AS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION
ON 04/30/99
FILE NOS: 811-9219
333-71501
SECURITIES AND EXCHANGE COMMISSION
----------------------------------
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [1]
Post-Effective Amendment No. [ ]
and
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. [1]
(Check appropriate box or boxes.)
OPTIMAL FUNDS, INC.
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(Exact name of Registrant as Specified in Charter)
213-G VT Route 15
Jericho, VT 05465
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(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code:
802-899-2593
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MR. MITCHELL M. MAYNARD
213-G VT ROUTE 15
JERICHO, VT 05465
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(Name and Address of Agent for Service)
Please send copy of communications to:
DAVID D. JONES, ESQUIRE
518 Kimberton Road, # 134
Phoenixville, Pennsylvania 19460
610-718-5381
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Approximate Date of Proposed Public Offering: As soon as practicable following
effective date.
Registrant declares that it is registering an indefinite number or amount of its
securities by this Registration Statement.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall became
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
TOTAL NUMBER OF PAGES _____
EXHIBIT INDEX BEGINS
ON PAGE _____
<PAGE>
THE OPTIMAL FUND
CROSS-REFERENCE SHEET
(As required by Rule 495)
<TABLE>
<CAPTION>
ITEM NO. ON FORM N-1A CAPTION OR SUBHEADING IN PROSPECTUS
- --------------------- -----------------------------------
OR STATEMENT OF ADDITIONAL INFORMATION
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PART A - INFORMATION REQUIRED IN PROSPECTUS
- -------------------------------------------
<S> <C>
1. Front and Back Cover Pages. Cover Page; Back Cover Page
2. Risk/Return Summary: Investments,
Risks, and Performance. Risk/Return Summary; Fees and Expenses
3. Risk/Return Summary/ Fee Table. Fees and Expenses
4. Investment Objectives, Principal Risk/Return Summary
Investment Strategies, and Related
Risks
5. Management's Discussion of Not Applicable
Fund Performance
6. Management, Organization and Management of the Fund; Investment Adviser;
Capital Structure General Information
7. Shareholder Information Investing in the Fund; How to Sell (Redeem)
Your Shares; Distribution Fee; Federal Taxes;
General Information; Dividends and Distributions
8. Distribution Arrangements Distribution Fee;
9. Financial Highlights Information Not Applicable
<PAGE>
PART B. STATEMENT OF ADDITIONAL INFORMATION
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10. Cover Page and Table of Contents Cover Page; Table of Contents
11. Fund History Not covered in Statement of Additional
Information (covered under Item 6 of
Part A)
12. Description of the Fund and its Investment Policies and Restrictions
Investments and Risks
13. Management of the Fund. Investment Adviser; Directors and Officers
14. Control Persons and Principal Directors and Officers; Principal Holders of
Holders of Securities. Securities
15. Investment Advisory and other Investment Adviser; Custodian; Transfer Agent;
Services. Administration: Distribution Fees
16. Brokerage Allocation and Other Portfolio Transactions
Practices
17. Capital Stock and Other Portfolio Transactions
Securities.
18. Purchase, Redemption and Pricing Purchasing and Redeeming Shares
of Securities Being Offered
19. Taxation of the Fund. Tax Information
20. Underwriters Transfer Agent; Administration
and Transfer Agents
21. Calculations of Performance Data. Performance Information
22. Financial Statements Not Applicable.
</TABLE>
PART C
Information required to be included in PART C is set forth under the appropriate
Item, so numbered, in PART C of the Registration Statement.
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<PAGE>
PART A
The Optimal Fund
(the "Fund")
A Portfolio of Optimal Funds, Inc.
PROSPECTUS
May 17, 1999
(Subject to Completion)
The Fund's investment objective is to achieve capital growth. Current income is
a secondary objective of the Fund. The Fund is offered by Optimal Funds, Inc.
(the "Company"), an open-end, diversified management investment company.
The Fund offers a single Class of shares--Class C shares, with maximum
continuing annual Distribution and Service (12b-1) fees of 1.00%.
The information contained in this Prospectus is subject to completion or
amendment. A registration statement relating to these securities has been filed
with the Securities and Exchange Commission. These Securities may not be sold,
and offers to buy may not be accepted, prior to the time the registration
statement becomes effective in any state or jurisdiction.
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is truthful or complete. Anyone who
tells you otherwise is committing a crime.
