purpose of determining net investment income earned during the period
(variable "a" in the formula), dividend income on equity securities held by a
fund is recognized by accruing 1/360 of the stated dividend rate of the security
each day that the security is in the fund. Except as noted below, interest
earned on any debt obligations held by a fund is calculated by computing the
yield to maturity of each obligation held by that fund based on the market value
of the obligation (including actual accrued interest) at the close of business
on the last business day of the month, the purchase price (plus actual accrued
interest)
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<PAGE> 72
and dividing the result by 360 and multiplying the quotient by the market value
of the obligation (including actual accrued interest) in order to determine the
interest income on the obligation for each day of the subsequent month that the
obligation is held by that fund. For purposes of this calculation, it is assumed
that each month contains thirty days. The date on which the obligation
reasonably may be expected to be called for, or if none, the maturity date. With
respect to debt obligations purchased at a discount or premium, the formula
generally calls for amortization of the discount premium. The amortization
schedule will be adjusted monthly to reflect changes in the market values of
such debt obligations.
Expenses accrued for the period (variable "b" in the formula) include all
recurring fees charged by a fund to all shareholder accounts in proportion to
the length of the base period and the Fund's mean (or median) account size.
Undeclared earned income will be subtracted from the offering price per capital
share (variable "d" in the formula).
With regard to mortgage or other receivables-backed obligations which are
expected to be subject to monthly payments of principal and interest
("pay-downs"): (i) gain or loss attributable to actual monthly pay-downs are
accounted for as an increase or decrease to interest income during the period;
and (ii) the Fund may elect either (a) to amortize the discount and premium on
the remaining security, based on the cost of the security, to the weighted
average maturity date, if such information is available, or to the remaining
term of the security, if any, if the weighted average date is not available or
(b) not to amortize discount or premium on the remaining security.
COMPARING PERFORMANCE
Performance information for the Funds may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Standard & Poor's 500 Composite Stock Price Index, the Dow Jones Industrial
Average, or other appropriate unmanaged domestic or foreign indexes of
performance of various types of investments so that investors may compare a
Fund's results with those of indexes widely regarded by investors as
representative of the securities markets in general; (ii) other groups of mutual
funds tracked by Lipper Analytical Services, Inc., a widely-used independent
research firm which ranks mutual funds by overall performance, investment
objectives and assets, or tracked by other services, companies, publications, or
persons who rank mutual funds on overall performance or other criteria; (iii)
the Consumer Price Index (a measure of inflation) to assess the real rate of
return from an investment in a Fund; and (iv) products managed by a universe of
money managers with similar performance objectives. Unmanaged indexes may assume
the reinvestment of dividends but generally do not reflect deductions or
administrative and management costs and expenses.
FINANCIAL STATEMENTS
REPORTS TO SHAREHOLDERS
Shareholders will receive unaudited semi-annual reports describing the Funds'
investment operations and annual financial statements audited by independent
certified public accountants.
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<PAGE> 73
APPENDIX A -- DESCRIPTIONS OF SECURITIES RATINGS
COMMERCIAL PAPER RATINGS
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S"): "PRIME-1" and "PRIME-2" are Moody's
two highest commercial paper rating categories. Moody's evaluates the salient
features that affect a commercial paper issuer's financial and competitive
position. The appraisal includes, but is not limited to the review of such
factors as:
1. Quality of management.
2. Industry strengths and risks.
3. Vulnerability to business cycles.
4. Competitive position.
5. Liquidity measurements.
6. Debt structures.
7. Operating trends and access to capital markets.
Differing degrees of weight are applied to the above factors as deemed
appropriate for individual situations.
STANDARD & POOR'S RATINGS GROUP, A DIVISION OF MCGRAW-HILL COMPANIES, INC.
("S&P"): "A-1" and "A-2" are S&P's two highest commercial paper rating
categories and issuers rated in these categories have the following
characteristics:
1. Liquidity ratios are adequate to meet cash requirements.
2. Long-term senior debt is rated "A" or better.
3. The issuer has access to at least two additional channels of
borrowing.
4. Basic earnings and cash flow have an upward trend with
allowance made for unusual circumstances.
5. Typically, the issuer is in a strong position in a
well-established industry or industries.
6. The reliability and quality of management is unquestioned.
Relative strength or weakness of the above characteristics determine whether an
issuer's paper is rated "A-1" or "A-2". Additionally, within the "A-1"
designation, those issues determined to possess overwhelming safety
characteristics are denoted with a plus (+) rating category.
BOND RATINGS
S&P: An S&P bond rating is a current assessment of the creditworthiness of an
obligor with respect to a specific debt obligation. This assessment may take
into consideration obligors such as guarantors, insurers or lessees.
The bond ratings are not a recommendation to purchase, sell or hold a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor.
The ratings are based on current information furnished by the issuer or obtained
by S&P from other sources it considers reliable. S&P does not perform any audit
in connection with any ratings and may, on occasion, rely on unaudited financial
information. The ratings may be changed, suspended or withdrawn as a result of
changes in, or unavailability of, such information, or for other circumstances.
The ratings are based, in varying degrees, on the following considerations:
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<PAGE> 74
I. Likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance
with the terms of the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization or other arrangement under the laws
of bankruptcy and other laws affecting creditor's rights.
The bond ratings of S&P and their meanings are:
"AAA" Bonds rated "AAA" have the highest rating assigned by S&P to a
- ------ debt obligation. Capacity to pay interest and repay principal is
extremely strong.
"AA" Bonds rated "AA" have a very strong capacity to pay interest and
- ----- repay principal and differ from the highest rated issues only in
small degree.
"A" Bonds rated "A" have a strong capacity to pay interest and repay
- ---- principal although they are somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than bonds in higher rated categories.
"BBB" Bonds rated "BBB" are regarded as having an adequate capacity to
- ----- pay interest and repay principal. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for bonds in this
category than for bonds in higher rated categories.
"BB" Bonds rated "BB" are regarded as less vulnerable in the near term
- ---- than lower rated obligors. However, they face major ongoing
uncertainties and exposure to adverse business, financial, or
economic conditions that could lead to the obligor's inadequate
capacity to meet its financial commitments.
"B" Bonds rated "B" are regarded to have a greater vulnerability to
- --- default but currently have the capacity to meet its financial
commitments. Adverse business, financial, or economic
conditions will impair the obligor's capacity or willingness to
meet its financial commitments.
"CCC" An obligor rated "CCC" is currently vulnerable, and is dependent
- ----- upon favorable business, financial, or economic conditions to meet
its financial commitments.
"CC" An obligor rated "CC" is currently highly vulnerable.
- ----
Plus (+) or Minus (-): The ratings from "AA" to "CC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
PROVISIONAL RATINGS The letter "P" indicates a provisional rating which assumes
successful completion of a project financed by the bonds being rated and
indicates that payment of debt service requirements is largely or entirely
dependent upon the successful and timely completion of the project. This rating,
while addressing credit quality subsequent to completion of the project, makes
no comment on the
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<PAGE> 75
likelihood of, or the risk of default upon failure of, such completion. The
investor should exercise his own judgement with respect to such likelihood and
risk.
Under present commercial bank regulations issued by the Comptroller of the
Currency, bonds rated in the top four categories ("AAA", "AA", "A", "BBB",
commonly known as "investment-grade" ratings) are generally regarded as eligible
for bank investment.
MOODY'S.: The ratings of Moody's and their meanings are:
"Aaa" Bonds rated "Aaa" are judged to be of the best quality. They carry
- ----- the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or
by an exceptionally stable margin and principal is secure. While
the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally
strong position of such issues.
"Aa" Bonds rated "Aa" are judged to be of high quality by all
- ---- standards. Together with the "Aaa" group they comprise what are
generally known as high-grade bonds. They are rated lower then the
best bonds because margins of protection may not be as large as in
"Aaa" securities or fluctuation of protective elements may
be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat
larger than in "Aaa" securities.
"A" Bonds rated "A" possess many favorable investment attributes and
- --- are to be considered as upper medium-grade obligations. Factors
giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to
impairment sometime in the future.
"Baa" Bonds rated "Baa" are considered as medium-grade obligations;
- ----- i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
"Ba" Bonds rated "Ba" are judged to have speculative elements; their
- ---- future cannot be considered as well assured. Often the protection
of interest and principal payments may be very moderate, and
thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this
class.
"B" Bonds rated "B" generally lack characteristics of the desirable
- --- investment. Assurance of interest and principal payments or
maintenance of other terms of the contract over any long period of
time may be small.
"Caa" Bonds rated "Caa" are of poor standing. Such issues may be in
- ----- default or there may be present elements of danger with respect to
principal or interest.
"Ca" Bonds rated "Ca" represent obligations that are speculative in a
- ---- high degree. Such issues are often in default or have other marked
shortcomings.
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<PAGE> 76
"C" Bonds rated "C" are the lowest rated class of bonds, and issues so
- --- rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
"Con." Bonds rated "Con." are bonds rated conditionally because the
- ----- security depends on the completion of some act or the fulfillment
of some condition. These are bonds secured by: (a) earnings of
projects under construction, (b) earnings of projects unseasoned
in operating experience, (c) rentals that begin when facilities
are completed, or (d) payments to which some other limiting
condition attaches. Parenthetical rating denotes probable credit
stature upon completion of construction or elimination of basis of
condition.
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<PAGE> 77
NEW COVENANT FUNDS
NEW COVENANT GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 22, 1999
ASSETS
Cash $ 25,000
Deferred Offering Costs (see note 2) 92,967
---------
Total Assets 117,967
=========
LIABILITIES
Payable to Sponsor 60,480
Accrued Expenses 32,487
---------
Total Liabilities 92,967
=========
NET ASSETS - consists of paid-in capital $ 25,000
=========
Shares of Beneficial Interest 2,500
($.001 par value)
Net Asset Value $10.00
The accompanying notes are an integral part of these financial statements.
<PAGE> 78
NEW COVENANT FUNDS
NEW COVENANT INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 22, 1999
ASSETS
Cash $ 25,000
Deferred Offering Costs (see note 2) 64,192
---------
Total Assets 89,192
=========
LIABILITIES
Payable to Sponsor 41,760
Accrued Expenses 22,432
---------
Total Liabilities 64,192
---------
NET ASSETS - consists of paid-in capital $ 25,000
=========
Shares of Beneficial Interest 2,500
($.001 par value)
Net Asset Value $10.00
The accompanying notes are an integral part of these financial statements.
<PAGE> 79
NEW COVENANT FUNDS
NEW COVENANT BALANCED GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 22, 1999
ASSETS
Cash $ 25,000
Deferred Offering Costs (see note 2) 42,057
---------
Total Assets 67,057
=========
LIABILITIES
Payable to Sponsor 27,360
Accrued Expenses 14,697
---------
Total Liabilities 42,057
---------
NET ASSETS - consists of paid-in capital $ 25,000
=========
Shares of Beneficial Interest 2,500
($.001 par value)
Net Asset Value $10.00
The accompanying notes are an integral part of these financial statements.
<PAGE> 80
NEW COVENANT FUNDS
NEW COVENANT BALANCED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 22, 1999
ASSETS
Cash $ 25,000
Deferred Offering Costs (see note 2) 22,135
---------
Total Assets 47,135
=========
LIABILITIES
Payable to Sponsor 14,400
Accrued Expenses 7,735
---------
Total Liabilities 22,135
---------
NET ASSETS - consists of paid-in capital $ 25,000
=========
Shares of Beneficial Interest 2,500
($.001 par value)
Net Asset Value $10.00
The accompanying notes are an integral part of these financial statements.
<PAGE> 81
NEW COVENANT FUNDS
NEW COVENANT GROWTH FUND
NEW COVENANT INCOME FUND
NEW COVENANT BALANCED GROWTH FUND
NEW COVENANT BALANCED INCOME FUND
NOTES TO THE STATEMENTS OF ASSETS AND LIABILITIES
JUNE 22, 1999
NOTE 1: ORGANIZATION
New Covenant Funds (the "Trust"), an open-end, diversified management investment
company, was organized as a Delaware business trust on September 30, 1998. It
currently consists of four investment funds: New Covenant Growth Fund ("Growth
Fund"), New Covenant Income Fund ("Income Fund"), New Covenant Balanced Growth
Fund ("Balanced Growth Fund") and New Covenant Balanced Income Fund ("Balanced
Income Fund"), (individually, a "Fund", and collectively, the "Funds"). The
Trust's authorized capital consists of an unlimited number of shares of
beneficial interest of $0.001 par value. The Funds' investment adviser is New
Covenant Trust Company, N.A. (the "Adviser").
The objectives of the Funds are as follows:
<TABLE>
<CAPTION>
- ------------------------------ -----------------------------------------------------------------------------
<S> <C>
Growth Fund Long-term capital appreciation. Dividend income, if any, will be incidental.
- ------------------------------ -----------------------------------------------------------------------------
Income Fund High level of current income with preservation of capital.
- ------------------------------ -----------------------------------------------------------------------------
Balanced Growth Fund Produce capital appreciation with less risk than would be present in a
portfolio of only common stocks.
- ------------------------------ -----------------------------------------------------------------------------
Balanced Income Fund Produce current income and long-term growth of capital.
- ------------------------------ -----------------------------------------------------------------------------
</TABLE>
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
FEDERAL INCOME TAXES: It is the Funds' intention to qualify as a regulated
investment company by complying with the appropriate provisions of the Internal
Revenue Code of 1986, as amended. Accordingly, no provision for federal income
tax has been made.
DEFERRED OFFERING COSTS: The Trust has deferred initial offering costs
by Fund as follows: Growth Fund, $92,967, Income Fund, $64,192, Balanced Growth
Fund, $42,057, and Balanced Income Fund, $22,135. These costs will be
amortized over the period of benefit, not to exceed 12 months from the date the
Fund commences operations.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements. Actual amounts could differ from these estimates.
NOTE 3: INVESTMENT ADVISORY AND OTHER AGREEMENTS
The Trust, on behalf of each Fund, has entered into an Investment Advisory
Agreement with the Adviser. Under the Agreement, the Adviser is responsible for
managing the Funds' investments as well as furnishing the Funds with certain
administrative services. The Growth Fund pays the Adviser a monthly fee at the
<PAGE> 82
annual rate of 0.99% of the Growth Fund's average daily net assets and the
Income Fund pays the Adviser a monthly fee at the annual rate of 0.75% of the
value of the Income Fund's average daily net assets. The Adviser does not
receive advisory fees for the Balanced Growth and Balanced Income Funds. The
Adviser has entered into Sub-Advisory Agreements with eight Sub-Advisers to
assist in the selection and management of each Fund's investment securities. It
is the responsibility of the Sub-Advisers, under the direction of the Adviser,
to make day-to-day investment decisions for the Funds. The Adviser pays each
Sub-Adviser a quarterly fee for their services in managing assets of the Funds.
The Adviser pays the Sub-Advisers' fees directly from its own advisory fees.
The Sub-Advisory fees are based on the assets of a Fund to which a Sub-Adviser
is responsible for making investment decisions.
The following are the Sub-Advisers for the Growth Fund: William
Blair & Company, L.L.C., John W. Bristol & Co., Inc., Capital Guardian Trust
Company, Carl Domino Associates, L.P., Lazard Asset Management and Seneca
Capital Management.
The following are the Sub-Advisers for the Income Fund: Standish,
Ayer & Wood, Inc. and Tattersall Advisory Group.
As part of the Trust's organization, each Fund has issued to the Presbyterian
Church (U.S.A.) Foundation 2,500 shares of beneficial interest at $10.00 per
share in a private placement.
The Trust has entered into a Distribution Agreement with First Data
Distributors, Inc. (the "Distributor") to serve as the principal distributor
of the Funds' shares. The Funds do not pay any fees to the Distributor in
its capacity as principal distributor.
The Trust has entered into a Services Agreement with First Data Investor
Services Group, Inc. ("Investor Services Group"). Under the Services Agreement,
Investor Services Group provides certain transfer agency and administrative
services to the Funds. Fees charged for fund administration are 0.15% of the
first $50 million of total net assets, 0.10% of the next $50 million of total
net assets and 0.05% of total net assets over $100 million. The maximum annual
combined fee for fund administration is $250,000 for all four Funds. Fees
charged for transfer agency services are $20 per shareholder account for each
Fund with a minimum annual fee of $27,000 per Fund. The Funds have also entered
into an agreement with State Street Bank & Trust Company to provide accounting
and custody services.
<PAGE> 83
Report of Independent Auditors
To the Shareholder and Board of Trustees
New Covenant Funds
We have audited the accompanying statements of assets and liabilities of New
Covenant Funds (comprising, respectively, New Covenant Growth Fund, New Covenant
Income Fund, New Covenant Balanced Growth Fund, and New Covenant Balanced Income
Fund (the "Funds")) as of June 22, 1999. These statements of assets and
liabilities are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these statements of assets and liabilities based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statements of assets and liabilities are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statements of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the statements of assets and liabilities referred to above
present fairly, in all material respects, the financial position of the
respective Funds at June 22, 1999, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
June 23, 1999
<PAGE> 84
NEW COVENANT FUNDS
PART C - OTHER INFORMATION
Item 23. EXHIBITS:
(a) Trust Instrument -Incorporated by reference to Exhibit to Item
23 (a) of Registrant's initial Registration Statement filed on
September 30, 1998.
(a)(1) Certificate of Trust - Incorporated by reference to Exhibit to
Item 23(a)(1) of Registrant's initial Registration Statement
filed on September 30, 1998.
(b) By-Laws - Incorporated by reference to Exhibit to Item 23(b)
of Registrant's initial Registration Statement filed on
September 30, 1998.
(c) Instruments Defining Rights of Security Holders. Not
applicable.
(d) Investment Advisory Contracts and Sub-Advisory Contracts are
filed herewith.
(i) Investment Advisory Agreement between Registrant
and New Covenant Trust Company, N.A.
(ii) Form of Sub-Advisory Agreement between New
Covenant Trust Company, N.A. and William Blair &
Company, L.L.C.
(iii) Form of Sub-Advisory Agreement between New
Covenant Trust Company, N.A. and John W. Bristol &
Co., Inc.
(iv) Form of Sub-Advisory Agreement between New
Covenant Trust Company, N.A. and Capital Guardian
Trust Company.
(v) Form of Sub-Advisory Agreement between New
Covenant Trust Company, N.A. and Carl Domino
Associates, L.P.
(vi) Form of Sub-Advisory Agreement between New
Covenant Trust Company, N.A. and Lazard Asset
Management.
(vii) Form of Sub-Advisory Agreement between New
Covenant Trust Company, N.A. and Seneca Capital
Management.
(viii) Form of Sub-Advisory Agreement between New
Covenant Trust Company, N.A. and Standish, Ayer &
Wood, Inc.
(ix) Form of Sub-Advisory Agreement between New
Covenant Trust Company, N.A. and Tattersall
Advisory Group.
(e) Underwriting Contracts - Form of Distribution Agreement
between Registrant and First Data Distributors, Inc.
(f) Bonus or Profit Sharing Contracts -- None.
(g) Custodian Agreement - Form of Custodian Agreement between
Registrant and State Street Bank and Trust Company is filed
herewith.
(h) Other Material Contracts.
(i) Form of Services Agreement between Registrant and First
Data Investor Services Group is filed herewith.
(i) Legal Opinion is filed herewith.
(j) Consent of Independent Accountants is filed herewith.
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<PAGE> 85
(k) Omitted Financial Statements -- None
(l) Initial Capital Agreements - filed herewith
(m) Rule 12b-1 Plan - not applicable.
(n) Financial Data Schedule - to be filed by Amendment.
(o) Rule 18f-3 Plan. None
(p) Powers of Attorney are filed herewith.
(i) Michael F. Ryan
(ii) Gail S. Duree
(iii) Rev. Donald B. Register
(iv) Cynthia S. Gooch
(v) Frank K. Bateman, Jr.
Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None
Item 25. INDEMNIFICATION.
Reference is made to Article IX of the Registrant's Trust
Instrument filed herewith.
The Trust Instrument limits the liabilities of a Trustee to that of
gross negligence and in the event a Trustee is sued for his or her
activities concerning the Trust, the Trust will indemnify that
Trustee to the fullest extent permitted by law, except if a Trustee
engages in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or
her office.
The Registrant intends to purchase Errors and Omissions insurance
with Directors and Officers liability coverage.
Item 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
New Covenant Trust Company, N.A. (the "Adviser"), a
Federally chartered national trust bank, is the investment adviser
for the Funds.
Other substantial business, professional, vocational or employment
activities of each director and officer of the Registrant's
Investment Adviser during the past two fiscal years are:
<TABLE>
<CAPTION>
Substantial Business Activities
Name and Position During Past Two Fiscal Years
- -------------------------- ----------------------------------
<S> <C>
Ralph R. Allen, Director Vice President and Assistant
and V.P., Administration Secretary, Presbyterian
Church (U.S.A.) Foundation, 200
East Twelfth Street,
Jeffersonville, IN 47130 from
3/95 to present.
Karen C. Anderson, Director Chief Financial Officer
Western Communications
1526 N.W. Hill Street
Bend, OR 97710
from 5/99 to present
Previously, Certified Public
Accountant, Grove, Mueller,
Hall & Swank, PC
494 State Street, Suite 330
Salem, OR 97301
9/93 to 5/99
Zane K. Buxton, Director Manager of Judicial Process
Presbyterian Church (U.S.A.)
100 Witherspoon Street
Louisville, KY 40202-1396
from 2/94 to present
</TABLE>
-78-
<PAGE> 86
Thomas W. Baylor, Director, Vice President and Controller, Presbyterian
Vice President and Controller Church (U.S.A.) Foundation, 200 East Twelfth
Street, Jeffersonville, IN 47130 from 1/93
to present
R. Keith Cullinan, Director President and part owner of, Cullinan
President and CEO Associates, Inc., 1406 Browns Lane, 2nd
Floor, Louisville, KY 40207 from 1990 to
present.
Vanessa G. Elkin, Presbyterian Church (USA) Foundation,
V.P., Trust Operations 200 East 12th Street,
Jeffersonville, IN 47130
from 10/98 to present
Previously, Vice President and
Manager of Trust Operations
Commonwealth Bank & Trust Company
12906 Shelbyville Rd.,
Louisville, KY from 1992 to 10/98
D. Fort Flowers, Jr., Director President Sentinel Trust Company, LBA,
2001 Kirby Drive #1210, Houston, TX 77019
from 1/97 to present.
Georgette L. Huie, Director Seminary Student
previously, Sales/Systems Engineer
IBM Corporation
San Francisco, CA
from 1978 to 1997
-79-
<PAGE> 87
<TABLE>
<S> <C>
Edwin T. Johnson, Director Retired since 1993; Previously,Officer for
Noble Lowndes Johnson, London, England, an
employee benefits firm, from 1990 to 1993;
Trustee and a member of the Governing Board
of Jackson Laboratory; Director, Precision
Systems Integrated; Director, Lincoln and
Soldiers Institute.
John S. Keck, Vice President, V.P., General Counsel and Assistant
General Counsel and Secretary Secretary, Presbyterian Church (USA)
Foundation, 200 East 12th Street
Jeffersonville, IN 47130 from 7/94
to present
Robert A. McNeely, Director Senior Vice President Union Bank of
California, 530 B Street, Suite 650
San Diego, CA 92101
from 10/68 to present
Dennis J. Murphy, Director Senior Vice President and Chief Financial
Sr. V.P. and CFO, Investments Officer, Presbyterian Church (U.S.A.)
Foundation, 200 East Twelfth Street,
Jeffersonville, IN 47130 from 1/82 to
present.
Merrell M. Peters, Director Attorney, Peters Law Office, Fort Dodge, IA
from 4/96 to present.
</TABLE>
-80-
<PAGE> 88
John W. Bristol & Co., Inc. is sub-Adviser for the Growth Fund. For
information as to any other business, vocation, or employment of a
substantial nature during the last two fiscal years in which each
director, officer or partner of the sub-Adviser has been engaged
for his own account or in the capacity of director, officer,
employee, partner or trustee, reference is made to the Form ADV
(File #801-13942) filed pursuant to the Investment Advisers Act of
1940.
William Blair & Company is sub-Adviser for the Growth Fund. For
information as to any other business, vocation, or employment of a
substantial nature during the last two fiscal years in which each
director, officer or partner of the sub-Adviser has been engaged
for his own account or in the capacity of director, officer,
employee, partner or trustee, reference is made to the Form ADV
(File #801-00688) filed pursuant to the Investment Advisers Act of
1940.
Carl Domino Associates, L.P. is sub-Adviser for the Growth Fund.
For information as to any other business, vocation, or employment
of a substantial nature during the last two fiscal years in which
each director, officer or partner of the sub-Adviser has been
engaged for his own account or in the capacity of director,
officer, employee, partner or trustee, reference is made to the
Form ADV (File #801-30266) filed pursuant to the Investment
Advisers Act of 1940.
Lazard Freres & Co. is sub-Adviser for the Growth Fund. For
information as to any other business, vocation, or employment of a
substantial nature during the last two fiscal years in which each
director, officer or partner of the sub-Adviser has been engaged
for his own account or in the capacity of director, officer,
employee, partner or trustee, reference is made to the Form ADV
(File #801-6568) filed pursuant to the Investment Advisers Act of
1940.
Seneca Capital Management is sub-Adviser for the Growth Fund. For
information as to any other business, vocation, or employment of a
substantial nature during the last two fiscal years in which each
director, officer or partner of the sub-Adviser has been engaged
for his own account or in the capacity of director, officer,
employee, partner or trustee, reference is made to the Form ADV
(File #801-61669) filed pursuant to the Investment Advisers Act of
1940.
Tattersall Advisory Group is sub-Adviser for the Income Fund.
For information as to any other business, vocation, or employment
of a substantial nature during the last two fiscal years in which
each director, officer or partner of the sub-Adviser has been
engaged for his own account or in the capacity of director,
officer, employee, partner or trustee, reference is made to the
Form ADV (File #801-53633) filed pursuant to the Investment
Advisers Act of 1940.
Standish, Ayer & Woods is sub-Adviser for the Income Fund. For
information as to any other business, vocation, or employment of a
substantial nature during the last two fiscal years in which each
director, officer or partner of the sub-Adviser has been engaged
for his own account or in the capacity of director, officer,
-81-
<PAGE> 89
employee, partner or trustee, reference is made to the Form ADV
(File #801-584) filed pursuant to the Investment Advisers Act of
1940.
Capital Guardian Trust Company is a sub-Adviser for the Growth
Fund. Information with respect to Capital Guardian Trust Company
and its officers and directors is set forth below:
<TABLE>
<CAPTION>
Substantial Business Activities
Name and Position During Past Two Fiscal Years
- ---------------------------- -------------------------------
<S> <C>
Andrew F. Barth, Director Executive Vice President and Research
Manager, Capital Guardian Research Company.
Michael D. Beckman, Senior Vice President, Director, Capital Guardian Trust
Treasurer and Director Company of Nevada; Treasurer,
Capital Guardian Research Company
Larry P. Clemmensen, Director Director, American Funds Distributors, Inc.;
Chairman of the Board, American
Funds Service Company; Director and
President, The Capital Group
Companies, Inc.; Senior Vice
President and Director, Capital
Research and Management Company;
President and Director, Capital
Management Services, Inc.;
Treasurer, Capital Strategy
Research, Inc.; Senior Vice
President, Capital Income Builder,
Inc. and Capital World Growth &
Income Fund, Inc.
Roberta A. Conroy, Senior Vice President and Senior Vice President and
Director Secretary, Capital Director and
Counsel International, Inc. and
Emerging Markets Growth Fund, Inc.;
Assistant General Counsel, The
Capital Group Companies, Inc.;
Secretary, Capital Management
Services, Inc.
John B. Emerson, Senior Vice President and Deputy Assistant to the President,
President, PIMS Division White House Coordinator, Deputy
Director of Presidential Personnel,
The White House.
Michael E. Ericksen, Senior Vice President Senior Vice President, Capital
International, Limited.
</TABLE>
-82-
<PAGE> 90
<TABLE>
<S> <C>
David I. Fisher, Chairman and Director Chairman and Director, The Capital
Group Companies, Inc. Vice Chairman
and Director, Capital
International, Inc., Capital
International K.K., Capital
International Limited and Emerging
Markets Growth Fund, Inc.;
President and Director, Capital
Group International, Inc. and
Capital International Limited
(Bermuda); Presidente du Conseil,
Capital International S.A.;
Director, Capital Group Research,
Inc., Capital Research
International, EuroPacific Growth
Fund and New Perspective Fund.
Richard N. Havas, Senior Vice President Senior Vice President, Capital
International Limited, Capital
Research International and Capital
Guardian Canada, Inc.
Frederick M. Hughes, Jr., Senior Vice President Senior Vice President, Capital
Guardian Trust Company
Robert G. Kirby, Chairman Emeritus Senior Partner, The Capital Group
Partners, L.P.
Nancy J. Kyle, Senior Vice President and President, Capital Guardian
Director Canada, Inc. and Vice
President, Emerging Markets Growth Fund, Inc.
Karin L. Larson, Director Director, The Capital Group
Companies, Inc.; President,
Director, and Director of Research,
Capital Guardian Research Company;
Chairperson, President and
Director, Capital Group Research,
Inc.; President, Director and
Director of International Research,
Capital Research International.
D. James Martin, Director Senior Vice President and Director, Capital
Guardian Research Company.
John R. McIlwraith, Senior Vice Senior Vice President and
President and Director Director, Capital International
Limited
James R. Mulally, Senior Vice Senior Vice President, Capital
President and Director International Limited;
</TABLE>
-83-
<PAGE> 91
<TABLE>
<S> <C>
Director, Capital Guardian
Research Company; Vice
President, Capital
Research Company.
Shelby Notkin, Senior Vice President and Director, Capital Guardian Trust
Chairman, PIMS Division Company of Nevada
Mary M. O'Hern, Senior Vice President Senior Vice President
Capital International
Limited; Vice President,
Capital International,
Inc.
Jeffrey C. Paster, Senior Vice President Senior Vice President,
Capital Guardian Trust
Company
Robert V. Pennington, Senior Vice President President, Capital Guardian Trust
and Vice Chairman, PIMS Division Company of Nevada
Jason M. Pilalas, Director Senior Vice President and
Director, Capital Guardian
Research Company
Robert Ronus, President and Director Chairman and Director,
Capital Guardian Canada,
Inc., Capital Guardian
Research Company and
Capital Research Company
and Capital Research
International; Director,
The Capital Group
Companies, Inc., Capital
Group International, Inc.
and Capital International
Fund S.A.; Directeur,
Capital International
S.A.; Senior Vice
President, Capital
International Limited.
Theodore R. Samuels, Senior Vice Director, Capital Guardian
President and Director Research Company.
John H. Seiter, Executive Vice Senior Vice President, Capital
President of Client Relations Group International, Inc.;
& Marketing and Director Vice President, The Capital Group
Companies, Inc.
Robert L. Spare, Senior Vice Senior Vice President, Capital
President Guardian Trust Company
Eugene P. Stein, Executive Vice Director, Capital Guardian
President and Director Research Company
Philip A. Swan, Senior Vice Senior Vice President, Capital
</TABLE>
-84-
<PAGE> 92
<TABLE>
<S> <C>
President Guardian Trust Company
Shaw B. Wagener, Director Director, Capital
International Asia Pacific
Management Company, S.A.,
Capital International
Management Company,
Capital International
Emerging Countries Fund
and Capital International
Latin American Fund;
President and Director,
Inc.; Senior Vice
President, Capital
International, Capital
Group International, Inc.
and Emerging Markets
Growth Fund, Inc.
William H. Hurt, Senior Vice Chairman, Capital Guardian Trust
President and Director Company of Nevada and
Capital Strategy Research, Inc.
Eugene Waldron, Senior Vice President Senior Vice President and Vice
President, Loomis, Sayles
& Co.
Lionel Sauvage, Senior Vice President Senior Vice President and
Director, Capital Guardian
Research Company; V.P.,
Capital International
Research, Inc.
Elizabeth Burns, Senior Vice President Senior Vice President
Donnalisa Barnum, Senior Vice President Senior Vice President and
V.P., Capital
International Limited
</TABLE>
Item 27. PRINCIPAL UNDERWRITERS
(a) First Data Distributors, Inc., the principal underwriter for
the Registrant's securities, currently acts as principal
underwriter for the following entities:
The Galaxy Fund
Galaxy Fund II
The Galaxy VIP Fund
Alleghany Funds (f/k/a CT&T Funds)
Wilshire Target Funds, Inc.
The Potomac Funds
Panorama Trust
First Choice Funds Trust
Undiscovered Managers Fund
LKCM Funds
BT Insurance Funds Trust
ABN AMRO Funds (f/k/a Rembrandt Funds)
IBJ Funds Trust
ICM Series Trust
Forward Funds, Inc.
Light Index Funds, Inc.
-85-
<PAGE> 93
WorldWide Index Funds
Weiss, Peck & Greer Funds Trust
Weiss, Peck & Greer International Fund
WPG Growth Fund
WPG Growth and Income Fund
WPG Tudor Fund
RWB/WPG U.S. Large Stock Fund
Tomorrow Funds Retirement Trust
The Govett Funds, Inc.
IAA Trust Growth Fund, Inc.
IAA Trust Asset Allocation Fund, Inc.
IAA Trust Tax Exempt Bond Fund, Inc.
IAA Trust Taxable Fixed Income Series Fund, Inc.
Matthews International Funds
McM Funds
Metropolitan West Funds
Smith Breeden Series Fund
Smith Breeden Trust
The Stratton Funds, Inc.
Stratton Growth Fund, Inc.
Stratton Monthly Dividend REIT Shares, Inc.
Trainer Wortham First Mutual Funds
(b) The information required by this Item 27 with respect to each
director, officer or partner of First Data Distributors, Inc.
is incorporated herein by reference to Form BD filed with the
Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934 (SEC File No. 8-45467)
(c) Not Applicable.
Item 28. LOCATION OF ACCOUNTS AND RECORDS. All records described in
Section 31(a) of the 1940 Act and the Rules 17 CFR 270.31a-1
to 31a-3 promulgated thereunder, are maintained by the Trust's
Investment Adviser, New Covenant Trust Company, N.A., except
for those maintained by the Funds' Custodian, State Street
Bank & Trust Co., 1776 Heritage Drive, North Quincy, MA 02171,
the Trust's Administrator and Transfer Agent, First Data
Investor Services Group, 3200 Horizon Drive, P.O. Box 61503,
King of Prussia, PA 19406-0903, and the Funds' Accounting
Agent, State Street Bank & Trust Co., 1776 Heritage Drive,
North Quincy, MA 02171.
Item 29. MANAGEMENT SERVICES. Not Applicable.
Item 30. UNDERTAKINGS.
(a) Registrant hereby undertakes to promptly call a meeting of
shareholders for the purpose of voting upon the question of
removal of any trustee or trustees when requested in writing
to do so by the recordholders of not less than 10% of the
Registrant's outstanding shares and to assist its shareholders
in accordance with the requirements of Section 16(c) of the
Investment Company Act relating to shareholder communications.
(b) Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of the Registrant's
latest annual report, upon request and without charge.
-86-
<PAGE> 94
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant has duly caused this
Registration Statement on Form N-1A to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Jeffersonville and the
State of Indiana on this 29th day of June, 1999.
NEW COVENANT FUNDS
(Registrant)
By: */s/ Frank K. Bateman, Jr.
--------------------------------
Frank K. Bateman, Jr., President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
*/s/ Frank K. Bateman, Jr. Trustee, President June 29, 1999
- ---------------------------- and Principal Executive
Frank K. Bateman, Jr. Officer
*/s/ Gail S. Duree Trustee June 29, 1999
- ----------------------------
Gail S. Duree
*/s/ Cynthia S. Gooch Trustee June 29, 1999
- ----------------------------
Cynthia S. Gooch
*/s/Rev. Donald B. Register Trustee June 29, 1999
- ----------------------------
Rev. Donald B. Register
*/s/Michael F. Ryan Trustee June 29, 1999
- ----------------------------
Michael F. Ryan
/s/Lynne M. Cannon Principal Financial And June 29, 1999
- ---------------------------- Accounting Officer
Lynne M. Cannon
*BY: /S/Deborah Ann Potter
-------------------------
Deborah Ann Potter
Attorney-In-Fact
</TABLE>
-87-
<PAGE> 95
NEW COVENANT FUNDS
EXHIBIT INDEX TO PART "C"
OF
REGISTRATION STATEMENT
ITEM NO. DESCRIPTION
-------- -----------
23(d)(i) Investment Advisory Agreement
23(d)(ii) Form of Sub-Advisory Agreement
23(d)(iii) Form of Sub-Advisory Agreement
23(d)(iv) Form of Sub-Advisory Agreement
23(d)(v) Form of Sub-Advisory Agreement
23(d)(vi) Form of Sub-Advisory Agreement
23(d)(vii) Form of Sub-Advisory Agreement
23(d)(viii) Form of Sub-Advisory Agreement
23(d)(ix) Form of Sub-Advisory Agreement
23(e) Form of Distribution Agreement
23(g) Form of Custodian Agreement
23(h)(i) Form of Services Agreement
23(i) Legal Opinion
23(j) Consent of Independent Accountants
23(l) Initial Capital Agreement
23(p) Powers of Attorney
(i) Michael F. Ryan
(ii) Gail S. Duree
(iii) Donald B. Register
(iv) Cynthia S. Gooch
(v) Frank K. Bateman, Jr.
-88-
<PAGE> 1
Exhibit 23(d)(i)
INVESTMENT ADVISORY AGREEMENT
This Investment Advisory Agreement made as of the 30th day of June,
1999, by and between New Covenant Funds, a Delaware business trust (hereinafter
called the "Trust"), on behalf of each series of the Trust listed in SCHEDULE A
hereto, as such may be amended from time to time (hereinafter referred to
individually as a "Fund" and collectively as the "Funds") and New Covenant Trust
Company, N.A., a national banking association (hereinafter called the
"Adviser").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, as a national banking association regulated by the Office of
the Comptroller of the Currency, the Adviser is not required to be registered as
an investment adviser under the Investment Advisers Act of 1940, as amended;
WHEREAS, the Trust desires to retain the Adviser to render investment
advisory services to the Funds pursuant to the terms and provisions of this
Agreement, and the Adviser is interested in furnishing said services;
NOW, THEREFORE, in consideration of the mutual agreements and covenants
contained in this Agreement, the parties hereto agree as follows:
1. APPOINTMENT. The Trust hereby appoints the Adviser to act as
investment adviser to the Funds for the period and on the terms and subject to
the conditions set forth in this Agreement. The Adviser accepts such appointment
and agrees to furnish the services herein set forth for the compensation herein
provided. Additional investment portfolios may from time to time be added to
those covered by this Agreement by the parties executing a new SCHEDULE A that
shall become effective upon its execution and shall supersede any SCHEDULE A
having an earlier date.
2. INVESTMENT ADVISORY SERVICES: The Adviser shall provide a continuous
investment program for each of the Funds in accordance with each of the Fund's
investment objectives, policies, and restrictions as stated in such Fund's most
current Prospectus and Statement of Additional Information, as then in effect,
and all amendments or supplements thereto, and resolutions of the Trust's Board
of Trustees as may be adopted from time to time. The Adviser further agrees that
it:
(a) will supervise and direct each Fund's investments and
shall have the discretion to determine from time to time what investments,
securities, commodities or financial futures contracts will be purchased,
retained, sold or lent by the Funds and what portion of the assets will be
invested or held uninvested in cash;
(b) for purposes of managing the Funds the Adviser may appoint
one or more sub-advisers ("Sub-Advisers") as provided in Section 3 below to
which it may delegate all or any portion of the responsibilities granted to it
herein;
(c) will use the same skill and care in providing such
services as it uses in providing services to any fiduciary accounts for
which it has investment responsibilities;
Page 1 of 6
<PAGE> 2
(d) will conform with all applicable Rules and Regulations of
the Securities and Exchange Commission (the "Commission") as they
pertain to the registration of the Trust and, in addition, will conduct
its activities under this Agreement in accordance with any applicable
regulations of any governmental authority pertaining to the investment
advisory activities of the Adviser;
(e) will place orders pursuant to its investment
determinations for the Funds either directly with the issuer or with an
underwriter, market maker or broker or dealer. The Adviser may delegate
this authority to Sub-Advisers duly appointed by it. In placing orders
with brokers and dealers, the Adviser or Sub-Advisers will attempt to
obtain and are hereby directed to obtain prompt execution of orders in
an effective manner at the most favorable price. Consistent with this
obligation, the Adviser or Sub-Advisers may, in their discretion,
effect portfolio securities transactions through brokers and dealers
who provide the Adviser or Sub-Advisers with brokerage and research
services (within the meaning of Section 28(e) of the Securities
Exchange Act of 1934). Subject to the review of the Trust's Board of
Trustees from time-to-time with respect to the extent and continuation
of this policy, the Adviser or Sub-Advisers are authorized to pay a
broker or dealer who provides such brokerage and research services a
commission for effecting a securities transaction for any of the Funds
which is in excess of the amount of commission another broker or dealer
would have charged for effecting that transaction if, but only if, the
Adviser or Sub-Adviser determines in good faith that such commission
was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either
that particular transaction or the overall responsibilities of the
Adviser or Sub-Adviser with respect to the accounts as to which it
exercises investment discretion. On occasions when the Adviser or
Sub-Adviser deems the purchase or sale of a security to be in the best
interest of one or more of the Funds as well as of other clients, the
Adviser or Sub-Adviser, to the extent permitted by applicable laws and
regulations, may aggregate the securities to be so purchased or sold in
order to obtain the most favorable price or lower brokerage commissions
and the most efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in
the transaction, will be made by the Adviser or Sub-Adviser in the
manner it considers to be the most equitable and consistent with its
fiduciary obligations to the Funds and to such other clients;
(f) will maintain, or cause the custodian and Sub-Advisers to
maintain, all books and records with respect to the securities
transactions executed for the Funds;
(g) will furnish, or cause the Sub-Advisers to furnish, the
Trust's Board of Trustees such periodic and special reports with
respect to each Fund's investment activities as the Board may
reasonably request; and
(h) will advise and assist the officers of the Trust in taking
such actions as may be necessary or appropriate to carry out the
decisions of the Trust's Board of Trustees and of the appropriate
committees of such Board regarding the conduct of the business of the
Funds.
3. SUB-ADVISERS. The Adviser is authorized to enter into agreements on
behalf of the Funds with Sub-Advisers under which the Sub-Advisers agree to
perform all or any portion of the
Page 2 of 6
<PAGE> 3
management and Advisory duties with respect to all or any portion of the Funds.
In the event the Adviser enters into one or more such agreements, the
Sub-Adviser shall be responsible directly to the Adviser for the performance of
such duties as may be imposed upon it by the Sub-Advisory Agreement. The Adviser
will, however, retain the authority and responsibility to monitor and review the
performance of duties of each Sub-Adviser. The Adviser may negotiate contracts
that specify investment fees and provide for payment of such fees directly by
the Adviser, and delegate to the Sub-Advisers responsibility for the day-to-day
operations of the Funds with respect to which the Sub-Advisers are hired,
including any or all of the responsibilities set forth in Section 2 hereof,
except the power to enter into contracts with Sub-Advisers. Each such contract
shall provide that it is terminable by the Adviser, without penalty, upon no
more than sixty (60) days notice to the Sub-Adviser.
4. EXPENSES. During the term of this Agreement, the Adviser will pay
all expenses incurred by it in performing its services under this Agreement. The
Adviser shall not be liable for any expenses of the Trust, including without
limitation (a) its interest and taxes, (b) brokerage commissions and other costs
in connection with the purchase or sale of securities or other investment
instruments with respect to the Trust and (c) custodian fees and expenses.
5. COMPENSATION. For the services provided and the expenses assumed
pursuant to this Agreement, each of the Funds will pay the Adviser and the
Adviser will accept as full compensation therefor a fee set forth on SCHEDULE A
hereto. The obligation to pay the fee to the Adviser will begin as of the
respective dates of the initial sale of shares in the Funds, including any
shares sold or exchanged in connection with a merger, consolidation or
reorganization involving one or more of the Funds. Such fee shall be paid
monthly based upon each respective Fund's average daily net assets calculated in
the manner provided in the Prospectus and Statement of Additional Information
then in effect.
The fee shall be accrued daily by each Fund and paid to the Adviser
within five (5) business days after the end of each calendar month. If this
Agreement is terminated before the end of any month, the fee to the Adviser
shall be prorated for the portion of any month in which this Agreement is in
effect and shall be payable within ten (10) days after the date of termination.
6. LIMITATION OF LIABILITY. The Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Funds in
connection with the performance of this Agreement, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of the Adviser in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
7. DURATION AND TERMINATION. This Agreement shall become effective at
the time the Trust's initial Registration Statement under the Securities Act of
1933 with respect to the shares of the Trust is declared effective by the
Commission and shall remain in effect for a period of two (2) years, unless
sooner terminated as hereinafter provided. This Agreement shall continue in
effect thereafter for successive one year periods so long as such continuation
is approved for each Fund at least annually by (i) the Board of Trustees of the
Trust or by the vote of a majority of the outstanding voting securities of each
Fund, and (ii) the vote of a majority of the disinterested Trustees, cast in
person at a meeting called for the purpose of voting on such approval.
Page 3 of 6
<PAGE> 4
Notwithstanding the foregoing, this Agreement may be terminated as to a
particular Fund at any time on sixty days' written notice, without the payment
of any penalty, by the Trust (by vote of the Trust's Board of Trustees or by
vote of a majority of the outstanding voting securities of such Fund) or by the
Adviser. This Agreement will automatically terminate in the event of its
assignment. Any notice under this Agreement shall be given in writing, addressed
and delivered or mailed to the other party at the principal office of such
party.
As used in this Agreement, the terms "majority of the outstanding
voting securities," "interested persons" and "assignment" shall have the same
meanings as ascribed to such terms in the 1940 Act.
8. NAME. The parties agree that the Adviser has a proprietary interest
in the name "New Covenant Funds" and the Trust agrees to promptly take such
action as may be necessary to delete from its name and/or the name of any Fund
any reference to such name promptly after receipt from the Adviser of a written
request therefore.
9. ADVISER'S REPRESENTATIONS. The Adviser hereby represents and
warrants that it is willing and possesses all requisite legal authority to
provide the services contemplated by this Agreement without violation of
applicable laws and regulations.
10. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
11. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by the laws of the State of Indiana.
Page 4 of 6
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
NEW COVENANT FUNDS
By: /s/ Frank K. Bateman, Jr.
-------------------------------
Name: Frank K. Bateman, Jr.
-------------------------------
Title: President
-------------------------------
NEW COVENANT TRUST COMPANY, N.A.
By: /s/ Ralph R. Allen
-------------------------------
Name: Ralph R. Allen
-------------------------------
Title: President
-------------------------------
Page 5 of 6
<PAGE> 6
SCHEDULE A
----------
INVESTMENT ADVISORY AGREEMENT
between
NEW COVENANT FUNDS
and
NEW COVENANT TRUST COMPANY, N.A.
Name of Fund Compensation*
- ------------ -------------
NEW COVENANT GROWTH FUND 0.99% OF THE AVERAGE DAILY
NET ASSETS OF THE FUND
NEW COVENANT INCOME FUND 0.75% OF THE AVERAGE DAILY
NET ASSETS OF THE FUND
NEW COVENANT BALANCED GROWTH FUND NONE
NEW COVENANT BALANCED INCOME FUND NONE
* All fees are computed and paid monthly.
NEW COVENANT TRUST COMPANY, N.A. NEW COVENANT FUNDS
By: /s/ Ralph R. Allen By: /s/ Frank K. Bateman, Jr.
----------------------------- --------------------------
Name: Ralph R. Allen Name: Frank K. Bateman, Jr.
--------------------------- -------------------------
Title: President Title: President
-------------------------- ------------------------
Page 6 of 6
<PAGE> 1
Exhibit 23(d)(ii)
SUB-ADVISORY AGREEMENT
This Sub-Advisory Agreement is made as of the day of June, 1999, by and
between New Covenant Trust Company, N.A., a limited purpose national trust bank
(the "Adviser"), and William Blair & Company, L.L.C. (the "Sub-Adviser").
WHEREAS, pursuant to an agreement between them dated as of June , 1999
(the "Advisory Agreement"), the Adviser serves as investment adviser to New
Covenant Funds, a Delaware business trust and an open-end management investment
company (the "Trust"), which has filed a registration statement (the
"Registration Statement") under the Investment Company Act of 1940, as amended
(the "1940 Act") and the Securities Act of 1933; and
WHEREAS, the Trust is comprised of four separate investment portfolios,
one of which is New Covenant Growth Fund (the "Fund"); and
WHEREAS, the Adviser desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser
experienced in the management of a portfolio of securities to assist the Adviser
in performing services for a portion of the Fund; and
WHEREAS, the Sub-Adviser represents that it has the legal power and
authority to perform the services contemplated hereunder without violation of
applicable law (including the Investment Advisers Act of 1940), and desires to
provide such services to the Trust and the Adviser.
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
Section 1. APPOINTMENT OF THE SUB-ADVISER. The Adviser hereby appoints
the Sub-Adviser to provide a continuous investment program for that portion of
the Fund designated by the Adviser as assigned to the Sub-Adviser (the "Segment"
of the Fund), subject to such written instructions and supervision as the
Adviser may from time to time furnish. The Sub-Adviser hereby accepts such
appointment and agrees to render the services and to assume the obligations
herein set forth for the compensation herein provided. The Sub-Adviser will
provide the services under this Agreement with respect to the Segment in
accordance with the Fund's investment objective, policies and applicable
restrictions as stated in the Fund's most recent Prospectus and Statement of
Additional Information and as the same may, from time to time, be supplemented
or amended and in resolutions of the Trust's Board of Trustees. The Adviser
agrees to furnish to the Sub-Adviser from time to time copies of all
Prospectuses and Statements of Additional Information and of all amendments of,
or supplements to, such Prospectuses and Statements of Additional Information
and of all resolutions of the Trust's Board of Trustees applicable to the
Sub-Adviser's services hereunder. The Sub-Adviser shall for all purposes herein
be deemed to be an independent contractor and shall, except as expressly
provided or authorized (whether herein or otherwise), have no authority to act
for or represent the Adviser, the Fund or the Trust in any way.
Section 2. SUB-ADVISORY SERVICES. Subject to such written instructions
and supervision as the Adviser may from time to time furnish, the Sub-Adviser
will provide an investment program for the Segment, including investment
research and management with respect to securities and investments, including
cash and cash equivalents in the Segment, and will determine from time to time
what
<PAGE> 2
securities and other investments will be purchased, retained or sold by and
within the Segment. The Sub-Adviser will implement such determinations through
the placement, on behalf of the Fund, of orders for the execution of portfolio
transactions through such brokers or dealers as it may select. The Adviser will
instruct the Trust's Custodian to forward promptly to the Sub-Adviser proxy and
other materials relating to the exercise of such shareholder rights and, unless
otherwise instructed by the Adviser, the Sub-Adviser will determine from time to
time the manner in which voting rights, rights to consent to corporate action
and other rights pertaining to the Fund's investments should be exercised.
In fulfilling its responsibilities hereunder, the Sub-Adviser agrees
that it will:
(a) use the same skill and care in providing such services as it
uses in providing services to other fiduciary accounts for
which it has investment responsibilities;
(b) conform with all applicable rules and regulations of the
United States Securities and Exchange Commission ("SEC") and
in addition will conduct its activities under this Agreement
in accordance with any applicable regulations of any
government authority pertaining to the investment advisory
activities of the Sub-Adviser and shall furnish such written
reports or other documents substantiating such compliance as
the Adviser reasonably may request from time to time;
(c) not make loans to any person to purchase or carry shares of
beneficial interest in the Trust or make loans to the Trust;
(d) place orders pursuant to investment determinations for the
Fund either directly with the issuer or with an underwriter,
market maker or broker or dealer. In placing orders, the
Sub-Adviser will use its reasonable best efforts to obtain
best execution of such orders. Consistent with this
obligation, the Sub-Adviser may, to the extent permitted by
law, effect portfolio securities transactions through brokers
and dealers who provide brokerage and research services
(within the meaning of Section 28(c) of the Securities
Exchange Act of 1934) to or for the benefit of the Fund and/or
other accounts over which the Sub-Adviser exercises investment
discretion. Subject to the review of the Trust's Board of
Trustees from time to time with respect to the extent and
continuation of the policy, the Sub-Adviser is authorized to
cause the Fund to pay a broker or dealer who provides such
brokerage and research services a commission for effecting a
securities transaction for the Fund which is in excess of the
amount of commission another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser
determines in good faith that such commission was reasonable
in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of
either that particular transaction or the overall
responsibilities of the Sub-Adviser with respect to the
accounts as to which it exercises investment discretion. The
Trust or the Adviser may, from time to time in writing, direct
the Sub-Adviser to place orders through one or more brokers or
dealers and, thereafter, the Sub-Adviser will have no
responsibility for ensuring best execution with respect to
such orders. In no instance will portfolio securities be
purchased from or sold to the Sub-Adviser or any affiliated
person of the Sub-Adviser as principal except as may be
permitted by the 1940 Act or an exemption therefrom. If the
Sub-Adviser determines in good faith that the transaction is
in the best interest of each client, securities may be
purchased on behalf of the Fund from,
-2-
<PAGE> 3
or sold on behalf of the Fund to, another client of the
Sub-Adviser in compliance with Rule 17a-7 under the 1940 Act;
(e) maintain all necessary or appropriate records with respect to
the Fund's securities transactions for the Segment in
accordance with all applicable laws, rules and regulations,
including but not limited to Section 31 (a) of the 1940 Act,
and will furnish the Trust's Board of Trustees and the Adviser
such periodic and special reports as the Board and Adviser
reasonably may request;
(f) treat confidentially and as proprietary information of the
Adviser and the Trust all records and other information
relative to the Adviser and the Trust and prior, present, or
potential shareholders, and will not use such records and
information for any purpose other than the performance of its
responsibilities and duties hereunder, except that subject to
prompt notification to the Trust and the Adviser, the
Sub-Adviser may divulge such information to its independent
auditors and regulatory authorities, or when so requested by
the Adviser and the Trust; provided, however, that nothing
contained herein shall prohibit the Sub-Adviser from (1)
advertising or soliciting the public generally with respect to
other products or services, regardless of whether such
advertisement or solicitation may include prior, present or
potential shareholders of the Fund or (2) including the
Adviser and Trust on its general list of disclosable clients.