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<PAGE>
TABLE OF CONTENTS
Risk/Return Summary
Fees And Expenses
Investing In The Fund
How To Sell (Redeem) Shares
Dividends and Distributions
Optimal Funds, Inc.
Management of the Fund
Fund Service Providers
Federal Taxes
General Information
Distribution Fee
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<PAGE>
RISK/RETURN SUMMARY
Investment Objectives
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The Fund's primary investment objective is capital growth. Current income is a
secondary objective of the Fund.
Primary Investment Strategies
- -----------------------------
The Fund seeks to achieve its objectives by investing primarily in stock index
futures and options contracts on stock indexes of developed countries all over
the world ("Global Indexes"). There are stock indexes for most of the world's
stock markets. In order to "invest" in an index, you must purchase a security
that is designed to mirror the performance of that index. Stock index futures
and options contracts are designed to mirror the performance of a particular
stock index. As the value of a particular index rises and falls, the value of
the underlying futures or options contract also rises or falls. Ideally, the two
will rise and fall together and to the same degree.
The Fund will invest in futures and options contracts on indexes that are
largely representative of the world's developed economies. The Fund will not
invest in "emerging" countries. Further, the Fund will limit its investment in
stock index
futures and options contracts so that the Fund will not invest more than
five percent (5%) of its net assets as initial margin on those contracts.
The table below sets out the Global Indexes in which the Fund normally intends
to concentrate its investments:
Country Index
- ------- -----
United States S&P 500
United Kingdom FTSE-100
France CAC-40
Germany DAX
Japan Nikkei-225
The Fund invests in futures and options contracts on the Global Indexes based on
each country's Gross Domestic Product ("GDP"). GDP is the measure of all goods
and services produced in a country in a year, measured in U.S. dollars. Each
year, the World Bank issues reports on the GDP for each of the countries that
will be included in the Fund. Each country's GDP is added together to get a
global GDP value, called the Base Value. Each country's individual GDP will be
divided by the Base value to determine that country's percentage representation
in the total. The Fund will then invest in stock index futures and options
contracts to the extent of that country's representation in the total. The
Adviser will recalculate the Base Value and each country's percentage
representation annually, usually in July.
If the Fund's Adviser determines that investing in stock index futures and
options contracts alone will not achieve adequate participation in the Global
Indexes, the Fund will also invest in shares of other registered investment
companies (mutual funds) that have the investment objective of tracking the
performance of an index or a basket of indexes. Examples of these types of
mutual funds are S&P Depository Receipts ("SPDRS") and World Equity Benchmarks
("WEBS"). SPDRS are mutual fund shares that trade on the American Stock Exchange
and track the performance of the S&P 500 Stock Index. WEBS are mutual fund
shares that also trade on the American Stock Exchange. There are a number of
distinct WEBS that track the performance of a number of foreign country indexes.
WEBS are based on the Morgan Stanley Capital International country index
baskets, and are designed to track the performance of such indexes.
1
<PAGE>
To further assist the Fund in achieving its investment objective of
participating in Global Indexes, the Fund may also invest in Eurotop 100 Index
futures contracts. The FTSE Eurotop 100 Index is a selection of the "top" 100
stocks of companies that are native to Europe. The companies in the index are
chosen based on their volume of trading activity, and are weighted in the index
based on their market capitalization. The index is calculated and managed by the
FTSE in London, England. The futures contracts on the Eurotop 100 Index also
trade on the FTSE in London.
The remaining net assets of the Fund normally will be invested in money market
instruments such as certificates of deposit and short-term treasury notes and
bills.
Investment Rationale
- --------------------
By investing in stock index futures and options contracts, registered investment
companies, and money market instruments, the Fund is designed to invest in a
manner that achieves both capital growth and current income.
Capital Growth. By investing up to 5% of the Fund's net assets as initial margin
for futures and options contracts, the Fund will be investing in securities that
rise or fall in value based on the performance of the underlying indexes. If the
value of the Global Indexes rise, the value of the underlying futures and
options contract will also rise.
Futures and options contracts are bought on margin, which means that a contract
can be purchased for a percentage of its full value. Purchasing futures and
options contracts on margin results in the Fund controlling an amount of
securities in excess of the price paid for those securities. Because the Fund
controls securities in excess of its invested margin, growth in the value of the
Global Indexes will generate greater growth than would be possible if such
margin amount were invested in other types of securities. To fully replicate the
price changes in the Global Indexes, the Fund attempts to achieve and maintain a
Beta of 1.0 to the Global Indexes that are included in the Fund's portfolio.