(g) maintain its policy and practice of conducting its fiduciary
functions independently. In making investment decisions for
the Fund, the Sub-Adviser's personnel will not inquire or take
into consideration whether the issuers of securities proposed
for purchase or sale for the Fund's account are customers of
the Adviser, other sub-advisers, the Sub-Adviser or of their
respective parents, subsidiaries or affiliates. In dealing
with such customers, the Sub-Adviser and its subsidiaries and
affiliates will not inquire or take into consideration whether
securities of those customers are held by the Trust; and
(h) render, upon request of the Adviser or the Trust's Board of
Trustees, written reports concerning the investment activities
of the Sub-Adviser with respect to the Sub-Adviser's Segment
of the Fund.
Section 3. EXPENSE. During the term of this Agreement, the Sub-Adviser
will pay all expenses incurred by it in performing its services under this
Agreement. The Sub-Adviser shall not be liable for any expenses of the Adviser
or the Trust, including without limitation (a) their interest and taxes, (b)
brokerage commissions and other costs in connection with the purchase or sale of
securities or other investment instruments with respect to the Fund and (c)
custodian fees and expenses.
Section 4. RECORDS. In compliance with the requirements of Rule 3la-3
under the 1940 Act, the Sub-Adviser hereby agrees that all records, if any,
which it maintains for the Fund are the property of the Fund and further agrees
to surrender promptly to the Adviser or the Trust any such records upon the
Adviser's or the Trust's request and that such records shall be available for
inspection by the SEC. The Sub-Adviser further agrees to preserve for the
periods and at the places prescribed by Rule 3la-2 under the 1940 Act the
records required to be maintained by Rule 31a-1 under the 1940 Act.
-3-
<PAGE> 4
Section 5. COMPENSATION OF THE SUB-ADVISER.
(a) In consideration of services rendered pursuant to this Agreement,
the Adviser will pay the Sub-Adviser a fee, in arrears, equal to an annual rate
in accordance with SCHEDULE A hereto, paid quarterly.
(b) Such fee for each calendar quarter shall be calculated based on the
average of the market value of the assets under management as of the end of each
of the three months in the quarter just ended, as provided by the Adviser.
(c) If the Sub-Adviser should serve for less than the whole of any
calendar quarter, its compensation shall be determined as provided above on the
basis of the ending market value of the assets managed in the month in which the
termination occurs and shall be payable on a pro rata basis for the period of
the calendar quarter for which it has served as Sub-Adviser hereunder.
Section 6. SERVICES NOT EXCLUSIVE. The services of the Sub-Adviser
hereunder are not to be deemed exclusive, and the Sub-Adviser shall be free to
render similar services to others and to engage in other activities, so long as
the services rendered hereunder are not impaired. It is understood that the
action taken by the Sub-Adviser under this Agreement may differ from the advice
given or the timing or nature of action taken with respect to other clients of
the Sub-Adviser, and that a transaction in a specific security may not be
accomplished for all clients of the Sub-Adviser at the same time or at the same
price.
Section 7. USE OF NAMES. The Adviser shall not use the name, logo,
trade or service mark or derivative of the foregoing of the Sub-Adviser or any
of the Sub-Adviser's affiliates in any prospectus, sales literature or other
materials whether or not relating to the Trust in any manner not approved prior
thereto by the Sub-Adviser; provided, however, that the Sub-Adviser shall
approve all uses of its or its affiliate's name which merely refer in accurate
terms to its appointment hereunder or which are required by the SEC or a state
securities commission; and, provided further, that in no event shall such
approval be unreasonably withheld. The Sub-Adviser shall not use the name of the
Trust, the Fund or the Adviser in any materials relating to the Sub-Adviser in
any manner not approved prior thereto by the Adviser; provided, however, that
the Adviser shall approve all uses of its and the Fund's or the Trust's name
which merely refer in accurate terms to the appointment of the Sub-Adviser
hereunder, including placing the Trust's or the Adviser's name on the
Sub-Adviser's list of representative clients, or which are required by the SEC
or a state securities commission, and, provided further, that in no event shall
such approval be unreasonably withheld.
Section 8. LIABILITY OF THE SUB-ADVISER. Absent willful misfeasance,
bad faith, gross negligence, or reckless disregard of obligations or duties
hereunder on the part of the Sub-Adviser, or loss resulting from breach of
fiduciary duty, the Sub-Adviser shall not be liable for any act or omission in
the course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security.
Notwithstanding the foregoing, neither the Adviser nor the Trust shall be deemed
to have waived any rights it may have against the Sub-Adviser under federal or
state securities laws.
The Sub-Adviser shall indemnify and hold harmless the Trust and the
Adviser (and its affiliated companies and their respective officers, directors
and employees) from any and all claims, losses, liabilities or damages
(including reasonable attorney's fees and other related expenses) arising
-4-
<PAGE> 5
out of or in connection with the willful misfeasance, bad faith, gross
negligence, or reckless disregard of obligations or duties including breach of
fiduciary duty, hereunder of the Sub-Adviser.
The Adviser shall hold harmless and indemnify the Sub-Adviser for any
loss, liability, cost, damage or expense (including reasonable attorney's fees
and costs) arising from any claim or demand by any person that is based upon (i)
the obligations of any other sub-adviser to the Fund, (ii) any obligation of the
Adviser under the Advisory Agreement that has not been delegated to the
Sub-Adviser under this Agreement or (iii) any matter for which the Sub-Adviser
does not have liability in accordance with the first sentence of this Section 8.
Section 9. LIMITATION OF TRUST'S LIABILITY. The Sub-Adviser
acknowledges that it has received notice of and accepts the limitations upon the
Trust's and the Fund's liability set forth in its Trust Instrument and under
Delaware law. The Sub-Adviser agrees that any of the Trust's obligations shall
be limited to the assets of the Fund and that the Sub-Adviser shall not seek
satisfaction of any such obligation from the shareholders of the Trust nor from
any Trustee, officer, employee or agent of the Trust.
The names "New Covenant Funds" and "Trustees of New Covenant Funds"
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under the Trust Instrument
dated as of September 30, 1998, to which reference is hereby made and a copy of
which is on file at the office of the Secretary of State of the State of
Delaware and elsewhere as required by law, and to any and all amendments thereto
so filed or hereafter filed. The obligations of "New Covenant Funds" entered
into in the name or on behalf thereof, or in the name or on behalf of any series
or class of shares of the Trust, by any of the Trustees, representatives or
agents are made not individually, but in such capacities, and are not binding
upon any of the Trustees, shareholders or representatives of the Trust
personally, but bind only the assets of the Trust, and all persons dealing with
any series or class of shares of the Trust must look solely to the assets of the
Trust belonging to such series or class for the enforcement of any claims
against the Trust.
Section 10. DURATION RENEWAL TERMINATION AND AMENDMENT. This Agreement
will become effective as of the date first written above, provided that it shall
have been approved by vote of a majority of the outstanding voting securities of
the Fund, in accordance with the requirements under the 1940 Act, and, unless
sooner terminated as provided herein, shall continue in effect for an initial
period of one (1) year.
Thereafter, if not terminated, this Agreement shall continue in effect
with respect to the Fund for successive one year periods provided such
continuance is specifically approved at least annually (a) by the vote of a
majority of the disinterested Trustees cast in person at a meeting called for
the purpose of voting on such approval, and (b) by the vote of a majority of the
Trust's Board of Trustees or by the vote of a majority of all votes attributable
to the outstanding Shares of the Fund. This Agreement may be terminated as to
the Fund at any time, without payment of any penalty, by the Trust's Board of
Trustees, by the Adviser, or by a vote of a majority of the outstanding voting
securities of the Fund, upon 60 days' prior written notice to the Sub-Adviser,
or by the Sub-Adviser upon 60 days' prior written notice to the Adviser and the
Trust's Board of Trustees, or upon such shorter notice as may be mutually agreed
upon.
This Agreement shall terminate automatically and immediately upon
termination of the Advisory Agreement. This Agreement shall terminate
automatically and immediately in the event
-5-
<PAGE> 6
of its assignment. No assignment of this Agreement shall be made by the
Sub-Adviser without the consent of the Adviser and the Board of Trustees of the
Trust.
This Agreement may be amended at any time by the Adviser and the
Sub-Adviser, subject to approval by the Trust's Board of Trustees and, if
required by the 1940 Act and applicable SEC rules and regulations, a vote of a
majority of the Fund's outstanding voting securities. Notwithstanding the
foregoing, the Trust shall be under no obligation to obtain shareholder approval
to materially amend this Agreement unless required to obtain such approval
pursuant to any orders or rules and regulations which may have been issued by
the Securities and Exchange Commission.
Section 11. YEAR 2000 WARRANTY. The Sub-Adviser represents and warrants
that it is actively pursuing a comprehensive and coordinated compliance strategy
(including remediation and testing) to ensure the readiness of its business
systems and applications for the Year 2000 and believes that all such systems
critical to the performance of Sub-Adviser's responsibilities hereunder will be
Year 2000 compliant prior to January 1, 2000. The Sub-Adviser will make
appropriate inquiries as to the readiness of its vendors, service providers,
clients and other third parties for the Year 2000; provided, however, that
neither the Sub-Adviser nor any of its officers, directors or employees (or
affiliated companies) make any representations or warranties regarding the Year
2000 readiness of such vendors, service providers, clients and other third
parties.
Section 12. CONFIDENTIAL RELATIONSHIP. Any information and advice
furnished by either party to this Agreement to the other shall be treated as
confidential and shall not be disclosed to third parties except as required by
law or as required or permitted by this Agreement.
Section 13. SEVERABILITY. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
Section 14. MISCELLANEOUS. This Agreement constitutes the full and
complete agreement of the parties hereto with respect to the subject matter
hereof and each party agrees to perform such further actions and execute such
further documents as are necessary to effectuate the purposes hereof. To the
extent not preempted by federal law, this Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of Indiana.
The captions in this Agreement are included for convenience only and in no way
define or delimit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement may be executed in several counterparts,
all of which together shall for all purposes constitute one Agreement, binding
on all parties.
Section 15. NOTICES. All notices and other communications hereunder
shall be in writing (including telex or similar writing) and shall be deemed
given if delivered in person or by messenger, cable, telegram or telex or
facsimile transmission or by a reputable overnight delivery service which
provides evidence of receipt to the parties at the following addresses or telex
or facsimile transmission numbers (or at such other address or number for a
party as shall be specified by like notice):
-6-
<PAGE> 7
(a) if to the Sub-Adviser, to:
------------------------------
------------------------------
------------------------------
(b) if to the Adviser, to:
New Covenant Trust Company, N.A.
200 East Twelfth Street, Suite B
Jeffersonville, IN 47130
Facsimile transmission number: ( )
---------------------
Attention: -------------------
Each such notice or other communication shall be effective (i) if given
by telex or facsimile transmission, when such telex or facsimile is transmitted
to the number specified in this section and the appropriate answer back or
confirmation is received, and (ii) if given by any other means, when delivered
at the address specified in this section.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
NEW COVENANT TRUST COMPANY, N.A.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
WILLIAM BLAIR & COMPANY, L.L.C.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Dated: June___, 1999
-7-
<PAGE> 8
SCHEDULE A
----------
To the Sub-Advisory Agreement
between New Covenant Trust Company, N.A. and
William Blair & Company, L.L.C.
<TABLE>
<CAPTION>
Name of Fund Compensation Date
- ------------ ------------ ----
<S> <C> <C>
New Covenant Growth Fund 0.55% of the average daily net June__, 1999
assets of the Fund
</TABLE>
NEW COVENANT TRUST COMPANY, N.A.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
WILLIAM BLAIR & COMPANY, L.L.C.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
-8-
<PAGE> 1
Exhibit 23(d)(iii)
SUB-ADVISORY AGREEMENT
This Sub-Advisory Agreement is made as of the _____ day of June, 1999,
by and between New Covenant Trust Company, N.A., a limited purpose national
trust bank (the "Adviser"), and John W. Bristol & Co., Inc. (the "Sub-Adviser").
WHEREAS, pursuant to an agreement between them dated as of June __,
1999 (the "Advisory Agreement"), the Adviser serves as investment adviser to New
Covenant Funds, a Delaware business trust and an open-end management investment
company (the "Trust"), which has filed a registration statement (the
"Registration Statement") under the Investment Company Act of 1940, as amended
(the "1940 Act") and the Securities Act of 1933; and
WHEREAS, the Trust is comprised of four separate investment portfolios,
one of which is New Covenant Growth Fund (the "Fund"); and
WHEREAS, the Adviser desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser
experienced in the management of a portfolio of securities to assist the Adviser
in performing services for a portion of the Fund; and
WHEREAS, the Sub-Adviser represents that it has the legal power and
authority to perform the services contemplated hereunder without violation of
applicable law (including the Investment Advisers Act of 1940), and desires to
provide such services to the Trust and the Adviser.
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
Section 1. APPOINTMENT OF THE SUB-ADVISER. The Adviser hereby appoints
the Sub-Adviser to provide a continuous investment program for that portion of
the Fund designated by the Adviser as assigned to the Sub-Adviser (the "Segment"
of the Fund), subject to such written instructions and supervision as the
Adviser may from time to time furnish. The Sub-Adviser hereby accepts such
appointment and agrees to render the services and to assume the obligations
herein set forth for the compensation herein provided. The Sub-Adviser will
provide the services under this Agreement with respect to the Segment in
accordance with the Fund's investment objective, policies and applicable
restrictions as stated in the Fund's most recent Prospectus and Statement of
Additional Information and as the same may, from time to time, be supplemented
or amended and in resolutions of the Trust's Board of Trustees. The Adviser
agrees to furnish to the Sub-Adviser from time to time copies of all
Prospectuses and Statements of Additional Information and of all amendments of,
or supplements to, such Prospectuses and Statements of Additional Information
and of all resolutions of the Trust's Board of Trustees applicable to the
Sub-Adviser's services hereunder. The Sub-Adviser shall for all purposes herein
be deemed to be an independent contractor and shall, except as expressly
provided or authorized (whether herein or otherwise), have no authority to act
for or represent the Adviser, the Fund or the Trust in any way.
Section 2. SUB-ADVISORY SERVICES. Subject to such written instructions
and supervision as the Adviser may from time to time furnish, the Sub-Adviser
will provide an investment program for the Segment, including investment
research and management with respect to securities and investments, including
cash and cash equivalents in the Segment, and will determine from time to time
what
<PAGE> 2
securities and other investments will be purchased, retained or sold by and
within the Segment. The Sub-Adviser will implement such determinations through
the placement, on behalf of the Fund, of orders for the execution of portfolio
transactions through such brokers or dealers as it may select. The Adviser will
instruct the Trust's Custodian to forward promptly to the Sub-Adviser proxy and
other materials relating to the exercise of such shareholder rights and, unless
otherwise instructed by the Adviser, the Sub-Adviser will determine from time to
time the manner in which voting rights, rights to consent to corporate action
and other rights pertaining to the Fund's investments should be exercised.
In fulfilling its responsibilities hereunder, the Sub-Adviser agrees
that it will:
(a) use the same skill and care in providing such services as it
uses in providing services to other fiduciary accounts for
which it has investment responsibilities;
(b) conform with all applicable rules and regulations of the
United States Securities and Exchange Commission ("SEC") and
in addition will conduct its activities under this Agreement
in accordance with any applicable regulations of any
government authority pertaining to the investment advisory
activities of the Sub-Adviser and shall furnish such written
reports or other documents substantiating such compliance as
the Adviser reasonably may request from time to time;
(c) not make loans to any person to purchase or carry shares of
beneficial interest in the Trust or make loans to the Trust;
(d) place orders pursuant to investment determinations for the
Fund either directly with the issuer or with an underwriter,
market maker or broker or dealer. In placing orders, the
Sub-Adviser will use its reasonable best efforts to obtain
best execution of such orders. Consistent with this
obligation, the Sub-Adviser may, to the extent permitted by
law, effect portfolio securities transactions through brokers
and dealers who provide brokerage and research services
(within the meaning of Section 28(c) of the Securities
Exchange Act of 1934) to or for the benefit of the Fund and/or
other accounts over which the Sub-Adviser exercises investment
discretion. Subject to the review of the Trust's Board of
Trustees from time to time with respect to the extent and
continuation of the policy, the Sub-Adviser is authorized to
cause the Fund to pay a broker or dealer who provides such
brokerage and research services a commission for effecting a
securities transaction for the Fund which is in excess of the
amount of commission another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser
determines in good faith that such commission was reasonable
in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of
either that particular transaction or the overall
responsibilities of the Sub-Adviser with respect to the
accounts as to which it exercises investment discretion. The
Trust or the Adviser may, from time to time in writing, direct
the Sub-Adviser to place orders through one or more brokers or
dealers and, thereafter, the Sub-Adviser will have no
responsibility for ensuring best execution with respect to
such orders. In no instance will portfolio securities be
purchased from or sold to the Sub-Adviser or any affiliated
person of the Sub-Adviser as principal except as may be
permitted by the 1940 Act or an exemption therefrom. If the
Sub-Adviser determines in good faith that the transaction is
in the best interest of each client, securities may be
purchased on behalf of the Fund from,
-2-
<PAGE> 3
or sold on behalf of the Fund to, another client of the
Sub-Adviser in compliance with Rule 17a-7 under the 1940 Act;
(e) maintain all necessary or appropriate records with respect to
the Fund's securities transactions for the Segment in
accordance with all applicable laws, rules and regulations,
including but not limited to Section 31 (a) of the 1940 Act,
and will furnish the Trust's Board of Trustees and the Adviser
such periodic and special reports as the Board and Adviser
reasonably may request;
(f) treat confidentially and as proprietary information of the
Adviser and the Trust all records and other information
relative to the Adviser and the Trust and prior, present, or
potential shareholders, and will not use such records and
information for any purpose other than the performance of its
responsibilities and duties hereunder, except that subject to
prompt notification to the Trust and the Adviser, the
Sub-Adviser may divulge such information to its independent
auditors and regulatory authorities, or when so requested by
the Adviser and the Trust; provided, however, that nothing
contained herein shall prohibit the Sub-Adviser from (1)
advertising or soliciting the public generally with respect to
other products or services, regardless of whether such
advertisement or solicitation may include prior, present or
potential shareholders of the Fund or (2) including the
Adviser and Trust on its general list of disclosable clients.
(g) maintain its policy and practice of conducting its fiduciary
functions independently. In making investment decisions for
the Fund, the Sub-Adviser's personnel will not inquire or take
into consideration whether the issuers of securities proposed
for purchase or sale for the Fund's account are customers of
the Adviser, other sub-advisers, the Sub-Adviser or of their
respective parents, subsidiaries or affiliates. In dealing
with such customers, the Sub-Adviser and its subsidiaries and
affiliates will not inquire or take into consideration whether
securities of those customers are held by the Trust; and
(h) render, upon request of the Adviser or the Trust's Board of
Trustees, written reports concerning the investment activities
of the Sub-Adviser with respect to the Sub-Adviser's Segment
of the Fund.
Section 3. EXPENSE. During the term of this Agreement, the Sub-Adviser
will pay all expenses incurred by it in performing its services under this
Agreement. The Sub-Adviser shall not be liable for any expenses of the Adviser
or the Trust, including without limitation (a) their interest and taxes, (b)
brokerage commissions and other costs in connection with the purchase or sale of
securities or other investment instruments with respect to the Fund and (c)
custodian fees and expenses.
Section 4. RECORDS. In compliance with the requirements of Rule 3la-3
under the 1940 Act, the Sub-Adviser hereby agrees that all records, if any,
which it maintains for the Fund are the property of the Fund and further agrees
to surrender promptly to the Adviser or the Trust any such records upon the
Adviser's or the Trust's request and that such records shall be available for
inspection by the SEC. The Sub-Adviser further agrees to preserve for the
periods and at the places prescribed by Rule 3la-2 under the 1940 Act the
records required to be maintained by Rule 31a-1 under the 1940 Act.
-3-
<PAGE> 4
Section 5. COMPENSATION OF THE SUB-ADVISER.
(a) In consideration of services rendered pursuant to this Agreement,
the Adviser will pay the Sub-Adviser a fee, in arrears, equal to an annual rate
in accordance with SCHEDULE A hereto, paid quarterly.
(b) Such fee for each calendar quarter shall be calculated based on the
average of the market value of the assets under management as of the end of each
of the three months in the quarter just ended, as provided by the Adviser.
(c) If the Sub-Adviser should serve for less than the whole of any
calendar quarter, its compensation shall be determined as provided above on the
basis of the ending market value of the assets managed in the month in which the
termination occurs and shall be payable on a pro rata basis for the period of
the calendar quarter for which it has served as Sub-Adviser hereunder.
Section 6. SERVICES NOT EXCLUSIVE. The services of the Sub-Adviser
hereunder are not to be deemed exclusive, and the Sub-Adviser shall be free to
render similar services to others and to engage in other activities, so long as
the services rendered hereunder are not impaired. It is understood that the
action taken by the Sub-Adviser under this Agreement may differ from the advice
given or the timing or nature of action taken with respect to other clients of
the Sub-Adviser, and that a transaction in a specific security may not be
accomplished for all clients of the Sub-Adviser at the same time or at the same
price.
Section 7. USE OF NAMES. The Adviser shall not use the name, logo,
trade or service mark or derivative of the foregoing of the Sub-Adviser or any
of the Sub-Adviser's affiliates in any prospectus, sales literature or other
materials whether or not relating to the Trust in any manner not approved prior
thereto by the Sub-Adviser; provided, however, that the Sub-Adviser shall
approve all uses of its or its affiliate's name which merely refer in accurate
terms to its appointment hereunder or which are required by the SEC or a state
securities commission; and, provided further, that in no event shall such
approval be unreasonably withheld. The Sub-Adviser shall not use the name of the
Trust, the Fund or the Adviser in any materials relating to the Sub-Adviser in
any manner not approved prior thereto by the Adviser; provided, however, that
the Adviser shall approve all uses of its and the Fund's or the Trust's name
which merely refer in accurate terms to the appointment of the Sub-Adviser
hereunder, including placing the Trust's or the Adviser's name on the
Sub-Adviser's list of representative clients, or which are required by the SEC
or a state securities commission, and, provided further, that in no event shall
such approval be unreasonably withheld.
Section 8. LIABILITY OF THE SUB-ADVISER. Absent willful misfeasance,
bad faith, gross negligence, or reckless disregard of obligations or duties
hereunder on the part of the Sub-Adviser, or loss resulting from breach of
fiduciary duty, the Sub-Adviser shall not be liable for any act or omission in
the course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security.
Notwithstanding the foregoing, neither the Adviser nor the Trust shall be deemed
to have waived any rights it may have against the Sub-Adviser under federal or
state securities laws.
The Sub-Adviser shall indemnify and hold harmless the Trust and the
Adviser (and its affiliated companies and their respective officers, directors
and employees) from any and all claims, losses, liabilities or damages
(including reasonable attorney's fees and other related expenses) arising
-4-
<PAGE> 5
out of or in connection with the willful misfeasance, bad faith, gross
negligence, or reckless disregard of obligations or duties including breach of
fiduciary duty, hereunder of the Sub-Adviser.
The Adviser shall hold harmless and indemnify the Sub-Adviser for any
loss, liability, cost, damage or expense (including reasonable attorney's fees
and costs) arising from any claim or demand by any person that is based upon (i)
the obligations of any other sub-adviser to the Fund, (ii) any obligation of the
Adviser under the Advisory Agreement that has not been delegated to the
Sub-Adviser under this Agreement or (iii) any matter for which the Sub-Adviser
does not have liability in accordance with the first sentence of this Section 8.
Section 9. LIMITATION OF TRUST'S LIABILITY. The Sub-Adviser
acknowledges that it has received notice of and accepts the limitations upon the
Trust's and the Fund's liability set forth in its Trust Instrument and under
Delaware law. The Sub-Adviser agrees that any of the Trust's obligations shall
be limited to the assets of the Fund and that the Sub-Adviser shall not seek
satisfaction of any such obligation from the shareholders of the Trust nor from
any Trustee, officer, employee or agent of the Trust.
The names "New Covenant Funds" and "Trustees of New Covenant Funds"
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under the Trust Instrument
dated as of September 30, 1998, to which reference is hereby made and a copy of
which is on file at the office of the Secretary of State of the State of
Delaware and elsewhere as required by law, and to any and all amendments thereto
so filed or hereafter filed. The obligations of "New Covenant Funds" entered
into in the name or on behalf thereof, or in the name or on behalf of any series
or class of shares of the Trust, by any of the Trustees, representatives or
agents are made not individually, but in such capacities, and are not binding
upon any of the Trustees, shareholders or representatives of the Trust
personally, but bind only the assets of the Trust, and all persons dealing with
any series or class of shares of the Trust must look solely to the assets of the
Trust belonging to such series or class for the enforcement of any claims
against the Trust.
Section 10. DURATION RENEWAL TERMINATION AND AMENDMENT. This Agreement
will become effective as of the date first written above, provided that it shall
have been approved by vote of a majority of the outstanding voting securities of
the Fund, in accordance with the requirements under the 1940 Act, and, unless
sooner terminated as provided herein, shall continue in effect for an initial
period of one (1) year.
Thereafter, if not terminated, this Agreement shall continue in effect
with respect to the Fund for successive one year periods provided such
continuance is specifically approved at least annually (a) by the vote of a
majority of the disinterested Trustees cast in person at a meeting called for
the purpose of voting on such approval, and (b) by the vote of a majority of the
Trust's Board of Trustees or by the vote of a majority of all votes attributable
to the outstanding Shares of the Fund. This Agreement may be terminated as to
the Fund at any time, without payment of any penalty, by the Trust's Board of
Trustees, by the Adviser, or by a vote of a majority of the outstanding voting
securities of the Fund, upon 60 days' prior written notice to the Sub-Adviser,
or by the Sub-Adviser upon 60 days' prior written notice to the Adviser and the
Trust's Board of Trustees, or upon such shorter notice as may be mutually agreed
upon.
This Agreement shall terminate automatically and immediately upon
termination of the Advisory Agreement. This Agreement shall terminate
automatically and immediately in the event
-5-
<PAGE> 6
of its assignment. No assignment of this Agreement shall be made by the
Sub-Adviser without the consent of the Adviser and the Board of Trustees of the
Trust.
This Agreement may be amended at any time by the Adviser and the
Sub-Adviser, subject to approval by the Trust's Board of Trustees and, if
required by the 1940 Act and applicable SEC rules and regulations, a vote of a
majority of the Fund's outstanding voting securities. Notwithstanding the
foregoing, the Trust shall be under no obligation to obtain shareholder approval
to materially amend this Agreement unless required to obtain such approval
pursuant to any orders or rules and regulations which may have been issued by
the Securities and Exchange Commission.
Section 11. YEAR 2000 WARRANTY. The Sub-Adviser represents and warrants
that it is actively pursuing a comprehensive and coordinated compliance strategy
(including remediation and testing) to ensure the readiness of its business
systems and applications for the Year 2000 and believes that all such systems
critical to the performance of Sub-Adviser's responsibilities hereunder will be
Year 2000 compliant prior to January 1, 2000. The Sub-Adviser will make
appropriate inquiries as to the readiness of its vendors, service providers,
clients and other third parties for the Year 2000; provided, however, that
neither the Sub-Adviser nor any of its officers, directors or employees (or
affiliated companies) make any representations or warranties regarding the Year
2000 readiness of such vendors, service providers, clients and other third
parties.
Section 12. CONFIDENTIAL RELATIONSHIP. Any information and advice
furnished by either party to this Agreement to the other shall be treated as
confidential and shall not be disclosed to third parties except as required by
law or as required or permitted by this Agreement.
Section 13. SEVERABILITY. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
Section 14. MISCELLANEOUS. This Agreement constitutes the full and
complete agreement of the parties hereto with respect to the subject matter
hereof and each party agrees to perform such further actions and execute such
further documents as are necessary to effectuate the purposes hereof. To the
extent not preempted by federal law, this Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of Indiana.
The captions in this Agreement are included for convenience only and in no way
define or delimit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement may be executed in several counterparts,
all of which together shall for all purposes constitute one Agreement, binding
on all parties.
Section 15. NOTICES. All notices and other communications hereunder
shall be in writing (including telex or similar writing) and shall be deemed
given if delivered in person or by messenger, cable, telegram or telex or
facsimile transmission or by a reputable overnight delivery service which
provides evidence of receipt to the parties at the following addresses or telex
or facsimile transmission numbers (or at such other address or number for a
party as shall be specified by like notice):
-6-
<PAGE> 7
(a) if to the Sub-Adviser, to:
-------------------------------------
-------------------------------------
-------------------------------------
(b) if to the Adviser, to:
New Covenant Trust Company, N.A.
200 East Twelfth Street, Suite B
Jeffersonville, IN 47130
Facsimile transmission number: ( )
---------------------
Attention:
-----------------
Each such notice or other communication shall be effective (i) if given
by telex or facsimile transmission, when such telex or facsimile is transmitted
to the number specified in this section and the appropriate answer back or
confirmation is received, and (ii) if given by any other means, when delivered
at the address specified in this section.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
NEW COVENANT TRUST COMPANY, N.A.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
JOHN W. BRISTOL & CO., INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Dated: June___, 1999
-7-
<PAGE> 8
SCHEDULE A
To the Sub-Advisory Agreement
between New Covenant Trust Company, N.A. and
John W. Bristol & Co., Inc.
NAME OF FUND COMPENSATION DATE
- ------------ ------------ ----
New Covenant Growth Fund 0.500% of first $10 Million in June __, 1999
Assets;
0.400% of next $10 Million in Assets;
0.300% of next $10 Million in Assets;
0.200% of Assets over $30 Million.
NEW COVENANT TRUST COMPANY, N.A.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
JOHN W. BRISTOL & CO., INC.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
-8-
<PAGE> 1
Exhibit 23 (d)(iv)
SUB-ADVISORY AGREEMENT
This Sub-Advisory Agreement is made as of the ______ day of June,
1999, by and between New Covenant Trust Company, N.A., a limited purpose
national trust bank (the "Adviser"), and Capital Guardian Trust Company (the
"Sub-Adviser").
WHEREAS, pursuant to an agreement between them dated as of June ______,
1999 (the "Advisory Agreement"), the Adviser serves as investment adviser to New
Covenant Funds, a Delaware business trust and an open-end management investment
company (the "Trust"), which has filed a registration statement (the
"Registration Statement") under the Investment Company Act of 1940, as amended
(the "1940 Act") and the Securities Act of 1933; and
WHEREAS, the Trust is comprised of four separate investment portfolios,
one of which is New Covenant Growth Fund (the "Fund"); and
WHEREAS, the Adviser desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser
experienced in the management of a portfolio of securities to assist the Adviser
in performing services for a portion of the Fund; and
WHEREAS, the Sub-Adviser represents that it has the legal power and
authority to perform the services contemplated hereunder without violation of
applicable law (including the Investment Advisers Act of 1940), and desires to
provide such services to the Trust and the Adviser.
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
Section 1. APPOINTMENT OF THE SUB-ADVISER. The Adviser hereby appoints
the Sub-Adviser to provide a continuous investment program for that portion of
the Fund designated by the Adviser as assigned to the Sub-Adviser (the "Segment"
of the Fund), subject to such written instructions and supervision as the
Adviser may from time to time furnish. The Sub-Adviser hereby accepts such
appointment and agrees to render the services and to assume the obligations
herein set forth for the compensation herein provided. The Sub-Adviser will
provide the services under this Agreement with respect to the Segment in
accordance with the Fund's investment objective, policies and applicable
restrictions as stated in the Fund's most recent Prospectus and Statement of
Additional Information and as the same may, from time to time, be supplemented
or amended and in resolutions of the Trust's Board of Trustees. The Adviser
agrees to furnish to the Sub-Adviser from time to time copies of all
Prospectuses and Statements of Additional Information and of all amendments of,
or supplements to, such Prospectuses and Statements of Additional Information
and of all resolutions of the Trust's Board of Trustees applicable to the
Sub-Adviser's services hereunder. The Sub-Adviser shall for all purposes herein
be deemed to be an independent contractor and shall, except as expressly
provided or authorized (whether herein or otherwise), have no authority to act
for or represent the Adviser, the Fund or the Trust in any way.
Section 2. SUB-ADVISORY SERVICES. Subject to such written instructions
and supervision as the Adviser may from time to time furnish, the Sub-Adviser
will provide an investment program for the Segment, including investment
research and management with respect to securities and investments, including
cash and cash equivalents in the Segment, and will determine from time to time
what
<PAGE> 2
securities and other investments will be purchased, retained or sold by and
within the Segment. The Sub-Adviser will implement such determinations through
the placement, on behalf of the Fund, of orders for the execution of portfolio
transactions through such brokers or dealers as it may select. The Adviser will
instruct the Trust's Custodian to forward promptly to the Sub-Adviser proxy and
other materials relating to the exercise of such shareholder rights and, unless
otherwise instructed by the Adviser, the Sub-Adviser will determine from time to
time the manner in which voting rights, rights to consent to corporate action
and other rights pertaining to the Fund's investments should be exercised.
In fulfilling its responsibilities hereunder, the Sub-Adviser agrees
that it will:
(a) use the same skill and care in providing such services as it
uses in providing services to other fiduciary accounts for
which it has investment responsibilities;
(b) conform with all applicable rules and regulations of the
United States Securities and Exchange Commission ("SEC") and
in addition will conduct its activities under this Agreement
in accordance with any applicable regulations of any
government authority pertaining to the investment advisory
activities of the Sub-Adviser and shall furnish such written
reports or other documents substantiating such compliance as
the Adviser reasonably may request from time to time;
(c) not make loans to any person to purchase or carry shares of
beneficial interest in the Trust or make loans to the Trust;
(d) place orders pursuant to investment determinations for the
Fund either directly with the issuer or with an underwriter,
market maker or broker or dealer. In placing orders, the
Sub-Adviser will use its reasonable best efforts to obtain
best execution of such orders. Consistent with this
obligation, the Sub-Adviser may, to the extent permitted by
law, effect portfolio securities transactions through brokers
and dealers who provide brokerage and research services
(within the meaning of Section 28(c) of the Securities
Exchange Act of 1934) to or for the benefit of the Fund and/or
other accounts over which the Sub-Adviser exercises investment
discretion. Subject to the review of the Trust's Board of
Trustees from time to time with respect to the extent and
continuation of the policy, the Sub-Adviser is authorized to
cause the Fund to pay a broker or dealer who provides such
brokerage and research services a commission for effecting a
securities transaction for the Fund which is in excess of the
amount of commission another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser
determines in good faith that such commission was reasonable
in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of
either that particular transaction or the overall
responsibilities of the Sub-Adviser with respect to the
accounts as to which it exercises investment discretion. The
Trust or the Adviser may, from time to time in writing, direct
the Sub-Adviser to place orders through one or more brokers or
dealers and, thereafter, the Sub-Adviser will have no
responsibility for ensuring best execution with respect to
such orders. In no instance will portfolio securities be
purchased from or sold to the Sub-Adviser or any affiliated
person of the Sub-Adviser as principal except as may be
permitted by the 1940 Act or an exemption therefrom. If the
Sub-Adviser determines in good faith that the transaction is
in the best interest of each client, securities may be
purchased on behalf of the Fund from,
-2-
<PAGE> 3
or sold on behalf of the Fund to, another client of the
Sub-Adviser in compliance with Rule 17a-7 under the 1940 Act;
(e) maintain all necessary or appropriate records with respect to
the Fund's securities transactions for the Segment in
accordance with all applicable laws, rules and regulations,
including but not limited to Section 31 (a) of the 1940 Act,
and will furnish the Trust's Board of Trustees and the Adviser
such periodic and special reports as the Board and Adviser
reasonably may request;
(f) treat confidentially and as proprietary information of the
Adviser and the Trust all records and other information
relative to the Adviser and the Trust and prior, present, or
potential shareholders, and will not use such records and
information for any purpose other than the performance of its
responsibilities and duties hereunder, except that subject to
prompt notification to the Trust and the Adviser, the
Sub-Adviser may divulge such information to its independent
auditors and regulatory authorities, or when so requested by
the Adviser and the Trust; provided, however, that nothing
contained herein shall prohibit the Sub-Adviser from (1)
advertising or soliciting the public generally with respect to
other products or services, regardless of whether such
advertisement or solicitation may include prior, present or
potential shareholders of the Fund or (2) including the
Adviser and Trust on its general list of disclosable clients.
(g) maintain its policy and practice of conducting its fiduciary
functions independently. In making investment decisions for
the Fund, the Sub-Adviser's personnel will not inquire or take
into consideration whether the issuers of securities proposed
for purchase or sale for the Fund's account are customers of
the Adviser, other sub-advisers, the Sub-Adviser or of their
respective parents, subsidiaries or affiliates. In dealing
with such customers, the Sub-Adviser and its subsidiaries and
affiliates will not inquire or take into consideration whether
securities of those customers are held by the Trust; and
(h) render, upon request of the Adviser or the Trust's Board of
Trustees, written reports concerning the investment activities
of the Sub-Adviser with respect to the Sub-Adviser's Segment
of the Fund.
Section 3. EXPENSE. During the term of this Agreement, the Sub-Adviser
will pay all expenses incurred by it in performing its services under this
Agreement. The Sub-Adviser shall not be liable for any expenses of the Adviser
or the Trust, including without limitation (a) their interest and taxes, (b)
brokerage commissions and other costs in connection with the purchase or sale of
securities or other investment instruments with respect to the Fund and (c)
custodian fees and expenses.
Section 4. RECORDS. In compliance with the requirements of Rule 3la-3
under the 1940 Act, the Sub-Adviser hereby agrees that all records, if any,
which it maintains for the Fund are the property of the Fund and further agrees
to surrender promptly to the Adviser or the Trust any such records upon the
Adviser's or the Trust's request and that such records shall be available for
inspection by the SEC. The Sub-Adviser further agrees to preserve for the
periods and at the places prescribed by Rule 3la-2 under the 1940 Act the
records required to be maintained by Rule 31a-1 under the 1940 Act.
-3-
<PAGE> 4
Section 5. COMPENSATION OF THE SUB-ADVISER.
(a) In consideration of services rendered pursuant to this Agreement,
the Adviser will pay the Sub-Adviser a fee, in arrears, equal to an annual rate
in accordance with SCHEDULE A hereto, paid quarterly.
(b) Such fee for each calendar quarter shall be calculated based on the
average of the market value of the assets under management as of the end of each
of the three months in the quarter just ended, as provided by the Adviser.
(c) If the Sub-Adviser should serve for less than the whole of any
calendar quarter, its compensation shall be determined as provided above on the
basis of the ending market value of the assets managed in the month in which the
termination occurs and shall be payable on a pro rata basis for the period of
the calendar quarter for which it has served as Sub-Adviser hereunder.
Section 6. SERVICES NOT EXCLUSIVE. The services of the Sub-Adviser
hereunder are not to be deemed exclusive, and the Sub-Adviser shall be free to
render similar services to others and to engage in other activities, so long as
the services rendered hereunder are not impaired. It is understood that the
action taken by the Sub-Adviser under this Agreement may differ from the advice
given or the timing or nature of action taken with respect to other clients of
the Sub-Adviser, and that a transaction in a specific security may not be
accomplished for all clients of the Sub-Adviser at the same time or at the same
price.
Section 7. USE OF NAMES. The Adviser shall not use the name, logo,
trade or service mark or derivative of the foregoing of the Sub-Adviser or any
of the Sub-Adviser's affiliates in any prospectus, sales literature or other
materials whether or not relating to the Trust in any manner not approved prior
thereto by the Sub-Adviser; provided, however, that the Sub-Adviser shall
approve all uses of its or its affiliate's name which merely refer in accurate
terms to its appointment hereunder or which are required by the SEC or a state
securities commission; and, provided further, that in no event shall such
approval be unreasonably withheld. The Sub-Adviser shall not use the name of the
Trust, the Fund or the Adviser in any materials relating to the Sub-Adviser in
any manner not approved prior thereto by the Adviser; provided, however, that
the Adviser shall approve all uses of its and the Fund's or the Trust's name
which merely refer in accurate terms to the appointment of the Sub-Adviser
hereunder, including placing the Trust's or the Adviser's name on the
Sub-Adviser's list of representative clients, or which are required by the SEC
or a state securities commission, and, provided further, that in no event shall
such approval be unreasonably withheld.
Section 8. LIABILITY OF THE SUB-ADVISER. Absent willful misfeasance,
bad faith, gross negligence, or reckless disregard of obligations or duties
hereunder on the part of the Sub-Adviser, or loss resulting from breach of
fiduciary duty, the Sub-Adviser shall not be liable for any act or omission in
the course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security.
Notwithstanding the foregoing, neither the Adviser nor the Trust shall be deemed
to have waived any rights it may have against the Sub-Adviser under federal or
state securities laws.
The Sub-Adviser shall indemnify and hold harmless the Trust and the
Adviser (and its affiliated companies and their respective officers, directors
and employees) from any and all claims, losses, liabilities or damages
(including reasonable attorney's fees and other related expenses) arising
-4-
<PAGE> 5
out of or in connection with the willful misfeasance, bad faith, gross
negligence, or reckless disregard of obligations or duties including breach of
fiduciary duty, hereunder of the Sub-Adviser.
The Adviser shall hold harmless and indemnify the Sub-Adviser for any
loss, liability, cost, damage or expense (including reasonable attorney's fees
and costs) arising from any claim or demand by any person that is based upon (i)
the obligations of any other sub-adviser to the Fund, (ii) any obligation of the
Adviser under the Advisory Agreement that has not been delegated to the
Sub-Adviser under this Agreement or (iii) any matter for which the Sub-Adviser
does not have liability in accordance with the first sentence of this Section 8.
Section 9. LIMITATION OF TRUST'S LIABILITY. The Sub-Adviser
acknowledges that it has received notice of and accepts the limitations upon the
Trust's and the Fund's liability set forth in its Trust Instrument and under
Delaware law. The Sub-Adviser agrees that any of the Trust's obligations shall
be limited to the assets of the Fund and that the Sub-Adviser shall not seek
satisfaction of any such obligation from the shareholders of the Trust nor from
any Trustee, officer, employee or agent of the Trust.
The names "New Covenant Funds" and "Trustees of New Covenant Funds"
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under the Trust Instrument
dated as of September 30, 1998, to which reference is hereby made and a copy of
which is on file at the office of the Secretary of State of the State of
Delaware and elsewhere as required by law, and to any and all amendments thereto
so filed or hereafter filed. The obligations of "New Covenant Funds" entered
into in the name or on behalf thereof, or in the name or on behalf of any series
or class of shares of the Trust, by any of the Trustees, representatives or
agents are made not individually, but in such capacities, and are not binding
upon any of the Trustees, shareholders or representatives of the Trust
personally, but bind only the assets of the Trust, and all persons dealing with
any series or class of shares of the Trust must look solely to the assets of the
Trust belonging to such series or class for the enforcement of any claims
against the Trust.
Section 10. DURATION RENEWAL TERMINATION AND AMENDMENT. This Agreement
will become effective as of the date first written above, provided that it shall
have been approved by vote of a majority of the outstanding voting securities of
the Fund, in accordance with the requirements under the 1940 Act, and, unless
sooner terminated as provided herein, shall continue in effect for an initial
period of one (1) year.
Thereafter, if not terminated, this Agreement shall continue in effect
with respect to the Fund for successive one year periods provided such
continuance is specifically approved at least annually (a) by the vote of a
majority of the disinterested Trustees cast in person at a meeting called for
the purpose of voting on such approval, and (b) by the vote of a majority of the
Trust's Board of Trustees or by the vote of a majority of all votes attributable
to the outstanding Shares of the Fund. This Agreement may be terminated as to
the Fund at any time, without payment of any penalty, by the Trust's Board of
Trustees, by the Adviser, or by a vote of a majority of the outstanding voting
securities of the Fund, upon 60 days' prior written notice to the Sub-Adviser,
or by the Sub-Adviser upon 60 days' prior written notice to the Adviser and the
Trust's Board of Trustees, or upon such shorter notice as may be mutually agreed
upon.
This Agreement shall terminate automatically and immediately upon
termination of the Advisory Agreement. This Agreement shall terminate
automatically and immediately in the event
-5-
<PAGE> 6
of its assignment. No assignment of this Agreement shall be made by the
Sub-Adviser without the consent of the Adviser and the Board of Trustees of the
Trust.
This Agreement may be amended at any time by the Adviser and the
Sub-Adviser, subject to approval by the Trust's Board of Trustees and, if
required by the 1940 Act and applicable SEC rules and regulations, a vote of a
majority of the Fund's outstanding voting securities. Notwithstanding the
foregoing, the Trust shall be under no obligation to obtain shareholder approval
to materially amend this Agreement unless required to obtain such approval
pursuant to any orders or rules and regulations which may have been issued by
the Securities and Exchange Commission.
Section 11. YEAR 2000 WARRANTY. The Sub-Adviser represents and warrants
that it is actively pursuing a comprehensive and coordinated compliance strategy
(including remediation and testing) to ensure the readiness of its business
systems and applications for the Year 2000 and believes that all such systems
critical to the performance of Sub-Adviser's responsibilities hereunder will be
Year 2000 compliant prior to January 1, 2000. The Sub-Adviser will make
appropriate inquiries as to the readiness of its vendors, service providers,
clients and other third parties for the Year 2000; provided, however, that
neither the Sub-Adviser nor any of its officers, directors or employees (or
affiliated companies) make any representations or warranties regarding the Year
2000 readiness of such vendors, service providers, clients and other third
parties.
Section 12. CONFIDENTIAL RELATIONSHIP. Any information and advice
furnished by either party to this Agreement to the other shall be treated as
confidential and shall not be disclosed to third parties except as required by
law or as required or permitted by this Agreement.
Section 13. SEVERABILITY. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
Section 14. MISCELLANEOUS. This Agreement constitutes the full and
complete agreement of the parties hereto with respect to the subject matter
hereof and each party agrees to perform such further actions and execute such
further documents as are necessary to effectuate the purposes hereof. To the
extent not preempted by federal law, this Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of Indiana.
The captions in this Agreement are included for convenience only and in no way
define or delimit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement may be executed in several counterparts,
all of which together shall for all purposes constitute one Agreement, binding
on all parties.
Section 15. NOTICES. All notices and other communications hereunder
shall be in writing (including telex or similar writing) and shall be deemed
given if delivered in person or by messenger, cable, telegram or telex or
facsimile transmission or by a reputable overnight delivery service which
provides evidence of receipt to the parties at the following addresses or telex
or facsimile transmission numbers (or at such other address or number for a
party as shall be specified by like notice):
-6-
<PAGE> 7
(a) if to the Sub-Adviser, to:
____________________________________
____________________________________
____________________________________
(b) if to the Adviser, to:
New Covenant Trust Company, N.A.
200 East Twelfth Street, Suite B
Jeffersonville, IN 47130
Facsimile transmission number: (__________________)
Attention:___________________
Each such notice or other communication shall be effective (i) if given
by telex or facsimile transmission, when such telex or facsimile is transmitted
to the number specified in this section and the appropriate answer back or
confirmation is received, and (ii) if given by any other means, when delivered
at the address specified in this section.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
NEW COVENANT TRUST COMPANY, N.A.
By:________________________________
Name:______________________________
Title:_____________________________
CAPITAL GUARDIAN TRUST COMPANY
By:________________________________
Name:______________________________
Title:_____________________________
Dated: June___, 1999
-7-
<PAGE> 8
SCHEDULE A
----------
To the Sub-Advisory Agreement
between New Covenant Trust Company N.A. and
Capital Guardian Trust Company
Name of Fund Compensation Date
- ------------ ------------ ----
New Covenant Growth Fund 0.700 % of the first $25 June __, 1999
Million in Assets;
0.550 % of the next $25
Million in Assets;
0.425 % of Assets over $50
Million
(less 10% eleemosynary
discount)
NEW COVENANT TRUST COMPANY, N.A.
By:_______________________________
Name:_____________________________
Title_____________________________
CAPITAL GUARDIAN TRUST COMPANY
By:_______________________________
Name:_____________________________
Title:____________________________
-8-
<PAGE> 1
Exhibit 23 (d)(v)
SUB-ADVISORY AGREEMENT
This Sub-Advisory Agreement is made as of the ______ day of June,
1999, by and between New Covenant Trust Company, N.A., a limited purpose
national trust bank (the "Adviser"), and Carl Domino Associates, L.P. (the
"Sub-Adviser").
WHEREAS, pursuant to an agreement between them dated as of June ______,
1999 (the "Advisory Agreement"), the Adviser serves as investment adviser to New
Covenant Funds, a Delaware business trust and an open-end management investment
company (the "Trust"), which has filed a registration statement (the
"Registration Statement") under the Investment Company Act of 1940, as amended
(the "1940 Act") and the Securities Act of 1933; and
WHEREAS, the Trust is comprised of four separate investment portfolios,
one of which is New Covenant Growth Fund (the "Fund"); and
WHEREAS, the Adviser desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser
experienced in the management of a portfolio of securities to assist the Adviser
in performing services for a portion of the Fund; and
WHEREAS, the Sub-Adviser represents that it has the legal power and
authority to perform the services contemplated hereunder without violation of
applicable law (including the Investment Advisers Act of 1940), and desires to
provide such services to the Trust and the Adviser.
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
Section 1. APPOINTMENT OF THE SUB-ADVISER. The Adviser hereby appoints
the Sub-Adviser to provide a continuous investment program for that portion of
the Fund designated by the Adviser as assigned to the Sub-Adviser (the "Segment"
of the Fund), subject to such written instructions and supervision as the
Adviser may from time to time furnish. The Sub-Adviser hereby accepts such
appointment and agrees to render the services and to assume the obligations
herein set forth for the compensation herein provided. The Sub-Adviser will
provide the services under this Agreement with respect to the Segment in
accordance with the Fund's investment objective, policies and applicable
restrictions as stated in the Fund's most recent Prospectus and Statement of
Additional Information and as the same may, from time to time, be supplemented
or amended and in resolutions of the Trust's Board of Trustees. The Adviser
agrees to furnish to the Sub-Adviser from time to time copies of all
Prospectuses and Statements of Additional Information and of all amendments of,
or supplements to, such Prospectuses and Statements of Additional Information
and of all resolutions of the Trust's Board of Trustees applicable to the
Sub-Adviser's services hereunder. The Sub-Adviser shall for all purposes herein
be deemed to be an independent contractor and shall, except as expressly
provided or authorized (whether herein or otherwise), have no authority to act
for or represent the Adviser, the Fund or the Trust in any way.
Section 2. SUB-ADVISORY SERVICES. Subject to such written instructions
and supervision as the Adviser may from time to time furnish, the Sub-Adviser
will provide an investment program for the Segment, including investment
research and management with respect to securities and investments, including
cash and cash equivalents in the Segment, and will determine from time to time
what
<PAGE> 2
securities and other investments will be purchased, retained or sold by and
within the Segment. The Sub-Adviser will implement such determinations through
the placement, on behalf of the Fund, of orders for the execution of portfolio
transactions through such brokers or dealers as it may select. The Adviser will
instruct the Trust's Custodian to forward promptly to the Sub-Adviser proxy and
other materials relating to the exercise of such shareholder rights and, unless
otherwise instructed by the Adviser, the Sub-Adviser will determine from time to
time the manner in which voting rights, rights to consent to corporate action
and other rights pertaining to the Fund's investments should be exercised.