Beta is a way of measuring the volatility of a portfolio versus the volatility
of some other standard, in this case, the Global Indexes. A Beta of less than
1.0 means that the portfolio is less volatile than the underlying index, and
price changes in the portfolio will not be as severe as price changes in the
underlying index. A Beta of greater than 1.0 means that prices in the portfolio
will increase or decrease in value more severely than price changes in the
underlying index. By attempting to maintain a Beta of 1.0, the Fund will attempt
to mirror changes in the Global Indexes.
The Fund, in order to maintain its Beta of 1.0, may also need to invest in WEBS,
SPDRS and Euorotop 100 Index futures. Generally, the Fund will invest in these
securities under the following conditions: (1) Where maintaining a Beta of 1.0
would call for less than a full futures or options contract value be purchased,
and (2) when the margin requirements to purchase an adequate amount of futures
and options contracts would result in the Fund exceeding its 5% initial margin
limitation.
If the value of the WEBS, SPDRS and Euorotop 100 Index futures rise as a result
of an increase in the value of the underlying indexes, the Fund will achieve
capital growth.
Current Income. The Fund attempts to realize current income by investing its
remaining net assets in money market instruments such as certificates of
deposit, short-term treasury notes and bills, and repurchase agreements. Money
market instruments are debt instruments that pay interest to the investor.
Accordingly, those net assets of the Fund invested in such instruments will
generate current income for the Fund.
2
<PAGE>
Principal Risks
- ---------------
Futures and Options Contracts. The primary risks of futures and options
contracts are (1) imperfect correlation between the price movement of the
futures and options contract and the price movement of the underlying security,
in this case, stock indexes, (2) margin risk, and (3) liquidity risk.
There is always the risk that an offsetting futures and options contract will
not correlate exactly to the underlying security. When that happens, price
movements of the underlying security will not be completely offset by the
related futures and options contract, and losses can occur.
Although the Fund may invest no more than 5% of its net assets in initial
margin, the Fund may lose far more than its initial margin if the value of the
stock index futures and/or options contracts drop.
There is the possibility that there will not be a liquid secondary market for a
futures and/or options contract, which would make it more difficult for the Fund
to close out the position prior to the maturity date. In a rapidly declining
market, the Fund could experience serious losses if it were unable to liquidate
its positions. The Fund will minimize these risks by purchasing futures and
options contracts only on national exchanges and over-the-counter markets with
an active and liquid secondary market. The Fund will also minimize these risks
by investing only in the most liquid and active indexes in each country.
Common Stock. Because the Fund invests globally in stock index futures and
options contracts, the Fund will be subject, indirectly, to changes in stock
markets, both in the United States and in the other countries in which the Fund
invests. The stock markets trade in a cyclical price pattern, with prices
generally rising or falling over time. These cyclical periods may last for a
significant period of time. The Global Indexes change in value as the value of
that country's stock market changes. Accordingly, a sustained period of
declining stock prices in a Global Index country will cause a sustained decline
in the value of that index, and in the Fund.
Currency Risk. Because the Fund will invest indirectly in Global Indexes, the
Fund will be exposed to currency risk. This means that the Fund could lose money
due to a change in the value of its foreign holdings caused by a change in the
value of that country's currency. Changes in the value of a country's currency
relative to the value of the dollar can have a pronounced effect on the value of
a foreign security. Investing in stock index futures and options generally
reduces the need for currency conversion. Additionally, the Adviser will
minimize the risk of currency fluctuations by selling currency futures contracts
as a hedge against foreign currency positions.
Registered Investment Companies. The Fund will invest in other registered
investment companies (mutual funds) whose investment objective is to replicate
the performance of an index or country index basket in which the Fund wishes to
invest. When the Fund invests in other mutual funds, you will be subject to the
risks associated with those funds, and you will pay, indirectly, a portion of
the fees and expenses of that mutual fund. The Fund may not invest more than 10%
of its net assets in other mutual funds, and the fund cannot own more than 3% of
any one mutual fund's outstanding shares.
Debt Securities. The Fund will normally invest net assets not invested in
futures contracts or registered investment companies in money market
instruments. The primary risks of money market instruments are interest rate
risk and credit risk. As interest rates generally rise, the value of money
market instruments generally fall. The longer a money market instrument has
until it matures, the more severely its price will change when interest rates
change. Also, the value of a money market instrument can change due to a change
in the creditworthiness of the issuer. The less creditworthy the issuer, the
less desirable the security, and the lower its value.