In fulfilling its responsibilities hereunder, the Sub-Adviser agrees
that it will:
(a) use the same skill and care in providing such services as it
uses in providing services to other fiduciary accounts for
which it has investment responsibilities;
(b) conform with all applicable rules and regulations of the
United States Securities and Exchange Commission ("SEC") and
in addition will conduct its activities under this Agreement
in accordance with any applicable regulations of any
government authority pertaining to the investment advisory
activities of the Sub-Adviser and shall furnish such written
reports or other documents substantiating such compliance as
the Adviser reasonably may request from time to time;
(c) not make loans to any person to purchase or carry shares of
beneficial interest in the Trust or make loans to the Trust;
(d) place orders pursuant to investment determinations for the
Fund either directly with the issuer or with an underwriter,
market maker or broker or dealer. In placing orders, the
Sub-Adviser will use its reasonable best efforts to obtain
best execution of such orders. Consistent with this
obligation, the Sub-Adviser may, to the extent permitted by
law, effect portfolio securities transactions through brokers
and dealers who provide brokerage and research services
(within the meaning of Section 28(c) of the Securities
Exchange Act of 1934) to or for the benefit of the Fund and/or
other accounts over which the Sub-Adviser exercises investment
discretion. Subject to the review of the Trust's Board of
Trustees from time to time with respect to the extent and
continuation of the policy, the Sub-Adviser is authorized to
cause the Fund to pay a broker or dealer who provides such
brokerage and research services a commission for effecting a
securities transaction for the Fund which is in excess of the
amount of commission another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser
determines in good faith that such commission was reasonable
in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of
either that particular transaction or the overall
responsibilities of the Sub-Adviser with respect to the
accounts as to which it exercises investment discretion. The
Trust or the Adviser may, from time to time in writing, direct
the Sub-Adviser to place orders through one or more brokers or
dealers and, thereafter, the Sub-Adviser will have no
responsibility for ensuring best execution with respect to
such orders. In no instance will portfolio securities be
purchased from or sold to the Sub-Adviser or any affiliated
person of the Sub-Adviser as principal except as may be
permitted by the 1940 Act or an exemption therefrom. If the
Sub-Adviser determines in good faith that the transaction is
in the best interest of each client, securities may be
purchased on behalf of the Fund from,
-2-
<PAGE> 3
or sold on behalf of the Fund to, another client of the
Sub-Adviser in compliance with Rule 17a-7 under the 1940 Act;
(e) maintain all necessary or appropriate records with respect to
the Fund's securities transactions for the Segment in
accordance with all applicable laws, rules and regulations,
including but not limited to Section 31 (a) of the 1940 Act,
and will furnish the Trust's Board of Trustees and the Adviser
such periodic and special reports as the Board and Adviser
reasonably may request;
(f) treat confidentially and as proprietary information of the
Adviser and the Trust all records and other information
relative to the Adviser and the Trust and prior, present, or
potential shareholders, and will not use such records and
information for any purpose other than the performance of its
responsibilities and duties hereunder, except that subject to
prompt notification to the Trust and the Adviser, the
Sub-Adviser may divulge such information to its independent
auditors and regulatory authorities, or when so requested by
the Adviser and the Trust; provided, however, that nothing
contained herein shall prohibit the Sub-Adviser from (1)
advertising or soliciting the public generally with respect to
other products or services, regardless of whether such
advertisement or solicitation may include prior, present or
potential shareholders of the Fund or (2) including the
Adviser and Trust on its general list of disclosable clients.
(g) maintain its policy and practice of conducting its fiduciary
functions independently. In making investment decisions for
the Fund, the Sub-Adviser's personnel will not inquire or take
into consideration whether the issuers of securities proposed
for purchase or sale for the Fund's account are customers of
the Adviser, other sub-advisers, the Sub-Adviser or of their
respective parents, subsidiaries or affiliates. In dealing
with such customers, the Sub-Adviser and its subsidiaries and
affiliates will not inquire or take into consideration whether
securities of those customers are held by the Trust; and
(h) render, upon request of the Adviser or the Trust's Board of
Trustees, written reports concerning the investment activities
of the Sub-Adviser with respect to the Sub-Adviser's Segment
of the Fund.
Section 3. EXPENSE. During the term of this Agreement, the Sub-Adviser
will pay all expenses incurred by it in performing its services under this
Agreement. The Sub-Adviser shall not be liable for any expenses of the Adviser
or the Trust, including without limitation (a) their interest and taxes, (b)
brokerage commissions and other costs in connection with the purchase or sale of
securities or other investment instruments with respect to the Fund and (c)
custodian fees and expenses.
Section 4. RECORDS. In compliance with the requirements of Rule 3la-3
under the 1940 Act, the Sub-Adviser hereby agrees that all records, if any,
which it maintains for the Fund are the property of the Fund and further agrees
to surrender promptly to the Adviser or the Trust any such records upon the
Adviser's or the Trust's request and that such records shall be available for
inspection by the SEC. The Sub-Adviser further agrees to preserve for the
periods and at the places prescribed by Rule 3la-2 under the 1940 Act the
records required to be maintained by Rule 31a-1 under the 1940 Act.
-3-
<PAGE> 4
Section 5. COMPENSATION OF THE SUB-ADVISER.
(a) In consideration of services rendered pursuant to this Agreement,
the Adviser will pay the Sub-Adviser a fee, in arrears, equal to an annual rate
in accordance with SCHEDULE A hereto, paid quarterly.
(b) Such fee for each calendar quarter shall be calculated based on the
average of the market value of the assets under management as of the end of each
of the three months in the quarter just ended, as provided by the Adviser.
(c) If the Sub-Adviser should serve for less than the whole of any
calendar quarter, its compensation shall be determined as provided above on the
basis of the ending market value of the assets managed in the month in which the
termination occurs and shall be payable on a pro rata basis for the period of
the calendar quarter for which it has served as Sub-Adviser hereunder.
Section 6. SERVICES NOT EXCLUSIVE. The services of the Sub-Adviser
hereunder are not to be deemed exclusive, and the Sub-Adviser shall be free to
render similar services to others and to engage in other activities, so long as
the services rendered hereunder are not impaired. It is understood that the
action taken by the Sub-Adviser under this Agreement may differ from the advice
given or the timing or nature of action taken with respect to other clients of
the Sub-Adviser, and that a transaction in a specific security may not be
accomplished for all clients of the Sub-Adviser at the same time or at the same
price.
Section 7. USE OF NAMES. The Adviser shall not use the name, logo,
trade or service mark or derivative of the foregoing of the Sub-Adviser or any
of the Sub-Adviser's affiliates in any prospectus, sales literature or other
materials whether or not relating to the Trust in any manner not approved prior
thereto by the Sub-Adviser; provided, however, that the Sub-Adviser shall
approve all uses of its or its affiliate's name which merely refer in accurate
terms to its appointment hereunder or which are required by the SEC or a state
securities commission; and, provided further, that in no event shall such
approval be unreasonably withheld. The Sub-Adviser shall not use the name of the
Trust, the Fund or the Adviser in any materials relating to the Sub-Adviser in
any manner not approved prior thereto by the Adviser; provided, however, that
the Adviser shall approve all uses of its and the Fund's or the Trust's name
which merely refer in accurate terms to the appointment of the Sub-Adviser
hereunder, including placing the Trust's or the Adviser's name on the
Sub-Adviser's list of representative clients, or which are required by the SEC
or a state securities commission, and, provided further, that in no event shall
such approval be unreasonably withheld.
Section 8. LIABILITY OF THE SUB-ADVISER. Absent willful misfeasance,
bad faith, gross negligence, or reckless disregard of obligations or duties
hereunder on the part of the Sub-Adviser, or loss resulting from breach of
fiduciary duty, the Sub-Adviser shall not be liable for any act or omission in
the course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security.
Notwithstanding the foregoing, neither the Adviser nor the Trust shall be deemed
to have waived any rights it may have against the Sub-Adviser under federal or
state securities laws.
The Sub-Adviser shall indemnify and hold harmless the Trust and the
Adviser (and its affiliated companies and their respective officers, directors
and employees) from any and all claims, losses, liabilities or damages
(including reasonable attorney's fees and other related expenses) arising
-4-
<PAGE> 5
out of or in connection with the willful misfeasance, bad faith, gross
negligence, or reckless disregard of obligations or duties including breach of
fiduciary duty, hereunder of the Sub-Adviser.
The Adviser shall hold harmless and indemnify the Sub-Adviser for any
loss, liability, cost, damage or expense (including reasonable attorney's fees
and costs) arising from any claim or demand by any person that is based upon (i)
the obligations of any other sub-adviser to the Fund, (ii) any obligation of the
Adviser under the Advisory Agreement that has not been delegated to the
Sub-Adviser under this Agreement or (iii) any matter for which the Sub-Adviser
does not have liability in accordance with the first sentence of this Section 8.
Section 9. LIMITATION OF TRUST'S LIABILITY. The Sub-Adviser
acknowledges that it has received notice of and accepts the limitations upon the
Trust's and the Fund's liability set forth in its Trust Instrument and under
Delaware law. The Sub-Adviser agrees that any of the Trust's obligations shall
be limited to the assets of the Fund and that the Sub-Adviser shall not seek
satisfaction of any such obligation from the shareholders of the Trust nor from
any Trustee, officer, employee or agent of the Trust.
The names "New Covenant Funds" and "Trustees of New Covenant Funds"
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under the Trust Instrument
dated as of September 30, 1998, to which reference is hereby made and a copy of
which is on file at the office of the Secretary of State of the State of
Delaware and elsewhere as required by law, and to any and all amendments thereto
so filed or hereafter filed. The obligations of "New Covenant Funds" entered
into in the name or on behalf thereof, or in the name or on behalf of any series
or class of shares of the Trust, by any of the Trustees, representatives or
agents are made not individually, but in such capacities, and are not binding
upon any of the Trustees, shareholders or representatives of the Trust
personally, but bind only the assets of the Trust, and all persons dealing with
any series or class of shares of the Trust must look solely to the assets of the
Trust belonging to such series or class for the enforcement of any claims
against the Trust.
Section 10. DURATION RENEWAL TERMINATION AND AMENDMENT. This Agreement
will become effective as of the date first written above, provided that it shall
have been approved by vote of a majority of the outstanding voting securities of
the Fund, in accordance with the requirements under the 1940 Act, and, unless
sooner terminated as provided herein, shall continue in effect for an initial
period of one (1) year.
Thereafter, if not terminated, this Agreement shall continue in effect
with respect to the Fund for successive one year periods provided such
continuance is specifically approved at least annually (a) by the vote of a
majority of the disinterested Trustees cast in person at a meeting called for
the purpose of voting on such approval, and (b) by the vote of a majority of the
Trust's Board of Trustees or by the vote of a majority of all votes attributable
to the outstanding Shares of the Fund. This Agreement may be terminated as to
the Fund at any time, without payment of any penalty, by the Trust's Board of
Trustees, by the Adviser, or by a vote of a majority of the outstanding voting
securities of the Fund, upon 60 days' prior written notice to the Sub-Adviser,
or by the Sub-Adviser upon 60 days' prior written notice to the Adviser and the
Trust's Board of Trustees, or upon such shorter notice as may be mutually agreed
upon.
This Agreement shall terminate automatically and immediately upon
termination of the Advisory Agreement. This Agreement shall terminate
automatically and immediately in the event
-5-
<PAGE> 6
of its assignment. No assignment of this Agreement shall be made by the
Sub-Adviser without the consent of the Adviser and the Board of Trustees of the
Trust.
This Agreement may be amended at any time by the Adviser and the
Sub-Adviser, subject to approval by the Trust's Board of Trustees and, if
required by the 1940 Act and applicable SEC rules and regulations, a vote of a
majority of the Fund's outstanding voting securities. Notwithstanding the
foregoing, the Trust shall be under no obligation to obtain shareholder approval
to materially amend this Agreement unless required to obtain such approval
pursuant to any orders or rules and regulations which may have been issued by
the Securities and Exchange Commission.
Section 11. YEAR 2000 WARRANTY. The Sub-Adviser represents and warrants
that it is actively pursuing a comprehensive and coordinated compliance strategy
(including remediation and testing) to ensure the readiness of its business
systems and applications for the Year 2000 and believes that all such systems
critical to the performance of Sub-Adviser's responsibilities hereunder will be
Year 2000 compliant prior to January 1, 2000. The Sub-Adviser will make
appropriate inquiries as to the readiness of its vendors, service providers,
clients and other third parties for the Year 2000; provided, however, that
neither the Sub-Adviser nor any of its officers, directors or employees (or
affiliated companies) make any representations or warranties regarding the Year
2000 readiness of such vendors, service providers, clients and other third
parties.
Section 12. CONFIDENTIAL RELATIONSHIP. Any information and advice
furnished by either party to this Agreement to the other shall be treated as
confidential and shall not be disclosed to third parties except as required by
law or as required or permitted by this Agreement.
Section 13. SEVERABILITY. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
Section 14. MISCELLANEOUS. This Agreement constitutes the full and
complete agreement of the parties hereto with respect to the subject matter
hereof and each party agrees to perform such further actions and execute such
further documents as are necessary to effectuate the purposes hereof. To the
extent not preempted by federal law, this Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of Indiana.
The captions in this Agreement are included for convenience only and in no way
define or delimit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement may be executed in several counterparts,
all of which together shall for all purposes constitute one Agreement, binding
on all parties.
Section 15. NOTICES. All notices and other communications hereunder
shall be in writing (including telex or similar writing) and shall be deemed
given if delivered in person or by messenger, cable, telegram or telex or
facsimile transmission or by a reputable overnight delivery service which
provides evidence of receipt to the parties at the following addresses or telex
or facsimile transmission numbers (or at such other address or number for a
party as shall be specified by like notice):
-6-
<PAGE> 7
(a) if to the Sub-Adviser, to:
______________________________________
______________________________________
______________________________________
(b) if to the Adviser, to:
New Covenant Trust Company, N.A.
200 East Twelfth Street, Suite B
Jeffersonville, IN 47130
Facsimile transmission number: (___________________)
Attention:____________________
Each such notice or other communication shall be effective (i) if given
by telex or facsimile transmission, when such telex or facsimile is transmitted
to the number specified in this section and the appropriate answer back or
confirmation is received, and (ii) if given by any other means, when delivered
at the address specified in this section.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
NEW COVENANT TRUST COMPANY, N.A.
By:________________________________
Name:______________________________
Title:_____________________________
CARL DOMINO ASSOCIATES, L.P.
By:________________________________
Name:______________________________
Title:_____________________________
Dated: June___, 1999
-7-
<PAGE> 8
SCHEDULE A
----------
To the Sub-Advisory Agreement
between New Covenant Trust Company N.A. and
Carl Domino Associates, L.P.
Name of Fund Compensation Date
- ------------ ------------ ----
New Covenant Growth Fund 1.000% of the first $1 Million June __, 1999
in Assets;
0.750% of the next $2 Million
in Assets;
0.500% of the next $47
Million in Assets;
0.350% of the next $25
Million in Assets;
0.250% of Assets over $75
Million.
(Fees are subject to a 10%
eleemosynary discount)
NEW COVENANT TRUST COMPANY, N.A.
By:_____________________________
Name:___________________________
Title:__________________________
CARL DOMINO ASSOCIATES, L.P.
By:_____________________________
Name:___________________________
Title:__________________________
-8-
<PAGE> 1
Exhibit 23 (d)(vi)
SUB-ADVISORY AGREEMENT
This Sub-Advisory Agreement is made as of the___day of June, 1999, by
and between New Covenant Trust Company, N.A., a limited purpose national trust
bank (the "Adviser"), and Lazard Asset Management (the "Sub-Adviser").
WHEREAS, pursuant to an agreement between them dated as of June___,
1999 (the "Advisory Agreement"), the Adviser serves as investment adviser to New
Covenant Funds, a Delaware business trust and an open-end management investment
company (the "Trust"), which has filed a registration statement (the
"Registration Statement") under the Investment Company Act of 1940, as amended
(the "1940 Act") and the Securities Act of 1933; and
WHEREAS, the Trust is comprised of four separate investment portfolios,
one of which is New Covenant Growth Fund (the "Fund"); and
WHEREAS, the Adviser desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser
experienced in the management of a portfolio of securities to assist the Adviser
in performing services for a portion of the Fund; and
WHEREAS, the Sub-Adviser represents that it has the legal power and
authority to perform the services contemplated hereunder without violation of
applicable law (including the Investment Advisers Act of 1940), and desires to
provide such services to the Trust and the Adviser.
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
Section 1. APPOINTMENT OF THE SUB-ADVISER. The Adviser hereby appoints
the Sub-Adviser to provide a continuous investment program for that portion of
the Fund designated by the Adviser as assigned to the Sub-Adviser (the "Segment"
of the Fund), subject to such written instructions and supervision as the
Adviser may from time to time furnish. The Sub-Adviser hereby accepts such
appointment and agrees to render the services and to assume the obligations
herein set forth for the compensation herein provided. The Sub-Adviser will
provide the services under this Agreement with respect to the Segment in
accordance with the Fund's investment objective, policies and applicable
restrictions as stated in the Fund's most recent Prospectus and Statement of
Additional Information and as the same may, from time to time, be supplemented
or amended and in resolutions of the Trust's Board of Trustees. The Adviser
agrees to furnish to the Sub-Adviser from time to time copies of all
Prospectuses and Statements of Additional Information and of all amendments of,
or supplements to, such Prospectuses and Statements of Additional Information
and of all resolutions of the Trust's Board of Trustees applicable to the
Sub-Adviser's services hereunder. The Sub-Adviser shall for all purposes herein
be deemed to be an independent contractor and shall, except as expressly
provided or authorized (whether herein or otherwise), have no authority to act
for or represent the Adviser, the Fund or the Trust in any way.
Section 2. SUB-ADVISORY SERVICES. Subject to such written instructions
and supervision as the Adviser may from time to time furnish, the Sub-Adviser
will provide an investment program for the Segment, including investment
research and management with respect to securities and investments, including
cash and cash equivalents in the Segment, and will determine from time to time
what
<PAGE> 2
securities and other investments will be purchased, retained or sold by and
within the Segment. The Sub-Adviser will implement such determinations through
the placement, on behalf of the Fund, of orders for the execution of portfolio
transactions through such brokers or dealers as it may select. The Adviser will
instruct the Trust's Custodian to forward promptly to the Sub-Adviser proxy and
other materials relating to the exercise of such shareholder rights and, unless
otherwise instructed by the Adviser, the Sub-Adviser will determine from time to
time the manner in which voting rights, rights to consent to corporate action
and other rights pertaining to the Fund's investments should be exercised.
In fulfilling its responsibilities hereunder, the Sub-Adviser agrees
that it will:
(a) use the same skill and care in providing such services as it
uses in providing services to other fiduciary accounts for
which it has investment responsibilities;
(b) conform with all applicable rules and regulations of the
United States Securities and Exchange Commission ("SEC") and
in addition will conduct its activities under this Agreement
in accordance with any applicable regulations of any
government authority pertaining to the investment advisory
activities of the Sub-Adviser and shall furnish such written
reports or other documents substantiating such compliance as
the Adviser reasonably may request from time to time;
(c) not make loans to any person to purchase or carry shares of
beneficial interest in the Trust or make loans to the Trust;
(d) place orders pursuant to investment determinations for the
Fund either directly with the issuer or with an underwriter,
market maker or broker or dealer. In placing orders, the
Sub-Adviser will use its reasonable best efforts to obtain
best execution of such orders. Consistent with this
obligation, the Sub-Adviser may, to the extent permitted by
law, effect portfolio securities transactions through brokers
and dealers who provide brokerage and research services
(within the meaning of Section 28(c) of the Securities
Exchange Act of 1934) to or for the benefit of the Fund and/or
other accounts over which the Sub-Adviser exercises investment
discretion. Subject to the review of the Trust's Board of
Trustees from time to time with respect to the extent and
continuation of the policy, the Sub-Adviser is authorized to
cause the Fund to pay a broker or dealer who provides such
brokerage and research services a commission for effecting a
securities transaction for the Fund which is in excess of the
amount of commission another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser
determines in good faith that such commission was reasonable
in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of
either that particular transaction or the overall
responsibilities of the Sub-Adviser with respect to the
accounts as to which it exercises investment discretion. The
Trust or the Adviser may, from time to time in writing, direct
the Sub-Adviser to place orders through one or more brokers or
dealers and, thereafter, the Sub-Adviser will have no
responsibility for ensuring best execution with respect to
such orders. In no instance will portfolio securities be
purchased from or sold to the Sub-Adviser or any affiliated
person of the Sub-Adviser as principal except as may be
permitted by the 1940 Act or an exemption therefrom. If the
Sub-Adviser determines in good faith that the transaction is
in the best interest of each client, securities may be
purchased on behalf of the Fund from,
-2-
<PAGE> 3
or sold on behalf of the Fund to, another client of the
Sub-Adviser in compliance with Rule 17a-7 under the 1940 Act;
(e) maintain all necessary or appropriate records with respect to
the Fund's securities transactions for the Segment in
accordance with all applicable laws, rules and regulations,
including but not limited to Section 31 (a) of the 1940 Act,
and will furnish the Trust's Board of Trustees and the Adviser
such periodic and special reports as the Board and Adviser
reasonably may request;
(f) treat confidentially and as proprietary information of the
Adviser and the Trust all records and other information
relative to the Adviser and the Trust and prior, present, or
potential shareholders, and will not use such records and
information for any purpose other than the performance of its
responsibilities and duties hereunder, except that subject to
prompt notification to the Trust and the Adviser, the
Sub-Adviser may divulge such information to its independent
auditors and regulatory authorities, or when so requested by
the Adviser and the Trust; provided, however, that nothing
contained herein shall prohibit the Sub-Adviser from (1)
advertising or soliciting the public generally with respect to
other products or services, regardless of whether such
advertisement or solicitation may include prior, present or
potential shareholders of the Fund or (2) including the
Adviser and Trust on its general list of disclosable clients.
(g) maintain its policy and practice of conducting its fiduciary
functions independently. In making investment decisions for
the Fund, the Sub-Adviser's personnel will not inquire or take
into consideration whether the issuers of securities proposed
for purchase or sale for the Fund's account are customers of
the Adviser, other sub-advisers, the Sub-Adviser or of their
respective parents, subsidiaries or affiliates. In dealing
with such customers, the Sub-Adviser and its subsidiaries and
affiliates will not inquire or take into consideration whether
securities of those customers are held by the Trust; and
(h) render, upon request of the Adviser or the Trust's Board of
Trustees, written reports concerning the investment activities
of the Sub-Adviser with respect to the Sub-Adviser's Segment
of the Fund.
Section 3. EXPENSE. During the term of this Agreement, the Sub-Adviser
will pay all expenses incurred by it in performing its services under this
Agreement. The Sub-Adviser shall not be liable for any expenses of the Adviser
or the Trust, including without limitation (a) their interest and taxes, (b)
brokerage commissions and other costs in connection with the purchase or sale of
securities or other investment instruments with respect to the Fund and (c)
custodian fees and expenses.
Section 4. RECORDS. In compliance with the requirements of Rule 3la-3
under the 1940 Act, the Sub-Adviser hereby agrees that all records, if any,
which it maintains for the Fund are the property of the Fund and further agrees
to surrender promptly to the Adviser or the Trust any such records upon the
Adviser's or the Trust's request and that such records shall be available for
inspection by the SEC. The Sub-Adviser further agrees to preserve for the
periods and at the places prescribed by Rule 3la-2 under the 1940 Act the
records required to be maintained by Rule 31a-1 under the 1940 Act.
-3-
<PAGE> 4
Section 5. COMPENSATION OF THE SUB-ADVISER.
(a) In consideration of services rendered pursuant to this Agreement,
the Adviser will pay the Sub-Adviser a fee, in arrears, equal to an annual rate
in accordance with SCHEDULE A hereto, paid quarterly.
(b) Such fee for each calendar quarter shall be calculated based on the
average of the market value of the assets under management as of the end of each
of the three months in the quarter just ended, as provided by the Adviser.
(c) If the Sub-Adviser should serve for less than the whole of any
calendar quarter, its compensation shall be determined as provided above on the
basis of the ending market value of the assets managed in the month in which the
termination occurs and shall be payable on a pro rata basis for the period of
the calendar quarter for which it has served as Sub-Adviser hereunder.
Section 6. SERVICES NOT EXCLUSIVE. The services of the Sub-Adviser
hereunder are not to be deemed exclusive, and the Sub-Adviser shall be free to
render similar services to others and to engage in other activities, so long as
the services rendered hereunder are not impaired. It is understood that the
action taken by the Sub-Adviser under this Agreement may differ from the advice
given or the timing or nature of action taken with respect to other clients of
the Sub-Adviser, and that a transaction in a specific security may not be
accomplished for all clients of the Sub-Adviser at the same time or at the same
price.
Section 7. USE OF NAMES. The Adviser shall not use the name, logo,
trade or service mark or derivative of the foregoing of the Sub-Adviser or any
of the Sub-Adviser's affiliates in any prospectus, sales literature or other
materials whether or not relating to the Trust in any manner not approved prior
thereto by the Sub-Adviser; provided, however, that the Sub-Adviser shall
approve all uses of its or its affiliate's name which merely refer in accurate
terms to its appointment hereunder or which are required by the SEC or a state
securities commission; and, provided further, that in no event shall such
approval be unreasonably withheld. The Sub-Adviser shall not use the name of the
Trust, the Fund or the Adviser in any materials relating to the Sub-Adviser in
any manner not approved prior thereto by the Adviser; provided, however, that
the Adviser shall approve all uses of its and the Fund's or the Trust's name
which merely refer in accurate terms to the appointment of the Sub-Adviser
hereunder, including placing the Trust's or the Adviser's name on the
Sub-Adviser's list of representative clients, or which are required by the SEC
or a state securities commission, and, provided further, that in no event shall
such approval be unreasonably withheld.
Section 8. LIABILITY OF THE SUB-ADVISER. Absent willful misfeasance,
bad faith, gross negligence, or reckless disregard of obligations or duties
hereunder on the part of the Sub-Adviser, or loss resulting from breach of
fiduciary duty, the Sub-Adviser shall not be liable for any act or omission in
the course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security.
Notwithstanding the foregoing, neither the Adviser nor the Trust shall be deemed
to have waived any rights it may have against the Sub-Adviser under federal or
state securities laws.
The Sub-Adviser shall indemnify and hold harmless the Trust and the
Adviser (and its affiliated companies and their respective officers, directors
and employees) from any and all claims, losses, liabilities or damages
(including reasonable attorney's fees and other related expenses) arising
-4-
<PAGE> 5
out of or in connection with the willful misfeasance, bad faith, gross
negligence, or reckless disregard of obligations or duties including breach of
fiduciary duty, hereunder of the Sub-Adviser.
The Adviser shall hold harmless and indemnify the Sub-Adviser for any
loss, liability, cost, damage or expense (including reasonable attorney's fees
and costs) arising from any claim or demand by any person that is based upon (i)
the obligations of any other sub-adviser to the Fund, (ii) any obligation of the
Adviser under the Advisory Agreement that has not been delegated to the
Sub-Adviser under this Agreement or (iii) any matter for which the Sub-Adviser
does not have liability in accordance with the first sentence of this Section 8.
Section 9. LIMITATION OF TRUST'S LIABILITY. The Sub-Adviser
acknowledges that it has received notice of and accepts the limitations upon the
Trust's and the Fund's liability set forth in its Trust Instrument and under
Delaware law. The Sub-Adviser agrees that any of the Trust's obligations shall
be limited to the assets of the Fund and that the Sub-Adviser shall not seek
satisfaction of any such obligation from the shareholders of the Trust nor from
any Trustee, officer, employee or agent of the Trust.
The names "New Covenant Funds" and "Trustees of New Covenant Funds"
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under the Trust Instrument
dated as of September 30, 1998, to which reference is hereby made and a copy of
which is on file at the office of the Secretary of State of the State of
Delaware and elsewhere as required by law, and to any and all amendments thereto
so filed or hereafter filed. The obligations of "New Covenant Funds" entered
into in the name or on behalf thereof, or in the name or on behalf of any series
or class of shares of the Trust, by any of the Trustees, representatives or
agents are made not individually, but in such capacities, and are not binding
upon any of the Trustees, shareholders or representatives of the Trust
personally, but bind only the assets of the Trust, and all persons dealing with
any series or class of shares of the Trust must look solely to the assets of the
Trust belonging to such series or class for the enforcement of any claims
against the Trust.
Section 10. DURATION RENEWAL TERMINATION AND AMENDMENT. This Agreement
will become effective as of the date first written above, provided that it shall
have been approved by vote of a majority of the outstanding voting securities of
the Fund, in accordance with the requirements under the 1940 Act, and, unless
sooner terminated as provided herein, shall continue in effect for an initial
period of one (1) year.
Thereafter, if not terminated, this Agreement shall continue in effect
with respect to the Fund for successive one year periods provided such
continuance is specifically approved at least annually (a) by the vote of a
majority of the disinterested Trustees cast in person at a meeting called for
the purpose of voting on such approval, and (b) by the vote of a majority of the
Trust's Board of Trustees or by the vote of a majority of all votes attributable
to the outstanding Shares of the Fund. This Agreement may be terminated as to
the Fund at any time, without payment of any penalty, by the Trust's Board of
Trustees, by the Adviser, or by a vote of a majority of the outstanding voting
securities of the Fund, upon 60 days' prior written notice to the Sub-Adviser,
or by the Sub-Adviser upon 60 days' prior written notice to the Adviser and the
Trust's Board of Trustees, or upon such shorter notice as may be mutually agreed
upon.
This Agreement shall terminate automatically and immediately upon
termination of the Advisory Agreement. This Agreement shall terminate
automatically and immediately in the event
-5-
<PAGE> 6
of its assignment. No assignment of this Agreement shall be made by the
Sub-Adviser without the consent of the Adviser and the Board of Trustees of the
Trust.
This Agreement may be amended at any time by the Adviser and the
Sub-Adviser, subject to approval by the Trust's Board of Trustees and, if
required by the 1940 Act and applicable SEC rules and regulations, a vote of a
majority of the Fund's outstanding voting securities. Notwithstanding the
foregoing, the Trust shall be under no obligation to obtain shareholder approval
to materially amend this Agreement unless required to obtain such approval
pursuant to any orders or rules and regulations which may have been issued by
the Securities and Exchange Commission.
Section 11. YEAR 2000 WARRANTY. The Sub-Adviser represents and warrants
that it is actively pursuing a comprehensive and coordinated compliance strategy
(including remediation and testing) to ensure the readiness of its business
systems and applications for the Year 2000 and believes that all such systems
critical to the performance of Sub-Adviser's responsibilities hereunder will be
Year 2000 compliant prior to January 1, 2000. The Sub-Adviser will make
appropriate inquiries as to the readiness of its vendors, service providers,
clients and other third parties for the Year 2000; provided, however, that
neither the Sub-Adviser nor any of its officers, directors or employees (or
affiliated companies) make any representations or warranties regarding the Year
2000 readiness of such vendors, service providers, clients and other third
parties.
Section 12. CONFIDENTIAL RELATIONSHIP. Any information and advice
furnished by either party to this Agreement to the other shall be treated as
confidential and shall not be disclosed to third parties except as required by
law or as required or permitted by this Agreement.
Section 13. SEVERABILITY. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
Section 14. MISCELLANEOUS. This Agreement constitutes the full and
complete agreement of the parties hereto with respect to the subject matter
hereof and each party agrees to perform such further actions and execute such
further documents as are necessary to effectuate the purposes hereof. To the
extent not preempted by federal law, this Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of Indiana.
The captions in this Agreement are included for convenience only and in no way
define or delimit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement may be executed in several counterparts,
all of which together shall for all purposes constitute one Agreement, binding
on all parties.
Section 15. NOTICES. All notices and other communications hereunder
shall be in writing (including telex or similar writing) and shall be deemed
given if delivered in person or by messenger, cable, telegram or telex or
facsimile transmission or by a reputable overnight delivery service which
provides evidence of receipt to the parties at the following addresses or telex
or facsimile transmission numbers (or at such other address or number for a
party as shall be specified by like notice):
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<PAGE> 7
(a) if to the Sub-Adviser, to:
_________________________________________
_________________________________________
_________________________________________
(b) if to the Adviser, to:
New Covenant Trust Company, N.A.
200 East Twelfth Street, Suite B
Jeffersonville, IN 47130
Facsimile transmission number: (____________________)
Attention:___________________
Each such notice or other communication shall be effective (i) if given
by telex or facsimile transmission, when such telex or facsimile is transmitted
to the number specified in this section and the appropriate answer back or
confirmation is received, and (ii) if given by any other means, when delivered
at the address specified in this section.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
NEW COVENANT TRUST COMPANY, N.A.
By:________________________________
Name:______________________________
Title:_____________________________
LAZARD ASSET MANAGEMENT
By:________________________________
Name:______________________________
Title:_____________________________
Dated: June___, 1999
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<PAGE> 8
SCHEDULE A
----------
To the Sub-Advisory Agreement
between New Covenant Trust Company, N.A. and
Lazard Asset Management
Name of Fund Compensation Date
- ------------ ------------ ----
New Covenant Growth Fund Domestic Portion: June __, 1999
----------------
0.500% of first $35 Million of
Assets;
0.250% of Assets over $35
Million
International Portion:
----------------------
0.750% of Assets managed
(All fees are less 20%
eleemosynary discount)
-8-
<PAGE> 1
Exhibit 23 (d)(vii)
SUB-ADVISORY AGREEMENT
This Sub-Advisory Agreement is made as of the _____ day of June, 1999,
by and between New Covenant Trust Company, N.A., a limited purpose national
trust bank (the "Adviser"), and Seneca Capital Management (the "Sub-Adviser").
WHEREAS, pursuant to an agreement between them dated as of June __,
1999 (the "Advisory Agreement"), the Adviser serves as investment adviser to New
Covenant Funds, a Delaware business trust and an open-end management investment
company (the "Trust"), which has filed a registration statement (the
"Registration Statement") under the Investment Company Act of 1940, as amended
(the "1940 Act") and the Securities Act of 1933; and
WHEREAS, the Trust is comprised of four separate investment portfolios,
one of which is New Covenant Growth Fund (the "Fund"); and
WHEREAS, the Adviser desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser
experienced in the management of a portfolio of securities to assist the Adviser
in performing services for a portion of the Fund; and
WHEREAS, the Sub-Adviser represents that it has the legal power and
authority to perform the services contemplated hereunder without violation of
applicable law (including the Investment Advisers Act of 1940), and desires to
provide such services to the Trust and the Adviser.
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
Section 1. APPOINTMENT OF THE SUB-ADVISER. The Adviser hereby appoints
the Sub-Adviser to provide a continuous investment program for that portion of
the Fund designated by the Adviser as assigned to the Sub-Adviser (the "Segment"
of the Fund), subject to such written instructions and supervision as the
Adviser may from time to time furnish. The Sub-Adviser hereby accepts such
appointment and agrees to render the services and to assume the obligations
herein set forth for the compensation herein provided. The Sub-Adviser will
provide the services under this Agreement with respect to the Segment in
accordance with the Fund's investment objective, policies and applicable
restrictions as stated in the Fund's most recent Prospectus and Statement of
Additional Information and as the same may, from time to time, be supplemented
or amended and in resolutions of the Trust's Board of Trustees. The Adviser
agrees to furnish to the Sub-Adviser from time to time copies of all
Prospectuses and Statements of Additional Information and of all amendments of,
or supplements to, such Prospectuses and Statements of Additional Information
and of all resolutions of the Trust's Board of Trustees applicable to the
Sub-Adviser's services hereunder. The Sub-Adviser shall for all purposes herein
be deemed to be an independent contractor and shall, except as expressly
provided or authorized (whether herein or otherwise), have no authority to act
for or represent the Adviser, the Fund or the Trust in any way.
Section 2. SUB-ADVISORY SERVICES. Subject to such written instructions
and supervision as the Adviser may from time to time furnish, the Sub-Adviser
will provide an investment program for the Segment, including investment
research and management with respect to securities and investments, including
cash and cash equivalents in the Segment, and will determine from time to time
what
<PAGE> 2
securities and other investments will be purchased, retained or sold by and
within the Segment. The Sub-Adviser will implement such determinations through
the placement, on behalf of the Fund, of orders for the execution of portfolio
transactions through such brokers or dealers as it may select. The Adviser will
instruct the Trust's Custodian to forward promptly to the Sub-Adviser proxy and
other materials relating to the exercise of such shareholder rights and, unless
otherwise instructed by the Adviser, the Sub-Adviser will determine from time to
time the manner in which voting rights, rights to consent to corporate action
and other rights pertaining to the Fund's investments should be exercised.
In fulfilling its responsibilities hereunder, the Sub-Adviser agrees
that it will:
(a) use the same skill and care in providing such services as it
uses in providing services to other fiduciary accounts for
which it has investment responsibilities;
(b) conform with all applicable rules and regulations of the
United States Securities and Exchange Commission ("SEC") and
in addition will conduct its activities under this Agreement
in accordance with any applicable regulations of any
government authority pertaining to the investment advisory
activities of the Sub-Adviser and shall furnish such written
reports or other documents substantiating such compliance as
the Adviser reasonably may request from time to time;
(c) not make loans to any person to purchase or carry shares of
beneficial interest in the Trust or make loans to the Trust;
(d) place orders pursuant to investment determinations for the
Fund either directly with the issuer or with an underwriter,
market maker or broker or dealer. In placing orders, the
Sub-Adviser will use its reasonable best efforts to obtain
best execution of such orders. Consistent with this
obligation, the Sub-Adviser may, to the extent permitted by
law, effect portfolio securities transactions through brokers
and dealers who provide brokerage and research services
(within the meaning of Section 28(c) of the Securities
Exchange Act of 1934) to or for the benefit of the Fund and/or
other accounts over which the Sub-Adviser exercises investment
discretion. Subject to the review of the Trust's Board of
Trustees from time to time with respect to the extent and
continuation of the policy, the Sub-Adviser is authorized to
cause the Fund to pay a broker or dealer who provides such
brokerage and research services a commission for effecting a
securities transaction for the Fund which is in excess of the
amount of commission another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser
determines in good faith that such commission was reasonable
in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of
either that particular transaction or the overall
responsibilities of the Sub-Adviser with respect to the
accounts as to which it exercises investment discretion. The
Trust or the Adviser may, from time to time in writing, direct
the Sub-Adviser to place orders through one or more brokers or
dealers and, thereafter, the Sub-Adviser will have no
responsibility for ensuring best execution with respect to
such orders. In no instance will portfolio securities be
purchased from or sold to the Sub-Adviser or any affiliated
person of the Sub-Adviser as principal except as may be
permitted by the 1940 Act or an exemption therefrom. If the
Sub-Adviser determines in good faith that the transaction is
in the best interest of each client, securities may be
purchased on behalf of the Fund from,
-2-
<PAGE> 3
or sold on behalf of the Fund to, another client of the
Sub-Adviser in compliance with Rule 17a-7 under the 1940 Act;
(e) maintain all necessary or appropriate records with respect to
the Fund's securities transactions for the Segment in
accordance with all applicable laws, rules and regulations,
including but not limited to Section 31 (a) of the 1940 Act,
and will furnish the Trust's Board of Trustees and the Adviser
such periodic and special reports as the Board and Adviser
reasonably may request;
(f) treat confidentially and as proprietary information of the
Adviser and the Trust all records and other information
relative to the Adviser and the Trust and prior, present, or
potential shareholders, and will not use such records and
information for any purpose other than the performance of its
responsibilities and duties hereunder, except that subject to
prompt notification to the Trust and the Adviser, the
Sub-Adviser may divulge such information to its independent
auditors and regulatory authorities, or when so requested by
the Adviser and the Trust; provided, however, that nothing
contained herein shall prohibit the Sub-Adviser from (1)
advertising or soliciting the public generally with respect to
other products or services, regardless of whether such
advertisement or solicitation may include prior, present or
potential shareholders of the Fund or (2) including the
Adviser and Trust on its general list of disclosable clients.
(g) maintain its policy and practice of conducting its fiduciary
functions independently. In making investment decisions for
the Fund, the Sub-Adviser's personnel will not inquire or take
into consideration whether the issuers of securities proposed
for purchase or sale for the Fund's account are customers of
the Adviser, other sub-advisers, the Sub-Adviser or of their
respective parents, subsidiaries or affiliates. In dealing
with such customers, the Sub-Adviser and its subsidiaries and
affiliates will not inquire or take into consideration whether
securities of those customers are held by the Trust; and
(h) render, upon request of the Adviser or the Trust's Board of
Trustees, written reports concerning the investment activities
of the Sub-Adviser with respect to the Sub-Adviser's Segment
of the Fund.
Section 3. EXPENSE. During the term of this Agreement, the Sub-Adviser
will pay all expenses incurred by it in performing its services under this
Agreement. The Sub-Adviser shall not be liable for any expenses of the Adviser
or the Trust, including without limitation (a) their interest and taxes, (b)
brokerage commissions and other costs in connection with the purchase or sale of
securities or other investment instruments with respect to the Fund and (c)
custodian fees and expenses.
Section 4. RECORDS. In compliance with the requirements of Rule 3la-3
under the 1940 Act, the Sub-Adviser hereby agrees that all records, if any,
which it maintains for the Fund are the property of the Fund and further agrees
to surrender promptly to the Adviser or the Trust any such records upon the
Adviser's or the Trust's request and that such records shall be available for
inspection by the SEC. The Sub-Adviser further agrees to preserve for the
periods and at the places prescribed by Rule 3la-2 under the 1940 Act the
records required to be maintained by Rule 31a-1 under the 1940 Act.
-3-
<PAGE> 4
Section 5. COMPENSATION OF THE SUB-ADVISER.
(a) In consideration of services rendered pursuant to this Agreement,
the Adviser will pay the Sub-Adviser a fee, in arrears, equal to an annual rate
in accordance with Schedule A hereto, paid quarterly.
(b) Such fee for each calendar quarter shall be calculated based on the
average of the market value of the assets under management as of the end of each
of the three months in the quarter just ended, as provided by the Adviser.
(c) If the Sub-Adviser should serve for less than the whole of any
calendar quarter, its compensation shall be determined as provided above on the
basis of the ending market value of the assets managed in the month in which the
termination occurs and shall be payable on a pro rata basis for the period of
the calendar quarter for which it has served as Sub-Adviser hereunder.
Section 6. SERVICES NOT EXCLUSIVE. The services of the Sub-Adviser
hereunder are not to be deemed exclusive, and the Sub-Adviser shall be free to
render similar services to others and to engage in other activities, so long as
the services rendered hereunder are not impaired. It is understood that the
action taken by the Sub-Adviser under this Agreement may differ from the advice
given or the timing or nature of action taken with respect to other clients of
the Sub-Adviser, and that a transaction in a specific security may not be
accomplished for all clients of the Sub-Adviser at the same time or at the same
price.
Section 7. USE OF NAMES. The Adviser shall not use the name, logo,
trade or service mark or derivative of the foregoing of the Sub-Adviser or any
of the Sub-Adviser's affiliates in any prospectus, sales literature or other
materials whether or not relating to the Trust in any manner not approved prior
thereto by the Sub-Adviser; provided, however, that the Sub-Adviser shall
approve all uses of its or its affiliate's name which merely refer in accurate
terms to its appointment hereunder or which are required by the SEC or a state
securities commission; and, provided further, that in no event shall such
approval be unreasonably withheld. The Sub-Adviser shall not use the name of the
Trust, the Fund or the Adviser in any materials relating to the Sub-Adviser in
any manner not approved prior thereto by the Adviser; provided, however, that
the Adviser shall approve all uses of its and the Fund's or the Trust's name
which merely refer in accurate terms to the appointment of the Sub-Adviser
hereunder, including placing the Trust's or the Adviser's name on the
Sub-Adviser's list of representative clients, or which are required by the SEC
or a state securities commission, and, provided further, that in no event shall
such approval be unreasonably withheld.
Section 8. LIABILITY OF THE SUB-ADVISER. Absent willful misfeasance,
bad faith, gross negligence, or reckless disregard of obligations or duties
hereunder on the part of the Sub-Adviser, or loss resulting from breach of
fiduciary duty, the Sub-Adviser shall not be liable for any act or omission in
the course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security.
Notwithstanding the foregoing, neither the Adviser nor the Trust shall be deemed
to have waived any rights it may have against the Sub-Adviser under federal or
state securities laws.
The Sub-Adviser shall indemnify and hold harmless the Trust and the
Adviser (and its affiliated companies and their respective officers, directors
and employees) from any and all claims, losses, liabilities or damages
(including reasonable attorney's fees and other related expenses) arising
-4-
<PAGE> 5
out of or in connection with the willful misfeasance, bad faith, gross
negligence, or reckless disregard of obligations or duties including breach of
fiduciary duty, hereunder of the Sub-Adviser.
The Adviser shall hold harmless and indemnify the Sub-Adviser for any
loss, liability, cost, damage or expense (including reasonable attorney's fees
and costs) arising from any claim or demand by any person that is based upon (i)
the obligations of any other sub-adviser to the Fund, (ii) any obligation of the
Adviser under the Advisory Agreement that has not been delegated to the
Sub-Adviser under this Agreement or (iii) any matter for which the Sub-Adviser
does not have liability in accordance with the first sentence of this Section 8.
Section 9. LIMITATION OF TRUST'S LIABILITY. The Sub-Adviser
acknowledges that it has received notice of and accepts the limitations upon the
Trust's and the Fund's liability set forth in its Trust Instrument and under
Delaware law. The Sub-Adviser agrees that any of the Trust's obligations shall
be limited to the assets of the Fund and that the Sub-Adviser shall not seek
satisfaction of any such obligation from the shareholders of the Trust nor from
any Trustee, officer, employee or agent of the Trust.
The names "New Covenant Funds" and "Trustees of New Covenant Funds"
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under the Trust Instrument
dated as of September 30, 1998, to which reference is hereby made and a copy of
which is on file at the office of the Secretary of State of the State of
Delaware and elsewhere as required by law, and to any and all amendments thereto
so filed or hereafter filed. The obligations of "New Covenant Funds" entered
into in the name or on behalf thereof, or in the name or on behalf of any series
or class of shares of the Trust, by any of the Trustees, representatives or
agents are made not individually, but in such capacities, and are not binding
upon any of the Trustees, shareholders or representatives of the Trust
personally, but bind only the assets of the Trust, and all persons dealing with
any series or class of shares of the Trust must look solely to the assets of the
Trust belonging to such series or class for the enforcement of any claims
against the Trust.
Section 10. DURATION RENEWAL TERMINATION AND AMENDMENT. This Agreement
will become effective as of the date first written above, provided that it shall
have been approved by vote of a majority of the outstanding voting securities of
the Fund, in accordance with the requirements under the 1940 Act, and, unless
sooner terminated as provided herein, shall continue in effect for an initial
period of one (1) year.
Thereafter, if not terminated, this Agreement shall continue in effect
with respect to the Fund for successive one year periods provided such
continuance is specifically approved at least annually (a) by the vote of a
majority of the disinterested Trustees cast in person at a meeting called for
the purpose of voting on such approval, and (b) by the vote of a majority of the
Trust's Board of Trustees or by the vote of a majority of all votes attributable
to the outstanding Shares of the Fund. This Agreement may be terminated as to
the Fund at any time, without payment of any penalty, by the Trust's Board of
Trustees, by the Adviser, or by a vote of a majority of the outstanding voting
securities of the Fund, upon 60 days' prior written notice to the Sub-Adviser,
or by the Sub-Adviser upon 60 days' prior written notice to the Adviser and the
Trust's Board of Trustees, or upon such shorter notice as may be mutually agreed
upon.
This Agreement shall terminate automatically and immediately upon
termination of the Advisory Agreement. This Agreement shall terminate
automatically and immediately in the event
-5-
<PAGE> 6
of its assignment. No assignment of this Agreement shall be made by the
Sub-Adviser without the consent of the Adviser and the Board of Trustees of the
Trust.
This Agreement may be amended at any time by the Adviser and the
Sub-Adviser, subject to approval by the Trust's Board of Trustees and, if
required by the 1940 Act and applicable SEC rules and regulations, a vote of a
majority of the Fund's outstanding voting securities. Notwithstanding the
foregoing, the Trust shall be under no obligation to obtain shareholder approval
to materially amend this Agreement unless required to obtain such approval
pursuant to any orders or rules and regulations which may have been issued by
the Securities and Exchange Commission.
Section 11. YEAR 2000 WARRANTY. The Sub-Adviser represents and warrants
that it is actively pursuing a comprehensive and coordinated compliance strategy
(including remediation and testing) to ensure the readiness of its business
systems and applications for the Year 2000 and believes that all such systems
critical to the performance of Sub-Adviser's responsibilities hereunder will be
Year 2000 compliant prior to January 1, 2000. The Sub-Adviser will make
appropriate inquiries as to the readiness of its vendors, service providers,
clients and other third parties for the Year 2000; provided, however, that
neither the Sub-Adviser nor any of its officers, directors or employees (or
affiliated companies) make any representations or warranties regarding the Year
2000 readiness of such vendors, service providers, clients and other third
parties.
Section 12. CONFIDENTIAL RELATIONSHIP. Any information and advice
furnished by either party to this Agreement to the other shall be treated as
confidential and shall not be disclosed to third parties except as required by
law or as required or permitted by this Agreement.
Section 13. SEVERABILITY. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
Section 14. MISCELLANEOUS. This Agreement constitutes the full and
complete agreement of the parties hereto with respect to the subject matter
hereof and each party agrees to perform such further actions and execute such
further documents as are necessary to effectuate the purposes hereof. To the
extent not preempted by federal law, this Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of Indiana.
The captions in this Agreement are included for convenience only and in no way
define or delimit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement may be executed in several counterparts,
all of which together shall for all purposes constitute one Agreement, binding
on all parties.
Section 15. NOTICES. All notices and other communications hereunder
shall be in writing (including telex or similar writing) and shall be deemed
given if delivered in person or by messenger, cable, telegram or telex or
facsimile transmission or by a reputable overnight delivery service which
provides evidence of receipt to the parties at the following addresses or telex
or facsimile transmission numbers (or at such other address or number for a
party as shall be specified by like notice):
-6-
<PAGE> 7
(a) if to the Sub-Adviser, to:
------------------------------------------
------------------------------------------
------------------------------------------
(b) if to the Adviser, to:
New Covenant Trust Company, N.A.
200 East Twelfth Street, Suite B
Jeffersonville, IN 47130
Facsimile transmission number: ( )
---------------------
Attention:
---------------------
Each such notice or other communication shall be effective (i) if given
by telex or facsimile transmission, when such telex or facsimile is transmitted
to the number specified in this section and the appropriate answer back or
confirmation is received, and (ii) if given by any other means, when delivered
at the address specified in this section.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
NEW COVENANT TRUST COMPANY, N.A.
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
SENECA CAPITAL MANAGEMENT
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
Dated: June___, 1999
-7-
<PAGE> 8
SCHEDULE A
----------
To the Sub-Advisory Agreement
between New Covenant Trust Company, N.A. and
Seneca Capital Management
<TABLE>
<CAPTION>
Name of Fund Compensation Date
- ------------ ------------ ----
<S> <C> <C>
New Covenant Growth Fund 1.000% of first $5 Million in Assets; June __, 1999
0.800% of next $10 Million in Assets;
0.500% of next $35 Million in Assets;
(less 10% eleemosynary discount)
and 0.350% of Assets over $50 Million;
(flat fee over $50 million)
</TABLE>
NEW COVENANT TRUST COMPANY, N.A.
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
SENECA CAPITAL MANAGEMENT
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
-8-
<PAGE> 9
Exhibit 23(d) (viii)
SUB-ADVISORY AGREEMENT
This Sub-Advisory Agreement is made as of the _____ day of June, 1999,
by and between New Covenant Trust Company, N.A., a limited purpose national
trust bank (the "Adviser"), and Standish, Ayer & Wood, Inc. (the "Sub-Adviser").
WHEREAS, pursuant to an agreement between them dated as of June __,
1999 (the "Advisory Agreement"), the Adviser serves as investment adviser to New
Covenant Funds, a Delaware business trust and an open-end management investment
company (the "Trust"), which has filed a registration statement (the
"Registration Statement") under the Investment Company Act of 1940, as amended
(the "1940 Act") and the Securities Act of 1933; and
WHEREAS, the Trust is comprised of four separate investment portfolios,
one of which is New Covenant Income Fund (the "Fund"); and
WHEREAS, the Adviser desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser
experienced in the management of a portfolio of securities to assist the Adviser
in performing services for a portion of the Fund; and
WHEREAS, the Sub-Adviser represents that it has the legal power and
authority to perform the services contemplated hereunder without violation of
applicable law (including the Investment Advisers Act of 1940), and desires to
provide such services to the Trust and the Adviser.
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
Section 1. APPOINTMENT OF THE SUB-ADVISER. The Adviser hereby appoints
the Sub-Adviser to provide a continuous investment program for that portion of
the Fund designated by the Adviser as assigned to the Sub-Adviser (the "Segment"
of the Fund), subject to such written instructions and supervision as the
Adviser may from time to time furnish. The Sub-Adviser hereby accepts such
appointment and agrees to render the services and to assume the obligations
herein set forth for the compensation herein provided. The Sub-Adviser will
provide the services under this Agreement with respect to the Segment in
accordance with the Fund's investment objective, policies and applicable
restrictions as stated in the Fund's most recent Prospectus and Statement of
Additional Information and as the same may, from time to time, be supplemented
or amended and in resolutions of the Trust's Board of Trustees. The Adviser
agrees to furnish to the Sub-Adviser from time to time copies of all
Prospectuses and Statements of Additional Information and of all amendments of,
or supplements to, such Prospectuses and Statements of Additional Information
and of all resolutions of the Trust's Board of Trustees applicable to the
Sub-Adviser's services hereunder. The Sub-Adviser shall for all purposes herein
be deemed to be an independent contractor and shall, except as expressly
provided or authorized (whether herein or otherwise), have no authority to act
for or represent the Adviser, the Fund or the Trust in any way.
Section 2. SUB-ADVISORY SERVICES. Subject to such written instructions
and supervision as the Adviser may from time to time furnish, the Sub-Adviser
will provide an investment program for the Segment, including investment
research and management with respect to securities and investments, including
cash and cash equivalents in the Segment, and will determine from time to time
what
<PAGE> 10
securities and other investments will be purchased, retained or sold by and
within the Segment. The Sub-Adviser will implement such determinations through
the placement, on behalf of the Fund, of orders for the execution of portfolio
transactions through such brokers or dealers as it may select. The Adviser will
instruct the Trust's Custodian to forward promptly to the Sub-Adviser proxy and
other materials relating to the exercise of such shareholder rights and, unless
otherwise instructed by the Adviser, the Sub-Adviser will determine from time to
time the manner in which voting rights, rights to consent to corporate action
and other rights pertaining to the Fund's investments should be exercised.