3
<PAGE>
To minimize interest rate risk, the Fund will only invest in money market
instruments with less than a year remaining to maturity, or will sell futures
contracts that correspond the security purchased as a hedge. To minimize credit
risk, the Fund will only invest in U.S. Government and agency securities, and
certificates of deposits and other interest bearing deposit instruments and
accounts from U.S. banks with over $1 Billion in assets.
Year 2000 Risks. As with other mutual funds, financial and business
organizations and individuals around the world, the Fund could be adversely
affected if the computer systems used by the Adviser and the Fund's other
service providers don't properly process and calculate date-related information
and data from and after January 1, 2000. This is commonly known as the "Year
2000" or "Y2K" problem. The Adviser is taking steps to address the Y2K problem
with respect to the computer systems that it uses and to obtain assurances that
comparable steps are being taken by the Fund's other major service providers. At
this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact on the Fund. Also, if issuers of
securities held by the Fund experience Y2K problems, those problems may
adversely affect the value of the Fund's portfolio.
Portfolio Risk. Because of the manner in which the Fund invests its assets, the
Fund requires a certain amount of assets in order to efficiently mange its
investments. The Adviser has determined that the Fund requires $10 million in
assets to efficiently invest according to the Fund's investment policies. Until
that asset level is reached, the Fund may not be invested in complete accordance
with its investment policies, and the Fund's performance could be negatively
affected as a result.
Other Risks. You may lose money by investing in the Fund. The likelihood of loss
is greater if you invest for a shorter period of time. The Fund intends to
engage in certain aggressive investment techniques, including transactions in
futures contracts. The Fund has no operating history, and the Adviser has no
previous experience advising this type of mutual fund. You should be aware that
there is no assurance that the Adviser will be successful in achieving the
objectives of the Fund, since all investments have some degree of risk.
The value of the Fund's investments will vary from day-to-day, reflecting
changes in market conditions, interest rates and other company, political, and
economic news. Over the short-term, stock prices can fluctuate dramatically in
response to these factors.
The Adviser has determined that, because of the manner in which the Fund
invests, in order to fully achieve the Fund's objective of a 1.0 Beta, the Fund
needs to have at least $10 million in net assets. Until such asset levels are
achieved, the Adviser will attempt to achieve the Fund's objectives through
selective investing in securities that the Advise believes will achieve the
fund's objective. However, there is no assurance that the Fund will be able to
achieve its objectives during this period.
A complete listing of the Fund's investment restrictions, including those that
may be changed only by a vote of the Fund's shareholders, may be found in the
Statement of Additional Information ("SAI") for the Fund.
The Fund is appropriate for investors who want capital appreciation and are
willing to accept moderate to high amounts of volatility and risk.
4
<PAGE>
FEES AND EXPENSES
This table describes the fees and expenses you may pay if you buy and hold
shares of the Fund.
Shareholder Fees: (fees paid directly from your investment) NONE
- -----------------
Annual Fund Operating Expenses: (expenses that are deducted from Fund assets)
- -------------------------------
Management Fees1 1.45%
Distribution and Service (12b-1) Fees2 1.00%
Other Expenses 3 0.05%
-----
Total Annual Fund Operating Expenses. 2.50%
1. The Adviser has voluntarily agreed to waive its advisory fee and/or to
reimburse the Fund, if necessary, if the Management Fees and/or Other Expenses
would cause the Total Annual Fund Operating expenses to exceed 2.50% for the
Class C shares. The Adviser may revise or cancel these expense limitations at
any time and will notify you in writing at least 30 days prior to any such
change.
2. Includes a maximum annual fee of 0.75% of average net assets for
distribution-related expenses and 0.25% for shareholder service expenses. You
should be aware that if you hold your shares for a substantial period of time,
you may indirectly pay more than the economic equivalent of the maximum
front-end sales charge allowed by the National Association of Securities Dealers
due to the recurring nature of Distribution (12b-1) fees.
3. Because this is a new Fund without an operating history, "Other Expenses" are
estimated for the Fund's first fiscal year.
5
<PAGE>
Example: This example is intended to help you compare the costs of investing in
the Fund with the costs of investing in other mutual funds.