In fulfilling its responsibilities hereunder, the Sub-Adviser agrees
that it will:
(a) use the same skill and care in providing such services as it
uses in providing services to other fiduciary accounts for
which it has investment responsibilities;
(b) conform with all applicable rules and regulations of the
United States Securities and Exchange Commission ("SEC") and
in addition will conduct its activities under this Agreement
in accordance with any applicable regulations of any
government authority pertaining to the investment advisory
activities of the Sub-Adviser and shall furnish such written
reports or other documents substantiating such compliance as
the Adviser reasonably may request from time to time;
(c) not make loans to any person to purchase or carry shares of
beneficial interest in the Trust or make loans to the Trust;
(d) place orders pursuant to investment determinations for the
Fund either directly with the issuer or with an underwriter,
market maker or broker or dealer. In placing orders, the
Sub-Adviser will use its reasonable best efforts to obtain
best execution of such orders. Consistent with this
obligation, the Sub-Adviser may, to the extent permitted by
law, effect portfolio securities transactions through brokers
and dealers who provide brokerage and research services
(within the meaning of Section 28(c) of the Securities
Exchange Act of 1934) to or for the benefit of the Fund and/or
other accounts over which the Sub-Adviser exercises investment
discretion. Subject to the review of the Trust's Board of
Trustees from time to time with respect to the extent and
continuation of the policy, the Sub-Adviser is authorized to
cause the Fund to pay a broker or dealer who provides such
brokerage and research services a commission for effecting a
securities transaction for the Fund which is in excess of the
amount of commission another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser
determines in good faith that such commission was reasonable
in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of
either that particular transaction or the overall
responsibilities of the Sub-Adviser with respect to the
accounts as to which it exercises investment discretion. The
Trust or the Adviser may, from time to time in writing, direct
the Sub-Adviser to place orders through one or more brokers or
dealers and, thereafter, the Sub-Adviser will have no
responsibility for ensuring best execution with respect to
such orders. In no instance will portfolio securities be
purchased from or sold to the Sub-Adviser or any affiliated
person of the Sub-Adviser as principal except as may be
permitted by the 1940 Act or an exemption therefrom. If the
Sub-Adviser determines in good faith that the transaction is
in the best interest of each client, securities may be
purchased on behalf of the Fund from,
-2-
<PAGE> 11
or sold on behalf of the Fund to, another client of the
Sub-Adviser in compliance with Rule 17a-7 under the 1940 Act;
(e) maintain all necessary or appropriate records with respect to
the Fund's securities transactions for the Segment in
accordance with all applicable laws, rules and regulations,
including but not limited to Section 31 (a) of the 1940 Act,
and will furnish the Trust's Board of Trustees and the Adviser
such periodic and special reports as the Board and Adviser
reasonably may request;
(f) treat confidentially and as proprietary information of the
Adviser and the Trust all records and other information
relative to the Adviser and the Trust and prior, present, or
potential shareholders, and will not use such records and
information for any purpose other than the performance of its
responsibilities and duties hereunder, except that subject to
prompt notification to the Trust and the Adviser, the
Sub-Adviser may divulge such information to its independent
auditors and regulatory authorities, or when so requested by
the Adviser and the Trust; provided, however, that nothing
contained herein shall prohibit the Sub-Adviser from (1)
advertising or soliciting the public generally with respect to
other products or services, regardless of whether such
advertisement or solicitation may include prior, present or
potential shareholders of the Fund or (2) including the
Adviser and Trust on its general list of disclosable clients.
(g) maintain its policy and practice of conducting its fiduciary
functions independently. In making investment decisions for
the Fund, the Sub-Adviser's personnel will not inquire or take
into consideration whether the issuers of securities proposed
for purchase or sale for the Fund's account are customers of
the Adviser, other sub-advisers, the Sub-Adviser or of their
respective parents, subsidiaries or affiliates. In dealing
with such customers, the Sub-Adviser and its subsidiaries and
affiliates will not inquire or take into consideration whether
securities of those customers are held by the Trust; and
(h) render, upon request of the Adviser or the Trust's Board of
Trustees, written reports concerning the investment activities
of the Sub-Adviser with respect to the Sub-Adviser's Segment
of the Fund.
Section 3. EXPENSE. During the term of this Agreement, the Sub-Adviser
will pay all expenses incurred by it in performing its services under this
Agreement. The Sub-Adviser shall not be liable for any expenses of the Adviser
or the Trust, including without limitation (a) their interest and taxes, (b)
brokerage commissions and other costs in connection with the purchase or sale of
securities or other investment instruments with respect to the Fund and (c)
custodian fees and expenses.
Section 4. RECORDS. In compliance with the requirements of Rule 3la-3
under the 1940 Act, the Sub-Adviser hereby agrees that all records, if any,
which it maintains for the Fund are the property of the Fund and further agrees
to surrender promptly to the Adviser or the Trust any such records upon the
Adviser's or the Trust's request and that such records shall be available for
inspection by the SEC. The Sub-Adviser further agrees to preserve for the
periods and at the places prescribed by Rule 3la-2 under the 1940 Act the
records required to be maintained by Rule 31a-1 under the 1940 Act.
-3-
<PAGE> 12
Section 5. COMPENSATION OF THE SUB-ADVISER.
(a) In consideration of services rendered pursuant to this Agreement,
the Adviser will pay the Sub-Adviser a fee, in arrears, equal to an annual rate
in accordance with SCHEDULE A hereto, paid quarterly.
(b) Such fee for each calendar quarter shall be calculated based on the
average of the market value of the assets under management as of the end of each
of the three months in the quarter just ended, as provided by the Adviser.
(c) If the Sub-Adviser should serve for less than the whole of any
calendar quarter, its compensation shall be determined as provided above on the
basis of the ending market value of the assets managed in the month in which the
termination occurs and shall be payable on a pro rata basis for the period of
the calendar quarter for which it has served as Sub-Adviser hereunder.
Section 6. SERVICES NOT EXCLUSIVE. The services of the Sub-Adviser
hereunder are not to be deemed exclusive, and the Sub-Adviser shall be free to
render similar services to others and to engage in other activities, so long as
the services rendered hereunder are not impaired. It is understood that the
action taken by the Sub-Adviser under this Agreement may differ from the advice
given or the timing or nature of action taken with respect to other clients of
the Sub-Adviser, and that a transaction in a specific security may not be
accomplished for all clients of the Sub-Adviser at the same time or at the same
price.
Section 7. USE OF NAMES. The Adviser shall not use the name, logo,
trade or service mark or derivative of the foregoing of the Sub-Adviser or any
of the Sub-Adviser's affiliates in any prospectus, sales literature or other
materials whether or not relating to the Trust in any manner not approved prior
thereto by the Sub-Adviser; provided, however, that the Sub-Adviser shall
approve all uses of its or its affiliate's name which merely refer in accurate
terms to its appointment hereunder or which are required by the SEC or a state
securities commission; and, provided further, that in no event shall such
approval be unreasonably withheld. The Sub-Adviser shall not use the name of the
Trust, the Fund or the Adviser in any materials relating to the Sub-Adviser in
any manner not approved prior thereto by the Adviser; provided, however, that
the Adviser shall approve all uses of its and the Fund's or the Trust's name
which merely refer in accurate terms to the appointment of the Sub-Adviser
hereunder, including placing the Trust's or the Adviser's name on the
Sub-Adviser's list of representative clients, or which are required by the SEC
or a state securities commission, and, provided further, that in no event shall
such approval be unreasonably withheld.
Section 8. LIABILITY OF THE SUB-ADVISER. Absent willful misfeasance,
bad faith, gross negligence, or reckless disregard of obligations or duties
hereunder on the part of the Sub-Adviser, or loss resulting from breach of
fiduciary duty, the Sub-Adviser shall not be liable for any act or omission in
the course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security.
Notwithstanding the foregoing, neither the Adviser nor the Trust shall be deemed
to have waived any rights it may have against the Sub-Adviser under federal or
state securities laws.
The Sub-Adviser shall indemnify and hold harmless the Trust and the
Adviser (and its affiliated companies and their respective officers, directors
and employees) from any and all claims, losses, liabilities or damages
(including reasonable attorney's fees and other related expenses) arising
-4-
<PAGE> 13
out of or in connection with the willful misfeasance, bad faith, gross
negligence, or reckless disregard of obligations or duties including breach of
fiduciary duty, hereunder of the Sub-Adviser.
The Adviser shall hold harmless and indemnify the Sub-Adviser for any
loss, liability, cost, damage or expense (including reasonable attorney's fees
and costs) arising from any claim or demand by any person that is based upon (i)
the obligations of any other sub-adviser to the Fund, (ii) any obligation of the
Adviser under the Advisory Agreement that has not been delegated to the
Sub-Adviser under this Agreement or (iii) any matter for which the Sub-Adviser
does not have liability in accordance with the first sentence of this Section 8.
Section 9. LIMITATION OF TRUST'S LIABILITY. The Sub-Adviser
acknowledges that it has received notice of and accepts the limitations upon the
Trust's and the Fund's liability set forth in its Trust Instrument and under
Delaware law. The Sub-Adviser agrees that any of the Trust's obligations shall
be limited to the assets of the Fund and that the Sub-Adviser shall not seek
satisfaction of any such obligation from the shareholders of the Trust nor from
any Trustee, officer, employee or agent of the Trust.
The names "New Covenant Funds" and "Trustees of New Covenant Funds"
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under the Trust Instrument
dated as of September 30, 1998, to which reference is hereby made and a copy of
which is on file at the office of the Secretary of State of the State of
Delaware and elsewhere as required by law, and to any and all amendments thereto
so filed or hereafter filed. The obligations of "New Covenant Funds" entered
into in the name or on behalf thereof, or in the name or on behalf of any series
or class of shares of the Trust, by any of the Trustees, representatives or
agents are made not individually, but in such capacities, and are not binding
upon any of the Trustees, shareholders or representatives of the Trust
personally, but bind only the assets of the Trust, and all persons dealing with
any series or class of shares of the Trust must look solely to the assets of the
Trust belonging to such series or class for the enforcement of any claims
against the Trust.
Section 10. DURATION RENEWAL TERMINATION AND AMENDMENT. This Agreement
will become effective as of the date first written above, provided that it shall
have been approved by vote of a majority of the outstanding voting securities of
the Fund, in accordance with the requirements under the 1940 Act, and, unless
sooner terminated as provided herein, shall continue in effect for an initial
period of one (1) year.
Thereafter, if not terminated, this Agreement shall continue in effect
with respect to the Fund for successive one year periods provided such
continuance is specifically approved at least annually (a) by the vote of a
majority of the disinterested Trustees cast in person at a meeting called for
the purpose of voting on such approval, and (b) by the vote of a majority of the
Trust's Board of Trustees or by the vote of a majority of all votes attributable
to the outstanding Shares of the Fund. This Agreement may be terminated as to
the Fund at any time, without payment of any penalty, by the Trust's Board of
Trustees, by the Adviser, or by a vote of a majority of the outstanding voting
securities of the Fund, upon 60 days' prior written notice to the Sub-Adviser,
or by the Sub-Adviser upon 60 days' prior written notice to the Adviser and the
Trust's Board of Trustees, or upon such shorter notice as may be mutually agreed
upon.
This Agreement shall terminate automatically and immediately upon
termination of the Advisory Agreement. This Agreement shall terminate
automatically and immediately in the event
-5-
<PAGE> 14
of its assignment. No assignment of this Agreement shall be made by the
Sub-Adviser without the consent of the Adviser and the Board of Trustees of the
Trust.
This Agreement may be amended at any time by the Adviser and the
Sub-Adviser, subject to approval by the Trust's Board of Trustees and, if
required by the 1940 Act and applicable SEC rules and regulations, a vote of a
majority of the Fund's outstanding voting securities. Notwithstanding the
foregoing, the Trust shall be under no obligation to obtain shareholder approval
to materially amend this Agreement unless required to obtain such approval
pursuant to any orders or rules and regulations which may have been issued by
the Securities and Exchange Commission.
Section 11. YEAR 2000 WARRANTY. The Sub-Adviser represents and warrants
that it is actively pursuing a comprehensive and coordinated compliance strategy
(including remediation and testing) to ensure the readiness of its business
systems and applications for the Year 2000 and believes that all such systems
critical to the performance of Sub-Adviser's responsibilities hereunder will be
Year 2000 compliant prior to January 1, 2000. The Sub-Adviser will make
appropriate inquiries as to the readiness of its vendors, service providers,
clients and other third parties for the Year 2000; provided, however, that
neither the Sub-Adviser nor any of its officers, directors or employees (or
affiliated companies) make any representations or warranties regarding the Year
2000 readiness of such vendors, service providers, clients and other third
parties.
Section 12. CONFIDENTIAL RELATIONSHIP. Any information and advice
furnished by either party to this Agreement to the other shall be treated as
confidential and shall not be disclosed to third parties except as required by
law or as required or permitted by this Agreement.
Section 13. SEVERABILITY. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
Section 14. MISCELLANEOUS. This Agreement constitutes the full and
complete agreement of the parties hereto with respect to the subject matter
hereof and each party agrees to perform such further actions and execute such
further documents as are necessary to effectuate the purposes hereof. To the
extent not preempted by federal law, this Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of Indiana.
The captions in this Agreement are included for convenience only and in no way
define or delimit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement may be executed in several counterparts,
all of which together shall for all purposes constitute one Agreement, binding
on all parties.
Section 15. NOTICES. All notices and other communications hereunder
shall be in writing (including telex or similar writing) and shall be deemed
given if delivered in person or by messenger, cable, telegram or telex or
facsimile transmission or by a reputable overnight delivery service which
provides evidence of receipt to the parties at the following addresses or telex
or facsimile transmission numbers (or at such other address or number for a
party as shall be specified by like notice):
-6-
<PAGE> 15
(a) if to the Sub-Adviser, to:
---------------------------------
---------------------------------
---------------------------------
(b) if to the Adviser, to:
New Covenant Trust Company, N.A.
200 East Twelfth Street, Suite B
Jeffersonville, IN 47130
Facsimile transmission number: (_____________________)
Attention:___________________
Each such notice or other communication shall be effective (i) if given
by telex or facsimile transmission, when such telex or facsimile is transmitted
to the number specified in this section and the appropriate answer back or
confirmation is received, and (ii) if given by any other means, when delivered
at the address specified in this section.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
NEW COVENANT TRUST COMPANY, N.A.
By:_____________________________
Name:___________________________
Title:__________________________
STANDISH, AYER & WOOD, INC.
By:_____________________________
Name:___________________________
Title:__________________________
Dated: June___, 1999
-7-
<PAGE> 16
SCHEDULE A
----------
To the Sub-Advisory Agreement
between New Covenant Trust Company, N.A. and
Standish, Ayer & Wood, Inc.
<TABLE>
<CAPTION>
Name of Fund Compensation Date
- ------------ ------------ ----
<S> <C> <C>
New Covenant Income Fund Domestic Segment: June__, 1999
-----------------
0.400% of first $10 Million in Assets;
0.250% of next $90 Million in Assets;
0.200% of next $100 Million in Assets;
0.180% of next $100 Million in Assets;
0.150% of next $200 Million in Assets;
0.120% of Assets over $500 Million.
Global High-yield Segment:
--------------------------
0.500% of Assets managed.
NEW COVENANT TRUST COMPANY, N.A.
By:__________________________________
Name:________________________________
Title:_______________________________
STANDISH, AYER & WOOD, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
</TABLE>
-8-
<PAGE> 17
Exhibit 23(d)(ix)
SUB-ADVISORY AGREEMENT
This Sub-Advisory Agreement is made as of the ______ day of June, 1999,
by and between New Covenant Trust Company, N.A., a limited purpose national
trust bank (the "Adviser"), and Tattersall Advisory Group (the "Sub-Adviser").
WHEREAS, pursuant to an agreement between them dated as of June ______,
1999 (the "Advisory Agreement"), the Adviser serves as investment adviser to New
Covenant Funds, a Delaware business trust and an open-end management investment
company (the "Trust"), which has filed a registration statement (the
"Registration Statement") under the Investment Company Act of 1940, as amended
(the "1940 Act") and the Securities Act of 1933; and
WHEREAS, the Trust is comprised of four separate investment portfolios,
one of which is New Covenant Income Fund (the "Fund"); and
WHEREAS, the Adviser desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser
experienced in the management of a portfolio of securities to assist the Adviser
in performing services for a portion of the Fund; and
WHEREAS, the Sub-Adviser represents that it has the legal power and
authority to perform the services contemplated hereunder without violation of
applicable law (including the Investment Advisers Act of 1940), and desires to
provide such services to the Trust and the Adviser.
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
Section 1. APPOINTMENT OF THE SUB-ADVISER. The Adviser hereby appoints
the Sub-Adviser to provide a continuous investment program for that portion of
the Fund designated by the Adviser as assigned to the Sub-Adviser (the "Segment"
of the Fund), subject to such written instructions and supervision as the
Adviser may from time to time furnish. The Sub-Adviser hereby accepts such
appointment and agrees to render the services and to assume the obligations
herein set forth for the compensation herein provided. The Sub-Adviser will
provide the services under this Agreement with respect to the Segment in
accordance with the Fund's investment objective, policies and applicable
restrictions as stated in the Fund's most recent Prospectus and Statement of
Additional Information and as the same may, from time to time, be supplemented
or amended and in resolutions of the Trust's Board of Trustees. The Adviser
agrees to furnish to the Sub-Adviser from time to time copies of all
Prospectuses and Statements of Additional Information and of all amendments of,
or supplements to, such Prospectuses and Statements of Additional Information
and of all resolutions of the Trust's Board of Trustees applicable to the
Sub-Adviser's services hereunder. The Sub-Adviser shall for all purposes herein
be deemed to be an independent contractor and shall, except as expressly
provided or authorized (whether herein or otherwise), have no authority to act
for or represent the Adviser, the Fund or the Trust in any way.
Section 2. SUB-ADVISORY SERVICES. Subject to such written instructions
and supervision as the Adviser may from time to time furnish, the Sub-Adviser
will provide an investment program for the Segment, including investment
research and management with respect to securities and investments, including
cash and cash equivalents in the Segment, and will determine from time to time
what
<PAGE> 18
securities and other investments will be purchased, retained or sold by and
within the Segment. The Sub-Adviser will implement such determinations through
the placement, on behalf of the Fund, of orders for the execution of portfolio
transactions through such brokers or dealers as it may select. The Adviser will
instruct the Trust's Custodian to forward promptly to the Sub-Adviser proxy and
other materials relating to the exercise of such shareholder rights and, unless
otherwise instructed by the Adviser, the Sub-Adviser will determine from time to
time the manner in which voting rights, rights to consent to corporate action
and other rights pertaining to the Fund's investments should be exercised.
In fulfilling its responsibilities hereunder, the Sub-Adviser agrees
that it will:
(a) use the same skill and care in providing such services as it
uses in providing services to other fiduciary accounts for
which it has investment responsibilities;
(b) conform with all applicable rules and regulations of the
United States Securities and Exchange Commission ("SEC") and
in addition will conduct its activities under this Agreement
in accordance with any applicable regulations of any
government authority pertaining to the investment advisory
activities of the Sub-Adviser and shall furnish such written
reports or other documents substantiating such compliance as
the Adviser reasonably may request from time to time;
(c) not make loans to any person to purchase or carry shares of
beneficial interest in the Trust or make loans to the Trust;
(d) place orders pursuant to investment determinations for the
Fund either directly with the issuer or with an underwriter,
market maker or broker or dealer. In placing orders, the
Sub-Adviser will use its reasonable best efforts to obtain
best execution of such orders. Consistent with this
obligation, the Sub-Adviser may, to the extent permitted by
law, effect portfolio securities transactions through brokers
and dealers who provide brokerage and research services
(within the meaning of Section 28(c) of the Securities
Exchange Act of 1934) to or for the benefit of the Fund and/or
other accounts over which the Sub-Adviser exercises investment
discretion. Subject to the review of the Trust's Board of
Trustees from time to time with respect to the extent and
continuation of the policy, the Sub-Adviser is authorized to
cause the Fund to pay a broker or dealer who provides such
brokerage and research services a commission for effecting a
securities transaction for the Fund which is in excess of the
amount of commission another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser
determines in good faith that such commission was reasonable
in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of
either that particular transaction or the overall
responsibilities of the Sub-Adviser with respect to the
accounts as to which it exercises investment discretion. The
Trust or the Adviser may, from time to time in writing, direct
the Sub-Adviser to place orders through one or more brokers or
dealers and, thereafter, the Sub-Adviser will have no
responsibility for ensuring best execution with respect to
such orders. In no instance will portfolio securities be
purchased from or sold to the Sub-Adviser or any affiliated
person of the Sub-Adviser as principal except as may be
permitted by the 1940 Act or an exemption therefrom. If the
Sub-Adviser determines in good faith that the transaction is
in the best interest of each client, securities may be
purchased on behalf of the Fund from,
-2-
<PAGE> 19
or sold on behalf of the Fund to, another client of the
Sub-Adviser in compliance with Rule 17a-7 under the 1940 Act;
(e) maintain all necessary or appropriate records with respect to
the Fund's securities transactions for the Segment in
accordance with all applicable laws, rules and regulations,
including but not limited to Section 31 (a) of the 1940 Act,
and will furnish the Trust's Board of Trustees and the Adviser
such periodic and special reports as the Board and Adviser
reasonably may request;
(f) treat confidentially and as proprietary information of the
Adviser and the Trust all records and other information
relative to the Adviser and the Trust and prior, present, or
potential shareholders, and will not use such records and
information for any purpose other than the performance of its
responsibilities and duties hereunder, except that subject to
prompt notification to the Trust and the Adviser, the
Sub-Adviser may divulge such information to its independent
auditors and regulatory authorities, or when so requested by
the Adviser and the Trust; provided, however, that nothing
contained herein shall prohibit the Sub-Adviser from (1)
advertising or soliciting the public generally with respect to
other products or services, regardless of whether such
advertisement or solicitation may include prior, present or
potential shareholders of the Fund or (2) including the
Adviser and Trust on its general list of disclosable clients.
(g) maintain its policy and practice of conducting its fiduciary
functions independently. In making investment decisions for
the Fund, the Sub-Adviser's personnel will not inquire or take
into consideration whether the issuers of securities proposed
for purchase or sale for the Fund's account are customers of
the Adviser, other sub-advisers, the Sub-Adviser or of their
respective parents, subsidiaries or affiliates. In dealing
with such customers, the Sub-Adviser and its subsidiaries and
affiliates will not inquire or take into consideration whether
securities of those customers are held by the Trust; and
(h) render, upon request of the Adviser or the Trust's Board of
Trustees, written reports concerning the investment activities
of the Sub-Adviser with respect to the Sub-Adviser's Segment
of the Fund.
Section 3. EXPENSE. During the term of this Agreement, the Sub-Adviser
will pay all expenses incurred by it in performing its services under this
Agreement. The Sub-Adviser shall not be liable for any expenses of the Adviser
or the Trust, including without limitation (a) their interest and taxes, (b)
brokerage commissions and other costs in connection with the purchase or sale of
securities or other investment instruments with respect to the Fund and (c)
custodian fees and expenses.
Section 4. RECORDS. In compliance with the requirements of Rule 3la-3
under the 1940 Act, the Sub-Adviser hereby agrees that all records, if any,
which it maintains for the Fund are the property of the Fund and further agrees
to surrender promptly to the Adviser or the Trust any such records upon the
Adviser's or the Trust's request and that such records shall be available for
inspection by the SEC. The Sub-Adviser further agrees to preserve for the
periods and at the places prescribed by Rule 3la-2 under the 1940 Act the
records required to be maintained by Rule 31a-1 under the 1940 Act.
-3-
<PAGE> 20
Section 5. COMPENSATION OF THE SUB-ADVISER.
(a) In consideration of services rendered pursuant to this Agreement,
the Adviser will pay the Sub-Adviser a fee, in arrears, equal to an annual rate
in accordance with SCHEDULE A hereto, paid quarterly.
(b) Such fee for each calendar quarter shall be calculated based on the
average of the market value of the assets under management as of the end of each
of the three months in the quarter just ended, as provided by the Adviser.
(c) If the Sub-Adviser should serve for less than the whole of any
calendar quarter, its compensation shall be determined as provided above on the
basis of the ending market value of the assets managed in the month in which the
termination occurs and shall be payable on a pro rata basis for the period of
the calendar quarter for which it has served as Sub-Adviser hereunder.
Section 6. SERVICES NOT EXCLUSIVE. The services of the Sub-Adviser
hereunder are not to be deemed exclusive, and the Sub-Adviser shall be free to
render similar services to others and to engage in other activities, so long as
the services rendered hereunder are not impaired. It is understood that the
action taken by the Sub-Adviser under this Agreement may differ from the advice
given or the timing or nature of action taken with respect to other clients of
the Sub-Adviser, and that a transaction in a specific security may not be
accomplished for all clients of the Sub-Adviser at the same time or at the same
price.
Section 7. USE OF NAMES. The Adviser shall not use the name, logo,
trade or service mark or derivative of the foregoing of the Sub-Adviser or any
of the Sub-Adviser's affiliates in any prospectus, sales literature or other
materials whether or not relating to the Trust in any manner not approved prior
thereto by the Sub-Adviser; provided, however, that the Sub-Adviser shall
approve all uses of its or its affiliate's name which merely refer in accurate
terms to its appointment hereunder or which are required by the SEC or a state
securities commission; and, provided further, that in no event shall such
approval be unreasonably withheld. The Sub-Adviser shall not use the name of the
Trust, the Fund or the Adviser in any materials relating to the Sub-Adviser in
any manner not approved prior thereto by the Adviser; provided, however, that
the Adviser shall approve all uses of its and the Fund's or the Trust's name
which merely refer in accurate terms to the appointment of the Sub-Adviser
hereunder, including placing the Trust's or the Adviser's name on the
Sub-Adviser's list of representative clients, or which are required by the SEC
or a state securities commission, and, provided further, that in no event shall
such approval be unreasonably withheld.
Section 8. LIABILITY OF THE SUB-ADVISER. Absent willful misfeasance,
bad faith, gross negligence, or reckless disregard of obligations or duties
hereunder on the part of the Sub-Adviser, or loss resulting from breach of
fiduciary duty, the Sub-Adviser shall not be liable for any act or omission in
the course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security.
Notwithstanding the foregoing, neither the Adviser nor the Trust shall be deemed
to have waived any rights it may have against the Sub-Adviser under federal or
state securities laws.
The Sub-Adviser shall indemnify and hold harmless the Trust and the
Adviser (and its affiliated companies and their respective officers, directors
and employees) from any and all claims, losses, liabilities or damages
(including reasonable attorney's fees and other related expenses) arising
-4-
<PAGE> 21
out of or in connection with the willful misfeasance, bad faith, gross
negligence, or reckless disregard of obligations or duties including breach of
fiduciary duty, hereunder of the Sub-Adviser.
The Adviser shall hold harmless and indemnify the Sub-Adviser for any
loss, liability, cost, damage or expense (including reasonable attorney's fees
and costs) arising from any claim or demand by any person that is based upon (i)
the obligations of any other sub-adviser to the Fund, (ii) any obligation of the
Adviser under the Advisory Agreement that has not been delegated to the
Sub-Adviser under this Agreement or (iii) any matter for which the Sub-Adviser
does not have liability in accordance with the first sentence of this Section 8.
Section 9. LIMITATION OF TRUST'S LIABILITY. The Sub-Adviser
acknowledges that it has received notice of and accepts the limitations upon the
Trust's and the Fund's liability set forth in its Trust Instrument and under
Delaware law. The Sub-Adviser agrees that any of the Trust's obligations shall
be limited to the assets of the Fund and that the Sub-Adviser shall not seek
satisfaction of any such obligation from the shareholders of the Trust nor from
any Trustee, officer, employee or agent of the Trust.
The names "New Covenant Funds" and "Trustees of New Covenant Funds"
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under the Trust Instrument
dated as of September 30, 1998, to which reference is hereby made and a copy of
which is on file at the office of the Secretary of State of the State of
Delaware and elsewhere as required by law, and to any and all amendments thereto
so filed or hereafter filed. The obligations of "New Covenant Funds" entered
into in the name or on behalf thereof, or in the name or on behalf of any series
or class of shares of the Trust, by any of the Trustees, representatives or
agents are made not individually, but in such capacities, and are not binding
upon any of the Trustees, shareholders or representatives of the Trust
personally, but bind only the assets of the Trust, and all persons dealing with
any series or class of shares of the Trust must look solely to the assets of the
Trust belonging to such series or class for the enforcement of any claims
against the Trust.
Section 10. DURATION RENEWAL TERMINATION AND AMENDMENT. This Agreement
will become effective as of the date first written above, provided that it shall
have been approved by vote of a majority of the outstanding voting securities of
the Fund, in accordance with the requirements under the 1940 Act, and, unless
sooner terminated as provided herein, shall continue in effect for an initial
period of one (1) year.
Thereafter, if not terminated, this Agreement shall continue in effect
with respect to the Fund for successive one year periods provided such
continuance is specifically approved at least annually (a) by the vote of a
majority of the disinterested Trustees cast in person at a meeting called for
the purpose of voting on such approval, and (b) by the vote of a majority of the
Trust's Board of Trustees or by the vote of a majority of all votes attributable
to the outstanding Shares of the Fund. This Agreement may be terminated as to
the Fund at any time, without payment of any penalty, by the Trust's Board of
Trustees, by the Adviser, or by a vote of a majority of the outstanding voting
securities of the Fund, upon 60 days' prior written notice to the Sub-Adviser,
or by the Sub-Adviser upon 60 days' prior written notice to the Adviser and the
Trust's Board of Trustees, or upon such shorter notice as may be mutually agreed
upon.
This Agreement shall terminate automatically and immediately upon
termination of the Advisory Agreement. This Agreement shall terminate
automatically and immediately in the event
-5-
<PAGE> 22
of its assignment. No assignment of this Agreement shall be made by the
Sub-Adviser without the consent of the Adviser and the Board of Trustees of the
Trust.
This Agreement may be amended at any time by the Adviser and the
Sub-Adviser, subject to approval by the Trust's Board of Trustees and, if
required by the 1940 Act and applicable SEC rules and regulations, a vote of a
majority of the Fund's outstanding voting securities. Notwithstanding the
foregoing, the Trust shall be under no obligation to obtain shareholder approval
to materially amend this Agreement unless required to obtain such approval
pursuant to any orders or rules and regulations which may have been issued by
the Securities and Exchange Commission.
Section 11. YEAR 2000 WARRANTY. The Sub-Adviser represents and warrants
that it is actively pursuing a comprehensive and coordinated compliance strategy
(including remediation and testing) to ensure the readiness of its business
systems and applications for the Year 2000 and believes that all such systems
critical to the performance of Sub-Adviser's responsibilities hereunder will be
Year 2000 compliant prior to January 1, 2000. The Sub-Adviser will make
appropriate inquiries as to the readiness of its vendors, service providers,
clients and other third parties for the Year 2000; provided, however, that
neither the Sub-Adviser nor any of its officers, directors or employees (or
affiliated companies) make any representations or warranties regarding the Year
2000 readiness of such vendors, service providers, clients and other third
parties.
Section 12. CONFIDENTIAL RELATIONSHIP. Any information and advice
furnished by either party to this Agreement to the other shall be treated as
confidential and shall not be disclosed to third parties except as required by
law or as required or permitted by this Agreement.
Section 13. SEVERABILITY. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
Section 14. MISCELLANEOUS. This Agreement constitutes the full and
complete agreement of the parties hereto with respect to the subject matter
hereof and each party agrees to perform such further actions and execute such
further documents as are necessary to effectuate the purposes hereof. To the
extent not preempted by federal law, this Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of Indiana.
The captions in this Agreement are included for convenience only and in no way
define or delimit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement may be executed in several counterparts,
all of which together shall for all purposes constitute one Agreement, binding
on all parties.
Section 15. NOTICES. All notices and other communications hereunder
shall be in writing (including telex or similar writing) and shall be deemed
given if delivered in person or by messenger, cable, telegram or telex or
facsimile transmission or by a reputable overnight delivery service which
provides evidence of receipt to the parties at the following addresses or telex
or facsimile transmission numbers (or at such other address or number for a
party as shall be specified by like notice):
-6-
<PAGE> 23
(a) if to the Sub-Adviser, to:
_____________________________________
_____________________________________
_____________________________________
(b) if to the Adviser, to:
New Covenant Trust Company, N.A.
200 East Twelfth Street, Suite B
Jeffersonville, IN 47130
Facsimile transmission number: (_____________________)
Attention:___________________
Each such notice or other communication shall be effective (i) if given
by telex or facsimile transmission, when such telex or facsimile is transmitted
to the number specified in this section and the appropriate answer back or
confirmation is received, and (ii) if given by any other means, when delivered
at the address specified in this section.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
NEW COVENANT TRUST COMPANY, N.A.
By:________________________________
Name:______________________________
Title:_____________________________
TATTERSALL ADVISORY GROUP
By:________________________________
Name:______________________________
Title:_____________________________
Dated: June___, 1999
-7-
<PAGE> 24
SCHEDULE A
----------
To the Sub-Advisory Agreement
between New Covenant Trust Company N.A. and
Tattersall Advisory Group
<TABLE>
<CAPTION>
<S> <C> <C>
Name of Fund Compensation Date
- ------------ ------------ ----
New Covenant Income Fund 0.250% of first $50 Million in June __, 1999
Assets;
0.125% of next $50 Million in Assets;
0.100% of Assets over $100 Million.
</TABLE>
NEW COVENANT TRUST COMPANY, N.A.
By:_____________________________
Name:___________________________
Title:__________________________
TATTERSALL ADVISORY GROUP
By:_____________________________
Name:___________________________
Title:__________________________
-8-
<PAGE> 25
Exhibit 23 (e)(i)
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of this ____ day of _______, 1999 (the
"Agreement") by and between New Covenant Funds, a Delaware business trust (the
"Fund") and First Data Distributors, Inc. (the "Distributor"), a Massachusetts
corporation.
WHEREAS, the Fund is registered as a diversified, open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and is currently offering units of beneficial interest (such units
of all series are hereinafter called the "Shares"), representing interests in
investment portfolios of the Fund identified on Schedule A hereto (the
"Portfolios") which are registered with the Securities and Exchange Commission
(the "SEC") pursuant to the Fund's Registration Statement on Form N-1A (the
"Registration Statement"); and
WHEREAS, the Fund desires to retain the Distributor as distributor for
the Portfolios to provide for the sale and distribution of the Shares of the
Portfolios identified on Schedule A and for such additional classes or series as
the Fund may issue, and the Distributor is prepared to provide such services
commencing on the date first written above.
NOW THEREFORE, in consideration of the premises and mutual covenants
set forth herein and intending to be legally bound hereby the parties hereto
agree as follows:
1. SERVICE AS DISTRIBUTOR
----------------------
1.1 The Distributor will act on behalf of the Fund for the distribution of
the Shares covered by the Registration Statement under the Securities
Act of 1933, as amended (the "1933 Act") and provide the distribution
services outlined in Schedule B to this Agreement. The Distributor will
have no liability for payment for the purchase of Shares sold pursuant
to this Agreement or with respect to redemptions or repurchases of
Shares.
1.2 The net asset value of the Shares shall be determined in the manner
provided in the then current Prospectus and Statement of Additional
Information relating to the Shares, and when determined shall be
applicable to all transactions as provided in the Prospectus. The net
asset value of the Shares shall be calculated by the Fund or by another
entity on behalf of the Fund. The Distributor shall have no duty to
inquire into, or liability for, the accuracy of the net asset value per
Share as calculated.
1.3 The Distributor agrees to use efforts deemed appropriate by the
Distributor to solicit orders for the sale of the Shares and will
undertake such advertising and promotion as it believes reasonable in
connection with such solicitation. To the extent that the Distributor
receives fees under any plan adopted by the Fund pursuant to Rule 12b-1
under the 1940 Act, the Distributor agrees to furnish and/or enter into
arrangements with others for the furnishing of marketing or sales
services with respect to the Shares as may be required pursuant to such
plan. To the extent that the Distributor receives shareholder services
fees under any shareholder services plan adopted by the Fund, the
Distributor
<PAGE> 26
agrees to furnish and/or enter into arrangements with others for the
furnishing of, personal and/or account maintenance services with
respect to the relevant shareholders of the Fund as may be required
pursuant to such plan. It is contemplated that the Distributor will
enter into sales or servicing agreements with securities dealers,
financial institutions and other industry professionals, such as
investment advisers, accountants and estate planning firms. The
Distributor will require each dealer with whom the Distributor has a
selling agreement to conform to the applicable provisions of the
Prospectus, with respect to the public offering price of the Shares,
and the Distributor shall not cause the Fund to withhold the placing of
purchase orders so as to make a profit thereby.
1.4 The Fund understands that the Distributor is now, and may in the future
be, the distributor of the shares of several investment companies or
series (collectively, the "Investment Entities"), including Investment
Entities having investment objectives similar to those of the Fund. The
Fund further understands that investors and potential investors in the
Fund may invest in shares of such other Investment Entities. The Fund
agrees that the Distributor's duties to such Investment Entities shall
not be deemed in conflict with its duties to the Fund under this
Section 1.4.
1.5 The Distributor shall not utilize any materials in connection with the
sale or offering of Shares except the Fund's Prospectus and Statement
of Additional Information and such other materials as the Fund shall
provide or approve. The Fund agrees to furnish the Distributor with
sufficient copies of any and all: agreements, plans, communications
with the public or other materials which the Fund intends to use in
connection any sales of Shares, in adequate time for the Distributor to
file and clear such materials with the proper authorities before they
are put in use. The Distributor and the Fund may agree that any such
material does not need to be filed subsequent to distribution. In
addition, the Fund agrees not to use any such materials until so filed
and cleared for use, if required, by appropriate authorities as well as
by the Distributor.
1.6 All activities by the Distributor and its employees, as distributor of
the Shares, shall comply with all applicable laws, rules and
regulations, including, without limitation, all rules and regulations
made or adopted by the SEC or the National Association of Securities
Dealers.
1.7 The Distributor will transmit any orders received by it for purchase or
redemption of the Shares to the transfer agent for the Fund.
1.8 Whenever in its judgment such action is warranted by unusual market,
economic or political conditions or abnormal circumstances of any kind,
the Fund may decline to accept any orders for, or make any sales of,
the Shares until such time as the Fund deems it advisable to accept
such orders and to make such sales, and the Fund advises the
Distributor promptly of such determination.
1.9 The Fund agrees to execute any and all documents and to furnish any and
all information and otherwise to take all actions that may be
reasonably necessary in connection with the
2
<PAGE> 27
qualification of the Shares for sale in such states as the Distributor
may designate. The Fund shall notify the Distributor in writing of the
states in which the Shares may be sold and shall notify the Distributor
in writing of any changes to the information contained in the previous
notification.
1.10 The Fund shall furnish from time to time, for use in connection with
the sale of the Shares, such information with respect to the Fund and
the Shares as the Distributor may reasonably request; and the Fund
warrants that the statements contained in any such information shall
fairly show or represent what they purport to show or represent. The
Fund shall also furnish the Distributor upon request with: (a) audited
annual statements and unaudited semi-annual statements of a Portfolio's
books and accounts prepared by the Fund, (b) quarterly earnings
statements prepared by the Fund, (c) a monthly itemized list of the
securities in the Portfolios, (d) monthly balance sheets as soon as
practicable after the end of each month, and (e) from time to time such
additional information regarding the financial condition of the Fund as
the Distributor may reasonably request.
1.11 The Fund represents to the Distributor that all Registration Statements
and Prospectuses filed by the Fund with the SEC under the 1933 Act with
respect to the Shares have been prepared in conformity with the
requirements of the 1933 Act and the rules and regulations of the SEC
thereunder. As used in this Agreement, the term "Registration
Statement" shall mean any Registration Statement and any Prospectus and
any Statement of Additional Information relating to the Fund filed with
the SEC and any amendments or supplements thereto at any time filed
with the SEC. Except as to information included in the Registration
Statement in reliance upon information provided to the Fund by the
Distributor or any affiliate of the Distributor expressly for use in
the Registration Statement, the Fund represents and warrants to the
Distributor that any Registration Statement, when such Registration
Statement becomes effective, will contain statements required to be
stated therein in conformity with the 1933 Act and the rules and
regulations of the SEC; that all statements of fact contained in any
such Registration Statement will be true and correct when such
Registration Statement becomes effective; and that no Registration
Statement when such Registration Statement becomes effective will
include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading to a purchaser of the Shares. The
Fund may but shall not be obligated to propose from time to time such
amendment or amendments to any Registration Statement and such
supplement or supplements to any Prospectus as, in the light of future
developments, may, in the opinion of the Fund's counsel, be necessary
or advisable. The Fund shall promptly notify the Distributor of any
advice given to it by its counsel regarding the necessity or
advisability of amending or supplementing such Registration Statement.
If the Fund shall not propose such amendment or amendments and/or
supplement or supplements within fifteen days after receipt by the Fund
of a written request from the Distributor to do so, the Distributor
may, at its option, terminate this Agreement. The Fund shall not file
any amendment to any Registration Statement or supplement to any
Prospectus without giving the Distributor reasonable notice thereof in
advance; provided, however, that nothing contained in this Agreement
shall in any way limit the Fund's right to file at any
3
<PAGE> 28
time such amendments to any Registration Statements and/or supplements
to any Prospectus, of whatever character, as the Fund may deem
advisable, such right being in all respects absolute and unconditional.
The Fund authorizes the Distributor to use any Prospectus or Statement
of Additional Information in the form furnished from time to time in
connection with the sale of the Shares.
1.12 No Shares shall be offered by either the Distributor or the Fund under
any of the provisions of this Agreement and no orders for the purchase
or sale of Shares hereunder shall be accepted by the Fund if and so
long as effectiveness of the Registration Statement then in effect or
any necessary amendments thereto shall be suspended under any of the
provisions of the 1933 Act, or if and so long as a current Prospectus
as required by Section 5(b)(2) of the 1933 Act is not on file with the
SEC; provided, however, that nothing contained in this Section 1.12
shall in any way restrict or have any application to or bearing upon
the Fund's obligation to redeem Shares tendered for redemption by any
shareholder in accordance with the provisions of the Fund's
Registration Statement, Articles of Incorporation, or bylaws.
1.13 The Fund agrees to advise the Distributor as soon as reasonably
practical by a notice in writing delivered to the Distributor:
(a) of any request by the SEC for amendments to the Registration
Statement, Prospectus or Statement of Additional Information
then in effect or for additional information;
(b) in the event of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement,
Prospectus or Statement of Additional Information then in
effect or the initiation by service of process on the Fund of
any proceeding for that purpose;
(c) of the happening of any event that makes untrue any statement
of a material fact made in the Registration Statement,
Prospectus or Statement of Additional Information then in
effect or that requires the making of a change in such
Registration Statement, Prospectus or Statement of Additional
Information in order to make the statements therein not
misleading; and
(d) of all actions of the SEC with respect to any amendments to
any Registration Statement, Prospectus or Statement of
Additional Information which may from time to time be filed
with the SEC.
For purposes of this section, informal requests by or acts of the Staff
of the SEC shall not be deemed actions of or requests by the SEC.
1.14 The Fund represents and warrants to the Distributor that the Fund is a
series of investment company registered under the 1940 Act and the
Shares sold by each Portfolio are, and will be, registered under the
1933 Act.
4
<PAGE> 29
2. FUND EXPENSES
-------------
2.1 The Fund will bear the following expenses:
(a) preparation, printing and distribution of sufficient copies of
the Prospectus and SAI for to shareholders;
(b) preparation, printing and distribution of reports and other
communications to shareholders;
(c) registration of the Shares under the federal and state
securities laws;
(d) maintaining facilities for the issue and transfer of Shares;
(e) supplying information, prices and other data to be furnished
by the Fund under this Agreement; and
(f) any original issue taxes or other transfer taxes applicable to
the sale or delivery of the Shares or certificates therefor.
The Fund will pay all other expenses incident to the sale and
distribution of the Shares sold hereunder.
3. INDEMNIFICATION
---------------
3.1 The Fund agrees to indemnify and hold harmless the Distributor, its
officers, directors, and employees, and any person who controls the
Distributor within the meaning of Section 15 of the 1933 Act, free and
harmless (a) from and against any and all claims, costs, expenses
(including reasonable attorneys' fees) losses, damages, charges,
payments and liabilities of any sort or kind which the Distributor, its
officers, directors, employees or any such controlling person may incur
under the 1933 Act, under any other statute, at common law or
otherwise, arising out of or based upon: (i) any untrue statement, or
alleged untrue statement, of a material fact contained in the Fund's
Registration Statement, Prospectus, Statement of Additional
Information, or sales literature (including amendments and supplements
thereto), or (ii) any omission, or alleged omission, to state a
material fact required to be stated in the Fund's Registration
Statement, Prospectus, Statement of Additional Information or sales
literature (including amendments or supplements thereto), necessary to
make the statements therein not misleading, provided, however, that
insofar as losses, claims, damages, liabilities or expenses arise out
of or are based upon any such untrue statement or omission or alleged
untrue statement or omission made in reliance on and in conformity with
information furnished to the Fund by the Distributor or its affiliated
persons for use in the Fund's Registration Statement, Prospectus, or
Statement of Additional Information or sales literature (including
amendments or supplements thereto), such indemnification is not
applicable; and (b)
5
<PAGE> 30
from and against any and all such claims, demands, liabilities and
expenses (including such costs and counsel fees) which you, your
officers and directors, or such controlling person, may incur in
connection with this Agreement or the Distributor's performance
hereunder (but excluding such claims, demands, liabilities and expenses
(including such costs and counsel fees) arising out of or based upon
any untrue statement, or alleged untrue statement, of a material fact
contained in any registration statement or any Prospectus or arising
out of or based upon any omission, or alleged omission, to state a
material fact required to be stated in either any registration
statement or any Prospectus or necessary to make the statements in
either thereof not misleading), unless such claims, demands,
liabilities and expenses (including such costs and counsel fees) arise
by reason of the Distributor's willful misfeasance, bad faith or
negligence in the performance of the Distributor's duties hereunder.
The Fund acknowledges and agrees that in the event that the
Distributor, at the request of the Fund, are required to give
indemnification comparable to that set forth in this Section 3.1 to any
broker-dealer selling Shares of the Fund or servicing agent servicing
the shareholders of the Fund and such broker-dealer or servicing agent
shall make a claim for indemnification against the Distributor, the
Distributor shall make a similar claim for indemnification against the
Fund.
The Fund will indemnify the Distributor against and hold it harmless
from any and all claims, costs, expenses (including reasonable
attorneys' fees), losses, damages, charges, payments and liabilities of
any sort or kind which may be asserted against the Distributor for
which the Distributor may be held to be liable in connection with this
Agreement or the Distributor's performance hereunder (a "Claim"),
unless such Claim resulted from a negligent act or omission to act or
bad faith by the Distributor in the performance of its duties
hereunder.
3.2 The Distributor agrees to indemnify and hold harmless the Fund, its
several officers and Board Members and each person, if any, who
controls a Portfolio within the meaning of Section 15 of the 1933 Act
against any and all claims, costs, expenses (including reasonable
attorneys' fees), losses, damages, charges, payments and liabilities of
any sort or kind which the Fund, its officers, Board Members or any
such controlling person may incur under the 1933 Act, under any other
statute, at common law or otherwise, but only to the extent that such
liability or expense incurred by the Fund, its officers or Board
Members, or any controlling person resulting from such claims or
demands arose out of the acquisition of any Shares by any person which
may be based upon any untrue statement, or alleged untrue statement, of
a material fact contained in the Fund's Registration Statement,
Prospectus or Statement of Additional Information (including amendments
and supplements thereto), or any omission, or alleged omission, to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading, if such statement or
omission was made in reliance upon information furnished or confirmed
in writing to the Fund by the Distributor or its affiliated persons (as
defined in the 1940 Act). The Distributor also agrees to indemnify and
hold harmless the Fund and each such person in connection with any
claim or in connection with any action, suit or proceeding which arises
out of or is alleged to arise out of the Distributor's failure to
exercise reasonable care and diligence with respect to its services
rendered in
6
<PAGE> 31
connection with the purchase and sale of Shares. The foregoing rights
of indemnification shall be in addition to any other rights to which
the Fund or any such person shall be entitled to as a matter of law.
3.3 In any case in which one party hereto (the "Indemnifying Party") may be
asked to indemnify or hold the other party hereto (the "Indemnified
Party") harmless, the Indemnified Party will notify the Indemnifying
Party promptly after identifying any situation which it believes
presents or appears likely to present a claim for indemnification (an
"Indemnification Claim") against the Indemnifying Party, although the
failure to do so shall not prevent recovery by the Indemnified Party,
and shall keep the Indemnifying Party advised with respect to all
developments concerning such situation. The Indemnifying Party shall
have the option to defend the Indemnified Party against any
Indemnification Claim which may be the subject of this indemnification,
and, in the event that the Indemnifying Party so elects, such defense
shall be conducted by counsel chosen by the Indemnifying Party and
satisfactory to the Indemnified Party, and thereupon the Indemnifying
Party shall take over complete defense of the Indemnification Claim and
the Indemnified Party shall sustain no further legal or other expenses
in respect of such Indemnification Claim. In the event that the
Indemnifying Party does not elect to assume the defense of any such
suit, or in case the Indemnified Party reasonably does not approve of
counsel chosen by the Indemnifying Party, or in case there is a
conflict of interest between the Indemnifying Party or the Indemnified
Party, the Indemnifying Party will reimburse the Indemnified Party for
the fees and expenses of any counsel retained by the Indemnified
Party.. The Fund agrees promptly to notify the Distributor of the
commencement of any litigation or proceedings against the Fund or any
of its officers or directors in connection with the issue and sale of
any Shares. The Indemnified Party will not confess any Indemnification
Claim or make any compromise in any case in which the Indemnifying
Party will be asked to provide indemnification, except with the
Indemnifying Party's prior written consent.
3.4 The obligations of the parties hereto under this Section 3 shall
survive the termination of this Agreement. The Fund's indemnification
agreement contained in this Section 3 and the Fund's representations
and warranties in this Agreement shall remain operative and in full
force and effect regardless of any investigation made by or on behalf
of the Distributor, its officers, directors and employees, or any
controlling person, and shall survive the delivery of any Shares. This
agreement of indemnity will inure exclusively to the Distributor's
benefit, to the benefit of its several officers, directors and
employees, and their respective estates and to the benefit of the
controlling persons and their successors.
4. STANDARD OF CARE; LIMITATION OF LIABILITY
-----------------------------------------
4.1 The Distributor shall not be liable to the Fund for any error of
judgment or mistake of law or for any loss suffered by the Fund in
connection with the performance of its obligations and duties under
this Agreement, except a loss resulting from the Distributor's willful
misfeasance, bad faith or negligence in the performance of such
obligations and duties, or by reason of its reckless disregard thereof.
7
<PAGE> 32
4.2 Notwithstanding any provision in this Agreement to the contrary, the
Distributor's cumulative liability (to the Fund) for all losses,
claims, suits, controversies, breaches, or damages ("Liability Claims")
for any cause whatsoever and regardless of the form of action or legal
theory, shall not exceed $500,000. The Fund understands the limitation
on the Distributor's damages to be a reasonable allocation of risk and
the Fund expressly consents with respect to such allocation of risk.
4.3 Neither party may assert any cause of action against the other party
under this Agreement that accrued more than two (2) years prior to the
filing of the suit (or commencement of arbitration proceedings)
alleging such cause of action.
4.4 Each party shall have the duty to mitigate damages for which the other
party may become responsible.
4.5 NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT
SHALL THE DISTRIBUTOR, ITS AFFILIATES OR ANY OF ITS OR THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE UNDER ANY
THEORY OF TORT, CONTRACT, STRICT LIABILITY OF OTHER LEGAL OR EQUITABLE
THEORY FOR LOST PROFITS, EXEMPLARY, PUNITIVE, SPECIAL, INCIDENTAL,
INDIRECT OR CONSEQUENTIAL DAMAGES, EACH OF WHICH IS HEREBY EXCLUDED BY
AGREEMENT OF THE PARTIES REGARDLESS OF WHETHER SUCH DAMAGES WERE
FORESEEABLE OR WHETHER EITHER PARTY OR ANY ENTITY HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES.
5. EXCLUSION OF WARRANTIES
-----------------------
THIS IS A SERVICE AGREEMENT. EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, THE DISTRIBUTOR DISCLAIMS ALL OTHER REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, MADE TO THE FUND, A PORTFOLIO OR ANY
OTHER PERSON, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES REGARDING
QUALITY, SUITABILITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE
OR OTHERWISE (IRRESPECTIVE OF ANY COURSE OF DEALING, CUSTOM OR USAGE OF
TRADE) OF ANY SERVICES OR ANY GOODS PROVIDED INCIDENTAL TO SERVICES
PROVIDED UNDER THIS AGREEMENT. THE DISTRIBUTOR DISCLAIMS ANY WARRANTY
OF TITLE OR NON-INFRINGEMENT EXCEPT AS OTHERWISE SET FORTH IN THIS
AGREEMENT.
6. TERM
----
6.1 This Agreement shall become effective on the date first written above
and, unless sooner terminated as provided herein, shall continue for an
initial two-year term and thereafter shall be renewed for successive
one-year terms, provided such continuance is specifically
8
<PAGE> 33
approved at least annually by (i) the Fund's Board of Directors or (ii)
by a vote of a majority (as defined in the 1940 Act and Rule 18f-2
thereunder) of the outstanding voting securities of the Fund, provided
that in either event the continuance is also approved by a majority of
the Board Members who are not parties to this Agreement and who are not
interested persons (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose
of voting on such approval. This Agreement is terminable without
penalty, on at least sixty days' written notice, by the Fund's Board of
Directors, by vote of a majority (as defined in the 1940 Act and Rule
18f-2 thereunder) of the outstanding voting securities of the Fund, or
by the Distributor. This Agreement will also terminate automatically in
the event of its assignment (as defined in the 1940 Act and the rules
thereunder).
6.2 In the event a termination notice is given by the Fund, all expenses
associated with movement of records and materials and conversion
thereof will be borne by the Fund.
7. MODIFICATIONS AND WAIVERS
-------------------------
No change, termination, modification, or waiver of any term or
condition of the Agreement shall be valid unless in writing signed by
each party. No such writing shall be effective as against the
Distributor unless said writing is executed by a Senior Vice President,
Executive Vice President or President of the Distributor. A party's
waiver of a breach of any term or condition in the Agreement shall not
be deemed a waiver of any subsequent breach of the same or another term
or condition.
8. NO PRESUMPTION AGAINST DRAFTER
------------------------------
The Distributor and the Fund have jointly participated in the
negotiation and drafting of this Agreement. The Agreement shall be
construed as if drafted jointly by the Fund and the Distributor, and no
presumptions arise favoring any party by virtue of the authorship of
any provision of this Agreement.
9. PUBLICITY
---------
Neither the Distributor nor the Fund shall release or publish news
releases, public announcements, advertising or other publicity relating
to this Agreement or to the transactions contemplated by it without
prior review and written approval of the other party; provided,
however, that either party may make such disclosures as are required by
legal, accounting or regulatory requirements after making reasonable
efforts in the circumstances to consult in advance with the other
party.
10. SEVERABILITY
------------
The parties intend every provision of this Agreement to be severable.
If a court of competent jurisdiction determines that any term or
provision is illegal or invalid for any reason, the illegality or
invalidity shall not affect the validity of the remainder of this
9
<PAGE> 34
Agreement. In such case, the parties shall in good faith modify or
substitute such provision consistent with the original intent of the
parties. Without limiting the generality of this paragraph, if a court
determines that any remedy stated in this Agreement has failed of its
essential purpose, then all other provisions of this Agreement,
including the limitations on liability and exclusion of damages, shall
remain fully effective.
11. FORCE MAJEURE
-------------
No party shall be liable for any default or delay in the performance of
its obligations under this Agreement if and to the extent such default
or delay is caused, directly or indirectly, by (i) fire, flood,
elements of nature or other acts of God; (ii) any outbreak or
escalation of hostilities, war, riots or civil disorders in any
country, (iii) any act or omission of the other party or any
governmental authority; (iv) any labor disputes (whether or not the
employees' demands are reasonable or within the party's power to
satisfy); or (v) nonperformance by a third party or any similar cause
beyond the reasonable control of such party, including without
limitation, failures or fluctuations in telecommunications or other
equipment. In any such event, the non-performing party shall be excused
from any further performance and observance of the obligations so
affected only for so long as such circumstances prevail and such party
continues to use commercially reasonable efforts to recommence
performance or observance as soon as practicable.
12. MISCELLANEOUS
-------------
12.1 Any notice or other instrument authorized or required by this Agreement
to be given in writing to the Fund or the Distributor shall be
sufficiently given if addressed to the party and received by it at its
office set forth below or at such other place as it may from time to
time designate in writing.
To the Fund:
New Covenant Funds
C/o Presbyterian Church (U.S.A.) Foundation
200 East Twelfth Street
Jeffersonville, Indiana 47103
Attention: Serge Bhachu, Esquire
To the Distributor:
First Data Distributors, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Attention: President
10
<PAGE> 35
with a copy to the Distributor's Chief Legal Officer
12.2 The laws of the Commonwealth of Massachusetts, excluding the laws on
conflicts of laws, and the applicable provisions of the 1940 Act shall
govern the interpretation, validity, and enforcement of this Agreement.
To the extent the provisions of Massachusetts law or the provisions
hereof conflict with the 1940 Act, the 1940 Act shall control. All
actions arising from or related to this Agreement shall be brought in
the state and federal courts sitting in the City of Boston, and the
Distributor and the Fund hereby submit themselves to the exclusive
jurisdiction of those courts
12.3 This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original and which collectively shall be
deemed to constitute only one instrument.
12.4 The captions of this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect.
12.5 This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and is not intended
to confer upon any other person any rights or remedies hereunder.
13. CONFIDENTIALITY
---------------
13.1 The parties agree that the Proprietary Information (defined below) and
the contents of this Agreement (collectively "Confidential
Information") are confidential information of the parties and their
respective licensers. The Fund and the Distributor shall exercise
reasonable care to safeguard the confidentiality of the Confidential
Information of the other. The Fund and the Distributor may each use the
Confidential Information only to exercise its rights or perform its
duties under this Agreement. The Fund and the Distributor shall not
duplicate, sell or disclose to others the Confidential Information of
the other, in whole or in part, without the prior written permission of
the other party. The Fund and the Distributor may, however, disclose
Confidential Information to its employees who have a need to know the
Confidential Information to perform work for the other, provided that
each shall use reasonable efforts to ensure that the Confidential
Information is not duplicated or disclosed by its employees in breach
of this Agreement. The Fund and the Distributor may also disclose the
Confidential Information to independent contractors, auditors and
professional advisors, provided they first agree in writing to be bound
by the confidentiality obligations substantially similar to this
Section 13. Notwithstanding the previous sentence, in no event shall
either the Fund or the Distributor disclose the Confidential
Information to any competitor of the other without specific, prior
written consent.
13.2 Proprietary Information means:
11
<PAGE> 36
(a) any data or information that is completely sensitive material, and
not generally known to the public, including, but not limited to,
information about product plans, marketing strategies, finance,
operations, customer relationships, customer profiles, sales estimates,
business plans, and internal performance results relating to the past,
present or future business activities of the Fund or the Distributor,
their respective subsidiaries and affiliated companies and the
customers, clients and suppliers of any of them;
(b) any scientific or technical information, design, process,
procedure, formula, or improvement that is commercially valuable and
secret in the sense that its confidentiality affords the Fund or the
Distributor a competitive advantage over its competitors: and
(c) all confidential or proprietary concepts, documentation, reports,
data, specifications, computer software, source code, object code, flow
charts, databases, inventions, know-how, show-how and trade secrets,
whether or not patentable or copyrightable.
13.3 Confidential Information includes, without limitation, all documents,
inventions, substances, engineering and laboratory notebooks, drawings,
diagrams, specifications, bills of material, equipment, prototypes and
models, and any other tangible manifestation of the foregoing of either
party which now exist or come into the control or possession of the
other.
13.4 The Fund acknowledges that breach of the restrictions on use,
dissemination or disclosure of any Confidential Information would
result in immediate and irreparable harm, and money damages would be
inadequate to compensate the Distributor for that harm. The Distributor
shall be entitled to equitable relief, in addition to all other
available remedies, to redress any such breach.
13.5 The obligations of confidentiality and restriction on use herein shall
not apply to any Confidential Information that a party proves:
(a) Was in the public domain prior to the date of this Agreement or
subsequently came into the public domain through no fault of such
party; or
(b) Was lawfully received by the party from a third party free of any
obligation of confidence to such third party; or
(c) Was already in the possession of the party prior to receipt
thereof, directly or indirectly, from the other party; or
(d) Is required to be disclosed in a judicial or administrative
proceeding after all reasonable legal remedies for maintaining such
information in confidence have been exhausted including, but not
limited to, giving the other party as much advance notice of the
possibility of such disclosure as practical so the other party may
attempt to stop such disclosure or obtain a protective order concerning
such disclosure; or
12
<PAGE> 37
(e) Is subsequently and independently developed by employees,
consultants or agents of the party without reference to the
Confidential Information disclosed under this Agreement.
14. ENTIRE AGREEMENT
----------------
This Agreement, including all Schedules hereto, constitutes the entire
agreement between the parties with respect to the subject matter hereof
and supersedes all prior and contemporaneous proposals, agreements,
contracts, representations, and understandings, whether written or
oral, between the parties with respect to the subject matter hereof.
15. BOARD MEMBER LIABILITY
----------------------
The Fund and the Distributor agree that the obligations of the Fund
under the Agreement shall not be binding upon any of the Board Members,
shareholders, nominees, officers, employees or agents, whether past,
present or future, of the Fund individually, but are binding only upon
the assets and property of the Fund, as provided in the Articles of
Incorporation. The execution and delivery of this Agreement have been
authorized by the Board Members of the Fund, and signed by an
authorized officer of the Fund, acting as such, and neither such
authorization by such Board Members nor such execution and delivery by
such officer shall be deemed to have been made by any of them or any
shareholder of the Fund individually or to impose any liability on any
of them or any shareholder of the Fund personally, but shall bind only
the assets and property of the Fund as provided in the Articles of
Incorporation.
13
<PAGE> 38
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
NEW COVENANT FUNDS
By:_________________________
Name:_______________________
Title:________________________
FIRST DATA DISTRIBUTORS, INC.
By:_________________________
Name:_______________________
Title:________________________
14
<PAGE> 39
SCHEDULE A
----------
NAME OF PORTFOLIOS
New Covenant Growth Fund
New Covenant Income Fund
New Covenant Balanced Growth Fund
New Covenant Balanced Income Fund
S-1
<PAGE> 40
SCHEDULE B
----------
DISTRIBUTION SERVICES
Services shall include:
1. Preparation and execution of sales or servicing agreements
monitoring accruals
monitoring expenses
making disbursements for expenses and fees
2. Quarterly 12b-1 Reports to the Board
3. Literature review, recommendations and submission to the NASD
S-1
<PAGE> 41
Exhibit 23(g)
FORM OF AGREEMENT
CUSTODIAN AGREEMENT
-------------------
This Agreement between NEW COVENANT FUNDS a business trust organized
and existing under the laws of Delaware (the "FUND"), and STATE STREET BANK and
TRUST COMPANY, a Massachusetts trust company (the "CUSTODIAN"),
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Fund intends that this Agreement be applicable to four
series, New Covenant Growth Fund, New Covenant Income Fund, New Covenant
Balanced Growth Fund and New Covenant Balanced Income Fund (such series together
with all other series subsequently established by the Fund and made subject to
this Agreement in accordance with Section 18, be referred to herein as the
"PORTFOLIO(S)");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
SECTION 1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as the custodian of the assets of
the Portfolios of the Fund, including securities which the Fund, on behalf of
the applicable Portfolio desires to be held in places within the United States
("DOMESTIC SECURITIES") and securities it desires to be held outside the United
States ("FOREIGN SECURITIES"). The Fund on behalf of the Portfolio(s) agrees to
deliver to the Custodian all securities and cash of the Portfolios, and all
payments of income, payments of principal or capital distributions received by
it with respect to all securities owned by the Portfolio(s) from time to time,
and the cash consideration received by it for such new or treasury shares of
beneficial interest of the Fund representing interests in the Portfolios
("SHARES") as may be issued or sold from time to time. The Custodian shall not
be responsible for any property of a Portfolio held or received by the Portfolio
and not delivered to the Custodian. With respect to uncertificated shares (the
"UNDERLYING SHARES") of registered investment companies in the same "group of
investment companies" (as defined in Section 12(d)(1)(G)(ii) of the Investment
Company Act of 1940, as amended (the "1940 ACT")) (hereinafter sometimes
referred to as the "UNDERLYING PORTFOLIOS") the holding of confirmation
statements that identify the shares as being recorded in the Custodian's name on
behalf of the Portfolios will be deemed custody for purposes hereof.
Upon receipt of "PROPER INSTRUCTIONS" (as such term is defined in
Section 6 hereof), the Custodian shall on behalf of the applicable Portfolio(s)
from time to time employ one or more sub-custodians located in the United
States, but only in accordance with an applicable vote by the Board of Trustees
of the Fund (the "BOARD") on behalf of
<PAGE> 42
FORM OF AGREEMENT
the applicable Portfolio(s), and provided that the Custodian shall have no more
or less responsibility or liability to the Fund on account of any actions or
omissions of any sub-custodian so employed than any such sub-custodian has to
the Custodian. The Custodian may employ as sub-custodian for the Fund's foreign
securities on behalf of the applicable Portfolio(s) the foreign banking
institutions and foreign securities depositories designated in Schedules A and B
hereto but only in accordance with the applicable provisions of Sections 3 and
4.
SECTION 2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND
HELD BY THE CUSTODIAN IN THE UNITED STATES
SECTION 2.1 HOLDING SECURITIES. The Custodian shall hold and physically
segregate for the account of each Portfolio all non-cash property, to be held by
it in the United States including all domestic securities owned by such
Portfolio, other than (a) securities which are maintained pursuant to Section
2.8 in a clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the Treasury (each, a
"U.S. SECURITIES SYSTEM") and (b) commercial paper of an issuer for which State
Street Bank and Trust Company acts as issuing and paying agent ("DIRECT PAPER")
which is deposited and/or maintained in the Direct Paper System of the Custodian
(the "DIRECT PAPER SYSTEM") pursuant to Section 2.9; and (c) the Underlying
Shares owned by the Fund which are maintained pursuant to Section 2.10A in an
account with State Street Bank and Trust Company or such other entity which may
from time to time act as a transfer agent for the Underlying Portfolios and with
respect to which the Custodian is provided with Proper Instructions (the
"UNDERLYING TRANSFER AGENT").
SECTION 2.2 DELIVERY OF SECURITIES. The Custodian shall release and
deliver domestic securities owned by a Portfolio held by the Custodian or in a
U.S. Securities System account of the Custodian or in the Custodian's Direct
Paper book entry system account ("DIRECT PAPER SYSTEM ACCOUNT") or in an account
at the Underlying Transfer Agent, only upon receipt of Proper Instructions on
behalf of the applicable Portfolio, which may be continuing instructions when
deemed appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio
and receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Portfolio;
3) In the case of a sale effected through a U.S. Securities
System, in accordance with the provisions of Section 2.8
hereof;
2.
<PAGE> 43
FORM OF AGREEMENT
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the
name of the Portfolio or into the name of any nominee or
nominees of the Custodian or into the name or nominee name of
any agent appointed pursuant to Section 2.7 or into the name
or nominee name of any sub-custodian appointed pursuant to
Section 1; or for exchange for a different number of bonds,
certificates or other evidence representing the same aggregate
face amount or number of units; PROVIDED that, in any such
case, the new securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street delivery"
custom; provided that in any such case, the Custodian shall
have no responsibility or liability for any loss arising from
the delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to
be delivered to the Custodian;
10) For delivery in connection with any loans of securities made
by the Portfolio, BUT ONLY against receipt of adequate
collateral as agreed upon from time to time by the Custodian
and the Fund on behalf of the Portfolio, which may be in the
form of cash or obligations issued by the United States
government, its agencies or instrumentalities, except that in
connection with any loans for which collateral is to be
credited to the Custodian's account in the book-entry system
authorized by the U.S.
3.
<PAGE> 44
Department of the Treasury, the Custodian will not be held
liable or responsible for the delivery of securities owned by
the Portfolio prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowing by
the Fund on behalf of the Portfolio requiring a pledge of
assets by the Fund on behalf of the Portfolio, BUT ONLY
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "EXCHANGE ACT") and a member of The
National Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities
exchange, or of any similar organization or organizations,
regarding escrow or other arrangements in connection with
transactions by the Portfolio of the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian, and a futures commission merchant registered under
the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission ("CFTC")
and/or any contract market, or any similar organization or
organizations, regarding account deposits in connection with
transactions by the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent for the
Fund (the "TRANSFER AGENT") for delivery to such Transfer
Agent or to the holders of Shares in connection with
distributions in kind, as may be described from time to time
in the currently effective prospectus and statement of
additional information of the Fund related to the Portfolio
(the "PROSPECTUS"), in satisfaction of requests by holders of
Shares for repurchase or redemption;
15) In the case of a sale processed through the Underlying
Transfer Agent of Underlying Shares, in accordance with
Section 2.10A hereof; and
16) For any other proper purpose, BUT ONLY upon receipt of Proper
Instructions from the Fund on behalf of the applicable
Portfolio specifying the securities of the Portfolio to be
delivered, setting forth the purpose for which such delivery
is to be made, declaring such purpose to be a proper trust
purpose, and naming the person or persons to whom delivery of
such securities shall be made.
4.
<PAGE> 45
FORM OF AGREEMENT
SECTION 2.3 REGISTRATION OF SECURITIES. Domestic securities held by the
Custodian (other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the Portfolio
or of any nominee of the Custodian which nominee shall be assigned exclusively
to the Portfolio, UNLESS the Fund has authorized in writing the appointment of a
nominee to be used in common with other registered investment companies having
the same investment adviser as the Portfolio, or in the name or nominee name of
any agent appointed pursuant to Section 2.7 or in the name or nominee name of
any sub-custodian appointed pursuant to Section 1. All securities accepted by
the Custodian on behalf of the Portfolio under the terms of this Agreement shall
be in "street name" or other good delivery form. If, however, the Fund directs
the Custodian to maintain securities in "street name", the Custodian shall
utilize its best efforts only to timely collect income due the Fund on such
securities and to notify the Fund on a best efforts basis only of relevant
corporate actions including, without limitation, pendency of calls, maturities,
tender or exchange offers.
SECTION 2.4 BANK ACCOUNTS. The Custodian shall open and maintain a
separate bank account or accounts in the United States in the name of each
Portfolio of the Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Agreement, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by it from or for
the account of the Portfolio, other than cash maintained by the Portfolio in a
bank account established and used in accordance with Rule 17f-3 under the 1940
Act. Funds held by the Custodian for a Portfolio may be deposited by it to its
credit as Custodian in the Banking Department of the Custodian or in such other
banks or trust companies as it may in its discretion deem necessary or
desirable; PROVIDED, however, that every such bank or trust company shall be
qualified to act as a custodian under the 1940 Act and that each such bank or
trust company and the funds to be deposited with each such bank or trust company
shall on behalf of each applicable Portfolio be approved by vote of a majority
of the Board. Such funds shall be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian only in that capacity.
SECTION 2.5 COLLECTION OF INCOME. Subject to the provisions of Section
2.3, the Custodian shall collect on a timely basis all income and other payments
with respect to registered domestic securities held hereunder to which each
Portfolio shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all income and other
payments with respect to bearer domestic securities if, on the date of payment
by the issuer, such securities are held by the Custodian or its agent thereof
and shall credit such income, as collected, to such Portfolio's custodian
account. Without limiting the generality of the foregoing, the Custodian shall
detach and present for payment all coupons and other income items requiring
presentation as and when they become due and shall collect interest when due on
securities held hereunder. Income due each Portfolio on securities loaned
pursuant to the provisions of Section 2.2 (10) shall be the responsibility of
the Fund. The Custodian will have no duty or responsibility in connection
therewith, other than to provide the Fund with such information or data as
5.
<PAGE> 46
may be necessary to assist the Fund in arranging for the timely delivery to the
Custodian of the income to which the Portfolio is properly entitled.
SECTION 2.6 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions
on behalf of the applicable Portfolio, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall pay out monies of a
Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of
the Portfolio but only (a) against the delivery of such
securities or evidence of title to such options, futures
contracts or options on futures contracts to the Custodian (or
any bank, banking firm or trust company doing business in the
United States or abroad which is qualified under the 1940 Act
to act as a custodian and has been designated by the Custodian
as its agent for this purpose) registered in the name of the
Portfolio or in the name of a nominee of the Custodian
referred to in Section 2.3 hereof or in proper form for
transfer; (b) in the case of a purchase effected through a
U.S. Securities System, in accordance with the conditions set
forth in Section 2.8 hereof; (c) in the case of a purchase of
Underlying Shares, in accordance with the conditions set forth
in Section 2.10A hereof; (d) in the case of a purchase
involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.9; (e) in the case of
repurchase agreements entered into between the Fund on behalf
of the Portfolio and the Custodian, or another bank, or a
broker-dealer which is a member of NASD, (i) against delivery
of the securities either in certificate form or through an
entry crediting the Custodian's account at the Federal Reserve
Bank with such securities or (ii) against delivery of the
receipt evidencing purchase by the Portfolio of securities
owned by the Custodian along with written evidence of the
agreement by the Custodian to repurchase such securities from
the Portfolio or (f) for transfer to a time deposit account of
the Fund in any bank, whether domestic or foreign; such
transfer may be effected prior to receipt of a confirmation
from a broker and/or the applicable bank pursuant to Proper
Instructions from the Fund as defined herein;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued as set
forth in Section 5 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments
for the account of the Portfolio: interest, taxes, management,
accounting, transfer agent and
6.
<PAGE> 47
FORM OF AGREEMENT
legal fees, and operating expenses of the Fund whether or not
such expenses are to be in whole or part capitalized or
treated as deferred expenses;
5) For the payment of any dividends on Shares declared pursuant
to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, BUT ONLY upon receipt of Proper
Instructions from the Fund on behalf of the Portfolio
specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring such
purpose to be a proper trust purpose, and naming the person or
persons to whom such payment is to be made.
SECTION 2.7 APPOINTMENT OF AGENTS. The Custodian may at any time or
times in its discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the 1940 Act to act as a
custodian, as its agent to carry out such of the provisions of this Section 2 as
the Custodian may from time to time direct; PROVIDED, HOWEVER, that the
appointment of any agent shall not relieve the Custodian of its responsibilities
or liabilities hereunder. The Underlying Transfer Agent shall not be deemed an
agent or subcustodian of the Custodian for purposes of this Section 2.7 or any
other provision of this Agreement.
SECTION 2.8 DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS. The
Custodian may deposit and/or maintain securities owned by a Portfolio in a U.S.
Securities System subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a U.S.
Securities System provided that such securities are
represented in an account of the Custodian in the U.S.
Securities System (the "U.S. SECURITIES SYSTEM ACCOUNT") which
account shall not include any assets of the Custodian other
than assets held as a fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a U.S. Securities System
shall identify by book-entry those securities belonging to the
Portfolio;
3) The Custodian shall pay for securities purchased for the
account of the Portfolio upon (i) receipt of advice from the
U.S. Securities System that such securities have been
transferred to the U.S. Securities System Account, and (ii)
the making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of the
Portfolio. The
7.
<PAGE> 48
FORM OF AGREEMENT
Custodian shall transfer securities sold for the account of
the Portfolio upon (i) receipt of advice from the U.S.
Securities System that payment for such securities has been
transferred to the U.S. Securities System Account, and (ii)
the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the
Portfolio. Copies of all advices from the U.S. Securities
System of transfers of securities for the account of the
Portfolio shall identify the Portfolio, be maintained for the
Portfolio by the Custodian and be provided to the Fund at its
request. Upon request, the Custodian shall furnish the Fund on
behalf of the Portfolio confirmation of each transfer to or
from the account of the Portfolio in the form of a written
advice or notice and shall furnish to the Fund on behalf of
the Portfolio copies of daily transaction sheets reflecting
each day's transactions in the U.S. Securities System for the
account of the Portfolio;
4) The Custodian shall provide the Fund with any report
obtained by the Custodian on the U.S. Securities System's
accounting system, internal accounting control and procedures
for safeguarding securities deposited in the U.S. Securities
System;
5) [Reserved.];
6) Anything to the contrary in this Agreement notwithstanding,
the Custodian shall be liable to the Fund for the benefit of
the Portfolio for any loss or damage to the Portfolio
resulting from use of the U.S. Securities System by reason of
any negligence, misfeasance or misconduct of the Custodian or
any of its agents or of any of its or their employees or from
failure of the Custodian or any such agent to enforce
effectively such rights as it may have against the U.S.
Securities System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with
respect to any claim against the U.S. Securities System or any
other person which the Custodian may have as a consequence of
any such loss or damage if and to the extent that the
Portfolio has not been made whole for any such loss or damage.
SECTION 2.9 FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM.
The Custodian may deposit and/or maintain securities owned by a Portfolio in the
Direct Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper Instructions
from the Fund on behalf of the Portfolio;
8.
<PAGE> 1
Exhibit 23(d) (viii)
SUB-ADVISORY AGREEMENT
This Sub-Advisory Agreement is made as of the _____ day of June, 1999,
by and between New Covenant Trust Company, N.A., a limited purpose national
trust bank (the "Adviser"), and Standish, Ayer & Wood, Inc. (the "Sub-Adviser").
WHEREAS, pursuant to an agreement between them dated as of June __,
1999 (the "Advisory Agreement"), the Adviser serves as investment adviser to New
Covenant Funds, a Delaware business trust and an open-end management investment
company (the "Trust"), which has filed a registration statement (the
"Registration Statement") under the Investment Company Act of 1940, as amended
(the "1940 Act") and the Securities Act of 1933; and
WHEREAS, the Trust is comprised of four separate investment portfolios,
one of which is New Covenant Income Fund (the "Fund"); and
WHEREAS, the Adviser desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser
experienced in the management of a portfolio of securities to assist the Adviser
in performing services for a portion of the Fund; and
WHEREAS, the Sub-Adviser represents that it has the legal power and
authority to perform the services contemplated hereunder without violation of
applicable law (including the Investment Advisers Act of 1940), and desires to
provide such services to the Trust and the Adviser.
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
Section 1. APPOINTMENT OF THE SUB-ADVISER. The Adviser hereby appoints
the Sub-Adviser to provide a continuous investment program for that portion of
the Fund designated by the Adviser as assigned to the Sub-Adviser (the "Segment"
of the Fund), subject to such written instructions and supervision as the
Adviser may from time to time furnish. The Sub-Adviser hereby accepts such
appointment and agrees to render the services and to assume the obligations
herein set forth for the compensation herein provided. The Sub-Adviser will
provide the services under this Agreement with respect to the Segment in
accordance with the Fund's investment objective, policies and applicable
restrictions as stated in the Fund's most recent Prospectus and Statement of
Additional Information and as the same may, from time to time, be supplemented
or amended and in resolutions of the Trust's Board of Trustees. The Adviser
agrees to furnish to the Sub-Adviser from time to time copies of all
Prospectuses and Statements of Additional Information and of all amendments of,
or supplements to, such Prospectuses and Statements of Additional Information
and of all resolutions of the Trust's Board of Trustees applicable to the
Sub-Adviser's services hereunder. The Sub-Adviser shall for all purposes herein
be deemed to be an independent contractor and shall, except as expressly
provided or authorized (whether herein or otherwise), have no authority to act
for or represent the Adviser, the Fund or the Trust in any way.
Section 2. SUB-ADVISORY SERVICES. Subject to such written instructions
and supervision as the Adviser may from time to time furnish, the Sub-Adviser
will provide an investment program for the Segment, including investment
research and management with respect to securities and investments, including
cash and cash equivalents in the Segment, and will determine from time to time
what
<PAGE> 2
securities and other investments will be purchased, retained or sold by and
within the Segment. The Sub-Adviser will implement such determinations through
the placement, on behalf of the Fund, of orders for the execution of portfolio
transactions through such brokers or dealers as it may select. The Adviser will
instruct the Trust's Custodian to forward promptly to the Sub-Adviser proxy and
other materials relating to the exercise of such shareholder rights and, unless
otherwise instructed by the Adviser, the Sub-Adviser will determine from time to
time the manner in which voting rights, rights to consent to corporate action
and other rights pertaining to the Fund's investments should be exercised.
In fulfilling its responsibilities hereunder, the Sub-Adviser agrees
that it will:
(a) use the same skill and care in providing such services as it
uses in providing services to other fiduciary accounts for
which it has investment responsibilities;
(b) conform with all applicable rules and regulations of the
United States Securities and Exchange Commission ("SEC") and
in addition will conduct its activities under this Agreement
in accordance with any applicable regulations of any
government authority pertaining to the investment advisory
activities of the Sub-Adviser and shall furnish such written
reports or other documents substantiating such compliance as
the Adviser reasonably may request from time to time;
(c) not make loans to any person to purchase or carry shares of
beneficial interest in the Trust or make loans to the Trust;
(d) place orders pursuant to investment determinations for the
Fund either directly with the issuer or with an underwriter,
market maker or broker or dealer. In placing orders, the
Sub-Adviser will use its reasonable best efforts to obtain
best execution of such orders. Consistent with this
obligation, the Sub-Adviser may, to the extent permitted by
law, effect portfolio securities transactions through brokers
and dealers who provide brokerage and research services
(within the meaning of Section 28(c) of the Securities
Exchange Act of 1934) to or for the benefit of the Fund and/or
other accounts over which the Sub-Adviser exercises investment
discretion. Subject to the review of the Trust's Board of
Trustees from time to time with respect to the extent and
continuation of the policy, the Sub-Adviser is authorized to
cause the Fund to pay a broker or dealer who provides such
brokerage and research services a commission for effecting a
securities transaction for the Fund which is in excess of the
amount of commission another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser
determines in good faith that such commission was reasonable
in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of
either that particular transaction or the overall
responsibilities of the Sub-Adviser with respect to the
accounts as to which it exercises investment discretion. The
Trust or the Adviser may, from time to time in writing, direct
the Sub-Adviser to place orders through one or more brokers or
dealers and, thereafter, the Sub-Adviser will have no
responsibility for ensuring best execution with respect to
such orders. In no instance will portfolio securities be
purchased from or sold to the Sub-Adviser or any affiliated
person of the Sub-Adviser as principal except as may be
permitted by the 1940 Act or an exemption therefrom. If the
Sub-Adviser determines in good faith that the transaction is
in the best interest of each client, securities may be
purchased on behalf of the Fund from,
-2-
<PAGE> 3
or sold on behalf of the Fund to, another client of the
Sub-Adviser in compliance with Rule 17a-7 under the 1940 Act;
(e) maintain all necessary or appropriate records with respect to
the Fund's securities transactions for the Segment in
accordance with all applicable laws, rules and regulations,
including but not limited to Section 31 (a) of the 1940 Act,
and will furnish the Trust's Board of Trustees and the Adviser
such periodic and special reports as the Board and Adviser
reasonably may request;
(f) treat confidentially and as proprietary information of the
Adviser and the Trust all records and other information
relative to the Adviser and the Trust and prior, present, or
potential shareholders, and will not use such records and
information for any purpose other than the performance of its
responsibilities and duties hereunder, except that subject to
prompt notification to the Trust and the Adviser, the
Sub-Adviser may divulge such information to its independent
auditors and regulatory authorities, or when so requested by
the Adviser and the Trust; provided, however, that nothing
contained herein shall prohibit the Sub-Adviser from (1)
advertising or soliciting the public generally with respect to
other products or services, regardless of whether such
advertisement or solicitation may include prior, present or
potential shareholders of the Fund or (2) including the
Adviser and Trust on its general list of disclosable clients.
(g) maintain its policy and practice of conducting its fiduciary
functions independently. In making investment decisions for
the Fund, the Sub-Adviser's personnel will not inquire or take
into consideration whether the issuers of securities proposed
for purchase or sale for the Fund's account are customers of
the Adviser, other sub-advisers, the Sub-Adviser or of their
respective parents, subsidiaries or affiliates. In dealing
with such customers, the Sub-Adviser and its subsidiaries and
affiliates will not inquire or take into consideration whether
securities of those customers are held by the Trust; and
(h) render, upon request of the Adviser or the Trust's Board of
Trustees, written reports concerning the investment activities
of the Sub-Adviser with respect to the Sub-Adviser's Segment
of the Fund.
Section 3. EXPENSE. During the term of this Agreement, the Sub-Adviser
will pay all expenses incurred by it in performing its services under this
Agreement. The Sub-Adviser shall not be liable for any expenses of the Adviser
or the Trust, including without limitation (a) their interest and taxes, (b)
brokerage commissions and other costs in connection with the purchase or sale of
securities or other investment instruments with respect to the Fund and (c)
custodian fees and expenses.
Section 4. RECORDS. In compliance with the requirements of Rule 3la-3
under the 1940 Act, the Sub-Adviser hereby agrees that all records, if any,
which it maintains for the Fund are the property of the Fund and further agrees
to surrender promptly to the Adviser or the Trust any such records upon the
Adviser's or the Trust's request and that such records shall be available for
inspection by the SEC. The Sub-Adviser further agrees to preserve for the
periods and at the places prescribed by Rule 3la-2 under the 1940 Act the
records required to be maintained by Rule 31a-1 under the 1940 Act.
-3-
<PAGE> 4
Section 5. COMPENSATION OF THE SUB-ADVISER.
(a) In consideration of services rendered pursuant to this Agreement,
the Adviser will pay the Sub-Adviser a fee, in arrears, equal to an annual rate
in accordance with SCHEDULE A hereto, paid quarterly.
(b) Such fee for each calendar quarter shall be calculated based on the
average of the market value of the assets under management as of the end of each
of the three months in the quarter just ended, as provided by the Adviser.
(c) If the Sub-Adviser should serve for less than the whole of any
calendar quarter, its compensation shall be determined as provided above on the
basis of the ending market value of the assets managed in the month in which the
termination occurs and shall be payable on a pro rata basis for the period of
the calendar quarter for which it has served as Sub-Adviser hereunder.
Section 6. SERVICES NOT EXCLUSIVE. The services of the Sub-Adviser
hereunder are not to be deemed exclusive, and the Sub-Adviser shall be free to
render similar services to others and to engage in other activities, so long as
the services rendered hereunder are not impaired. It is understood that the
action taken by the Sub-Adviser under this Agreement may differ from the advice
given or the timing or nature of action taken with respect to other clients of
the Sub-Adviser, and that a transaction in a specific security may not be
accomplished for all clients of the Sub-Adviser at the same time or at the same
price.
Section 7. USE OF NAMES. The Adviser shall not use the name, logo,
trade or service mark or derivative of the foregoing of the Sub-Adviser or any
of the Sub-Adviser's affiliates in any prospectus, sales literature or other
materials whether or not relating to the Trust in any manner not approved prior
thereto by the Sub-Adviser; provided, however, that the Sub-Adviser shall
approve all uses of its or its affiliate's name which merely refer in accurate
terms to its appointment hereunder or which are required by the SEC or a state
securities commission; and, provided further, that in no event shall such
approval be unreasonably withheld. The Sub-Adviser shall not use the name of the
Trust, the Fund or the Adviser in any materials relating to the Sub-Adviser in
any manner not approved prior thereto by the Adviser; provided, however, that
the Adviser shall approve all uses of its and the Fund's or the Trust's name
which merely refer in accurate terms to the appointment of the Sub-Adviser
hereunder, including placing the Trust's or the Adviser's name on the
Sub-Adviser's list of representative clients, or which are required by the SEC
or a state securities commission, and, provided further, that in no event shall
such approval be unreasonably withheld.
Section 8. LIABILITY OF THE SUB-ADVISER. Absent willful misfeasance,
bad faith, gross negligence, or reckless disregard of obligations or duties
hereunder on the part of the Sub-Adviser, or loss resulting from breach of
fiduciary duty, the Sub-Adviser shall not be liable for any act or omission in
the course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security.
Notwithstanding the foregoing, neither the Adviser nor the Trust shall be deemed
to have waived any rights it may have against the Sub-Adviser under federal or
state securities laws.
The Sub-Adviser shall indemnify and hold harmless the Trust and the
Adviser (and its affiliated companies and their respective officers, directors
and employees) from any and all claims, losses, liabilities or damages
(including reasonable attorney's fees and other related expenses) arising
-4-
<PAGE> 5
out of or in connection with the willful misfeasance, bad faith, gross
negligence, or reckless disregard of obligations or duties including breach of
fiduciary duty, hereunder of the Sub-Adviser.
The Adviser shall hold harmless and indemnify the Sub-Adviser for any
loss, liability, cost, damage or expense (including reasonable attorney's fees
and costs) arising from any claim or demand by any person that is based upon (i)
the obligations of any other sub-adviser to the Fund, (ii) any obligation of the
Adviser under the Advisory Agreement that has not been delegated to the
Sub-Adviser under this Agreement or (iii) any matter for which the Sub-Adviser
does not have liability in accordance with the first sentence of this Section 8.
Section 9. LIMITATION OF TRUST'S LIABILITY. The Sub-Adviser
acknowledges that it has received notice of and accepts the limitations upon the
Trust's and the Fund's liability set forth in its Trust Instrument and under
Delaware law. The Sub-Adviser agrees that any of the Trust's obligations shall
be limited to the assets of the Fund and that the Sub-Adviser shall not seek
satisfaction of any such obligation from the shareholders of the Trust nor from
any Trustee, officer, employee or agent of the Trust.
The names "New Covenant Funds" and "Trustees of New Covenant Funds"
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under the Trust Instrument
dated as of September 30, 1998, to which reference is hereby made and a copy of
which is on file at the office of the Secretary of State of the State of
Delaware and elsewhere as required by law, and to any and all amendments thereto
so filed or hereafter filed. The obligations of "New Covenant Funds" entered
into in the name or on behalf thereof, or in the name or on behalf of any series
or class of shares of the Trust, by any of the Trustees, representatives or
agents are made not individually, but in such capacities, and are not binding
upon any of the Trustees, shareholders or representatives of the Trust
personally, but bind only the assets of the Trust, and all persons dealing with
any series or class of shares of the Trust must look solely to the assets of the
Trust belonging to such series or class for the enforcement of any claims
against the Trust.
Section 10. DURATION RENEWAL TERMINATION AND AMENDMENT. This Agreement
will become effective as of the date first written above, provided that it shall
have been approved by vote of a majority of the outstanding voting securities of
the Fund, in accordance with the requirements under the 1940 Act, and, unless
sooner terminated as provided herein, shall continue in effect for an initial
period of one (1) year.
Thereafter, if not terminated, this Agreement shall continue in effect
with respect to the Fund for successive one year periods provided such
continuance is specifically approved at least annually (a) by the vote of a
majority of the disinterested Trustees cast in person at a meeting called for
the purpose of voting on such approval, and (b) by the vote of a majority of the
Trust's Board of Trustees or by the vote of a majority of all votes attributable
to the outstanding Shares of the Fund. This Agreement may be terminated as to
the Fund at any time, without payment of any penalty, by the Trust's Board of
Trustees, by the Adviser, or by a vote of a majority of the outstanding voting
securities of the Fund, upon 60 days' prior written notice to the Sub-Adviser,
or by the Sub-Adviser upon 60 days' prior written notice to the Adviser and the
Trust's Board of Trustees, or upon such shorter notice as may be mutually agreed
upon.
This Agreement shall terminate automatically and immediately upon
termination of the Advisory Agreement. This Agreement shall terminate
automatically and immediately in the event
-5-
<PAGE> 6
of its assignment. No assignment of this Agreement shall be made by the
Sub-Adviser without the consent of the Adviser and the Board of Trustees of the
Trust.
This Agreement may be amended at any time by the Adviser and the
Sub-Adviser, subject to approval by the Trust's Board of Trustees and, if
required by the 1940 Act and applicable SEC rules and regulations, a vote of a
majority of the Fund's outstanding voting securities. Notwithstanding the
foregoing, the Trust shall be under no obligation to obtain shareholder approval
to materially amend this Agreement unless required to obtain such approval
pursuant to any orders or rules and regulations which may have been issued by
the Securities and Exchange Commission.
Section 11. YEAR 2000 WARRANTY. The Sub-Adviser represents and warrants
that it is actively pursuing a comprehensive and coordinated compliance strategy
(including remediation and testing) to ensure the readiness of its business
systems and applications for the Year 2000 and believes that all such systems
critical to the performance of Sub-Adviser's responsibilities hereunder will be
Year 2000 compliant prior to January 1, 2000. The Sub-Adviser will make
appropriate inquiries as to the readiness of its vendors, service providers,
clients and other third parties for the Year 2000; provided, however, that
neither the Sub-Adviser nor any of its officers, directors or employees (or
affiliated companies) make any representations or warranties regarding the Year
2000 readiness of such vendors, service providers, clients and other third
parties.
Section 12. CONFIDENTIAL RELATIONSHIP. Any information and advice
furnished by either party to this Agreement to the other shall be treated as
confidential and shall not be disclosed to third parties except as required by
law or as required or permitted by this Agreement.
Section 13. SEVERABILITY. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
Section 14. MISCELLANEOUS. This Agreement constitutes the full and
complete agreement of the parties hereto with respect to the subject matter
hereof and each party agrees to perform such further actions and execute such
further documents as are necessary to effectuate the purposes hereof. To the
extent not preempted by federal law, this Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of Indiana.
The captions in this Agreement are included for convenience only and in no way
define or delimit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement may be executed in several counterparts,
all of which together shall for all purposes constitute one Agreement, binding
on all parties.
Section 15. NOTICES. All notices and other communications hereunder
shall be in writing (including telex or similar writing) and shall be deemed
given if delivered in person or by messenger, cable, telegram or telex or
facsimile transmission or by a reputable overnight delivery service which
provides evidence of receipt to the parties at the following addresses or telex
or facsimile transmission numbers (or at such other address or number for a
party as shall be specified by like notice):
-6-
<PAGE> 7
(a) if to the Sub-Adviser, to:
---------------------------------
---------------------------------
---------------------------------
(b) if to the Adviser, to:
New Covenant Trust Company, N.A.
200 East Twelfth Street, Suite B
Jeffersonville, IN 47130
Facsimile transmission number: (_____________________)
Attention:___________________
Each such notice or other communication shall be effective (i) if given
by telex or facsimile transmission, when such telex or facsimile is transmitted
to the number specified in this section and the appropriate answer back or
confirmation is received, and (ii) if given by any other means, when delivered
at the address specified in this section.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
NEW COVENANT TRUST COMPANY, N.A.
By:_____________________________
Name:___________________________
Title:__________________________
STANDISH, AYER & WOOD, INC.
By:_____________________________
Name:___________________________
Title:__________________________
Dated: June___, 1999
-7-
<PAGE> 8
SCHEDULE A
----------
To the Sub-Advisory Agreement
between New Covenant Trust Company, N.A. and
Standish, Ayer & Wood, Inc.
<TABLE>
<CAPTION>
Name of Fund Compensation Date
- ------------ ------------ ----
<S> <C> <C>
New Covenant Income Fund Domestic Segment: June__, 1999
-----------------
0.400% of first $10 Million in Assets;
0.250% of next $90 Million in Assets;
0.200% of next $100 Million in Assets;
0.180% of next $100 Million in Assets;
0.150% of next $200 Million in Assets;
0.120% of Assets over $500 Million.
Global High-yield Segment:
--------------------------
0.500% of Assets managed.
NEW COVENANT TRUST COMPANY, N.A.
By:__________________________________
Name:________________________________
Title:_______________________________
STANDISH, AYER & WOOD, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
</TABLE>
-8-
<PAGE> 1
Exhibit 23(d)(ix)
SUB-ADVISORY AGREEMENT
This Sub-Advisory Agreement is made as of the ______ day of June, 1999,
by and between New Covenant Trust Company, N.A., a limited purpose national
trust bank (the "Adviser"), and Tattersall Advisory Group (the "Sub-Adviser").
WHEREAS, pursuant to an agreement between them dated as of June ______,
1999 (the "Advisory Agreement"), the Adviser serves as investment adviser to New
Covenant Funds, a Delaware business trust and an open-end management investment
company (the "Trust"), which has filed a registration statement (the
"Registration Statement") under the Investment Company Act of 1940, as amended
(the "1940 Act") and the Securities Act of 1933; and
WHEREAS, the Trust is comprised of four separate investment portfolios,
one of which is New Covenant Income Fund (the "Fund"); and
WHEREAS, the Adviser desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser
experienced in the management of a portfolio of securities to assist the Adviser
in performing services for a portion of the Fund; and
WHEREAS, the Sub-Adviser represents that it has the legal power and
authority to perform the services contemplated hereunder without violation of
applicable law (including the Investment Advisers Act of 1940), and desires to
provide such services to the Trust and the Adviser.
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
Section 1. APPOINTMENT OF THE SUB-ADVISER. The Adviser hereby appoints
the Sub-Adviser to provide a continuous investment program for that portion of
the Fund designated by the Adviser as assigned to the Sub-Adviser (the "Segment"
of the Fund), subject to such written instructions and supervision as the
Adviser may from time to time furnish. The Sub-Adviser hereby accepts such
appointment and agrees to render the services and to assume the obligations
herein set forth for the compensation herein provided. The Sub-Adviser will
provide the services under this Agreement with respect to the Segment in
accordance with the Fund's investment objective, policies and applicable
restrictions as stated in the Fund's most recent Prospectus and Statement of
Additional Information and as the same may, from time to time, be supplemented
or amended and in resolutions of the Trust's Board of Trustees. The Adviser
agrees to furnish to the Sub-Adviser from time to time copies of all
Prospectuses and Statements of Additional Information and of all amendments of,
or supplements to, such Prospectuses and Statements of Additional Information
and of all resolutions of the Trust's Board of Trustees applicable to the
Sub-Adviser's services hereunder. The Sub-Adviser shall for all purposes herein
be deemed to be an independent contractor and shall, except as expressly
provided or authorized (whether herein or otherwise), have no authority to act
for or represent the Adviser, the Fund or the Trust in any way.
Section 2. SUB-ADVISORY SERVICES. Subject to such written instructions
and supervision as the Adviser may from time to time furnish, the Sub-Adviser
will provide an investment program for the Segment, including investment
research and management with respect to securities and investments, including
cash and cash equivalents in the Segment, and will determine from time to time
what
<PAGE> 2
securities and other investments will be purchased, retained or sold by and
within the Segment. The Sub-Adviser will implement such determinations through
the placement, on behalf of the Fund, of orders for the execution of portfolio
transactions through such brokers or dealers as it may select. The Adviser will
instruct the Trust's Custodian to forward promptly to the Sub-Adviser proxy and
other materials relating to the exercise of such shareholder rights and, unless
otherwise instructed by the Adviser, the Sub-Adviser will determine from time to
time the manner in which voting rights, rights to consent to corporate action
and other rights pertaining to the Fund's investments should be exercised.
In fulfilling its responsibilities hereunder, the Sub-Adviser agrees
that it will:
(a) use the same skill and care in providing such services as it
uses in providing services to other fiduciary accounts for
which it has investment responsibilities;
(b) conform with all applicable rules and regulations of the
United States Securities and Exchange Commission ("SEC") and
in addition will conduct its activities under this Agreement
in accordance with any applicable regulations of any
government authority pertaining to the investment advisory
activities of the Sub-Adviser and shall furnish such written
reports or other documents substantiating such compliance as
the Adviser reasonably may request from time to time;
(c) not make loans to any person to purchase or carry shares of
beneficial interest in the Trust or make loans to the Trust;
(d) place orders pursuant to investment determinations for the
Fund either directly with the issuer or with an underwriter,
market maker or broker or dealer. In placing orders, the
Sub-Adviser will use its reasonable best efforts to obtain
best execution of such orders. Consistent with this
obligation, the Sub-Adviser may, to the extent permitted by
law, effect portfolio securities transactions through brokers
and dealers who provide brokerage and research services
(within the meaning of Section 28(c) of the Securities
Exchange Act of 1934) to or for the benefit of the Fund and/or
other accounts over which the Sub-Adviser exercises investment
discretion. Subject to the review of the Trust's Board of
Trustees from time to time with respect to the extent and
continuation of the policy, the Sub-Adviser is authorized to
cause the Fund to pay a broker or dealer who provides such
brokerage and research services a commission for effecting a
securities transaction for the Fund which is in excess of the
amount of commission another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser
determines in good faith that such commission was reasonable
in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of
either that particular transaction or the overall
responsibilities of the Sub-Adviser with respect to the
accounts as to which it exercises investment discretion. The
Trust or the Adviser may, from time to time in writing, direct
the Sub-Adviser to place orders through one or more brokers or
dealers and, thereafter, the Sub-Adviser will have no
responsibility for ensuring best execution with respect to
such orders. In no instance will portfolio securities be
purchased from or sold to the Sub-Adviser or any affiliated
person of the Sub-Adviser as principal except as may be
permitted by the 1940 Act or an exemption therefrom. If the
Sub-Adviser determines in good faith that the transaction is
in the best interest of each client, securities may be
purchased on behalf of the Fund from,
-2-
<PAGE> 3
or sold on behalf of the Fund to, another client of the
Sub-Adviser in compliance with Rule 17a-7 under the 1940 Act;
(e) maintain all necessary or appropriate records with respect to
the Fund's securities transactions for the Segment in
accordance with all applicable laws, rules and regulations,
including but not limited to Section 31 (a) of the 1940 Act,
and will furnish the Trust's Board of Trustees and the Adviser
such periodic and special reports as the Board and Adviser
reasonably may request;
(f) treat confidentially and as proprietary information of the
Adviser and the Trust all records and other information
relative to the Adviser and the Trust and prior, present, or
potential shareholders, and will not use such records and
information for any purpose other than the performance of its
responsibilities and duties hereunder, except that subject to
prompt notification to the Trust and the Adviser, the
Sub-Adviser may divulge such information to its independent
auditors and regulatory authorities, or when so requested by
the Adviser and the Trust; provided, however, that nothing
contained herein shall prohibit the Sub-Adviser from (1)
advertising or soliciting the public generally with respect to
other products or services, regardless of whether such
advertisement or solicitation may include prior, present or
potential shareholders of the Fund or (2) including the
Adviser and Trust on its general list of disclosable clients.
(g) maintain its policy and practice of conducting its fiduciary
functions independently. In making investment decisions for
the Fund, the Sub-Adviser's personnel will not inquire or take
into consideration whether the issuers of securities proposed
for purchase or sale for the Fund's account are customers of
the Adviser, other sub-advisers, the Sub-Adviser or of their
respective parents, subsidiaries or affiliates. In dealing
with such customers, the Sub-Adviser and its subsidiaries and
affiliates will not inquire or take into consideration whether
securities of those customers are held by the Trust; and
(h) render, upon request of the Adviser or the Trust's Board of
Trustees, written reports concerning the investment activities
of the Sub-Adviser with respect to the Sub-Adviser's Segment
of the Fund.
Section 3. EXPENSE. During the term of this Agreement, the Sub-Adviser
will pay all expenses incurred by it in performing its services under this
Agreement. The Sub-Adviser shall not be liable for any expenses of the Adviser
or the Trust, including without limitation (a) their interest and taxes, (b)
brokerage commissions and other costs in connection with the purchase or sale of
securities or other investment instruments with respect to the Fund and (c)
custodian fees and expenses.
Section 4. RECORDS. In compliance with the requirements of Rule 3la-3
under the 1940 Act, the Sub-Adviser hereby agrees that all records, if any,
which it maintains for the Fund are the property of the Fund and further agrees
to surrender promptly to the Adviser or the Trust any such records upon the
Adviser's or the Trust's request and that such records shall be available for
inspection by the SEC. The Sub-Adviser further agrees to preserve for the
periods and at the places prescribed by Rule 3la-2 under the 1940 Act the
records required to be maintained by Rule 31a-1 under the 1940 Act.
-3-
<PAGE> 4
Section 5. COMPENSATION OF THE SUB-ADVISER.
(a) In consideration of services rendered pursuant to this Agreement,
the Adviser will pay the Sub-Adviser a fee, in arrears, equal to an annual rate
in accordance with SCHEDULE A hereto, paid quarterly.
(b) Such fee for each calendar quarter shall be calculated based on the
average of the market value of the assets under management as of the end of each
of the three months in the quarter just ended, as provided by the Adviser.
(c) If the Sub-Adviser should serve for less than the whole of any
calendar quarter, its compensation shall be determined as provided above on the
basis of the ending market value of the assets managed in the month in which the
termination occurs and shall be payable on a pro rata basis for the period of
the calendar quarter for which it has served as Sub-Adviser hereunder.
Section 6. SERVICES NOT EXCLUSIVE. The services of the Sub-Adviser
hereunder are not to be deemed exclusive, and the Sub-Adviser shall be free to
render similar services to others and to engage in other activities, so long as
the services rendered hereunder are not impaired. It is understood that the
action taken by the Sub-Adviser under this Agreement may differ from the advice
given or the timing or nature of action taken with respect to other clients of
the Sub-Adviser, and that a transaction in a specific security may not be
accomplished for all clients of the Sub-Adviser at the same time or at the same
price.
Section 7. USE OF NAMES. The Adviser shall not use the name, logo,
trade or service mark or derivative of the foregoing of the Sub-Adviser or any
of the Sub-Adviser's affiliates in any prospectus, sales literature or other
materials whether or not relating to the Trust in any manner not approved prior
thereto by the Sub-Adviser; provided, however, that the Sub-Adviser shall
approve all uses of its or its affiliate's name which merely refer in accurate
terms to its appointment hereunder or which are required by the SEC or a state
securities commission; and, provided further, that in no event shall such
approval be unreasonably withheld. The Sub-Adviser shall not use the name of the
Trust, the Fund or the Adviser in any materials relating to the Sub-Adviser in
any manner not approved prior thereto by the Adviser; provided, however, that
the Adviser shall approve all uses of its and the Fund's or the Trust's name
which merely refer in accurate terms to the appointment of the Sub-Adviser
hereunder, including placing the Trust's or the Adviser's name on the
Sub-Adviser's list of representative clients, or which are required by the SEC
or a state securities commission, and, provided further, that in no event shall
such approval be unreasonably withheld.
Section 8. LIABILITY OF THE SUB-ADVISER. Absent willful misfeasance,
bad faith, gross negligence, or reckless disregard of obligations or duties
hereunder on the part of the Sub-Adviser, or loss resulting from breach of
fiduciary duty, the Sub-Adviser shall not be liable for any act or omission in
the course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security.
Notwithstanding the foregoing, neither the Adviser nor the Trust shall be deemed
to have waived any rights it may have against the Sub-Adviser under federal or
state securities laws.
The Sub-Adviser shall indemnify and hold harmless the Trust and the
Adviser (and its affiliated companies and their respective officers, directors
and employees) from any and all claims, losses, liabilities or damages
(including reasonable attorney's fees and other related expenses) arising
-4-
<PAGE> 5
out of or in connection with the willful misfeasance, bad faith, gross
negligence, or reckless disregard of obligations or duties including breach of
fiduciary duty, hereunder of the Sub-Adviser.
The Adviser shall hold harmless and indemnify the Sub-Adviser for any
loss, liability, cost, damage or expense (including reasonable attorney's fees
and costs) arising from any claim or demand by any person that is based upon (i)
the obligations of any other sub-adviser to the Fund, (ii) any obligation of the
Adviser under the Advisory Agreement that has not been delegated to the
Sub-Adviser under this Agreement or (iii) any matter for which the Sub-Adviser
does not have liability in accordance with the first sentence of this Section 8.
Section 9. LIMITATION OF TRUST'S LIABILITY. The Sub-Adviser
acknowledges that it has received notice of and accepts the limitations upon the
Trust's and the Fund's liability set forth in its Trust Instrument and under
Delaware law. The Sub-Adviser agrees that any of the Trust's obligations shall
be limited to the assets of the Fund and that the Sub-Adviser shall not seek
satisfaction of any such obligation from the shareholders of the Trust nor from
any Trustee, officer, employee or agent of the Trust.
The names "New Covenant Funds" and "Trustees of New Covenant Funds"
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under the Trust Instrument
dated as of September 30, 1998, to which reference is hereby made and a copy of
which is on file at the office of the Secretary of State of the State of
Delaware and elsewhere as required by law, and to any and all amendments thereto
so filed or hereafter filed. The obligations of "New Covenant Funds" entered
into in the name or on behalf thereof, or in the name or on behalf of any series
or class of shares of the Trust, by any of the Trustees, representatives or
agents are made not individually, but in such capacities, and are not binding
upon any of the Trustees, shareholders or representatives of the Trust
personally, but bind only the assets of the Trust, and all persons dealing with
any series or class of shares of the Trust must look solely to the assets of the
Trust belonging to such series or class for the enforcement of any claims
against the Trust.
Section 10. DURATION RENEWAL TERMINATION AND AMENDMENT. This Agreement
will become effective as of the date first written above, provided that it shall
have been approved by vote of a majority of the outstanding voting securities of
the Fund, in accordance with the requirements under the 1940 Act, and, unless
sooner terminated as provided herein, shall continue in effect for an initial
period of one (1) year.
Thereafter, if not terminated, this Agreement shall continue in effect
with respect to the Fund for successive one year periods provided such
continuance is specifically approved at least annually (a) by the vote of a
majority of the disinterested Trustees cast in person at a meeting called for
the purpose of voting on such approval, and (b) by the vote of a majority of the
Trust's Board of Trustees or by the vote of a majority of all votes attributable
to the outstanding Shares of the Fund. This Agreement may be terminated as to
the Fund at any time, without payment of any penalty, by the Trust's Board of
Trustees, by the Adviser, or by a vote of a majority of the outstanding voting
securities of the Fund, upon 60 days' prior written notice to the Sub-Adviser,
or by the Sub-Adviser upon 60 days' prior written notice to the Adviser and the
Trust's Board of Trustees, or upon such shorter notice as may be mutually agreed
upon.
This Agreement shall terminate automatically and immediately upon
termination of the Advisory Agreement. This Agreement shall terminate
automatically and immediately in the event
-5-
<PAGE> 6
of its assignment. No assignment of this Agreement shall be made by the
Sub-Adviser without the consent of the Adviser and the Board of Trustees of the
Trust.
This Agreement may be amended at any time by the Adviser and the
Sub-Adviser, subject to approval by the Trust's Board of Trustees and, if
required by the 1940 Act and applicable SEC rules and regulations, a vote of a
majority of the Fund's outstanding voting securities. Notwithstanding the
foregoing, the Trust shall be under no obligation to obtain shareholder approval
to materially amend this Agreement unless required to obtain such approval
pursuant to any orders or rules and regulations which may have been issued by
the Securities and Exchange Commission.
Section 11. YEAR 2000 WARRANTY. The Sub-Adviser represents and warrants
that it is actively pursuing a comprehensive and coordinated compliance strategy
(including remediation and testing) to ensure the readiness of its business
systems and applications for the Year 2000 and believes that all such systems
critical to the performance of Sub-Adviser's responsibilities hereunder will be
Year 2000 compliant prior to January 1, 2000. The Sub-Adviser will make
appropriate inquiries as to the readiness of its vendors, service providers,
clients and other third parties for the Year 2000; provided, however, that
neither the Sub-Adviser nor any of its officers, directors or employees (or
affiliated companies) make any representations or warranties regarding the Year
2000 readiness of such vendors, service providers, clients and other third
parties.
Section 12. CONFIDENTIAL RELATIONSHIP. Any information and advice
furnished by either party to this Agreement to the other shall be treated as
confidential and shall not be disclosed to third parties except as required by
law or as required or permitted by this Agreement.
Section 13. SEVERABILITY. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
Section 14. MISCELLANEOUS. This Agreement constitutes the full and
complete agreement of the parties hereto with respect to the subject matter
hereof and each party agrees to perform such further actions and execute such
further documents as are necessary to effectuate the purposes hereof. To the
extent not preempted by federal law, this Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of Indiana.
The captions in this Agreement are included for convenience only and in no way
define or delimit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement may be executed in several counterparts,
all of which together shall for all purposes constitute one Agreement, binding
on all parties.
Section 15. NOTICES. All notices and other communications hereunder
shall be in writing (including telex or similar writing) and shall be deemed
given if delivered in person or by messenger, cable, telegram or telex or
facsimile transmission or by a reputable overnight delivery service which
provides evidence of receipt to the parties at the following addresses or telex
or facsimile transmission numbers (or at such other address or number for a
party as shall be specified by like notice):
-6-
<PAGE> 7
(a) if to the Sub-Adviser, to:
_____________________________________
_____________________________________
_____________________________________
(b) if to the Adviser, to:
New Covenant Trust Company, N.A.
200 East Twelfth Street, Suite B
Jeffersonville, IN 47130
Facsimile transmission number: (_____________________)
Attention:___________________
Each such notice or other communication shall be effective (i) if given
by telex or facsimile transmission, when such telex or facsimile is transmitted
to the number specified in this section and the appropriate answer back or
confirmation is received, and (ii) if given by any other means, when delivered
at the address specified in this section.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
NEW COVENANT TRUST COMPANY, N.A.
By:________________________________
Name:______________________________
Title:_____________________________
TATTERSALL ADVISORY GROUP
By:________________________________
Name:______________________________
Title:_____________________________
Dated: June___, 1999
-7-
<PAGE> 8
SCHEDULE A
----------
To the Sub-Advisory Agreement
between New Covenant Trust Company N.A. and
Tattersall Advisory Group
<TABLE>
<CAPTION>
<S> <C> <C>
Name of Fund Compensation Date
- ------------ ------------ ----
New Covenant Income Fund 0.250% of first $50 Million in June __, 1999
Assets;
0.125% of next $50 Million in Assets;
0.100% of Assets over $100 Million.
</TABLE>
NEW COVENANT TRUST COMPANY, N.A.
By:_____________________________
Name:___________________________
Title:__________________________
TATTERSALL ADVISORY GROUP
By:_____________________________
Name:___________________________
Title:__________________________
-8-
<PAGE> 1
Exhibit 23 (e)(i)
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of this ____ day of _______, 1999 (the
"Agreement") by and between New Covenant Funds, a Delaware business trust (the
"Fund") and First Data Distributors, Inc. (the "Distributor"), a Massachusetts
corporation.
WHEREAS, the Fund is registered as a diversified, open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and is currently offering units of beneficial interest (such units
of all series are hereinafter called the "Shares"), representing interests in
investment portfolios of the Fund identified on Schedule A hereto (the
"Portfolios") which are registered with the Securities and Exchange Commission
(the "SEC") pursuant to the Fund's Registration Statement on Form N-1A (the
"Registration Statement"); and
WHEREAS, the Fund desires to retain the Distributor as distributor for
the Portfolios to provide for the sale and distribution of the Shares of the
Portfolios identified on Schedule A and for such additional classes or series as
the Fund may issue, and the Distributor is prepared to provide such services
commencing on the date first written above.
NOW THEREFORE, in consideration of the premises and mutual covenants
set forth herein and intending to be legally bound hereby the parties hereto
agree as follows:
1. SERVICE AS DISTRIBUTOR
----------------------
1.1 The Distributor will act on behalf of the Fund for the distribution of
the Shares covered by the Registration Statement under the Securities
Act of 1933, as amended (the "1933 Act") and provide the distribution
services outlined in Schedule B to this Agreement. The Distributor will
have no liability for payment for the purchase of Shares sold pursuant
to this Agreement or with respect to redemptions or repurchases of
Shares.
1.2 The net asset value of the Shares shall be determined in the manner
provided in the then current Prospectus and Statement of Additional
Information relating to the Shares, and when determined shall be
applicable to all transactions as provided in the Prospectus. The net
asset value of the Shares shall be calculated by the Fund or by another
entity on behalf of the Fund. The Distributor shall have no duty to
inquire into, or liability for, the accuracy of the net asset value per
Share as calculated.
1.3 The Distributor agrees to use efforts deemed appropriate by the
Distributor to solicit orders for the sale of the Shares and will
undertake such advertising and promotion as it believes reasonable in
connection with such solicitation. To the extent that the Distributor
receives fees under any plan adopted by the Fund pursuant to Rule 12b-1
under the 1940 Act, the Distributor agrees to furnish and/or enter into
arrangements with others for the furnishing of marketing or sales
services with respect to the Shares as may be required pursuant to such
plan. To the extent that the Distributor receives shareholder services
fees under any shareholder services plan adopted by the Fund, the
Distributor
<PAGE> 2
agrees to furnish and/or enter into arrangements with others for the
furnishing of, personal and/or account maintenance services with
respect to the relevant shareholders of the Fund as may be required
pursuant to such plan. It is contemplated that the Distributor will
enter into sales or servicing agreements with securities dealers,
financial institutions and other industry professionals, such as
investment advisers, accountants and estate planning firms. The
Distributor will require each dealer with whom the Distributor has a
selling agreement to conform to the applicable provisions of the
Prospectus, with respect to the public offering price of the Shares,
and the Distributor shall not cause the Fund to withhold the placing of
purchase orders so as to make a profit thereby.
1.4 The Fund understands that the Distributor is now, and may in the future
be, the distributor of the shares of several investment companies or
series (collectively, the "Investment Entities"), including Investment
Entities having investment objectives similar to those of the Fund. The
Fund further understands that investors and potential investors in the
Fund may invest in shares of such other Investment Entities. The Fund
agrees that the Distributor's duties to such Investment Entities shall
not be deemed in conflict with its duties to the Fund under this
Section 1.4.
1.5 The Distributor shall not utilize any materials in connection with the
sale or offering of Shares except the Fund's Prospectus and Statement
of Additional Information and such other materials as the Fund shall
provide or approve. The Fund agrees to furnish the Distributor with
sufficient copies of any and all: agreements, plans, communications
with the public or other materials which the Fund intends to use in
connection any sales of Shares, in adequate time for the Distributor to
file and clear such materials with the proper authorities before they
are put in use. The Distributor and the Fund may agree that any such
material does not need to be filed subsequent to distribution. In
addition, the Fund agrees not to use any such materials until so filed
and cleared for use, if required, by appropriate authorities as well as
by the Distributor.
1.6 All activities by the Distributor and its employees, as distributor of
the Shares, shall comply with all applicable laws, rules and
regulations, including, without limitation, all rules and regulations
made or adopted by the SEC or the National Association of Securities
Dealers.
1.7 The Distributor will transmit any orders received by it for purchase or
redemption of the Shares to the transfer agent for the Fund.
1.8 Whenever in its judgment such action is warranted by unusual market,
economic or political conditions or abnormal circumstances of any kind,
the Fund may decline to accept any orders for, or make any sales of,
the Shares until such time as the Fund deems it advisable to accept
such orders and to make such sales, and the Fund advises the
Distributor promptly of such determination.
1.9 The Fund agrees to execute any and all documents and to furnish any and
all information and otherwise to take all actions that may be
reasonably necessary in connection with the
2
<PAGE> 3
qualification of the Shares for sale in such states as the Distributor
may designate. The Fund shall notify the Distributor in writing of the
states in which the Shares may be sold and shall notify the Distributor
in writing of any changes to the information contained in the previous
notification.
1.10 The Fund shall furnish from time to time, for use in connection with
the sale of the Shares, such information with respect to the Fund and
the Shares as the Distributor may reasonably request; and the Fund
warrants that the statements contained in any such information shall
fairly show or represent what they purport to show or represent. The
Fund shall also furnish the Distributor upon request with: (a) audited
annual statements and unaudited semi-annual statements of a Portfolio's
books and accounts prepared by the Fund, (b) quarterly earnings
statements prepared by the Fund, (c) a monthly itemized list of the
securities in the Portfolios, (d) monthly balance sheets as soon as
practicable after the end of each month, and (e) from time to time such
additional information regarding the financial condition of the Fund as
the Distributor may reasonably request.
1.11 The Fund represents to the Distributor that all Registration Statements
and Prospectuses filed by the Fund with the SEC under the 1933 Act with
respect to the Shares have been prepared in conformity with the
requirements of the 1933 Act and the rules and regulations of the SEC
thereunder. As used in this Agreement, the term "Registration
Statement" shall mean any Registration Statement and any Prospectus and
any Statement of Additional Information relating to the Fund filed with
the SEC and any amendments or supplements thereto at any time filed
with the SEC. Except as to information included in the Registration
Statement in reliance upon information provided to the Fund by the
Distributor or any affiliate of the Distributor expressly for use in
the Registration Statement, the Fund represents and warrants to the
Distributor that any Registration Statement, when such Registration
Statement becomes effective, will contain statements required to be
stated therein in conformity with the 1933 Act and the rules and
regulations of the SEC; that all statements of fact contained in any
such Registration Statement will be true and correct when such
Registration Statement becomes effective; and that no Registration
Statement when such Registration Statement becomes effective will
include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading to a purchaser of the Shares. The
Fund may but shall not be obligated to propose from time to time such
amendment or amendments to any Registration Statement and such
supplement or supplements to any Prospectus as, in the light of future
developments, may, in the opinion of the Fund's counsel, be necessary
or advisable. The Fund shall promptly notify the Distributor of any
advice given to it by its counsel regarding the necessity or
advisability of amending or supplementing such Registration Statement.
If the Fund shall not propose such amendment or amendments and/or
supplement or supplements within fifteen days after receipt by the Fund
of a written request from the Distributor to do so, the Distributor
may, at its option, terminate this Agreement. The Fund shall not file
any amendment to any Registration Statement or supplement to any
Prospectus without giving the Distributor reasonable notice thereof in
advance; provided, however, that nothing contained in this Agreement
shall in any way limit the Fund's right to file at any
3
<PAGE> 4
time such amendments to any Registration Statements and/or supplements
to any Prospectus, of whatever character, as the Fund may deem
advisable, such right being in all respects absolute and unconditional.
The Fund authorizes the Distributor to use any Prospectus or Statement
of Additional Information in the form furnished from time to time in
connection with the sale of the Shares.
1.12 No Shares shall be offered by either the Distributor or the Fund under
any of the provisions of this Agreement and no orders for the purchase
or sale of Shares hereunder shall be accepted by the Fund if and so
long as effectiveness of the Registration Statement then in effect or
any necessary amendments thereto shall be suspended under any of the
provisions of the 1933 Act, or if and so long as a current Prospectus
as required by Section 5(b)(2) of the 1933 Act is not on file with the
SEC; provided, however, that nothing contained in this Section 1.12
shall in any way restrict or have any application to or bearing upon
the Fund's obligation to redeem Shares tendered for redemption by any
shareholder in accordance with the provisions of the Fund's
Registration Statement, Articles of Incorporation, or bylaws.
1.13 The Fund agrees to advise the Distributor as soon as reasonably
practical by a notice in writing delivered to the Distributor:
(a) of any request by the SEC for amendments to the Registration
Statement, Prospectus or Statement of Additional Information
then in effect or for additional information;
(b) in the event of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement,
Prospectus or Statement of Additional Information then in
effect or the initiation by service of process on the Fund of
any proceeding for that purpose;
(c) of the happening of any event that makes untrue any statement
of a material fact made in the Registration Statement,
Prospectus or Statement of Additional Information then in
effect or that requires the making of a change in such
Registration Statement, Prospectus or Statement of Additional
Information in order to make the statements therein not
misleading; and
(d) of all actions of the SEC with respect to any amendments to
any Registration Statement, Prospectus or Statement of
Additional Information which may from time to time be filed
with the SEC.
For purposes of this section, informal requests by or acts of the Staff
of the SEC shall not be deemed actions of or requests by the SEC.
1.14 The Fund represents and warrants to the Distributor that the Fund is a
series of investment company registered under the 1940 Act and the
Shares sold by each Portfolio are, and will be, registered under the
1933 Act.
4
<PAGE> 5
2. FUND EXPENSES
-------------
2.1 The Fund will bear the following expenses:
(a) preparation, printing and distribution of sufficient copies of
the Prospectus and SAI for to shareholders;
(b) preparation, printing and distribution of reports and other
communications to shareholders;
(c) registration of the Shares under the federal and state
securities laws;
(d) maintaining facilities for the issue and transfer of Shares;
(e) supplying information, prices and other data to be furnished
by the Fund under this Agreement; and
(f) any original issue taxes or other transfer taxes applicable to
the sale or delivery of the Shares or certificates therefor.
The Fund will pay all other expenses incident to the sale and
distribution of the Shares sold hereunder.
3. INDEMNIFICATION
---------------
3.1 The Fund agrees to indemnify and hold harmless the Distributor, its
officers, directors, and employees, and any person who controls the
Distributor within the meaning of Section 15 of the 1933 Act, free and
harmless (a) from and against any and all claims, costs, expenses
(including reasonable attorneys' fees) losses, damages, charges,
payments and liabilities of any sort or kind which the Distributor, its
officers, directors, employees or any such controlling person may incur
under the 1933 Act, under any other statute, at common law or
otherwise, arising out of or based upon: (i) any untrue statement, or
alleged untrue statement, of a material fact contained in the Fund's
Registration Statement, Prospectus, Statement of Additional
Information, or sales literature (including amendments and supplements
thereto), or (ii) any omission, or alleged omission, to state a
material fact required to be stated in the Fund's Registration
Statement, Prospectus, Statement of Additional Information or sales
literature (including amendments or supplements thereto), necessary to
make the statements therein not misleading, provided, however, that
insofar as losses, claims, damages, liabilities or expenses arise out
of or are based upon any such untrue statement or omission or alleged
untrue statement or omission made in reliance on and in conformity with
information furnished to the Fund by the Distributor or its affiliated
persons for use in the Fund's Registration Statement, Prospectus, or
Statement of Additional Information or sales literature (including
amendments or supplements thereto), such indemnification is not
applicable; and (b)
5
<PAGE> 6
from and against any and all such claims, demands, liabilities and
expenses (including such costs and counsel fees) which you, your
officers and directors, or such controlling person, may incur in
connection with this Agreement or the Distributor's performance
hereunder (but excluding such claims, demands, liabilities and expenses
(including such costs and counsel fees) arising out of or based upon
any untrue statement, or alleged untrue statement, of a material fact
contained in any registration statement or any Prospectus or arising
out of or based upon any omission, or alleged omission, to state a
material fact required to be stated in either any registration
statement or any Prospectus or necessary to make the statements in
either thereof not misleading), unless such claims, demands,
liabilities and expenses (including such costs and counsel fees) arise
by reason of the Distributor's willful misfeasance, bad faith or
negligence in the performance of the Distributor's duties hereunder.
The Fund acknowledges and agrees that in the event that the
Distributor, at the request of the Fund, are required to give
indemnification comparable to that set forth in this Section 3.1 to any
broker-dealer selling Shares of the Fund or servicing agent servicing
the shareholders of the Fund and such broker-dealer or servicing agent
shall make a claim for indemnification against the Distributor, the
Distributor shall make a similar claim for indemnification against the
Fund.
The Fund will indemnify the Distributor against and hold it harmless
from any and all claims, costs, expenses (including reasonable
attorneys' fees), losses, damages, charges, payments and liabilities of
any sort or kind which may be asserted against the Distributor for
which the Distributor may be held to be liable in connection with this
Agreement or the Distributor's performance hereunder (a "Claim"),
unless such Claim resulted from a negligent act or omission to act or
bad faith by the Distributor in the performance of its duties
hereunder.
3.2 The Distributor agrees to indemnify and hold harmless the Fund, its
several officers and Board Members and each person, if any, who
controls a Portfolio within the meaning of Section 15 of the 1933 Act
against any and all claims, costs, expenses (including reasonable
attorneys' fees), losses, damages, charges, payments and liabilities of
any sort or kind which the Fund, its officers, Board Members or any
such controlling person may incur under the 1933 Act, under any other
statute, at common law or otherwise, but only to the extent that such
liability or expense incurred by the Fund, its officers or Board
Members, or any controlling person resulting from such claims or
demands arose out of the acquisition of any Shares by any person which
may be based upon any untrue statement, or alleged untrue statement, of
a material fact contained in the Fund's Registration Statement,
Prospectus or Statement of Additional Information (including amendments
and supplements thereto), or any omission, or alleged omission, to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading, if such statement or
omission was made in reliance upon information furnished or confirmed
in writing to the Fund by the Distributor or its affiliated persons (as
defined in the 1940 Act). The Distributor also agrees to indemnify and
hold harmless the Fund and each such person in connection with any
claim or in connection with any action, suit or proceeding which arises
out of or is alleged to arise out of the Distributor's failure to
exercise reasonable care and diligence with respect to its services
rendered in
6
<PAGE> 7
connection with the purchase and sale of Shares. The foregoing rights
of indemnification shall be in addition to any other rights to which
the Fund or any such person shall be entitled to as a matter of law.
3.3 In any case in which one party hereto (the "Indemnifying Party") may be
asked to indemnify or hold the other party hereto (the "Indemnified
Party") harmless, the Indemnified Party will notify the Indemnifying
Party promptly after identifying any situation which it believes
presents or appears likely to present a claim for indemnification (an
"Indemnification Claim") against the Indemnifying Party, although the
failure to do so shall not prevent recovery by the Indemnified Party,
and shall keep the Indemnifying Party advised with respect to all
developments concerning such situation. The Indemnifying Party shall
have the option to defend the Indemnified Party against any
Indemnification Claim which may be the subject of this indemnification,
and, in the event that the Indemnifying Party so elects, such defense
shall be conducted by counsel chosen by the Indemnifying Party and
satisfactory to the Indemnified Party, and thereupon the Indemnifying
Party shall take over complete defense of the Indemnification Claim and
the Indemnified Party shall sustain no further legal or other expenses
in respect of such Indemnification Claim. In the event that the
Indemnifying Party does not elect to assume the defense of any such
suit, or in case the Indemnified Party reasonably does not approve of
counsel chosen by the Indemnifying Party, or in case there is a
conflict of interest between the Indemnifying Party or the Indemnified
Party, the Indemnifying Party will reimburse the Indemnified Party for
the fees and expenses of any counsel retained by the Indemnified
Party.. The Fund agrees promptly to notify the Distributor of the
commencement of any litigation or proceedings against the Fund or any
of its officers or directors in connection with the issue and sale of
any Shares. The Indemnified Party will not confess any Indemnification
Claim or make any compromise in any case in which the Indemnifying
Party will be asked to provide indemnification, except with the
Indemnifying Party's prior written consent.
3.4 The obligations of the parties hereto under this Section 3 shall
survive the termination of this Agreement. The Fund's indemnification
agreement contained in this Section 3 and the Fund's representations
and warranties in this Agreement shall remain operative and in full
force and effect regardless of any investigation made by or on behalf
of the Distributor, its officers, directors and employees, or any
controlling person, and shall survive the delivery of any Shares. This
agreement of indemnity will inure exclusively to the Distributor's
benefit, to the benefit of its several officers, directors and
employees, and their respective estates and to the benefit of the
controlling persons and their successors.
4. STANDARD OF CARE; LIMITATION OF LIABILITY
-----------------------------------------
4.1 The Distributor shall not be liable to the Fund for any error of
judgment or mistake of law or for any loss suffered by the Fund in
connection with the performance of its obligations and duties under
this Agreement, except a loss resulting from the Distributor's willful
misfeasance, bad faith or negligence in the performance of such
obligations and duties, or by reason of its reckless disregard thereof.
7
<PAGE> 8
4.2 Notwithstanding any provision in this Agreement to the contrary, the
Distributor's cumulative liability (to the Fund) for all losses,
claims, suits, controversies, breaches, or damages ("Liability Claims")
for any cause whatsoever and regardless of the form of action or legal
theory, shall not exceed $500,000. The Fund understands the limitation
on the Distributor's damages to be a reasonable allocation of risk and
the Fund expressly consents with respect to such allocation of risk.
4.3 Neither party may assert any cause of action against the other party
under this Agreement that accrued more than two (2) years prior to the
filing of the suit (or commencement of arbitration proceedings)
alleging such cause of action.
4.4 Each party shall have the duty to mitigate damages for which the other
party may become responsible.
4.5 NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT
SHALL THE DISTRIBUTOR, ITS AFFILIATES OR ANY OF ITS OR THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE UNDER ANY
THEORY OF TORT, CONTRACT, STRICT LIABILITY OF OTHER LEGAL OR EQUITABLE
THEORY FOR LOST PROFITS, EXEMPLARY, PUNITIVE, SPECIAL, INCIDENTAL,
INDIRECT OR CONSEQUENTIAL DAMAGES, EACH OF WHICH IS HEREBY EXCLUDED BY
AGREEMENT OF THE PARTIES REGARDLESS OF WHETHER SUCH DAMAGES WERE
FORESEEABLE OR WHETHER EITHER PARTY OR ANY ENTITY HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES.
5. EXCLUSION OF WARRANTIES
-----------------------
THIS IS A SERVICE AGREEMENT. EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, THE DISTRIBUTOR DISCLAIMS ALL OTHER REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, MADE TO THE FUND, A PORTFOLIO OR ANY
OTHER PERSON, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES REGARDING
QUALITY, SUITABILITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE
OR OTHERWISE (IRRESPECTIVE OF ANY COURSE OF DEALING, CUSTOM OR USAGE OF
TRADE) OF ANY SERVICES OR ANY GOODS PROVIDED INCIDENTAL TO SERVICES
PROVIDED UNDER THIS AGREEMENT. THE DISTRIBUTOR DISCLAIMS ANY WARRANTY
OF TITLE OR NON-INFRINGEMENT EXCEPT AS OTHERWISE SET FORTH IN THIS
AGREEMENT.
6. TERM
----
6.1 This Agreement shall become effective on the date first written above
and, unless sooner terminated as provided herein, shall continue for an
initial two-year term and thereafter shall be renewed for successive
one-year terms, provided such continuance is specifically
8
<PAGE> 9
approved at least annually by (i) the Fund's Board of Directors or (ii)
by a vote of a majority (as defined in the 1940 Act and Rule 18f-2
thereunder) of the outstanding voting securities of the Fund, provided
that in either event the continuance is also approved by a majority of
the Board Members who are not parties to this Agreement and who are not
interested persons (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose
of voting on such approval. This Agreement is terminable without
penalty, on at least sixty days' written notice, by the Fund's Board of
Directors, by vote of a majority (as defined in the 1940 Act and Rule
18f-2 thereunder) of the outstanding voting securities of the Fund, or
by the Distributor. This Agreement will also terminate automatically in
the event of its assignment (as defined in the 1940 Act and the rules
thereunder).
6.2 In the event a termination notice is given by the Fund, all expenses
associated with movement of records and materials and conversion
thereof will be borne by the Fund.
7. MODIFICATIONS AND WAIVERS
-------------------------
No change, termination, modification, or waiver of any term or
condition of the Agreement shall be valid unless in writing signed by
each party. No such writing shall be effective as against the
Distributor unless said writing is executed by a Senior Vice President,
Executive Vice President or President of the Distributor. A party's
waiver of a breach of any term or condition in the Agreement shall not
be deemed a waiver of any subsequent breach of the same or another term
or condition.
8. NO PRESUMPTION AGAINST DRAFTER
------------------------------
The Distributor and the Fund have jointly participated in the
negotiation and drafting of this Agreement. The Agreement shall be
construed as if drafted jointly by the Fund and the Distributor, and no
presumptions arise favoring any party by virtue of the authorship of
any provision of this Agreement.
9. PUBLICITY
---------
Neither the Distributor nor the Fund shall release or publish news
releases, public announcements, advertising or other publicity relating
to this Agreement or to the transactions contemplated by it without
prior review and written approval of the other party; provided,
however, that either party may make such disclosures as are required by
legal, accounting or regulatory requirements after making reasonable
efforts in the circumstances to consult in advance with the other
party.
10. SEVERABILITY
------------
The parties intend every provision of this Agreement to be severable.
If a court of competent jurisdiction determines that any term or
provision is illegal or invalid for any reason, the illegality or
invalidity shall not affect the validity of the remainder of this
9
<PAGE> 10
Agreement. In such case, the parties shall in good faith modify or
substitute such provision consistent with the original intent of the
parties. Without limiting the generality of this paragraph, if a court
determines that any remedy stated in this Agreement has failed of its
essential purpose, then all other provisions of this Agreement,
including the limitations on liability and exclusion of damages, shall
remain fully effective.
11. FORCE MAJEURE
-------------
No party shall be liable for any default or delay in the performance of
its obligations under this Agreement if and to the extent such default
or delay is caused, directly or indirectly, by (i) fire, flood,
elements of nature or other acts of God; (ii) any outbreak or
escalation of hostilities, war, riots or civil disorders in any
country, (iii) any act or omission of the other party or any
governmental authority; (iv) any labor disputes (whether or not the
employees' demands are reasonable or within the party's power to
satisfy); or (v) nonperformance by a third party or any similar cause
beyond the reasonable control of such party, including without
limitation, failures or fluctuations in telecommunications or other
equipment. In any such event, the non-performing party shall be excused
from any further performance and observance of the obligations so
affected only for so long as such circumstances prevail and such party
continues to use commercially reasonable efforts to recommence
performance or observance as soon as practicable.
12. MISCELLANEOUS
-------------
12.1 Any notice or other instrument authorized or required by this Agreement
to be given in writing to the Fund or the Distributor shall be
sufficiently given if addressed to the party and received by it at its
office set forth below or at such other place as it may from time to
time designate in writing.
To the Fund:
New Covenant Funds
C/o Presbyterian Church (U.S.A.) Foundation
200 East Twelfth Street
Jeffersonville, Indiana 47103
Attention: Serge Bhachu, Esquire
To the Distributor:
First Data Distributors, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Attention: President
10
<PAGE> 11
with a copy to the Distributor's Chief Legal Officer
12.2 The laws of the Commonwealth of Massachusetts, excluding the laws on
conflicts of laws, and the applicable provisions of the 1940 Act shall
govern the interpretation, validity, and enforcement of this Agreement.
To the extent the provisions of Massachusetts law or the provisions
hereof conflict with the 1940 Act, the 1940 Act shall control. All
actions arising from or related to this Agreement shall be brought in
the state and federal courts sitting in the City of Boston, and the
Distributor and the Fund hereby submit themselves to the exclusive
jurisdiction of those courts
12.3 This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original and which collectively shall be
deemed to constitute only one instrument.
12.4 The captions of this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect.
12.5 This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and is not intended
to confer upon any other person any rights or remedies hereunder.
13. CONFIDENTIALITY
---------------
13.1 The parties agree that the Proprietary Information (defined below) and
the contents of this Agreement (collectively "Confidential
Information") are confidential information of the parties and their
respective licensers. The Fund and the Distributor shall exercise
reasonable care to safeguard the confidentiality of the Confidential
Information of the other. The Fund and the Distributor may each use the
Confidential Information only to exercise its rights or perform its
duties under this Agreement. The Fund and the Distributor shall not
duplicate, sell or disclose to others the Confidential Information of
the other, in whole or in part, without the prior written permission of
the other party. The Fund and the Distributor may, however, disclose
Confidential Information to its employees who have a need to know the
Confidential Information to perform work for the other, provided that
each shall use reasonable efforts to ensure that the Confidential
Information is not duplicated or disclosed by its employees in breach
of this Agreement. The Fund and the Distributor may also disclose the
Confidential Information to independent contractors, auditors and
professional advisors, provided they first agree in writing to be bound
by the confidentiality obligations substantially similar to this
Section 13. Notwithstanding the previous sentence, in no event shall
either the Fund or the Distributor disclose the Confidential
Information to any competitor of the other without specific, prior
written consent.
13.2 Proprietary Information means:
11
<PAGE> 12
(a) any data or information that is completely sensitive material, and
not generally known to the public, including, but not limited to,
information about product plans, marketing strategies, finance,
operations, customer relationships, customer profiles, sales estimates,
business plans, and internal performance results relating to the past,
present or future business activities of the Fund or the Distributor,
their respective subsidiaries and affiliated companies and the
customers, clients and suppliers of any of them;
(b) any scientific or technical information, design, process,
procedure, formula, or improvement that is commercially valuable and
secret in the sense that its confidentiality affords the Fund or the
Distributor a competitive advantage over its competitors: and
(c) all confidential or proprietary concepts, documentation, reports,
data, specifications, computer software, source code, object code, flow
charts, databases, inventions, know-how, show-how and trade secrets,
whether or not patentable or copyrightable.
13.3 Confidential Information includes, without limitation, all documents,
inventions, substances, engineering and laboratory notebooks, drawings,
diagrams, specifications, bills of material, equipment, prototypes and
models, and any other tangible manifestation of the foregoing of either
party which now exist or come into the control or possession of the
other.
13.4 The Fund acknowledges that breach of the restrictions on use,
dissemination or disclosure of any Confidential Information would
result in immediate and irreparable harm, and money damages would be
inadequate to compensate the Distributor for that harm. The Distributor
shall be entitled to equitable relief, in addition to all other
available remedies, to redress any such breach.
13.5 The obligations of confidentiality and restriction on use herein shall
not apply to any Confidential Information that a party proves:
(a) Was in the public domain prior to the date of this Agreement or
subsequently came into the public domain through no fault of such
party; or
(b) Was lawfully received by the party from a third party free of any
obligation of confidence to such third party; or
(c) Was already in the possession of the party prior to receipt
thereof, directly or indirectly, from the other party; or
(d) Is required to be disclosed in a judicial or administrative
proceeding after all reasonable legal remedies for maintaining such
information in confidence have been exhausted including, but not
limited to, giving the other party as much advance notice of the
possibility of such disclosure as practical so the other party may
attempt to stop such disclosure or obtain a protective order concerning
such disclosure; or
12
<PAGE> 13
(e) Is subsequently and independently developed by employees,
consultants or agents of the party without reference to the
Confidential Information disclosed under this Agreement.
14. ENTIRE AGREEMENT
----------------
This Agreement, including all Schedules hereto, constitutes the entire
agreement between the parties with respect to the subject matter hereof
and supersedes all prior and contemporaneous proposals, agreements,
contracts, representations, and understandings, whether written or
oral, between the parties with respect to the subject matter hereof.
15. BOARD MEMBER LIABILITY
----------------------
The Fund and the Distributor agree that the obligations of the Fund
under the Agreement shall not be binding upon any of the Board Members,
shareholders, nominees, officers, employees or agents, whether past,
present or future, of the Fund individually, but are binding only upon
the assets and property of the Fund, as provided in the Articles of
Incorporation. The execution and delivery of this Agreement have been
authorized by the Board Members of the Fund, and signed by an
authorized officer of the Fund, acting as such, and neither such
authorization by such Board Members nor such execution and delivery by
such officer shall be deemed to have been made by any of them or any
shareholder of the Fund individually or to impose any liability on any
of them or any shareholder of the Fund personally, but shall bind only
the assets and property of the Fund as provided in the Articles of
Incorporation.
13
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
NEW COVENANT FUNDS
By:_________________________
Name:_______________________
Title:________________________
FIRST DATA DISTRIBUTORS, INC.
By:_________________________
Name:_______________________
Title:________________________
14
<PAGE> 15
SCHEDULE A
----------
NAME OF PORTFOLIOS
New Covenant Growth Fund
New Covenant Income Fund
New Covenant Balanced Growth Fund
New Covenant Balanced Income Fund
S-1
<PAGE> 16
SCHEDULE B
----------
DISTRIBUTION SERVICES
Services shall include:
1. Preparation and execution of sales or servicing agreements
monitoring accruals
monitoring expenses
making disbursements for expenses and fees
2. Quarterly 12b-1 Reports to the Board
3. Literature review, recommendations and submission to the NASD
S-1
<PAGE> 1
Exhibit 23(g)
FORM OF AGREEMENT
CUSTODIAN AGREEMENT
-------------------
This Agreement between NEW COVENANT FUNDS a business trust organized
and existing under the laws of Delaware (the "FUND"), and STATE STREET BANK and
TRUST COMPANY, a Massachusetts trust company (the "CUSTODIAN"),
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Fund intends that this Agreement be applicable to four
series, New Covenant Growth Fund, New Covenant Income Fund, New Covenant
Balanced Growth Fund and New Covenant Balanced Income Fund (such series together
with all other series subsequently established by the Fund and made subject to
this Agreement in accordance with Section 18, be referred to herein as the
"PORTFOLIO(S)");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
SECTION 1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as the custodian of the assets of
the Portfolios of the Fund, including securities which the Fund, on behalf of
the applicable Portfolio desires to be held in places within the United States
("DOMESTIC SECURITIES") and securities it desires to be held outside the United
States ("FOREIGN SECURITIES"). The Fund on behalf of the Portfolio(s) agrees to
deliver to the Custodian all securities and cash of the Portfolios, and all
payments of income, payments of principal or capital distributions received by
it with respect to all securities owned by the Portfolio(s) from time to time,
and the cash consideration received by it for such new or treasury shares of
beneficial interest of the Fund representing interests in the Portfolios
("SHARES") as may be issued or sold from time to time. The Custodian shall not
be responsible for any property of a Portfolio held or received by the Portfolio
and not delivered to the Custodian. With respect to uncertificated shares (the
"UNDERLYING SHARES") of registered investment companies in the same "group of
investment companies" (as defined in Section 12(d)(1)(G)(ii) of the Investment
Company Act of 1940, as amended (the "1940 ACT")) (hereinafter sometimes
referred to as the "UNDERLYING PORTFOLIOS") the holding of confirmation
statements that identify the shares as being recorded in the Custodian's name on
behalf of the Portfolios will be deemed custody for purposes hereof.
Upon receipt of "PROPER INSTRUCTIONS" (as such term is defined in
Section 6 hereof), the Custodian shall on behalf of the applicable Portfolio(s)
from time to time employ one or more sub-custodians located in the United
States, but only in accordance with an applicable vote by the Board of Trustees
of the Fund (the "BOARD") on behalf of
<PAGE> 2
FORM OF AGREEMENT
the applicable Portfolio(s), and provided that the Custodian shall have no more
or less responsibility or liability to the Fund on account of any actions or
omissions of any sub-custodian so employed than any such sub-custodian has to
the Custodian. The Custodian may employ as sub-custodian for the Fund's foreign
securities on behalf of the applicable Portfolio(s) the foreign banking
institutions and foreign securities depositories designated in Schedules A and B
hereto but only in accordance with the applicable provisions of Sections 3 and
4.
SECTION 2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND
HELD BY THE CUSTODIAN IN THE UNITED STATES
SECTION 2.1 HOLDING SECURITIES. The Custodian shall hold and physically
segregate for the account of each Portfolio all non-cash property, to be held by
it in the United States including all domestic securities owned by such
Portfolio, other than (a) securities which are maintained pursuant to Section
2.8 in a clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the Treasury (each, a
"U.S. SECURITIES SYSTEM") and (b) commercial paper of an issuer for which State
Street Bank and Trust Company acts as issuing and paying agent ("DIRECT PAPER")
which is deposited and/or maintained in the Direct Paper System of the Custodian
(the "DIRECT PAPER SYSTEM") pursuant to Section 2.9; and (c) the Underlying
Shares owned by the Fund which are maintained pursuant to Section 2.10A in an
account with State Street Bank and Trust Company or such other entity which may
from time to time act as a transfer agent for the Underlying Portfolios and with
respect to which the Custodian is provided with Proper Instructions (the
"UNDERLYING TRANSFER AGENT").
SECTION 2.2 DELIVERY OF SECURITIES. The Custodian shall release and
deliver domestic securities owned by a Portfolio held by the Custodian or in a
U.S. Securities System account of the Custodian or in the Custodian's Direct
Paper book entry system account ("DIRECT PAPER SYSTEM ACCOUNT") or in an account
at the Underlying Transfer Agent, only upon receipt of Proper Instructions on
behalf of the applicable Portfolio, which may be continuing instructions when
deemed appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio
and receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Portfolio;
3) In the case of a sale effected through a U.S. Securities
System, in accordance with the provisions of Section 2.8
hereof;
2.
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FORM OF AGREEMENT
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the
name of the Portfolio or into the name of any nominee or
nominees of the Custodian or into the name or nominee name of
any agent appointed pursuant to Section 2.7 or into the name
or nominee name of any sub-custodian appointed pursuant to
Section 1; or for exchange for a different number of bonds,
certificates or other evidence representing the same aggregate
face amount or number of units; PROVIDED that, in any such
case, the new securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street delivery"
custom; provided that in any such case, the Custodian shall
have no responsibility or liability for any loss arising from
the delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to
be delivered to the Custodian;
10) For delivery in connection with any loans of securities made
by the Portfolio, BUT ONLY against receipt of adequate
collateral as agreed upon from time to time by the Custodian
and the Fund on behalf of the Portfolio, which may be in the
form of cash or obligations issued by the United States
government, its agencies or instrumentalities, except that in
connection with any loans for which collateral is to be
credited to the Custodian's account in the book-entry system
authorized by the U.S.
3.
<PAGE> 4
Department of the Treasury, the Custodian will not be held
liable or responsible for the delivery of securities owned by
the Portfolio prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowing by
the Fund on behalf of the Portfolio requiring a pledge of
assets by the Fund on behalf of the Portfolio, BUT ONLY
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "EXCHANGE ACT") and a member of The
National Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities
exchange, or of any similar organization or organizations,
regarding escrow or other arrangements in connection with
transactions by the Portfolio of the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian, and a futures commission merchant registered under
the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission ("CFTC")
and/or any contract market, or any similar organization or
organizations, regarding account deposits in connection with
transactions by the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent for the
Fund (the "TRANSFER AGENT") for delivery to such Transfer
Agent or to the holders of Shares in connection with
distributions in kind, as may be described from time to time
in the currently effective prospectus and statement of
additional information of the Fund related to the Portfolio
(the "PROSPECTUS"), in satisfaction of requests by holders of
Shares for repurchase or redemption;
15) In the case of a sale processed through the Underlying
Transfer Agent of Underlying Shares, in accordance with
Section 2.10A hereof; and
16) For any other proper purpose, BUT ONLY upon receipt of Proper
Instructions from the Fund on behalf of the applicable
Portfolio specifying the securities of the Portfolio to be
delivered, setting forth the purpose for which such delivery
is to be made, declaring such purpose to be a proper trust
purpose, and naming the person or persons to whom delivery of
such securities shall be made.
4.
<PAGE> 5
FORM OF AGREEMENT
SECTION 2.3 REGISTRATION OF SECURITIES. Domestic securities held by the
Custodian (other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the Portfolio
or of any nominee of the Custodian which nominee shall be assigned exclusively
to the Portfolio, UNLESS the Fund has authorized in writing the appointment of a
nominee to be used in common with other registered investment companies having
the same investment adviser as the Portfolio, or in the name or nominee name of
any agent appointed pursuant to Section 2.7 or in the name or nominee name of
any sub-custodian appointed pursuant to Section 1. All securities accepted by
the Custodian on behalf of the Portfolio under the terms of this Agreement shall
be in "street name" or other good delivery form. If, however, the Fund directs
the Custodian to maintain securities in "street name", the Custodian shall
utilize its best efforts only to timely collect income due the Fund on such
securities and to notify the Fund on a best efforts basis only of relevant
corporate actions including, without limitation, pendency of calls, maturities,
tender or exchange offers.
SECTION 2.4 BANK ACCOUNTS. The Custodian shall open and maintain a
separate bank account or accounts in the United States in the name of each
Portfolio of the Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Agreement, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by it from or for
the account of the Portfolio, other than cash maintained by the Portfolio in a
bank account established and used in accordance with Rule 17f-3 under the 1940
Act. Funds held by the Custodian for a Portfolio may be deposited by it to its
credit as Custodian in the Banking Department of the Custodian or in such other
banks or trust companies as it may in its discretion deem necessary or
desirable; PROVIDED, however, that every such bank or trust company shall be
qualified to act as a custodian under the 1940 Act and that each such bank or
trust company and the funds to be deposited with each such bank or trust company
shall on behalf of each applicable Portfolio be approved by vote of a majority
of the Board. Such funds shall be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian only in that capacity.
SECTION 2.5 COLLECTION OF INCOME. Subject to the provisions of Section
2.3, the Custodian shall collect on a timely basis all income and other payments
with respect to registered domestic securities held hereunder to which each
Portfolio shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all income and other
payments with respect to bearer domestic securities if, on the date of payment
by the issuer, such securities are held by the Custodian or its agent thereof
and shall credit such income, as collected, to such Portfolio's custodian
account. Without limiting the generality of the foregoing, the Custodian shall
detach and present for payment all coupons and other income items requiring
presentation as and when they become due and shall collect interest when due on
securities held hereunder. Income due each Portfolio on securities loaned
pursuant to the provisions of Section 2.2 (10) shall be the responsibility of
the Fund. The Custodian will have no duty or responsibility in connection
therewith, other than to provide the Fund with such information or data as
5.
<PAGE> 6
may be necessary to assist the Fund in arranging for the timely delivery to the
Custodian of the income to which the Portfolio is properly entitled.
SECTION 2.6 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions
on behalf of the applicable Portfolio, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall pay out monies of a
Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of
the Portfolio but only (a) against the delivery of such
securities or evidence of title to such options, futures
contracts or options on futures contracts to the Custodian (or
any bank, banking firm or trust company doing business in the
United States or abroad which is qualified under the 1940 Act
to act as a custodian and has been designated by the Custodian
as its agent for this purpose) registered in the name of the
Portfolio or in the name of a nominee of the Custodian
referred to in Section 2.3 hereof or in proper form for
transfer; (b) in the case of a purchase effected through a
U.S. Securities System, in accordance with the conditions set
forth in Section 2.8 hereof; (c) in the case of a purchase of
Underlying Shares, in accordance with the conditions set forth
in Section 2.10A hereof; (d) in the case of a purchase
involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.9; (e) in the case of
repurchase agreements entered into between the Fund on behalf
of the Portfolio and the Custodian, or another bank, or a
broker-dealer which is a member of NASD, (i) against delivery
of the securities either in certificate form or through an
entry crediting the Custodian's account at the Federal Reserve
Bank with such securities or (ii) against delivery of the
receipt evidencing purchase by the Portfolio of securities
owned by the Custodian along with written evidence of the
agreement by the Custodian to repurchase such securities from
the Portfolio or (f) for transfer to a time deposit account of
the Fund in any bank, whether domestic or foreign; such
transfer may be effected prior to receipt of a confirmation
from a broker and/or the applicable bank pursuant to Proper
Instructions from the Fund as defined herein;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued as set
forth in Section 5 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments
for the account of the Portfolio: interest, taxes, management,
accounting, transfer agent and
6.
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FORM OF AGREEMENT
legal fees, and operating expenses of the Fund whether or not
such expenses are to be in whole or part capitalized or
treated as deferred expenses;
5) For the payment of any dividends on Shares declared pursuant
to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, BUT ONLY upon receipt of Proper
Instructions from the Fund on behalf of the Portfolio
specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring such
purpose to be a proper trust purpose, and naming the person or
persons to whom such payment is to be made.
SECTION 2.7 APPOINTMENT OF AGENTS. The Custodian may at any time or
times in its discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the 1940 Act to act as a
custodian, as its agent to carry out such of the provisions of this Section 2 as
the Custodian may from time to time direct; PROVIDED, HOWEVER, that the
appointment of any agent shall not relieve the Custodian of its responsibilities
or liabilities hereunder. The Underlying Transfer Agent shall not be deemed an
agent or subcustodian of the Custodian for purposes of this Section 2.7 or any
other provision of this Agreement.
SECTION 2.8 DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS. The
Custodian may deposit and/or maintain securities owned by a Portfolio in a U.S.
Securities System subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a U.S.
Securities System provided that such securities are
represented in an account of the Custodian in the U.S.
Securities System (the "U.S. SECURITIES SYSTEM ACCOUNT") which
account shall not include any assets of the Custodian other
than assets held as a fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a U.S. Securities System
shall identify by book-entry those securities belonging to the
Portfolio;
3) The Custodian shall pay for securities purchased for the
account of the Portfolio upon (i) receipt of advice from the
U.S. Securities System that such securities have been
transferred to the U.S. Securities System Account, and (ii)
the making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of the
Portfolio. The
7.
<PAGE> 8
FORM OF AGREEMENT
Custodian shall transfer securities sold for the account of
the Portfolio upon (i) receipt of advice from the U.S.
Securities System that payment for such securities has been
transferred to the U.S. Securities System Account, and (ii)
the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the
Portfolio. Copies of all advices from the U.S. Securities
System of transfers of securities for the account of the
Portfolio shall identify the Portfolio, be maintained for the
Portfolio by the Custodian and be provided to the Fund at its
request. Upon request, the Custodian shall furnish the Fund on
behalf of the Portfolio confirmation of each transfer to or
from the account of the Portfolio in the form of a written
advice or notice and shall furnish to the Fund on behalf of
the Portfolio copies of daily transaction sheets reflecting
each day's transactions in the U.S. Securities System for the
account of the Portfolio;
4) The Custodian shall provide the Fund with any report
obtained by the Custodian on the U.S. Securities System's
accounting system, internal accounting control and procedures
for safeguarding securities deposited in the U.S. Securities
System;
5) [Reserved.];
6) Anything to the contrary in this Agreement notwithstanding,
the Custodian shall be liable to the Fund for the benefit of
the Portfolio for any loss or damage to the Portfolio
resulting from use of the U.S. Securities System by reason of
any negligence, misfeasance or misconduct of the Custodian or
any of its agents or of any of its or their employees or from
failure of the Custodian or any such agent to enforce
effectively such rights as it may have against the U.S.
Securities System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with
respect to any claim against the U.S. Securities System or any
other person which the Custodian may have as a consequence of
any such loss or damage if and to the extent that the
Portfolio has not been made whole for any such loss or damage.
SECTION 2.9 FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM.
The Custodian may deposit and/or maintain securities owned by a Portfolio in the
Direct Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper Instructions
from the Fund on behalf of the Portfolio;
8.
<PAGE> 9
FORM OF AGREEMENT
2) The Custodian may keep securities of the Portfolio in the
Direct Paper System only if such securities are represented in
the Direct Paper System Account, which account shall not
include any assets of the Custodian other than assets held as
a fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System
shall identify by book-entry those securities belonging to the
Portfolio;
4) The Custodian shall pay for securities purchased for the
account of the Portfolio upon the making of an entry on the
records of the Custodian to reflect such payment and transfer
of securities to the account of the Portfolio. The Custodian
shall transfer securities sold for the account of the
Portfolio upon the making of an entry on the records of the
Custodian to reflect such transfer and receipt of payment for
the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the account
of the Portfolio, in the form of a written advice or notice,
of Direct Paper on the next business day following such
transfer and shall furnish to the Fund on behalf of the
Portfolio copies of daily transaction sheets reflecting each
day's transaction in the Direct Paper System for the account
of the Portfolio;
6) The Custodian shall provide the Fund on behalf of the
Portfolio with any report on its system of internal accounting
control as the Fund may reasonably request from time to time.
SECTION 2.10 SEGREGATED ACCOUNT. The Custodian shall upon receipt of
Proper Instructions on behalf of each applicable Portfolio establish and
maintain a segregated account or accounts for and on behalf of each such
Portfolio, into which account or accounts may be transferred cash and/or
securities, including securities maintained in an account by the Custodian
pursuant to Section 2.8 hereof, (i) in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Exchange Act and a member of the NASD (or any
futures commission merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing Corporation and of
any registered national securities exchange (or the CFTC or any registered
contract market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the Portfolio,
(ii) for purposes of segregating cash or government securities in connection
with options purchased, sold or written by the Portfolio or commodity futures
contracts or options thereon purchased or sold by the Portfolio, (iii) for the
purposes of compliance by the Portfolio with the procedures required by
Investment Company Act Release No. 10666,
9.
<PAGE> 10
FORM OF AGREEMENT
or any subsequent release of the SEC, or interpretative opinion of the staff of
the SEC, relating to the maintenance of segregated accounts by registered
investment companies and (iv) for other proper trust purposes, but only, in the
case of clause (iv), upon receipt of Proper Instructions from the Fund on behalf
of the applicable Portfolio, setting forth the purpose or purposes of such
segregated account and declaring such purpose(s) to be a proper trust purpose.
SECTION 2.10A DEPOSIT OF FUND ASSETS WITH THE UNDERLYING TRANSFER
AGENT. Underlying Shares shall be deposited and/or maintained in an account or
accounts maintained with the Underlying Transfer Agent. The Underlying Transfer
Agent shall be deemed to be acting as if it is a "securities depository" for
purposes of Rule 17f-4 under the 1940 Act. The Fund hereby directs the Custodian
to deposit and/or maintain such securities with the Underlying Transfer Agent,
subject to the following provisions:
1) The Custodian shall keep Underlying Shares owned by a
Portfolio with the Underlying Transfer Agent provided that
such securities are maintained in an account or accounts on
the books and records of the Underlying Transfer Agent in the
name of the Custodian as custodian for the Portfolio.
2) The records of the Custodian with respect to Underlying Shares
which are maintained with the Underlying Transfer Agent shall
identify by book-entry those Underlying Shares belonging to
each Portfolio;
3) The Custodian shall pay for Underlying Shares purchased for
the account of a Portfolio upon (i) receipt of advice from the
Portfolio's investment adviser that such Underlying Shares
have been purchased and will be transferred to the account of
the Custodian, on behalf of the Portfolio, on the books and
records of the Underlying Transfer Agent, and (ii) the making
of an entry on the records of the Custodian to reflect such
payment and transfer for the account of the Portfolio. The
Custodian shall receive confirmation from the Underlying
Transfer Agent of the purchase of such securities and the
transfer of such securities to the Custodian's account with
the Underlying Transfer Agent only after such payment is made.
The Custodian shall transfer Underlying Shares redeemed for
the account of a Portfolio (i) upon receipt of an advice from
the Portfolio's investment adviser that such securities have
been redeemed and that payment for such securities will be
transferred to the Custodian and (ii) the making of an entry
on the records of the Custodian to reflect such transfer and
payment for the account of the Portfolio. The Custodian will
receive confirmation from the Underlying Transfer Agent of the
redemption of such securities and payment therefor only after
such securities are redeemed. Copies of all advices from the
Portfolio's investment adviser of purchases and sales of
Underlying Shares for the account of the Portfolio shall
identify the
10.
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FORM OF AGREEMENT
Portfolio, be maintained for the Portfolio by the Custodian,
and be provided to the investment adviser at its request;
4) The Custodian shall be not be liable to the Fund or any
Portfolio for any loss or damage to the Fund or any Portfolio
resulting from maintenance of Underlying Shares with
Underlying Transfer Agent except for losses resulting directly
from the negligence, misfeasance or misconduct of the
Custodian or any of its agents or of any of its or their
employees.
SECTION 2.11 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian
shall execute ownership and other certificates and affidavits for all federal
and state tax purposes in connection with receipt of income or other payments
with respect to domestic securities of each Portfolio held by it and in
connection with transfers of securities.
SECTION 2.12 PROXIES. The Custodian shall, with respect to the domestic
securities held hereunder, cause to be promptly executed by the registered
holder of such securities, if the securities are registered otherwise than in
the name of the Portfolio or a nominee of the Portfolio, all proxies, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Portfolio such proxies, all proxy soliciting materials
and all notices relating to such securities.
SECTION 2.13 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Subject
to the provisions of Section 2.3, the Custodian shall transmit promptly to the
Fund for each Portfolio all written information (including, without limitation,
pendency of calls and maturities of domestic securities and expirations of
rights in connection therewith and notices of exercise of call and put options
written by the Fund on behalf of the Portfolio and the maturity of futures
contracts purchased or sold by the Portfolio) received by the Custodian from
issuers of the securities being held for the Portfolio. With respect to tender
or exchange offers, the Custodian shall transmit promptly to the Portfolio all
written information received by the Custodian from issuers of the securities
whose tender or exchange is sought and from the party (or his agents) making the
tender or exchange offer. If the Portfolio desires to take action with respect
to any tender offer, exchange offer or any other similar transaction, the
Portfolio shall notify the Custodian at least three business days prior to the
date on which the Custodian is to take such action.
SECTION 3. THE CUSTODIAN AS FOREIGN CUSTODY MANAGER OF THE PORTFOLIOS
SECTION 3.1 DEFINITIONS. The following capitalized terms shall have the
indicated meanings:
"COUNTRY RISK" means all factors reasonably related to the systemic risk of
holding Foreign Assets in a particular country including, but not limited to,
such country's political environment; economic and financial infrastructure
(including any Mandatory
11.
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FORM OF AGREEMENT
Securities Depositories operating in the country); prevailing or developing
custody and settlement practices; and laws and regulations applicable to the
safekeeping and recovery of Foreign Assets held in custody in that country.
"ELIGIBLE FOREIGN CUSTODIAN" has the meaning set forth in section (a)(1) of Rule
17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as
defined in Rule 17f-5), a bank holding company meeting the requirements of an
Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate
action of the SEC), or a foreign branch of a Bank (as defined in Section 2(a)(5)
of the 1940 Act) meeting the requirements of a custodian under Section 17(f) of
the 1940 Act, except that the term does not include Mandatory Securities
Depositories.
"FOREIGN ASSETS" means any of the Portfolios' investments (including foreign
currencies) for which the primary market is outside the United States and such
cash and cash equivalents as are reasonably necessary to effect the Portfolios'
transactions in such investments.
"FOREIGN CUSTODY MANAGER" has the meaning set forth in section (a)(2) of Rule
17f-5.
"MANDATORY SECURITIES DEPOSITORY" means a foreign securities depository or
clearing agency that, either as a legal or practical matter, must be used if the
Fund, on the Portfolios' behalf, determines to place Foreign Assets in a country
outside the United States (i) because required by law or regulation; (ii)
because securities cannot be withdrawn from such foreign securities depository
or clearing agency; or (iii) because maintaining or effecting trades in
securities outside the foreign securities depository or clearing agency is not
consistent with prevailing or developing custodial or market practices.
SECTION 3.2 DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER. The
Fund, by resolution adopted by the Board, hereby delegates to the Custodian with
respect to the Portfolios, subject to Section (b) of Rule 17f-5, the
responsibilities set forth in this Section 3 with respect to Foreign Assets of
the Portfolios held outside the United States, and the Custodian hereby accepts
such delegation, as Foreign Custody Manager with respect to the Portfolios.
SECTION 3.3 COUNTRIES COVERED. The Foreign Custody Manager shall be
responsible for performing the delegated responsibilities defined below only
with respect to the countries and custody arrangements for each such country
listed on Schedule A to this Agreement, which list of countries may be amended
from time to time by the Fund with the Agreement of the Foreign Custody Manager.
The Foreign Custody Manager shall list on Schedule A the Eligible Foreign
Custodians selected by the Foreign Custody Manager to maintain the assets of the
Portfolios, which list of Eligible Foreign Custodians may be amended from time
to time in the sole discretion of the Foreign Custody Manager. Mandatory
Securities Depositories are listed on Schedule B to this
12.
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FORM OF AGREEMENT
Contract, which Schedule B may be amended from time to time by the Foreign
Custody Manager. The Foreign Custody Manager will provide amended versions of
Schedules A and B in accordance with Section 3.7 hereof.
Upon the receipt by the Foreign Custody Manager of Proper Instructions
to open an account or to place or maintain Foreign Assets in a country listed on
Schedule A, and the fulfillment by the Fund on behalf of the Portfolios of the
applicable account opening requirements for such country, the Foreign Custody
Manager shall be deemed to have been delegated by the Board on behalf of the
Portfolios responsibility as Foreign Custody Manager with respect to that
country and to have accepted such delegation. Following the receipt of Proper
Instructions directing the Foreign Custody Manager to close the account of a
Portfolio with the Eligible Foreign Custodian selected by the Foreign Custody
Manager in a designated country, the delegation by the Board on behalf of the
Portfolios to the Custodian as Foreign Custody Manager for that country shall be
deemed to have been withdrawn and the Custodian shall immediately cease to be
the Foreign Custody Manager of the Portfolios with respect to that country.
The Foreign Custody Manager may withdraw its acceptance of delegated
responsibilities with respect to a designated country upon written notice to the
Fund. Thirty days (or such longer period as to which the parties agree in
writing) after receipt of any such notice by the Fund, the Custodian shall have
no further responsibility as Foreign Custody Manager to the Fund with respect to
the country as to which the Custodian's acceptance of delegation is withdrawn.
SECTION 3.4 SCOPE OF DELEGATED RESPONSIBILITIES.
3.4.1. SELECTION OF ELIGIBLE FOREIGN CUSTODIANS. Subject to the
provisions of this Section 3, the Portfolios' Foreign Custody Manager may place
and maintain the Foreign Assets in the care of the Eligible Foreign Custodian
selected by the Foreign Custody Manager in each country listed on Schedule A, as
amended from time to time. In performing its delegated responsibilities as
Foreign Custody Manager to place or maintain Foreign Assets with an Eligible
Foreign Custodian, the Foreign Custody Manager shall determine that the Foreign
Assets will be subject to reasonable care, based on the standards applicable to
custodians in the country in which the Foreign Assets will be held by that
Eligible Foreign Custodian, after considering all factors relevant to the
safekeeping of such assets, including, without limitation the factors specified
in Rule 17f-5(c)(1).
3.4.2. CONTRACTS WITH ELIGIBLE FOREIGN CUSTODIANS. The Foreign Custody
Manager shall determine that the contract (or the rules or established practices
or procedures in the case of an Eligible Foreign Custodian that is a foreign
securities depository or clearing agency) governing the foreign custody
arrangements with each Eligible Foreign Custodian selected by the Foreign
Custody Manager will satisfy the requirements of Rule 17f-5(c)(2).
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3.4.3. MONITORING. In each case in which the Foreign Custody Manager
maintains Foreign Assets with an Eligible Foreign Custodian selected by the
Foreign Custody Manager, the Foreign Custody Manager shall establish a system to
monitor (i) the appropriateness of maintaining the Foreign Assets with such
Eligible Foreign Custodian and (ii) the contract governing the custody
arrangements established by the Foreign Custody Manager with the Eligible
Foreign Custodian (or the rules or established practices and procedures in the
case of an Eligible Foreign Custodian selected by the Foreign Custody Manager
which is a foreign securities depository or clearing agency that is not a
Mandatory Securities Depository). In the event the Foreign Custody Manager
determines that the custody arrangements with an Eligible Foreign Custodian it
has selected are no longer appropriate, the Foreign Custody Manager shall notify
the Board in accordance with Section 3.7 hereunder.
SECTION 3.5 GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY. For
purposes of this Section 3, the Board shall be deemed to have considered and
determined to accept such Country Risk as is incurred by placing and maintaining
the Foreign Assets in each country for which the Custodian is serving as Foreign
Custody Manager of the Portfolios. The Fund, on behalf of the Portfolios, and
the Board shall be deemed to be monitoring on a continuing basis such Country
Risk to the extent that the Board considers necessary or appropriate. The Fund
and the Custodian each expressly acknowledge that the Foreign Custody Manager
shall not be delegated any responsibilities under this Section 3 with respect to
Mandatory Securities Depositories.
SECTION 3.6 STANDARD OF CARE AS FOREIGN CUSTODY MANAGER OF THE
PORTFOLIOS. In performing the responsibilities delegated to it, the Foreign
Custody Manager agrees to exercise reasonable care, prudence and diligence such
as a person having responsibility for the safekeeping of assets of management
investment companies registered under the 1940 Act would exercise.
SECTION 3.7 REPORTING REQUIREMENTS. The Foreign Custody Manager shall
report the withdrawal of the Foreign Assets from an Eligible Foreign Custodian
and the placement of such Foreign Assets with another Eligible Foreign Custodian
by providing to the Board amended Schedules A or B at the end of the calendar
quarter in which an amendment to either Schedule has occurred. The Foreign
Custody Manager shall make written reports notifying the Board of any other
material change in the foreign custody arrangements of the Portfolios described
in this Section 3 after the occurrence of the material change.
SECTION 3.8 REPRESENTATIONS WITH RESPECT TO RULE 17f-5. The Foreign
Custody Manager represents to the Fund that it is a U.S. Bank as defined in
section (a)(7) of Rule 17f-5. The Fund represents to the Custodian that the
Board has determined that it is reasonable for the Board to rely on the
Custodian to perform the responsibilities
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delegated pursuant to this Agreement to the Custodian as the Foreign Custody
Manager of the Portfolios.
SECTION 3.9 EFFECTIVE DATE AND TERMINATION OF THE CUSTODIAN AS FOREIGN
CUSTODY MANAGER. The Board's delegation to the Custodian as Foreign Custody
Manager of the Portfolios shall be effective as of the date of execution of this
Agreement and shall remain in effect until terminated at any time, without
penalty, by written notice from the terminating party to the non-terminating
party. Termination will become effective thirty (30) days after receipt by the
non-terminating party of such notice. The provisions of Section 3.3 hereof shall
govern the delegation to and termination of the Custodian as Foreign Custody
Manager of the Portfolios with respect to designated countries.
SECTION 4. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE PORTFOLIOS
HELD OUTSIDE OF THE UNITED STATES
SECTION 4.1 DEFINITIONS. Capitalized terms in this Section 4 shall have
the following meanings:
"FOREIGN SECURITIES SYSTEM" means either a clearing agency or a securities
depository listed on Schedule A hereto or a Mandatory Securities Depository
listed on Schedule B hereto.
"FOREIGN SUB-CUSTODIAN" means a foreign banking institution serving as an
Eligible Foreign Custodian.
SECTION 4.2 HOLDING SECURITIES. The Custodian shall identify on its
books as belonging to the Portfolios the foreign securities held by each Foreign
Sub-Custodian or Foreign Securities System. The Custodian may hold foreign
securities for all of its customers, including the Portfolios, with any Foreign
Sub-Custodian in an account that is identified as belonging to the Custodian for
the benefit of its customers, PROVIDED HOWEVER, that (i) the records of the
Custodian with respect to foreign securities of the Portfolios which are
maintained in such account shall identify those securities as belonging to the
Portfolios and (ii), to the extent permitted and customary in the market in
which the account is maintained, the Custodian shall require that securities so
held by the Foreign Sub-Custodian be held separately from any assets of such
Foreign Sub-Custodian or of other customers of such Foreign Sub-Custodian.
SECTION 4.3 FOREIGN SECURITIES SYSTEMS. Foreign securities shall be
maintained in a Foreign Securities System in a designated country only through
arrangements implemented by the Foreign Sub-Custodian in such country pursuant
to the terms of this Agreement.
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SECTION 4.4 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.
4.4.1. DELIVERY OF FOREIGN SECURITIES. The Custodian or a Foreign
Sub-Custodian shall release and deliver foreign securities of the Portfolios
held by such Foreign Sub-Custodian, or in a Foreign Securities System account,
only upon receipt of Proper Instructions, which may be continuing instructions
when deemed appropriate by the parties, and only in the following cases:
(i) upon the sale of such foreign securities for the Portfolios in
accordance with commercially reasonable market practice in the
country where such foreign securities are held or traded,
including, without limitation: (A) delivery against
expectation of receiving later payment; or (B) in the case of
a sale effected through a Foreign Securities System in
accordance with the rules governing the operation of the
Foreign Securities System;
(ii) in connection with any repurchase agreement related to
foreign securities;
(iii) to the depository agent in connection with tender or other
similar offers for foreign securities of the Portfolios;
(iv) to the issuer thereof or its agent when such foreign
securities are called, redeemed, retired or otherwise become
payable;
(v) to the issuer thereof, or its agent, for transfer into the
name of the Custodian (or the name of the respective Foreign
Sub-Custodian or of any nominee of the Custodian or such
Foreign Sub-Custodian) or for exchange for a different number
of bonds, certificates or other evidence representing the same
aggregate face amount or number of units;
(vi) to brokers, clearing banks or other clearing agents for
examination or trade execution in accordance with market
custom; PROVIDED that in any such case the Foreign
Sub-Custodian shall have no responsibility or liability for
any loss arising from the delivery of such securities prior to
receiving payment for such securities except as may arise from
the Foreign Sub-Custodian's own negligence or willful
misconduct;
(vii) for exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
(viii) in the case of warrants, rights or similar foreign securities,
the surrender thereof in the exercise of such warrants, rights
or similar securities or the
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surrender of interim receipts or temporary securities for
definitive securities;
(ix) for delivery as security in connection with any borrowing by
the Portfolios requiring a pledge of assets by the Portfolios;
(x) in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
(xi) in connection with the lending of foreign securities; and
(xii) for any other proper purpose, BUT ONLY upon receipt of Proper
Instructions specifying the foreign securities to be
delivered, setting forth the purpose for which such delivery
is to be made, declaring such purpose to be a proper trust
purpose, and naming the person or persons to whom delivery of
such securities shall be made.
4.4.2. PAYMENT OF PORTFOLIO MONIES. Upon receipt of Proper
Instructions, which may be continuing instructions when deemed appropriate by
the parties, the Custodian shall pay out, or direct the respective Foreign
Sub-Custodian or the respective Foreign Securities System to pay out, monies of
a Portfolio in the following cases only:
(i) upon the purchase of foreign securities for the Portfolio,
unless otherwise directed by Proper Instructions, by (A)
delivering money to the seller thereof or to a dealer therefor
(or an agent for such seller or dealer) against expectation of
receiving later delivery of such foreign securities; or (B) in
the case of a purchase effected through a Foreign Securities
System, in accordance with the rules governing the operation
of such Foreign Securities System;
(ii) in connection with the conversion, exchange or surrender of
foreign securities of the Portfolio;
(iii) for the payment of any expense or liability of the Portfolio,
including but not limited to the following payments: interest,
taxes, investment advisory fees, transfer agency fees, fees
under this Agreement, legal fees, accounting fees, and other
operating expenses;
(iv) for the purchase or sale of foreign exchange or foreign
exchange contracts for the Portfolio, including transactions
executed with or through the Custodian or its Foreign
Sub-Custodians;
(v) in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
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(vi) in connection with the borrowing or lending of foreign
securities; and
(vii) for any other proper purpose, BUT ONLY upon receipt of Proper
Instructions specifying the amount of such payment, setting
forth the purpose for which such payment is to be made,
declaring such purpose to be a proper trust purpose, and
naming the person or persons to whom such payment is to be
made.
4.4.3. MARKET CONDITIONS. Notwithstanding any provision of this
Agreement to the contrary, settlement and payment for Foreign Assets received
for the account of the Portfolios and delivery of Foreign Assets maintained for
the account of the Portfolios may be effected in accordance with the customary
established securities trading or processing practices and procedures in the
country or market in which the transaction occurs, including, without
limitation, delivering Foreign Assets to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer) with the expectation of
receiving later payment for such Foreign Assets from such purchaser or dealer.
The Custodian shall provide to the Board the information with respect
to custody and settlement practices in countries in which the Custodian employs
a Foreign Sub-Custodian, including without limitation information relating to
Foreign Securities Systems, described on Schedule C hereto at the time or times
set forth on such Schedule. The Custodian may revise Schedule C from time to
time, provided that no such revision shall result in the Board being provided
with substantively less information than had been previously provided hereunder.
SECTION 4.5 REGISTRATION OF FOREIGN SECURITIES. The foreign securities
maintained in the custody of a Foreign Sub-Custodian (other than bearer
securities) shall be registered in the name of the applicable Portfolio or in
the name of the Custodian or in the name of any Foreign Sub-Custodian or in the
name of any nominee of the foregoing, and the Fund on behalf of such Portfolio
agrees to hold any such nominee harmless from any liability as a holder of
record of such foreign securities. The Custodian or a Foreign Sub-Custodian
shall not be obligated to accept securities on behalf of a Portfolio under the
terms of this Agreement unless the form of such securities and the manner in
which they are delivered are in accordance with reasonable market practice.
SECTION 4.6 BANK ACCOUNTS. The Custodian shall identify on its books as
belonging to the Fund cash (including cash denominated in foreign currencies)
deposited with the Custodian. Where the Custodian is unable to maintain, or
market practice does not facilitate the maintenance of, cash on the books of the
Custodian, a bank account or bank accounts opened and maintained outside the
United States on behalf of a Portfolio with a Foreign Sub-Custodian shall be
subject only to draft or order by the Custodian or such Foreign Sub-Custodian,
acting pursuant to the terms of this Agreement to hold cash received by or from
or for the account of the Portfolio.
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SECTION 4.7 COLLECTION OF INCOME. The Custodian shall use reasonable
commercial efforts to collect all income and other payments with respect to the
Foreign Assets held hereunder to which the Portfolios shall be entitled and
shall credit such income, as collected, to the applicable Portfolio. In the
event that extraordinary measures are required to collect such income, the Fund
and the Custodian shall consult as to such measures and as to the compensation
and expenses of the Custodian relating to such measures.
SECTION 4.8 SHAREHOLDER RIGHTS. With respect to the foreign securities
held pursuant to this Agreement, the Custodian will use reasonable commercial
efforts to facilitate the exercise of voting and other shareholder rights,
subject always to the laws, regulations and practical constraints that may exist
in the country where such securities are issued. The Fund acknowledges that
local conditions, including lack of regulation, onerous procedural obligations,
lack of notice and other factors may have the effect of severely limiting the
ability of the Fund to exercise shareholder rights.
SECTION 4.9 COMMUNICATIONS RELATING TO FOREIGN SECURITIES. The
Custodian shall transmit promptly to the Fund written information (including,
without limitation, pendency of calls and maturities of foreign securities and
expirations of rights in connection therewith) received by the Custodian via the
Foreign Sub-Custodians from issuers of the foreign securities being held for the
account of the Portfolios. With respect to tender or exchange offers, the
Custodian shall transmit promptly to the Fund written information so received by
the Custodian from issuers of the foreign securities whose tender or exchange is
sought or from the party (or its agents) making the tender or exchange offer.
The Custodian shall not be liable for any untimely exercise of any tender,
exchange or other right or power in connection with foreign securities or other
property of the Portfolios at any time held by it unless (i) the Custodian or
the respective Foreign Sub-Custodian is in actual possession of such foreign
securities or property and (ii) the Custodian receives Proper Instructions with
regard to the exercise of any such right or power, and both (i) and (ii) occur
at least three business days prior to the date on which the Custodian is to take
action to exercise such right or power
SECTION 4.10 LIABILITY OF FOREIGN SUB-CUSTODIANS AND FOREIGN SECURITIES
SYSTEMS. Each agreement pursuant to which the Custodian employs as a Foreign
Sub-Custodian shall, to the extent possible, require the Foreign Sub-Custodian
to exercise reasonable care in the performance of its duties and, to the extent
possible, to indemnify, and hold harmless, the Custodian from and against any
loss, damage, cost, expense, liability or claim arising out of or in connection
with the Foreign Sub-Custodian's performance of such obligations. At the Fund's
election, the Portfolios shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims against a Foreign Sub-Custodian as a
consequence of any such loss, damage, cost, expense, liability or claim if and
to the extent that the Portfolios have not been made whole for any such loss,
damage, cost, expense, liability or claim.
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SECTION 4.11 TAX LAW. The Custodian shall have no responsibility or
liability for any obligations now or hereafter imposed on the Fund, the
Portfolios or the Custodian as custodian of the Portfolios by the tax law of the
United States or of any state or political subdivision thereof. It shall be the
responsibility of the Fund to notify the Custodian of the obligations imposed on
the Fund with respect to the Portfolios or the Custodian as custodian of the
Portfolios by the tax law of countries other than those mentioned in the above
sentence, including responsibility for withholding and other taxes, assessments
or other governmental charges, certifications and governmental reporting. The
sole responsibility of the Custodian with regard to such tax law shall be to use
reasonable efforts to assist the Fund with respect to any claim for exemption or
refund under the tax law of countries for which the Fund has provided such
information.
SECTION 4.12 CONFLICT. If the Custodian is delegated the
responsibilities of Foreign Custody Manager pursuant to the terms of Section 3
hereof, in the event of any conflict between the provisions of Sections 3 and 4
hereof, the provisions of Section 3 shall prevail.
SECTION 5. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES
The Custodian shall receive from the distributor for the Shares or from
the Transfer Agent and deposit into the account of the appropriate Portfolio
such payments as are received for Shares thereof issued or sold from time to
time by the Fund. The Custodian will provide timely notification to the Fund on
behalf of each such Portfolio and the Transfer Agent of any receipt by it of
payments for Shares of such Portfolio.
From such funds as may be available for the purpose, the Custodian
shall, upon receipt of instructions from the Transfer Agent, make funds
available for payment to holders of Shares who have delivered to the Transfer
Agent a request for redemption or repurchase of their Shares. In connection with
the redemption or repurchase of Shares, the Custodian is authorized upon receipt
of instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares, the Custodian shall honor checks drawn on the Custodian
by a holder of Shares, which checks have been furnished by the Fund to the
holder of Shares, when presented to the Custodian in accordance with such
procedures and controls as are mutually agreed upon from time to time between
the Fund and the Custodian.
SECTION 6. PROPER INSTRUCTIONS
Proper Instructions as used throughout this Agreement means a writing
signed or initialed by one or more person or persons as the Board shall have
from time to time
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authorized. Each such writing shall set forth the specific transaction or type
of transaction involved, including a specific statement of the purpose for which
such action is requested. Oral instructions will be considered Proper
Instructions if the Custodian reasonably believes them to have been given by a
person authorized to give such instructions with respect to the transaction
involved. The Fund shall cause all oral instructions to be confirmed in writing.
Proper Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Fund and the
Custodian agree to security procedures, including but not limited to, the
security procedures selected by the Fund in the Funds Transfer Addendum attached
hereto. For purposes of this Section, Proper Instructions shall include
instructions received by the Custodian pursuant to any three-party agreement
which requires a segregated asset account in accordance with Section 2.10.
SECTION 7. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Agreement, provided that all such payments
shall be accounted for to the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Portfolio,
checks, drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property
of the Portfolio except as otherwise directed by the Board.
SECTION 8. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the Fund.
The Custodian may receive and accept a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Fund ("CERTIFIED RESOLUTION") as
conclusive evidence (a) of the authority of any person to act in accordance with
such resolution or (b) of any determination or of any action by
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the Board as described in such resolution, and such resolution may be considered
as in full force and effect until receipt by the Custodian of written notice to
the contrary.
SECTION 9. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND
CALCULATION OF NET ASSET VALUE AND NET INCOME
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board to keep the books of account of
each Portfolio and/or compute the net asset value per Share of the outstanding
Shares or, if directed in writing to do so by the Fund on behalf of the
Portfolio, shall itself keep such books of account and/or compute such net asset
value per Share. If so directed, the Custodian shall also calculate daily the
net income of the Portfolio as described in the Prospectus and shall advise the
Fund and the Transfer Agent daily of the total amounts of such net income and,
if instructed in writing by an officer of the Fund to do so, shall advise the
Transfer Agent periodically of the division of such net income among its various
components. The Fund acknowledges and agrees that, with respect to investments
maintained with the Underlying Transfer Agent, the Underlying Transfer Agent is
the sole source of information on the number of shares of a fund held by it on
behalf of a Portfolio and that the Custodian has the right to rely on holdings
information furnished by the Underlying Transfer Agent to the Custodian in
performing its duties under this Agreement, including without limitation, the
duties set forth in this Section 9 and in Section 10 hereof; provided, however,
that the Custodian shall be obligated to reconcile information as to purchases
and sales of Underlying Shares contained in trade instructions and confirmations
received by the Custodian and to report promptly any discrepancies to the
Underlying Transfer Agent. The calculations of the net asset value per Share and
the daily income of each Portfolio shall be made at the time or times described
from time to time in the Prospectus.
SECTION 10. RECORDS
The Custodian shall with respect to each Portfolio create and maintain
all records relating to its activities and obligations under this Agreement in
such manner as will meet the obligations of the Fund under the 1940 Act, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder.
All such records shall be the property of the Fund and shall at all times during
the regular business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Fund and employees and agents of
the SEC. The Custodian shall, at the Fund's request, supply the Fund with a
tabulation of securities owned by each Portfolio and held by the Custodian and
shall, when requested to do so by the Fund and for such compensation as shall be
agreed upon between the Fund and the Custodian, include certificate numbers in
such tabulations.
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SECTION 11. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Fund on behalf
of each applicable Portfolio may from time to time request, to obtain from year
to year favorable opinions from the Fund's independent accountants with respect
to its activities hereunder in connection with the preparation of the Fund's
Form N-1A, and Form N-SAR or other annual reports to the SEC and with respect to
any other requirements thereof.
SECTION 12. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund, on behalf of each of the
Portfolios at such times as the Fund may reasonably require, with reports by
independent public accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, futures contracts and
options on futures contracts, including securities deposited and/or maintained
in a U.S. Securities System or a Foreign Securities System, relating to the
services provided by the Custodian under this Agreement; such reports, shall be
of sufficient scope and in sufficient detail, as may reasonably be required by
the Fund to provide reasonable assurance that any material inadequacies would be
disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
SECTION 13. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund on behalf of each applicable Portfolio and the Custodian.
SECTION 14. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Agreement and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Agreement,
but shall be kept indemnified by and shall be without liability to the Fund for
any action taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel (who may be counsel for
the Fund) on all matters, and shall be without
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FORM OF AGREEMENT
liability for any action reasonably taken or omitted pursuant to such advice.
The Custodian shall be without liability to the Fund and the Portfolios for any
loss, liability, claim or expense resulting from or caused by anything which is
(A) part of Country Risk (as defined in Section 3 hereof), including without
limitation nationalization, expropriation, currency restrictions, or acts of
war, revolution, riots or terrorism, or (B) part of the "prevailing country
risk" of the Portfolios, as such term is used in SEC Release Nos. IC-22658;
IS-1080 (May 12, 1997) or as such term or other similar terms are now or in the
future interpreted by the SEC or by the staff of the Division of Investment
Management thereof.
Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a sub-custodian or agent,
the Custodian shall be without liability to the Fund for any loss, liability,
claim or expense resulting from or caused by; (i) events or circumstances beyond
the reasonable control of the Custodian or any sub-custodian or Securities
System or any agent or nominee of any of the foregoing, including, without
limitation, the interruption, suspension or restriction of trading on or the
closure of any securities market, power or other mechanical or technological
failures or interruptions, computer viruses or communications disruptions, work
stoppages, natural disasters, or other similar events or acts; (ii) errors by
the Fund or the Investment Advisor in their instructions to the Custodian
provided such instructions have been in accordance with this Agreement; (iii)
the insolvency of or acts or omissions by a Securities System; (iv) any delay or
failure of any broker, agent or intermediary, central bank or other commercially
prevalent payment or clearing system to deliver to the Custodian's sub-custodian
or agent securities purchased or in the remittance or payment made in connection
with securities sold; (v) any delay or failure of any company, corporation, or
other body in charge of registering or transferring securities in the name of
the Custodian, the Fund, the Custodian's sub-custodians, nominees or agents or
any consequential losses arising out of such delay or failure to transfer such
securities including non-receipt of bonus, dividends and rights and other
accretions or benefits; (vi) delays or inability to perform its duties due to
any disorder in market infrastructure with respect to any particular security or
Securities System; and (vii) any provision of any present or future law or
regulation or order of the United States of America, or any state thereof, or
any other country, or political subdivision thereof or of any court of competent
jurisdiction.
The Custodian shall be liable for the acts or omissions of a Foreign
Sub-Custodian (as defined in Section 4 hereof) to the same extent as set forth
with respect to sub-custodians generally in this Agreement.
If the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Fund or the Portfolio being liable for the payment
of money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the
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Custodian to take such action, shall provide indemnity to the Custodian in an
amount and form satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, foreign exchange contracts and assumed settlement) or
in the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Agreement, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the applicable Portfolio shall
be security therefor and should the Fund fail to repay the Custodian promptly,
the Custodian shall be entitled to utilize available cash and to dispose of such
Portfolio's assets to the extent necessary to obtain reimbursement.
In no event shall the Custodian be liable for indirect, special or
consequential damages.
SECTION 15. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Agreement shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than sixty (60) days after the date of such delivery or mailing; PROVIDED,
however, that the Fund shall not amend or terminate this Agreement in
contravention of any applicable federal or state regulations, or any provision
of the Fund's Declaration of Trust, and further provided, that the Fund on
behalf of one or more of the Portfolios may at any time by action of its Board
(i) substitute another bank or trust company for the Custodian by giving notice
as described above to the Custodian, or (ii) immediately terminate this
Agreement in the event of the appointment of a conservator or receiver for the
Custodian by the Comptroller of the Currency or upon the happening of a like
event at the direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Agreement, the Fund on behalf of each
applicable Portfolio shall pay to the Custodian such compensation as may be due
as of the date of such termination and shall likewise reimburse the Custodian
for its costs, expenses and disbursements.
25.
<PAGE> 26
FORM OF AGREEMENT
SECTION 16. SUCCESSOR CUSTODIAN
If a successor custodian for one or more Portfolios shall be appointed
by the Board, the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the form for
transfer, all securities of each applicable Portfolio then held by it hereunder
and shall transfer to an account of the successor custodian all of the
securities of each such Portfolio held in a Securities System or at the
Underlying Transfer Agent.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a Certified Resolution, deliver at the office of
the Custodian and transfer such securities, funds and other properties in
accordance with such resolution.
In the event that no written order designating a successor custodian or
Certified Resolution shall have been delivered to the Custodian on or before the
date when such termination shall become effective, then the Custodian shall have
the right to deliver to a bank or trust company, which is a "bank" as defined in
the 1940 Act, doing business in Boston, Massachusetts, or New York, New York, of
its own selection, having an aggregate capital, surplus, and undivided profits,
as shown by its last published report, of not less than $25,000,000, all
securities, funds and other properties held by the Custodian on behalf of each
applicable Portfolio and all instruments held by the Custodian relative thereto
and all other property held by it under this Agreement on behalf of each
applicable Portfolio, and to transfer to an account of such successor custodian
all of the securities of each such Portfolio held in any Securities System or at
the Underlying Transfer Agent. Thereafter, such bank or trust company shall be
the successor of the Custodian under this Agreement.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the Certified Resolution to appoint a successor
custodian, the Custodian shall be entitled to fair compensation for its services
during such period as the Custodian retains possession of such securities, funds
and other properties and the provisions of this Agreement relating to the duties
and obligations of the Custodian shall remain in full force and effect.
SECTION 17. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Agreement, the Custodian and
the Fund on behalf of each of the Portfolios, may from time to time agree on
such provisions interpretive of or in addition to the provisions of this
Agreement as may in their joint opinion be consistent with the general tenor of
this Agreement. Any such interpretive or additional provisions shall be in a
writing signed by both parties and shall be annexed hereto, PROVIDED that no
such interpretive or additional provisions shall contravene any
26.
<PAGE> 27
FORM OF AGREEMENT
applicable federal or state regulations or any provision of the Fund's
Declaration of Trust. No interpretive or additional provisions made as provided
in the preceding sentence shall be deemed to be an amendment of this Agreement.
SECTION 18. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of Shares in
addition to New Covenant Growth Fund, New Covenant Income Fund, New Covenant
Balanced Growth Fund and New Covenant Balanced Income Fund, with respect to
which it desires to have the Custodian render services as custodian under the
terms hereof, it shall so notify the Custodian in writing, and if the Custodian
agrees in writing to provide such services, such series of Shares shall become a
Portfolio hereunder.
SECTION 19. MASSACHUSETTS LAW TO APPLY
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
SECTION 20. PRIOR AGREEMENTS
This Agreement supersedes and terminates, as of the date hereof, all
prior Agreements between the Fund on behalf of each of the Portfolios and the
Custodian relating to the custody of the Fund's assets.
SECTION 21. NOTICES.
Any notice, instruction or other instrument required to be given
hereunder may be delivered in person to the offices of the parties as set forth
herein during normal business hours or delivered prepaid registered mail or by
telex, cable or telecopy to the parties at the following addresses or such other
addresses as may be notified by any party from time to time.
To the Fund: NEW COVENANT FUNDS
200 East Twelfth Street
Jeffersonville, Indiana 47310
Attention: __________________
Telephone:__________________
Telecopy: __________________
27.
<PAGE> 28
FORM OF AGREEMENT
To the Custodian: STATE STREET BANK AND TRUST COMPANY
1776 Heritage Drive
North Quincy, Massachusetts 02171
Attention: __________________
Telephone: __________________
Telecopy: __________________
Such notice, instruction or other instrument shall be deemed to have
been served in the case of a registered letter at the expiration of five
business days after posting, in the case of cable twenty-four hours after
dispatch and, in the case of telex, immediately on dispatch and if delivered
outside normal business hours it shall be deemed to have been received at the
next time after delivery when normal business hours commence and in the case of
cable, telex or telecopy on the business day after the receipt thereof. Evidence
that the notice was properly addressed, stamped and put into the post shall be
conclusive evidence of posting.
SECTION 22. REPRODUCTION OF DOCUMENTS
This Agreement and all schedules, addenda, exhibits, attachments and
amendments hereto may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties hereto
all/each agree that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original is in existence and whether or not such reproduction was made by a
party in the regular course of business, and that any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence.
SECTION 23. DATA ACCESS SERVICES ADDENDUM
The Custodian and the Fund agree to be bound by the terms of the Data
Access Services Addendum attached hereto.
SECTION 24. SHAREHOLDER COMMUNICATIONS ELECTION
SEC Rule 14b-2 requires banks which hold securities for the account of
customers to respond to requests by issuers of securities for the names,
addresses and holdings of beneficial owners of securities of that issuer held by
the bank unless the beneficial owner has expressly objected to disclosure of
this information. In order to comply with the rule, the Custodian needs the Fund
to indicate whether it authorizes the Custodian to provide the Fund's name,
address, and share position to requesting companies whose securities the Fund
owns. If the Fund tells the Custodian "no", the Custodian will not provide this
28.
<PAGE> 29
FORM OF AGREEMENT
information to requesting companies. If the Fund tells the Custodian "yes" or
does not check either "yes" or "no" below, the Custodian is required by the rule
to treat the Fund as consenting to disclosure of this information for all
securities owned by the Fund or any funds or accounts established by the Fund.
For the Fund's protection, the Rule prohibits the requesting company from using
the Fund's name and address for any purpose other than corporate communications.
Please indicate below whether the Fund consents or objects by checking one of
the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name,
address, and share positions.
NO [ ] The Custodian is not authorized to release the Fund's name,
address, and share positions.
SECTION 25. YEAR 2000
State Street will take reasonable steps to ensure that its products (and
those of its third-party suppliers) reflect the available state of the art
technology to offer products that are Year 2000 compliant, including, but not
limited to, century recognition of dates, calculations that correctly compute
same century and multi century formulas and date values, and interface values
that reflect the date issues arising between now and the next one-hundred years,
and if any changes are required, State Street will make the changes to its
products at no cost to Customer and in a commercially reasonable time frame and
will require third-party suppliers to do likewise.
Remainder of Page Intentionally Left Blank
29.
<PAGE> 30
FORM OF AGREEMENT
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of April ____, 1999.
FUND SIGNATURE ATTESTED TO BY: NEW COVENANT FUNDS
By:______________________ By: _________________________
Name:____________________ Name: _______________________
Title: _________________ Title: ______________________
SIGNATURE ATTESTED TO BY: STATE STREET BANK AND TRUST
COMPANY
By:_________________________ By:________________________
Name: Name: Ronald E. Logue
Title: Title: Vice Chairman
30.
<PAGE> 1
Exhibit 23(h)(i)
SERVICES AGREEMENT
THIS AGREEMENT, dated as of this __________ day of __________, 1999 (the
"Effective Date") between NEW COVENANT FUNDS (the "Fund"), a Delaware business
trust having its principal place of business at 200 East Twelfth Street,
Jeffersonville, Indiana 47103 and FIRST DATA INVESTOR SERVICES GROUP, INC.
("Investor Services Group"), a Massachusetts corporation with principal offices
at 4400 Computer Drive, Westboro, Massachusetts 01581.
WITNESSETH
----------
WHEREAS, the Fund is authorized to issue Shares in separate series,
with each such series representing interests in a separate portfolio of
securities or other assets.
WHEREAS, the Fund initially intends to offer Shares in those Portfolios
identified in the attached Schedule A, each such Portfolio, together with all
other Portfolios subsequently established by the Fund shall be subject to this
Agreement in accordance with Article 14;
WHEREAS, the Fund on behalf of the Portfolios, desires to appoint
Investor Services Group as its administrator, transfer agent, dividend
disbursing agent and agent in connection with certain other activities and
Investor Services Group desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, the Fund and Investor Services Group agree as follows:
Article 1 Definitions.
------------
1.1 Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the
following meanings:
(a) "Articles of Incorporation" shall mean the Articles of
Incorporation, Declaration of Trust, or other similar
organizational document as the case may be, of the Fund as the same
may be amended from time to time.
(b) "Authorized Person" shall be deemed to include (i) any
authorized officer of the Fund; or (ii) any person, whether or not
such person is an officer or employee of the Fund, duly authorized
to give Oral Instructions or Written Instructions on behalf of the
Fund as indicated in writing to Investor Services Group from time
to time.
(c) "Board Members" shall mean the Directors or Trustees of the
governing body of the Fund, as the case may be.
(d) "Board of Directors" shall mean the Board of Directors or
Board of Trustees of the Fund, as the case may be.
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<PAGE> 2
(e) "Commencement Date" shall mean the date on which Investor
Services Group commences providing services to the Fund pursuant to
this Agreement.
(f) "Commission" shall mean the Securities and Exchange
Commission.
(g) "Custodian" refers to any custodian or subcustodian of
securities and other property which the Fund may from time to time
deposit, or cause to be deposited or held under the name or account
of such a custodian pursuant to a Custodian Agreement.
(h) "1934 Act" shall mean the Securities Exchange Act of 1934
and the rules and regulations promulgated thereunder, all as
amended from time to time.
(i) "1940 Act" shall mean the Investment Company Act of 1940
and the rules and regulations promulgated thereunder, all as
amended from time to time.
(j) "Oral Instructions" shall mean instructions, other than
Written Instructions, actually received by Investor Services Group
from a person reasonably believed by Investor Services Group to be
an Authorized Person;
(k) "Portfolio" shall mean each separate series of shares
offered by the Fund representing interests in a separate portfolio
of securities and other assets;
(l) "Prospectus" shall mean the most recently dated Fund
Prospectus and Statement of Additional Information, including any
supplements thereto if any, which has become effective under the
Securities Act of 1933 and the 1940 Act.
(m) "Shares" refers collectively to such shares of capital
stock or beneficial interest, as the case may be, or class thereof,
of each respective Portfolio of the Fund as may be issued from time
to time.
(n) "Shareholder" shall mean a record owner of Shares of each
respective Portfolio of the Fund.
(o) "Written Instructions" shall mean a written communication
signed by a person reasonably believed by Investor Services Group
to be an Authorized Person and actually received by Investor
Services Group. Written Instructions shall include manually
executed originals and authorized electronic transmissions,
including telefacsimile of a manually executed original or other
process.
Article 2 Appointment of Investor Services Group.
---------------------------------------
The Fund, on behalf of the Portfolios, hereby appoints and constitutes
Investor Services Group as its sole and exclusive transfer agent and dividend
disbursing agent for Shares of each respective Portfolio of the Fund and as
administrator, shareholder servicing agent for the Fund
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<PAGE> 3
and Investor Services Group hereby accepts such appointments and agrees to
perform the duties hereinafter set forth. This Agreement shall be effective as
of the Effective Date.
Article 3 Duties of Investor Services Group.
----------------------------------
3.1 Investor Services Group shall be responsible for:
(a) Administering and/or performing the customary services of a
transfer agent; acting as service agent in connection with dividend and
distribution functions; and for performing shareholder account and
administrative agent functions in connection with the issuance,
transfer and redemption or repurchase (including coordination with the
Custodian) of Shares of each Portfolio, as more fully described in the
written schedule of Duties of Investor Services Group annexed hereto as
Schedule B and incorporated herein, and in accordance with the terms of
the Prospectus of the Fund on behalf of the applicable Portfolio,
applicable law and the procedures established from time to time between
Investor Services Group and the Fund.
(b) Recording the issuance of Shares and maintaining pursuant to
Rule 17Ad-10(e) of the 1934 Act a record of the total number of Shares
of each Portfolio which are authorized, based upon data provided to it
by the Fund, and issued and outstanding. Investor Services Group shall
provide the Fund on a regular basis with the total number of Shares of
each Portfolio which are authorized and issued and outstanding and
shall have no obligation, when recording the issuance of Shares, to
monitor the issuance of such Shares or to take cognizance of any laws
relating to the issue or sale of such Shares, which functions shall be
the sole responsibility of the Fund.
(c) Investor Services Group shall be responsible for the following:
performing the customary services of an administrator, including
corporate secretarial, treasury and blue sky services, for the Fund, as
more fully described in the written schedule of Duties of Investor
Services Group annexed hereto as Schedule B and incorporated herein,
and subject to the supervision and direction of the Board of Directors
of the Fund.
(d) In addition to providing the foregoing services, the Fund hereby
engages Investor Services Group as its exclusive service provider with
respect to the Print/Mail Services as set forth in Schedule C for the
fees also identified in Schedule C. Investor Services Group agrees to
perform the services and its obligations subject to the terms and
conditions of this Agreement.
(e) Notwithstanding any of the foregoing provisions of this
Agreement, Investor Services Group shall be under no duty or obligation
to inquire into, and shall not be liable for: (i) the legality of the
issuance or sale of any Shares or the sufficiency of the amount to be
received therefor; (ii) the legality of the redemption of any Shares,
or the propriety of the amount to be paid therefor; (iii) the legality
of the declaration of any dividend by the Board of Directors, or the
legality of the issuance of any Shares in
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<PAGE> 4
payment of any dividend; or (iv) the legality of any recapitalization
or readjustment of the Shares.
3.2 In addition, the Fund shall (i) identify to Investor Services Group
in writing those transactions and assets to be treated as exempt from blue sky
reporting for each State and (ii) verify the establishment of transactions for
each State on the system prior to activation and thereafter monitor the daily
activity for each State. The responsibility of Investor Services Group for the
Fund's blue sky State registration status is solely limited to the initial
establishment of transactions subject to blue sky compliance by the Fund and the
reporting of such transactions to the Fund as provided above.
3.3 In performing its duties under this Agreement, Investor Services
Group: (a) will act in accordance with the Articles of Incorporation, By-Laws,
Prospectuses and with the Oral Instructions and Written Instructions of the Fund
and will conform to and comply with the requirements of the 1940 Act and all
other applicable federal or state laws and regulations; and (b) will consult
with legal counsel to the Fund, as necessary and appropriate. Furthermore,
Investor Services Group shall not have or be required to have any authority to
supervise the investment or reinvestment of the securities or other properties
which comprise the assets of the Fund or any of its Portfolios and shall not
provide any investment advisory services to the Fund or any of its Portfolios.
3.4 In addition to the duties set forth herein, Investor Services Group
shall perform such other duties and functions, and shall be paid such amounts
therefor, as may from time to time be agreed upon in writing between the Fund
and Investor Services Group.
Article 4 Recordkeeping and Other Information.
-----------------------------------
4.1 Investor Services Group shall create and maintain all records
required of it pursuant to its duties hereunder and as set forth in Schedule B
in accordance with all applicable laws, rules and regulations, including records
required by Section 31(a) of the 1940 Act. Where applicable, such records shall
be maintained by Investor Services Group for the periods and in the places
required by Rule 31a-2 under the 1940 Act.
4.2 To the extent required by Section 31 of the 1940 Act, Investor
Services Group agrees that all such records prepared or maintained by Investor
Services Group relating to the services to be performed by Investor Services
Group hereunder are the property of the Fund and will be preserved, maintained
and made available in accordance with such section, and will be surrendered
promptly to the Fund on and in accordance with the Fund's request.
4.3 In case of any requests or demands for the inspection of
Shareholder records of the Fund, Investor Services Group will endeavor to notify
the Fund of such request and secure Written Instructions as to the handling of
such request. Investor Services Group reserves the right, however, to exhibit
the Shareholder records to any person whenever it is advised by its counsel that
it may be held liable for the failure to comply with such request.
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<PAGE> 5
Article 5 Fund Instructions.
-----------------
5.1 Investor Services Group will have no liability when acting upon
Written or Oral Instructions believed to have been executed or orally
communicated by an Authorized Person and will not be held to have any notice of
any change of authority of any person until receipt of a Written Instruction
thereof from the Fund. Investor Services Group will also have no liability when
processing Share certificates which it reasonably believes to bear the proper
manual or facsimile signatures of the officers of the Fund and the proper
countersignature of Investor Services Group.
5.2 At any time, Investor Services Group may request Written
Instructions from the Fund and may seek advice from legal counsel for the Fund,
or its own legal counsel, with respect to any matter arising in connection with
this Agreement, and it shall not be liable for any action taken or not taken or
suffered by it in good faith in accordance with such Written Instructions or in
accordance with the opinion of counsel for the Fund or for Investor Services
Group. Written Instructions requested by Investor Services Group will be
provided by the Fund within a reasonable period of time.
5.3 Investor Services Group, its officers, agents or employees, shall
accept Oral Instructions or Written Instructions given to them by any person
representing or acting on behalf of the Fund only if said representative is an
Authorized Person. The Fund agrees that all Oral Instructions shall be followed
within one business day by confirming Written Instructions, and that the Fund's
failure to so confirm shall not impair in any respect Investor Services Group's
right to rely on Oral Instructions.
Article 6 Compensation.
------------
6.1 The Fund on behalf of each of the Portfolios will compensate
Investor Services Group for the performance of its obligations hereunder in
accordance with the fees set forth in the written Fee Schedule annexed hereto as
Schedule C and incorporated herein.
6.2 In addition to those fees set forth in Section 6.1 above, the Fund
on behalf of each of the Portfolios agrees to pay, and will be billed separately
for, out-of-pocket expenses incurred by Investor Services Group in the
performance of its duties hereunder. Out-of-pocket expenses shall include, but
shall not be limited to, the items specified in the written schedule of
out-of-pocket charges annexed hereto as Schedule D and incorporated herein.
Schedule D may be modified by written agreement between the parties. Unspecified
out-of-pocket expenses shall be limited to those out-of-pocket expenses
reasonably incurred by Investor Services Group in the performance of its
obligations hereunder.
6.3 The Fund on behalf of each of the Portfolios agrees to pay all fees
and out-of-pocket expenses to Investor Services Group by Federal Funds Wire
within fifteen (15) business days following the receipt of the respective
invoice. In addition, with respect to all fees under this Agreement, Investor
Services Group may charge a service fee equal to the lesser of (i) one and
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<PAGE> 6
one half percent (1 1/2%) per month or (ii) the highest interest rate legally
permitted on any past due invoiced amounts.
6.4 Any compensation agreed to hereunder may be adjusted from time to
time by attaching to Schedule C, a revised Fee Schedule executed and dated by
the parties hereto.
6.5 The Fund acknowledges that the fees that Investor Services Group
charges the Fund under this Agreement reflect the allocation of risk between the
parties, including the disclaimer of warranties in Section 9.3 and the
limitations on liability and exclusion of remedies in Section 11.2 and Article
12. Modifying the allocation of risk from what is stated here would affect the
fees that Investor Services Group charges, and in consideration of those fees,
the Fund agrees to the stated allocation of risk.
6.6 Investor Services Group will from time to time employ or associate
with itself such person or persons as Investor Services Group may believe to be
particularly suited to assist it in performing services under this Agreement.
Such person or persons may be officers and employees who are employed by both
Investor Services Group and the Fund. The compensation of such person or persons
shall be paid by Investor Services Group and no obligation shall be incurred on
behalf of the Fund in such respect.
6.7 Investor Services Group shall not be required to pay any of the
following expenses incurred by the Fund: membership dues in the Investment
Company Institute or any similar organization; investment advisory expenses;
costs of printing and mailing stock certificates, prospectuses, reports and
notices; interest on borrowed money; brokerage commissions; stock exchange
listing fees; taxes and fees payable to Federal, state and other governmental
agencies; fees of Board Members of the Fund who are not affiliated with Investor
Services Group; outside auditing expenses; outside legal expenses; Blue Sky
registration or filing fees; or other expenses not specified in this Section 6.7
which may be properly payable by the Fund. Investor Services Group shall not be
required to pay any Blue Sky registration or filing fees unless and until it has
received the amount of such fees from the Fund.
Article 7 Documents.
---------
In connection with the appointment of Investor Services Group, the Fund
shall, on or before the date this Agreement goes into effect, but in any case
within a reasonable period of time for Investor Services Group to prepare to
perform its duties hereunder, deliver or caused to be delivered to Investor
Services Group the documents set forth in the written schedule of Fund Documents
annexed hereto as Schedule E.
Article 8 Investor Services Group System.
-------------------------------
8.1 Investor Services Group shall retain title to and ownership of any
and all data bases, computer programs, screen formats, report formats,
interactive design techniques, derivative works, inventions, discoveries,
patentable or copyrightable matters, concepts, expertise, patents, copyrights,
trade secrets, and other related legal rights utilized by Investor
-6-
<PAGE> 7
Services Group in connection with the services provided by Investor Services
Group to the Fund herein (the "Investor Services Group System").
8.2 Investor Services Group hereby grants to the Fund a limited license
to the Investor Services Group System for the sole and limited purpose of having
Investor Services Group provide the services contemplated hereunder and nothing
contained in this Agreement shall be construed or interpreted otherwise and such
license shall immediately terminate with the termination of this Agreement.
8.3 In the event that the Fund, including any affiliate or agent of the
Fund or any third party acting on behalf of the Fund is provided with direct
access to the Investor Services Group System for either account inquiry or to
transmit transaction information, including but not limited to maintenance,
exchanges, purchases and redemptions, such direct access capability shall be
limited to direct entry to the Investor Services Group System by means of
on-line mainframe terminal entry or PC emulation of such mainframe terminal
entry and any other non-conforming method of transmission of information to the
Investor Services Group System is strictly prohibited without the prior written
consent of Investor Services Group.
Article 9 Representations and Warranties.
------------------------------
9.1 Investor Services Group represents and warrants to the Fund that:
(a) it is a corporation duly organized, existing and in good
standing under the laws of the Commonwealth of Massachusetts;
(b) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement;
(c) all requisite corporate proceedings have been taken to
authorize it to enter into this Agreement;
(d) it is duly registered with its appropriate regulatory agency as
a transfer agent and such registration will remain in effect for the
duration of this Agreement; and
(e) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
9.2 The Fund represents and warrants to Investor Services Group that:
(a) it is duly organized, existing and in good standing under the
laws of the jurisdiction in which it is organized;
(b) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into this Agreement;
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<PAGE> 8
(c) all corporate proceedings required by said Articles of
Incorporation, ByLaws and applicable laws have been taken to authorize
it to enter into this Agreement;
(d) a registration statement under the Securities Act of 1933, as
amended, and the 1940 Act on behalf of each of the Portfolios is
currently effective and will remain effective, and all appropriate
state securities law filings have been made and will continue to be
made, with respect to all Shares of the Fund being offered for sale;
(e) all outstanding Shares are validly issued, fully paid and
non-assessable and when Shares are hereafter issued in accordance with
the terms of the Fund's Articles of Incorporation and its Prospectus
with respect to each Portfolio, such Shares shall be validly issued,
fully paid and non-assessable; and
(f) as of the date hereof, each Portfolio is duly registered and
lawfully eligible for sale in each jurisdiction indicated for such
Portfolio on the list furnished to Investor Services Group pursuant to
Article 7 of this Agreement and that it will notify Investor Services
Group immediately of any changes to the aforementioned list.
9.3 THIS IS A SERVICE AGREEMENT. EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, INVESTOR SERVICES GROUP DISCLAIMS ALL OTHER REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, MADE TO THE FUND OR ANY OTHER PERSON, INCLUDING,
WITHOUT LIMITATION, ANY WARRANTIES REGARDING QUALITY, SUITABILITY,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE (IRRESPECTIVE OF
ANY COURSE OF DEALING, CUSTOM OR USAGE OF TRADE) OF ANY SERVICES OR ANY GOODS
PROVIDED INCIDENTAL TO SERVICES PROVIDED UNDER THIS AGREEMENT. INVESTOR SERVICES
GROUP DISCLAIMS ANY WARRANTY OF TITLE OR NON- INFRINGEMENT EXCEPT AS OTHERWISE
SET FORTH IN THIS AGREEMENT.
Article 10 Indemnification.
---------------
10.1 Investor Services Group shall not be responsible for and the Fund
on behalf of each Portfolio shall indemnify and hold Investor Services Group
harmless from and against any and all claims, costs, expenses (including
reasonable attorneys' fees), losses, damages, charges, payments and liabilities
of any sort or kind which may be asserted against Investor Services Group or for
which Investor Services Group may be held to be liable (a "Claim") arising out
of or attributable to any of the following:
(a) any actions of Investor Services Group required to be taken
pursuant to this Agreement unless such Claim resulted from a negligent
act or omission to act or bad faith by Investor Services Group in the
performance of its duties hereunder;
(b) Investor Services Group's reasonable reliance on, or reasonable
use of information, data, records and documents (including but not
limited to magnetic tapes, computer printouts, hard copies and
microfilm copies) received by Investor Services
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<PAGE> 9
Group from the Fund, or any authorized third party acting on behalf of
the Fund, including but not limited to the prior transfer agent for the
Fund, in the performance of Investor Services Group's duties and
obligations hereunder;
(c) the reliance on, or the implementation of, any Written or Oral
Instructions or any other instructions or requests of the Fund on
behalf of the applicable Portfolio;
(d) the offer or sales of shares in violation of any requirement
under the securities laws or regulations of any state that such shares
be registered in such state or in violation of any stop order or other
determination or ruling by any state with respect to the offer or sale
of such shares in such state; and
(e) the Fund's refusal or failure to comply with the terms of this
Agreement, or any Claim which arises out of the Fund's negligence or
misconduct or the breach of any representation or warranty of the Fund
made herein.
10.2 The Fund agrees and acknowledges that Investor Services Group has
not prior to the date hereof assumed, and will not assume, any obligations or
liabilities arising out of the conduct by the Company prior to the date hereof
of those duties which Investor Services Group has agreed to perform pursuant to
this Agreement. The Fund further agrees to indemnify Investor Services Group
against any losses, claims, damages or liabilities to which Investor Services
Group may become subject in connection with the conduct by the Fund or its agent
of such duties prior to the date hereof.
10.3 In any case in which the Fund may be asked to indemnify or hold
Investor Services Group harmless, Investor Services Group will notify the Fund
promptly after identifying any situation which it believes presents or appears
likely to present a claim for indemnification against the Fund although the
failure to do so shall not prevent recovery by Investor Services Group and shall
keep the Fund advised with respect to all developments concerning such
situation. The Fund shall have the option to defend Investor Services Group
against any Claim which may be the subject of this indemnification, and, in the
event that the Fund so elects, such defense shall be conducted by counsel chosen
by the Fund and satisfactory to Investor Services Group, and thereupon the Fund
shall take over complete defense of the Claim and Investor Services Group shall
sustain no further legal or other expenses in respect of such Claim. Investor
Services Group will not confess any Claim or make any compromise in any case in
which the Fund will be asked to provide indemnification, except with the Fund's
prior written consent. The obligations of the parties hereto under this Article
10 shall survive the termination of this Agreement.
10.4 Any claim for indemnification under this Agreement must be made
prior to the earlier of:
(a) one year after the Fund becomes aware of the event for which
indemnification is claimed; or
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<PAGE> 10
(b) one year after the earlier of the termination of this
Agreement or the expiration of the term of this Agreement.
10.5 Except for remedies that cannot be waived as a matter of law (and
injunctive or provisional relief), the provisions of this Article 10 shall be
Investor Services Group's sole and exclusive remedy for claims or other actions
or proceedings to which the Fund's indemnification obligations pursuant to this
Article 10 may apply.
Article 11 Standard of Care.
----------------
11.1 Investor Services Group shall at all times act in good faith and
agrees to use its best efforts within commercially reasonable limits to ensure
the accuracy of all services performed under this Agreement, but assumes no
responsibility for loss or damage to the Fund unless said errors are caused by
Investor Services Group's own negligence, bad faith or willful misconduct or
that of its employees.
11.2 Notwithstanding any provision in this Agreement to the contrary,
Investor Services Group's cumulative liability (to the Fund) for all losses,
claims, suits, controversies, breaches, or damages for any cause whatsoever
(including but not limited to those arising out of or related to this Agreement)
and regardless of the form of action or legal theory shall not exceed the lesser
of (i) $500,000 or (ii) the fees received by Investor Services Group for
services provided under this Agreement during the twelve months immediately
prior to the date of such loss or damage. Fund understands the limitation on
Investor Services Group's damages to be a reasonable allocation of risk and Fund
expressly consents with respect to such allocation of risk. In allocating risk
under the Agreement, the parties agree that the damage limitation set forth
above shall apply to any alternative remedy ordered by a court in the event such
court determines that sole and exclusive remedy provided for in the Agreement
fails of its essential purpose.
11.3 Neither party may assert any cause of action against the other
party under this Agreement that accrued more than two (2) years prior to the
filing of the suit (or commencement of arbitration proceedings) alleging such
cause of action.
11.4 Each party shall have the duty to mitigate damages for which the
other party may become responsible.
Article 12 Consequential Damages.
---------------------
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT
SHALL INVESTOR SERVICES GROUP, ITS AFFILIATES OR ANY OF ITS OR THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE UNDER ANY THEORY OF
TORT, CONTRACT, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR LOST
PROFITS, EXEMPLARY, PUNITIVE, SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL
DAMAGES, EACH OF WHICH IS HEREBY EXCLUDED BY AGREEMENT OF THE PARTIES REGARDLESS
OF WHETHER SUCH DAMAGES WERE FORESEEABLE OR WHETHER
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<PAGE> 11
EITHER PARTY OR ANY ENTITY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Article 13 Term and Termination.
--------------------
13.1 This Agreement shall be effective on the date first written above
and shall continue for a period of five (5) years (the "Initial Term").
13.2 Upon the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of three (3) years ("Renewal Terms")
each, unless the Fund or Investor Services Group provides written notice to the
other of its intent not to renew. Such notice must be received not less than
ninety (90) days and not more than one-hundred eighty (180) days prior to the
expiration of the Initial Term or the then current Renewal Term.
13.3 In the event a termination notice is given by the Fund, all
expenses associated with movement of records and materials and conversion
thereof to a successor transfer agent will be borne by the Fund.
13.4 If a party hereto is guilty of a material failure to perform its
duties and obligations hereunder (a "Defaulting Party") the other party (the
"Non-Defaulting Party") may give written notice thereof to the Defaulting Party,
and if such material breach shall not have been remedied within thirty (30) days
after such written notice is given, then the Non-Defaulting Party may terminate
this Agreement by giving thirty (30) days written notice of such termination to
the Defaulting Party. If Investor Services Group is the Non-Defaulting Party,
its termination of this Agreement shall not constitute a waiver of any other
rights or remedies of Investor Services Group with respect to services performed
prior to such termination of rights of Investor Services Group to be reimbursed
for out-of-pocket expenses. In all cases, termination by the Non-Defaulting
Party shall not constitute a waiver by the Non-Defaulting Party of any other
rights it might have under this Agreement or otherwise against the Defaulting
Party.
13.5 Notwithstanding the provisions of Section 13.4 or anything
otherwise contained in this Agreement to the contrary, should the Fund desire to
move any of the services provided by Investor Services Group hereunder to a
successor service provider prior to the expiration of the then current Initial
or Renewal Term, or should the Fund or any of its affiliates take any action
which would result in Investor Services Group ceasing to provide transfer
agency, administration or fund accounting services to the Fund prior to the
expiration of the Initial or any Renewal Term, Investor Services Group shall
make a good faith effort to facilitate the conversion on such prior date,
however, there can be no guarantee that Investor Services Group will be able to
facilitate a conversion of services on such prior date. In connection with the
foregoing, should services be converted to a successor service provider or
should the Fund or any of its affiliates take any action which would result in
Investor Services Group ceasing to provide transfer agency, administration or
fund accounting services to the Fund prior to the expiration of the Initial or
any Renewal Term, the payment of fees to Investor Services Group as set forth
herein shall be accelerated to a date prior to the conversion or termination of
services and calculated as if the services had remained with Investor Services
Group until the expiration of the then current
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<PAGE> 12
Initial or Renewal Term and calculated at the asset and/or Shareholder account
levels, as the case may be, on the date notice of termination was given to
Investor Services Group.
Article 14 Additional Portfolios
---------------------
14.1 In the event that the Fund establishes one or more Portfolios in
addition to those identified in Schedule A, with respect to which the Fund
desires to have Investor Services Group render services as transfer agent under
the terms hereof, the Fund shall so notify Investor Services Group in writing,
and if Investor Services Group agrees in writing to provide such services,
Exhibit 1 shall be amended to include such additional Portfolios.
Article 15 Confidentiality.
---------------
15.1 The parties agree that the Proprietary Information (defined below)
and the contents of this Agreement (collectively "Confidential Information") are
confidential information of the parties and their respective licensors. The Fund
and Investor Services Group shall exercise at least the same degree of care, but
not less than reasonable care, to safeguard the confidentiality of the
Confidential Information of the other as it would exercise to protect its own
confidential information of a similar nature. The Fund and Investor Services
Group shall not duplicate, sell or disclose to others the Confidential
Information of the other, in whole or in part, without the prior written
permission of the other party. The Fund and Investor Services Group may,
however, disclose Confidential Information to their respective parent
corporation, their respective affiliates, their subsidiaries and affiliated
companies and employees, provided that each shall use reasonable efforts to
ensure that the Confidential Information is not duplicated or disclosed in
breach of this Agreement. The Fund and Investor Services Group may also disclose
the Confidential Information to independent contractors, auditors, and
professional advisors, provided they first agree in writing to be bound by the
confidentiality obligations substantially similar to this Section 15.1.
Notwithstanding the previous sentence, in no event shall either the Fund or
Investor Services Group disclose the Confidential Information to any competitor
of the other without specific, prior written consent.
15.2 Proprietary Information means:
(a) any data or information that is competitively sensitive
material, and not generally known to the public, including, but not
limited to, information about product plans, marketing strategies,
finance, operations, customer relationships, customer profiles, sales
estimates, business plans, and internal performance results relating to
the past, present or future business activities of the Fund or Investor
Services Group, their respective subsidiaries and affiliated companies
and the customers, clients and suppliers of any of them;
(b) any scientific or technical information, design, process,
procedure, formula, or improvement that is commercially valuable and
secret in the sense that its confidentiality affords the Fund or
Investor Services Group a competitive advantage over its competitors;
and
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<PAGE> 13
(c) all confidential or proprietary concepts, documentation,
reports, data, specifications, computer software, source code, object
code, flow charts, databases, inventions, know-how, show-how and trade
secrets, whether or not patentable or copyrightable.
15.3 Confidential Information includes, without limitation, all
documents, inventions, substances, engineering and laboratory notebooks,
drawings, diagrams, specifications, bills of material, equipment, prototypes and
models, and any other tangible manifestation of the foregoing of either party
which now exist or come into the control or possession of the other.
15.4 The obligations of confidentiality and restriction on use herein
shall not apply to any Confidential Information that a party proves:
(a) Was in the public domain prior to the date of this Agreement
or subsequently came into the public domain through no fault of such
party; or
(b) Was lawfully received by the party from a third party free of
any obligation of confidence to such third party; or
(c) Was already in the possession of the party prior to receipt
thereof, directly or indirectly, from the other party; or
(d) Is required to be disclosed in a judicial or administrative
proceeding after all reasonable legal remedies for maintaining such
information in confidence have been exhausted including, but not
limited to, giving the other party as much advance notice of the
possibility of such disclosure as practical so the other party may
attempt to stop such disclosure or obtain a protective order concerning
such disclosure; or
(f) Is subsequently and independently developed by employees,
consultants or agents of the party without reference to the
Confidential Information disclosed under this Agreement.
Article 16 Force Majeure.
-------------
No party shall be liable for any default or delay in the performance of
its obligations under this Agreement if and to the extent such default or delay
is caused, directly or indirectly, by (i) fire, flood, elements of nature or
other acts of God; (ii) any outbreak or escalation of hostilities, war, riots or
civil disorders in any country, (iii) any act or omission of the other party or
any governmental authority; (iv) any labor disputes (whether or not the
employees' demands are reasonable or within the party's power to satisfy); or
(v) nonperformance by a third party or any similar cause beyond the reasonable
control of such party, including without limitation, failures or fluctuations in
telecommunications or other equipment. In any such event, the non-performing
party shall be excused from any further performance and observance of the
obligations so affected only for as long as such circumstances prevail and such
party continues to
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<PAGE> 14
use commercially reasonable efforts to recommence performance or observance as
soon as practicable.
Article 17 Assignment and Subcontracting.
-----------------------------
This Agreement, its benefits and obligations shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement may not be assigned or otherwise transferred
by either party hereto, without the prior written consent of the other party,
which consent shall not be unreasonably withheld; provided, however, that
Investor Services Group may, in its sole discretion, assign all its right, title
and interest in this Agreement to an affiliate, parent or subsidiary, or to the
purchaser of substantially all of its business. Investor Services Group may, in
its sole discretion, engage subcontractors to perform any of the obligations
contained in this Agreement to be performed by Investor Services Group.
Article 18 Arbitration.
-----------
18.1 Any claim or controversy arising out of or relating to this
Agreement, or breach hereof, shall be settled by arbitration administered by the
American Arbitration Association in Boston, Massachusetts in accordance with its
applicable rules, except that the Federal Rules of Evidence and the Federal
Rules of Civil Procedure with respect to the discovery process shall apply.
18.2 The parties hereby agree that judgment upon the award rendered by
the arbitrator may be entered in any court having jurisdiction.
18.3 The parties acknowledge and agree that the performance of the
obligations under this Agreement necessitates the use of instrumentalities of
interstate commerce and, notwithstanding other general choice of law provisions
in this Agreement, the parties agree that the Federal Arbitration Act shall
govern and control with respect to the provisions of this Article 18.
Article 19 Notice.
------
Any notice or other instrument authorized or required by this
Agreement to be given in writing to the Fund or Investor Services Group, shall
be sufficiently given if addressed to that party and received by it at its
office set forth below or at such other place as it may from time to time
designate in writing.
To the Fund:
New Covenant Funds
C/o Presbyterian Church (U.S.A.) Foundation
200 East Twelfth Street
Jeffersonville, Indiana 47103
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<PAGE> 15
Attention: Serge Bhachu, Esquire
To Investor Services Group:
First Data Investor Services Group, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Attention: President
with a copy to Investor Services Group's General Counsel
Article 20 Governing Law/Venue.
-------------------
The laws of the Commonwealth of Massachusetts, excluding the laws on
conflicts of laws, shall govern the interpretation, validity, and enforcement of
this agreement. All actions arising from or related to this Agreement shall be
brought in the state and federal courts sitting in the City of Boston, and
Investor Services Group and the Fund hereby submit themselves to the exclusive
jurisdiction of those courts.
Article 21 Counterparts.
------------
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
Article 22 Captions.
--------
The captions of this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
Article 23 Publicity.
---------
Neither Investor Services Group nor the Fund shall release or
publish news releases, public announcements, advertising or other publicity
relating to this Agreement or to the transactions contemplated by it without the
prior review and written approval of the other party; provided, however, that
either party may make such disclosures as are required by legal, accounting or
regulatory requirements after making reasonable efforts in the circumstances to
consult in advance with the other party.
Article 24 Relationship of Parties/Non-Solicitation.
----------------------------------------
24.1 The parties agree that they are independent contractors and not
partners or co-venturers and nothing contained herein shall be interpreted or
construed otherwise.
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<PAGE> 16
24.2 During the term of this Agreement and for one (1) year afterward,
the Fund shall not recruit, solicit, employ or engage, for the Fund or others,
Investor Services Group's employees.
Article 25 Entire Agreement; Severability.
------------------------------
25.1 This Agreement, including Schedules, Addenda, and Exhibits hereto,
constitutes the entire Agreement between the parties with respect to the subject
matter hereof and supersedes all prior and contemporaneous proposals,
agreements, contracts, representations, and understandings, whether written or
oral, between the parties with respect to the subject matter hereof. No change,
termination, modification, or waiver of any term or condition of the Agreement
shall be valid unless in writing signed by each party. No such writing shall be
effective as against Investor Services Group unless said writing is executed by
a Senior Vice President, Executive Vice President, or President of Investor
Services Group. A party's waiver of a breach of any term or condition in the
Agreement shall not be deemed a waiver of any subsequent breach of the same or
another term or condition.
25.2 The parties intend every provision of this Agreement to be
severable. If a court of competent jurisdiction determines that any term or
provision is illegal or invalid for any reason, the illegality or invalidity
shall not affect the validity of the remainder of this Agreement. In such case,
the parties shall in good faith modify or substitute such provision consistent
with the original intent of the parties. Without limiting the generality of this
paragraph, if a court determines that any remedy stated in this Agreement has
failed of its essential purpose, then all other provisions of this Agreement,
including the limitations on liability and exclusion of damages, shall remain
fully effective.
Article 26 Miscellaneous.
-------------
The Fund and Investor Services Group agree that the obligations of the
Fund under the Agreement shall not be binding upon any of the Board Members,
shareholders, nominees, officers, employees or agents, whether past, present or
future, of the Fund individually, but are binding only upon the assets and
property of the Fund, as provided in the Articles of Incorporation. The
execution and delivery of this Agreement have been authorized by the Board
Members of the Fund, and signed by an authorized officer of the Fund, acting as
such, and neither such authorization by such Board Members nor such execution
and delivery by such officer shall be deemed to have been made by any of them or
any shareholder of the Fund individually or to impose any liability on any of
them or any shareholder of the Fund personally, but shall bind only the assets
and property of the Fund as provided in the Articles of Incorporation.
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<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers, as of the day and
year first above written.
NEW COVENANT FUNDS
By:
-------------------------
Title:
FIRST DATA INVESTOR SERVICES GROUP, INC.
By:
Title:
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<PAGE> 18
SCHEDULE A
----------
LIST OF PORTFOLIOS
New Covenant Growth Fund
New Covenant Income Fund
New Covenant Balanced Growth Fund
New Covenant Balanced Income Fund
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<PAGE> 19
SCHEDULE B
----------
DUTIES OF INVESTOR SERVICES GROUP
I. TRANSFER AGENCY SERVICES
------------------------
A. SHAREHOLDER FILE
1. Establish new accounts and enter demographic data into shareholder
base. Includes in-house processing and National Securities Clearing
Corporation (NSCC) - Fund/SERV and/or Networking transmissions.
2. Create Customer Information File (CIF) to link accounts within the Fund
and across Portfolios within the Fund Group. Facilitates account
maintenance, lead tracking, quality control, household mailings and
combined statements.
3. 100% quality control of new account information including verification
of initial investment.
4. Maintain account and customer file records based on shareholder request
and routine quality review.
5. Maintain tax ID certification and Non Resident Agent (NRA) records for
each account, including backup withholding.
6. Provide written confirmation of address changes.
7. Produce shareholder statements for daily activity, dividends,
on-request, interested party and periodic mailings.
8. Automated processing of dividends and capital gains with daily,
monthly, quarterly or annual distributions. Payment options include
reinvestment, directed payment to another fund, cash via mail, Fed wire
or ACH.
9. Image all applications, account documents, data changes,
correspondence, monetary transactions and other pertinent shareholder
documents.
B. SHAREHOLDER SERVICES
1. Provide quality service through a staff of highly trained customer
service personnel, including phone, research and correspondence
representatives.
2. Answer shareholder calls: provide routine account information,
transaction details including direct and wire purchases, redemptions,
exchanges, systematic withdrawals,
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<PAGE> 20
pre-authorized drafts, Fund/SERV and wire order trades, problem solving
and process telephone transactions.
3. Record and maintain tape recordings of all shareholder calls for a six
month period.
4. Phone supervisor produces daily management reports of shareholder calls
which include tracking volume, call length, average wait time and
abandoned call rates.
5. Customer inquiries received by letter or telephone are researched by a
correspondence team. These inquires include such items as
account/customer file information, complete historical account
information, stop payments on checks, transaction details and lost
certificates.
6. Provide written correspondence in response to shareholder inquiries and
request through the Letter Writer system.
C. INVESTMENT PROCESSING
1. Initial investment
2. Subsequent investments processed through lock box
3. Pre-authorized investments (PAD) through ACH system
4. Government allotments through ACH system
5. Wire order and NSCC - Fund/SERV trades
6. Prepare and process daily bank deposit of shareholder investments
D. REDEMPTION PROCESSING
1. Process mail redemption requests
2. Process telephone redemption transactions
3. Establish Systematic Withdrawal file and process automated transactions
on monthly basis
4. Provide wire order and NSCC - Fund/SERV trade processing
5. Distribute redemption proceeds to shareholder by check, wire or ACH
processing
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<PAGE> 21
E. EXCHANGE & TRANSFER PROCESSING
1. Process legal transfers
2. Process ACATS transfers
3. Issue and cancel certificates
4. Replace certificates through surety bonds (separate charge to
shareholder)
5. Process exchange transactions (letter and/or telephone requests)
F. RETIREMENT PLAN SERVICES
1. Fund sponsored IRAs offered using Semper Trust Company as custodian.
Services include:
a. Contribution processing
b. Distribution processing
c. Apply rollover transactions
d. Process Transfer of Assets
e. Letters of Acceptance to prior custodians
f. Notify IRA holders of 70 requirements
g. Calculate Required Minimum Distributions (RMD)
h. Maintain beneficiary information file
i. Solicit birth date information
2. Fund sponsored SEP-IRA plans offered using Semper Trust Company as
custodian. Services include those listed under IRAs and: a.
Identification of employer contributions
G. SETTLEMENT & CONTROL
1. Daily review of processed shareholder transactions to assure input was
processed correctly. Accurate trade activity figures passed to Investor
Services Group.
2. Preparation of daily cash movement sheets to be passed to Investor
Services Group and Custodian Bank for use in determining the Fund's
daily cash availability.
3. Prepare a daily share reconcilement which balances the shares on the
Transfer Agent system to those on the books of the Fund.
4. Resolve any outstanding share or cash issues that are not cleared by
trade date + 2.
5 Process shareholder adjustments to also include the proper notification
of any booking entries needed, as well as any necessary cash movement.
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<PAGE> 22
6. Settlement and review of the Fund's declared dividends and capital
gains will include the following:
a. Review of record date report for
accuracy of shares
b. Prepare dividend settlement report after dividend
is posted
c. Verify the posting date shares, the rate used and the NAV
price of reinvest date to ensure dividend was posted properly
d. Distribute copies to Investor Services Group
e. Prepare the checks prior to being mailed
f. Send any dividends via wire, if requested
g. Prepare cash movement sheets for the cash portion of the dividend
payout on payable date
7. Placement of stop payments on dividend and liquidation checks as well
as the issuance of their replacements.
8. Maintain inventory control for stock certificates and dividend check
form.
9. Aggregate tax filings for all Investor Services Group clients. Monthly
deposits are made to the IRS for all taxes withheld from shareholder
disbursements, distributions and foreign account distributions.
Correspond with the IRS concerning any of the above issues.
10. Timely settlement and cash movement for all NSCC - Fund/SERV activity.
H. YEAR-END PROCESSING
1. Maintain shareholder records in accordance with IRS notices for
under-reporting and invalid tax IDs. This includes initiating 31%
backup withholding and notifying shareholders of their tax status and
the corrective action which is needed.
2. Conduct annual W-9 solicitation of all uncertified accounts. Update
account tax status to reflect backup withholding or certified status
depending upon responses.
3. Conduct periodic W-8 solicitation of all non-resident alien shareholder
accounts. Update account tax status with updated shareholder
information and treaty rates for NRA tax.
4. Review IRS Revenue Procedures for changes in transaction and
distribution reporting and specifications for the production of forms
to ensure compliance.
5. Coordinate year-end activity with client. Activities include producing
year-end statements, scheduling record dates for year-end dividends and
capital gains, production of combined statements and printing of
inserts to be mailed with tax forms.
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<PAGE> 23
6. Distribute Dividend Letter to Portfolios for them to sign off on all
distributions paid year-to-date. Dates and rates must be authorized so
that they can be used for reporting to the IRS.
7. Coordinate the ordering of forms and envelopes from vendors in
preparation of tax reporting. Compare forms with IRS requirements to
ensure accuracy. Upon receipt of forms and envelopes, allocate space
for storage.
8. Prepare form flashes for the microfiche vendor. Test and oversee the
production of fiche for year-end statements and tax forms.
9. Match and settle tax reporting totals to Fund records and on-line data
from INVESTAR.
10. Produce forms 1099R, 1099B, 1099Div, 5498, 1042S and year-end
valuations. Quality assure forms before mailing to shareholders.
11. Monitor IRS deadlines and special events such as crossover dividends
and prior year IRA contributions.
12. Prepare magnetic tapes and appropriate forms for the filing of all
reportable activity to the IRS.
I. CLIENT SERVICES
1. An Account Manager is assigned to each relationship and is the liaison
between the Fund and Investor Services Group staff. Responsibilities
include scheduling of events, system enhancement implementation,
special promotion/event implementation and follow-up and constant Fund
interaction on daily operational issues.
Specifically:
a. Scheduling of dividends, proxies, report mailings and special
mailings
b. Coordinating with the Fund the shipment of materials for scheduled
mailings
c. Acting as liaison between the Fund and support services for
preparation of proofs and eventual printing of statement forms,
certificates, proxy cards, envelopes, etc.
d. Handling all notification to the client regarding proxy tabulation
through the meeting - coordinate scheduling of materials,
including voted cards, tabulation letters and shareholder list to
be available for the meeting
e. Ordering special reports, tapes and/or discs for special systems
requests received
f. Implementing new operational procedures, i.e., check writing
feature, load discounts, minimum waivers, sweeps, telephone
options, PAD promotions, etc.
g. Coordinating with systems, services and operations, special
events, i.e., mergers, new fund start ups, small account
liquidations, combined statements, household mailings, additional
mail files
h. Preparing standard operating procedures and review prospectuses -
coordinate implementation of suggested changes with the Fund
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<PAGE> 24
i. Acting as liaison between the Fund and Investor Services Group
staff regarding all service and operational issues
J. CASH MANAGEMENT SERVICES.
(a) Investor Services Group shall establish demand deposit accounts (DDA's)
with a cash management provider to facilitate the receipt of purchase payments
and the processing of other Shareholder-related transactions. Investor Services
Group shall retain any excess balance credits earned with respect to the amounts
in such DDA's ("Balance Credits") after such Balance Credits are first used to
offset any banking service fees charged in connection with banking services
provided on behalf of the Fund. Balance Credits will be calculated and applied
toward the Fund's banking service charges regardless of the withdrawal of DDA
balances described in Section (b) below.
(b) DDA balances which cannot be forwarded on the day of receipt may be
withdrawn on a daily basis and invested in U.S. Treasury and Federal Agency
obligations, money market mutual funds, repurchase agreements, money market
preferred securities (rated A or better), commercial paper (rated A1 or P1),
corporate notes/bonds (rated A or better) and/or Eurodollar time deposits
(issued by banks rated A or better). Investor Services Group bears the risk of
loss on any such investment and shall retain any earnings generated thereby.
Other similarly rated investment vehicles may be used, provided however,
Investor Services Group shall first notify the Fund of any such change.
(c) Investor Services Group may facilitate the payment of distributions from
the Fund which are made by check ("Distributions") through the "IPS Official
Check" program. "IPS Official Check" is a product and service provided by
Investor Services Group's affiliate, Integrated Payment Systems ("IPS"). IPS is
licensed and regulated as an "issuer of payment instruments". In the event the
IPS Official Check program is utilized, funds used to cover such Distributions
shall be forwarded to and held by IPS. IPS may invest such funds while awaiting
presentment of items for payment. In return the services provided by IPS, IPS
imposes a per item charge which is identified in the Schedule of Out-of-Pocket
Expenses attached hereto and shall retain, and share with Investor Services
Group, the benefit of the revenue generated from its investment practices.
K. LOST SHAREHOLDERS.
Investor Services Group shall perform such services as are required in order
to comply with Rules 17a-24 and 17Ad-17 of the 34 Act (the Lost Shareholder
Rules"), including, but not limited to those set forth below. Investor Services
Group may, in its sole discretion, use the services of a third party to perform
the some or all such services.
- documentation of electronic search policies and procedures;
- execution of required searches;
- creation and mailing of confirmation letters;
- taking receipt of returned verification forms;
-24-
<PAGE> 25
- providing confirmed address corrections in batch via electronic
media;;
- tracking results and maintaining data sufficient to comply with the
Lost Shareholder Rules; and
- preparation and submission of data required under the Lost
Shareholder Rules.
L. INBOUND TELESERVICING SERVICES WITH LITERATURE FULFILLMENT
1. Install an 800 line for prospective shareholders to use and track the
number of inbound calls received.
2. Answer calls with the name of the Fund.
3. Utilize pre-approved scripts provided by Fund Management.
4. Respond to Fund inquiries such as:
- Requests for Literature/Prospectuses
- Yields, Distribution Rates
- Performance
- Advisor/Management experience
- Dividends
- Portfolio Holdings
- Account Attributes
5. Store all marketing inquiries on a confidential database, and make
available for Fund Management review.
6. Make Call Reports are available, including the following information:
- Number received
- Alphabetical list
- Regional Response List
- Source List
- Match calls with new accounts on Transfer Agent files
7. Assist with any special direct mail programs required.
II. ADMINISTRATION SERVICES
-----------------------
I. REGULATORY COMPLIANCE
---------------------
A. Compliance - Federal Investment Company Act of 1940
1. Review, report and renew
a. investment advisory contracts
-25-
<PAGE> 26
b. fidelity bond
c. underwriting contracts
d. distribution (12b-1) plans
e administration contracts
f. accounting contracts
g. custody administration contracts
h. transfer agent and shareholder services
2. Filings
a. N-SAR (semi-annual report)
b. N-1A (prospectus), post-effective amendments and
supplements ("stickers")
c. 24f-2 indefinite registration of shares
d. filing fidelity bond under 17g-1
e. filing shareholder reports under Rule 30b2-1
3. Annual up-dates of biographical information and
questionnaires for Directors/Trustees and Officers
II. CORPORATE BUSINESS AND SHAREHOLDER/PUBLIC INFORMATION
-----------------------------------------------------
A. Directors/Trustees/Management
1. Preparation of meetings
a. agendas - all necessary items of compliance
b. arrange and conduct meetings
c. prepare minutes of meetings
d. keep attendance records
e. maintain corporate records/minute book
B. Coordinate Proposals
1. Printers
2. Auditors
3. Literature Fulfillment
4. Insurance
C. Maintain Corporate Calendars and Files
D. Release Corporate Information
1. To shareholders
2. To financial and general press
3. To industry publications
a. distributions (dividends and capital gains)
b. tax information
c. changes to prospectus
d. letters from management
-26-
<PAGE> 27
e. Fund performance
4. Respond to:
a. financial press
b. miscellaneous shareholders inquiries
c. industry questionnaires
E. Communications to Shareholders
1. Coordinate printing and distribution of annual,
semi-annual reports, and prospectus
III. FINANCIAL AND MANAGEMENT REPORTING
----------------------------------
A. Income and Expenses
1. Monitoring of expense accruals, budgets, expense payments
and expense caps
2. Approve and coordinate payment of expenses
3. Calculation of advisory fee, 12b-1 fee and reimbursements
to Fund, (if applicable)
4. Authorize the recording and amortization of
organizational costs and pre-paid expenses (supplied by
Advisor), for start-up funds and reorganizations
5. Calculation of average net assets
6. Expense ratios calculated
B. Distributions to Shareholders
1. Calculations of income dividends and capital gain
distributions (in conjunction with the Fund and their
auditors)
a. compliance with income tax provisions
b. compliance with excise tax provisions
c. compliance with Investment Company Act of 1940
2. Book/Tax identification and adjustments at required
distribution periods (in conjunction with the Funds'
auditors)
C. Financial Reporting
1. Liaison between Fund management, independent auditors and
printers for semi-annual and annual shareholder reports
2. Preparation of semi-annual and annual reports to
shareholders
3. Preparation of semi-annual and annual NSAR's (Financial
Data)
4. Preparation of required performance graph (annually)
(based on Advisor supplied indices)
D. Subchapter M Compliance (monthly)
1. Asset diversification and gross income tests
E. Other Financial Analyses
-27-
<PAGE> 28
1. Upon request from Fund management, other budgeting and
analyses can be constructed to meet a Fund's specific
needs (additional fees may apply)
2. Sales information, portfolio turnover (monthly)
3. Work closely with independent auditors on tax reporting
schedules prepared by Investor Services Group on return
of capital presentation, excise tax calculation
4. 1099 Miscellaneous - prepared and filed for
Directors/Trustees (annual)
5. Analysis of interest derived from various Government
obligations (annual) (if interest income was distributed
in a calendar year)
6. Analysis of interest derived, by state, for Municipal
Bonds
7. Review and characterize 1099-Dividend Forms
8. Prepare and coordinate with printer the printing and
mailing of 1099- Dividend Insert Cards
F. Review and Monitoring Functions (monthly)
1. Review expense and reclassification entries to ensure
proper update
2. Perform various reviews to ensure accuracy of Accounting
(the monthly expense analysis) and Custody (review of
daily bank statements to ensure accurate expense money
movement for expense payments)
3. Review accruals, budgets and expenditures (where
applicable)
G. Provide rating agencies statistical data as requested
(monthly/quarterly)
H. Standard schedules for Board Package (Quarterly)
1. Activity Summary
2. Expense analysis
3. Other schedules can be provided (additional fees may
apply)
IV. SPECIAL ISSUES RELATED TO FOREIGN SECURITIES
--------------------------------------------
A. Financial Reporting
1. Review and provide reports on the treatment of currency
gain/loss and capital gain/loss in conjunction with the
Funds' Independent Auditors
a. Section 988 transactions
b. Section 1256 contracts
c. Section 1092 deferrals
2. Tax Reporting (depending on the level of assistance
required by the Funds' independent auditors, additional
fees may apply)
a. Analyze tax treatment of foreign investments based
on the Fund's elections and their impact on:
1. Subchapter M tests --e.g. diversification,
qualified income, short-short (30% tests)
2. Taxable income and capital gains
-28-
<PAGE> 29
3. Prepare excise tax worksheets
b. Calculate distributions to shareholders
1. Monitor character and impact of realized
currency gain/loss on distribution amount
3. Assist the Advisor and work with the Independent Auditors
in identification of PFIC's (by providing a list of
potential PFIC's that the fund may be holding).
V. BLUE SKY ADMINISTRATION
-----------------------
A. Sales Data
1. Receive daily sales figures from Price Waterhouse Blue 2
System.
2. Receive daily sales figures broken down by state from
Charles Schwab or other mutual fund marketplaces (if
applicable).
3. Produce daily warning report for sales in excess of
pre-determined percentage.
4. Analysis of all sales data to determine trends within any
state.
B. Filings
1. Produce and mail the following required filings:
a. Initial Filings - produce all required forms
including notification of SEC Effectiveness.
b. Renewals - produce all renewal documents and mail
to states, includes follow-up to ensure all is in
order to continue selling in states.
c. Sales Reports - produce all relevant sales reports
for the states and complete necessary documents to
properly file sales reports with states.
d. Prospectus Filings - file all copies of Definitive
SAI & Prospectuses with the states which require
notification.
e. Post-Effective Amendment Filing - file all
Post-Effective Amendments with the states which
require notification, as well as, any other
required documents.
2. On demand additional states - complete filing for any
states that the Fund would like to add. This includes all
of the items in 1(a).
3. Amendments to current permits - file in a timely manner
any amendment to registered share amounts.
4. Update and file hard copy of all data pertaining to
individual permits.
C. Consulting and Analysis - Investor Services Group will supply
the Fund with the most current fee structure for each state and
help the Fund decide what course of action to take in each
state to minimize the amount of money spent on Blue Sky
Registration.
-29-
<PAGE> 30
SCHEDULE C
----------
FEE SCHEDULE
FUND ADMINISTRATION (1/12th payable monthly)
.0015 On the First $ 50 Million of Average Net Assets
.0010 On the Next $ 50 Million of Average Net Assets
.0005 Over $100 Million of Average Net Assets
The above fee schedule is applicable to TOTAL NET ASSETS of all
portfolios within a group. Annual minimum fees are $55,000 for
the first portfolio or class, $15,000 for each additional
portfolio or class.
Maximum annual fee for four single class Funds not to exceed
$250,000. This will increase $50,000 per each additional fund.
Blue Sky fees will be charged at a rate of $65.00 per permit
filed, including initial and renewal permits.
Assumes a single advisor per Portfolio and that Fund Accounting and Custody are
provided by the same entity for all Portfolios.
TRANSFER AGENCY AND SHAREHOLDER SERVICES
I. TRANSFER AGENT AND SHAREHOLDER SERVICES: (1/12th payable monthly)
---------------------------------------
All Portfolios (other than Equity or Bond Portfolios)
$20.00 per account per year per Portfolio
$30,000 annual minimum fee per Portfolio*
Each additional class annual minimum is $15,000.
*This fee is reduced to $27,000 for the first three years of a
five-year contract.
Equity and Bond Portfolios
$20.00 per account per year per Portfolio
$24,000 annual minimum fee per Portfolio*
Each additional class annual minimum is $15,000.
-1-
<PAGE> 31
*This fee is reduced to $22,000 for the first three years of a
five-year contract.
Assumes one omnibus account per Portfolio and perhaps a few other accounts
initially, with some account growth expected over time. Also assumes no need to
maintain a dealer/rep file, use NSCC's Fund/Serv system, etc.
II. IRA's, 403(b) PLANS, DEFINED CONTRIBUTION/BENEFIT PLANS:
--------------------------------------------------------
Annual Maintenance Fee - $12.00 per account per year
(Normally charged to participants)
III. FUND/SERV PROCESSING (If Applicable)
------------------------------------
$1,000 One time set-up charge - new fund
$50.00 Per month/per fund monthly maintenance fee
IV. NETWORKING PROCESSING (If Applicable)
-------------------------------------
$1,000 One time set-up charge - new fund
$75.00 Per month/per fund monthly maintenance fee
V. FULFILLMENT SERVICES
--------------------
$4.00 per inquiry and fulfillment request
$3,000 per month minimum fee
VI. VRU SERVICES
------------
$25,000 one time set-up charge, plus
$1,000 monthly fee if volume is less than 2,000 calls per
month ($500 if over), plus
$0 .23 per minute, plus $0
.10 per call
VII. NSCC SERVICES
-------------
Set-up fee of $8,000 per management company for Fund/Serv
and Networking, plus
$0.15 per transaction, plus
$0.10 per same day trade
VIII. MISCELLANEOUS CHARGES
---------------------
The Fund shall be charged for the following products and services as applicable:
- Ad hoc reports
- Ad hoc SQL time
- COLD Storage
- Digital Recording o Banking Services, including incoming and
outgoing wire charges
- Microfiche/microfilm production
- Magnetic media tapes and freight
- Manual Pricing
-2-
<PAGE> 32
- Materials for Rule 15c-3 Presentations
- Pre-Printed Stock, including business forms, certificates,
envelopes, checks and stationary
ADDITIONAL SERVICES
To the extent Investor Services Group is called upon to provide services
relating to investment techniques such as Security Lending, Swaps, Leveraging,
Short Sales, Derivatives, Precious Metals, or foreign currency futures and
options, additional fees will apply. Activities of a non-recurring nature such
as shareholder in-kinds, fund consolidations, mergers or reorganizations will be
subject to negotiation. Any additional/enhanced services, programming requests,
or reports will be quoted upon request.
CONVERSION EXPENSES
Conversion costs will be determined based on file conditions, available history,
quality of report details and reconciliations, as well as programming costs.
-3-
<PAGE> 33
SCHEDULE D
----------
OUT-OF-POCKET EXPENSES
The Fund shall reimburse Investor Services Group monthly for
applicable out-of-pocket expenses, including, but not limited to the following
items:
- Postage - direct pass through to the Fund
- Telephone and telecommunication costs, including all lease,
maintenance and line costs
- Proxy solicitations, mailings and tabulations
- Shipping, Certified and Overnight mail and insurance
- Terminals, communication lines, printers and other equipment and
any expenses incurred in connection with such terminals and lines
- Duplicating services
- Distribution and Redemption Check Issuance - $.07 per item
- Courier services
- Overtime, as approved by the Fund
- Temporary staff, as approved by the Fund
- Travel and entertainment, as approved by the Fund
- Record retention, retrieval and destruction costs, including, but
not limited to exit fees charged by third party record keeping
vendors
- Third party audit reviews (SAS 70)
- Insurance
- Pricing services (or services used to determine Fund NAV) o
Vendor set-up charges for Blue Sky and other services
- Blue Sky filing or registration fees o EDGAR filing fees
- Vendor pricing comparison
- Such other expenses as are agreed to by Investor Services Group
and the Fund
The Fund agrees that postage and mailing expenses will be paid on the
day of or prior to mailing as agreed with Investor Services Group. In addition,
the Fund will promptly reimburse Investor Services Group for any other
unscheduled expenses incurred by Investor Services Group whenever the Fund and
Investor Services Group mutually agree that such expenses are not otherwise
properly borne by Investor Services Group as part of its duties and obligations
under the Agreement.
-4-
<PAGE> 34
SCHEDULE E
----------
FUND DOCUMENTS
- Certified copy of the Articles of Incorporation of the Fund,
as amended
- Certified copy of the By-laws of the Fund, as amended
- Copy of the resolution of the Board of Directors authorizing
the execution and delivery of this Agreement
- Copies of all agreements between the Fund and its service
providers
- Specimens of the certificates for Shares of the Fund, if
applicable, in the form approved by the Board of Directors of
the Fund, with a certificate of the Secretary of the Fund as
to such approval
- All account application forms and other documents relating to
Shareholder accounts or to any plan, program or service
offered by the Fund
- Certified list of Shareholders of the Fund with the name,
address and taxpayer identification number of each
Shareholder, and the number of Shares of the Fund held by
each, certificate numbers and denominations (if any
certificates have been issued), lists of any accounts against
which stop transfer orders have been placed, together with the
reasons therefore, and the number of Shares redeemed by the
Fund
- All notices issued by the Fund with respect to the Shares in
accordance with and pursuant to the Articles of Incorporation
or By-laws of the Fund or as required by law and shall perform
such other specific duties as are set forth in the Articles of
Incorporation including the giving of notice of any special or
annual meetings of shareholders and any other notices required
thereby.
- A listing of all jurisdictions in which each Portfolio is
registered and lawfully available for sale as of the date of
this Agreement and all information relative to the monitoring
of sales and registrations of Fund shares in such
jurisdictions
- Each Fund's most recent post-effective amendment to its
Registration Statement
- Each Fund's most recent prospectus and statement of additional
information, if applicable, and all amendments and supplements
thereto
-5-
<PAGE> 1
Exhibit 23(i)
DECHERT PRICE & RHOADS
1775 Eye Street, N.W.
Washington, DC 20006
June 30, 1999
New Covenant Funds
200 East Twelfth Street - Suite C
Jeffersonville, Indiana 47130
Dear Ladies and Gentlemen:
As counsel to New Covenant Funds (the "Trust"), we are familiar with
the Trust's registration under the Investment Company Act of 1940, as amended,
and with the registration statement relating to its shares of beneficial
interest under the Securities Act of 1933 (File No. 333-64981) (the
"Registration Statement"). We have also examined such other corporate records,
agreements, documents and instruments as we deemed appropriate.
On the basis of the foregoing, we are of the opinion that the shares of
beneficial interest of the Trust being registered under the Securities Act of
1933 in Pre-Effective Amendment No. 2 to the Registration Statement will, when
sold, be legally issued, fully paid and non-assessable by the Trust.
We hereby consent to the filing of this opinion with and as part of
Pre-Effective Amendment No. 2 to the Registration Statement.
Very truly yours,
Dechert Price & Rhoads
<PAGE> 1
Exhibit 23(j)
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Independent Auditors"
in the Statement of Additional Information and to the use of our report dated
June 23, 1999 in Pre-Effective Amendment No. 2 to the Registration Statement on
Form N-1A (No. 333-64981) of New Covenant Funds.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
June 28, 1999
<PAGE> 1
Exhibit 23(l)
June 28, 1999
New Covenant Funds
200 East Twelfth Street, Suite B
Jeffersonville, IN 47130
RE: Initial Capital Letter of Understanding
- --- ---------------------------------------
Ladies and Gentlemen:
The Presbyterian Church (USA) Foundation (the "Foundation") hereby agrees to
acquire 2,500 shares of beneficial interest (the "Shares") in each of the New
Covenant Growth Fund, New Covenant Income Fund, New Covenant Balanced Growth
Fund and New Covenant Balanced Income Fund for a total of 10,000 shares at
$10.00 per share.
Shares will be issued in a private offering prior to the effectiveness of the
Registration Statement filed by New Covenant Funds (the "Trust") under the
Securities Act of 1933. The Shares are being purchased pursuant to Section 14 of
the Investment Company Act of 1940 to serve as the seed money for the Trust
prior to the commencement of the public offering of its shares.
In connection with such purchase, the Foundation represents that the purchase is
being made for investment purposes and not with the present intention of
redeeming or reselling the Shares.
The Foundation, as evidenced by the signature of its officer, hereby agrees to
the above and consents to the filing of this Investment Letter as an exhibit to
the Form N-1A Registration Statement of the Trust.
Sincerely,
Presbyterian Church (USA) Foundation
By: /s/ Ralph R. Allen
------------------
Name: Ralph R. Allen
Title: Vice President
<PAGE> 1
Exhibit 23(p)
POWER-OF-ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints DEBORAH A. POTTER, KELLY O'NEILL and CHRISTINE MASON and each of them,
with full power to act without the other, as a true and lawful attorney-in-fact
and agent, with full and several power of substitution, to take any appropriate
action to execute and file with the U.S. Securities and Exchange Commission, any
amendment to the Registration Statement of New Covenant Funds (the "Trust"), to
file any request for exemptive relief from state and federal regulations, to
file the prescribed notices in the various states regarding the sale of shares
of the Trust, to perform on behalf of the Trust any and all such acts as such
attorneys-in-fact may deem necessary or advisable in order to comply with the
applicable laws of the United States or any such state, and in connection
therewith to execute and file all requisite papers and documents including, but
not limited to, applications, reports, surety bonds, irrevocable consents and
appointments of attorneys for service of process; granting to such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act requisite and necessary to be done in connection
therewith, as fully as each might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 11th day of June, 1999.
NEW COVENANT FUNDS
/s/Frank K. Bateman, Jr.
------------------------
Frank K. Bateman, Jr.
<PAGE> 2
POWER-OF-ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints DEBORAH A. POTTER, KELLY O'NEILL and CHRISTINE MASON and each of them,
with full power to act without the other, as a true and lawful attorney-in-fact
and agent, with full and several power of substitution, to take any appropriate
action to execute and file with the U.S. Securities and Exchange Commission, any
amendment to the Registration Statement of New Covenant Funds (the "Trust"), to
file any request for exemptive relief from state and federal regulations, to
file the prescribed notices in the various states regarding the sale of shares
of the Trust, to perform on behalf of the Trust any and all such acts as such
attorneys-in-fact may deem necessary or advisable in order to comply with the
applicable laws of the United States or any such state, and in connection
therewith to execute and file all requisite papers and documents including, but
not limited to, applications, reports, surety bonds, irrevocable consents and
appointments of attorneys for service of process; granting to such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act requisite and necessary to be done in connection
therewith, as fully as each might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 11th day of June, 1999.
NEW COVENANT FUNDS
/s/Cynthia S. Gooch
-------------------
Cynthia S. Gooch
<PAGE> 3
POWER-OF-ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints DEBORAH A. POTTER, KELLY O'NEILL and CHRISTINE MASON and each of them,
with full power to act without the other, as a true and lawful attorney-in-fact
and agent, with full and several power of substitution, to take any appropriate
action to execute and file with the U.S. Securities and Exchange Commission, any
amendment to the Registration Statement of New Covenant Funds (the "Trust"), to
file any request for exemptive relief from state and federal regulations, to
file the prescribed notices in the various states regarding the sale of shares
of the Trust, to perform on behalf of the Trust any and all such acts as such
attorneys-in-fact may deem necessary or advisable in order to comply with the
applicable laws of the United States or any such state, and in connection
therewith to execute and file all requisite papers and documents including, but
not limited to, applications, reports, surety bonds, irrevocable consents and
appointments of attorneys for service of process; granting to such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act requisite and necessary to be done in connection
therewith, as fully as each might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 11th day of June, 1999.
NEW COVENANT FUNDS
/s/Donald B. Register
---------------------
Donald B. Register
<PAGE> 4
POWER-OF-ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints DEBORAH A. POTTER, KELLY O'NEILL and CHRISTINE MASON and each of them,
with full power to act without the other, as a true and lawful attorney-in-fact
and agent, with full and several power of substitution, to take any appropriate
action to execute and file with the U.S. Securities and Exchange Commission, any
amendment to the Registration Statement of New Covenant Funds (the "Trust"), to
file any request for exemptive relief from state and federal regulations, to
file the prescribed notices in the various states regarding the sale of shares
of the Trust, to perform on behalf of the Trust any and all such acts as such
attorneys-in-fact may deem necessary or advisable in order to comply with the
applicable laws of the United States or any such state, and in connection
therewith to execute and file all requisite papers and documents including, but
not limited to, applications, reports, surety bonds, irrevocable consents and
appointments of attorneys for service of process; granting to such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act requisite and necessary to be done in connection
therewith, as fully as each might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 11th day of June, 1999.
NEW COVENANT FUNDS
/s/Gail S. Duree
----------------
Gail S. Duree
<PAGE> 5
POWER-OF-ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints DEBORAH A. POTTER, KELLY O'NEILL and CHRISTINE MASON and each of them,
with full power to act without the other, as a true and lawful attorney-in-fact
and agent, with full and several power of substitution, to take any appropriate
action to execute and file with the U.S. Securities and Exchange Commission, any
amendment to the Registration Statement of New Covenant Funds (the "Trust"), to
file any request for exemptive relief from state and federal regulations, to
file the prescribed notices in the various states regarding the sale of shares
of the Trust, to perform on behalf of the Trust any and all such acts as such
attorneys-in-fact may deem necessary or advisable in order to comply with the
applicable laws of the United States or any such state, and in connection
therewith to execute and file all requisite papers and documents including, but
not limited to, applications, reports, surety bonds, irrevocable consents and
appointments of attorneys for service of process; granting to such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act requisite and necessary to be done in connection
therewith, as fully as each might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 11th day of June, 1999.
NEW COVENANT FUNDS
/s/Michael F. Ryan
------------------
Michael F. Ryan