The Example below assumes that you invest $10,000 in the Fund for the time
periods indicated and then redeem all your shares at the end of those periods.
The Example also assumes that your investment has a 5% return each year and that
the Fund's operating expenses that were described above remain the same.
Although your actual costs may be higher or lower, based on these assumptions,
your costs would be:
Time Period Class C
- ----------- -------
One Year $253
Three Years $779
Because the Fund does not charge a redemption fee, you would pay the same fees
set forth above even if you did not redeem your shares. However, the Fund's
custodian does charge a $10 wire transfer fee for redemptions made by wire
transfer. That charge is not included in the example. If it were, your expenses
would be higher.
INVESTING IN THE FUND
Opening And Adding To Your Account
- ----------------------------------
You can invest directly in the Fund in a number of ways. Simply choose the one
that is most convenient for you. Any questions you may have can be answered by
calling 1-800-___-____. You may also purchase Fund shares through
broker-dealers, registered investment advisers or other financial organizations.
Payments for Fund shares should be in U.S. dollars, and in order to avoid fees
and delays, should be drawn on a U.S. bank. Please remember that Fund management
reserves the right to reject any purchase order for Fund shares. Your purchase
of Fund shares is subject to the following minimum investment amounts:
Minimum Investment To Open Account Additional Investments
--------------- ---------------------
Class C Shares
- --------------
Regular Account $500 $50
IRA's $500 $50
6
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<TABLE>
<CAPTION>
TO OPEN AN ACCOUNT TO ADD TO ACCOUNT
<S> <C> <C>
By Mail Complete an Account Make your check payable to
Registration Form, make The Optimal Fund and
a check payable to The mail it to the address at left.
Optimal Fund
and mail the Form and check
to Optimal Funds, Inc. Please include your account
c/o Declaration Services number on your check.
Company, 555 North Lane Or use the convenient form
Suite 6160, Conshohocken, attached to your regular
PA 19428. Fund statement.
By Wire Ask your bank to wire funds Ask your bank to wire
to Account of First Union immediately available funds
National Bank, N.A. to the location described at
ABA#: -------------- the left, except that the wire
Credit: Optimal Funds, Inc. should note that it is to make
Account #: -------------- a subsequent purchase rather
Further credit: The Optimal than to open a new account.
Fund.
The wire should state that the Include your name and
Fund purchase is to be in your account number.
name(s).
The wire should state that you
are opening a new Fund account.
Include your name(s), address and
taxpayer identification number or
Social Security number and the
name of the Fund in which you are
purchasing shares.
Call 1-800-___-____ to inform us
that a wire is being sent.
By Telephone transactions may Call 1-800-___-____ to make
Tele- not be used for initial purchases your purchase.
Phone. If you want to make
subsequent transactions via
telephone, please select this
service on your account
Registration Form.
</TABLE>
Optimal Funds, Inc. wants you to be kept current regarding the status of your
account in the Fund. To assist you, the following statements and reports will be
sent to you:
7
<PAGE>
Confirmation Statements After every transaction that affects your account
balance or your account registration.
Financial Reports Semi-annually -- to reduce Fund expenses, only one
copy of the Fund report will be mailed to each
taxpayer identification number even if you have
more than one account in the Fund.
Purchase By Mail
- ----------------
Your purchase order, if in proper form and accompanied by payment, will be
processed upon receipt by Declaration Services Company, the Fund's Transfer
Agent. If the Transfer Agent receives your order and payment by the close of
regular trading on the Exchange (currently 4:00 p.m. East Coast time), your
shares will be purchased at the Fund's net asset value calculated at the close
of regular trading on that day. Otherwise, your shares will be purchased at the
net asset value determined as of the close of regular trading on the next
business day.
The Company does not consider the U.S. Postal Service or any other independent
delivery service to be its agent. Therefore, deposit in the mail or with such
services, or receipt at Declaration Service Company's Post Office Box, of
purchase applications or redemption requests does not constitute receipt by the
Custodian or the Fund. Do not mail letters by overnight courier to the post
office box address. Correspondence mailed by overnight courier should be sent to
the Fund at:
Declaration Services Company
555 North Lane, Suite 6160
Conshohocken, Pa 19428
All applications to purchase shares of the Fund are subject to acceptance or
rejection by authorized officers of the Company and are not binding until
accepted. Applications will not be accepted unless they are accompanied by
payment in U.S. funds. Payment must be made by check or money order drawn on a
U.S. bank, savings & loan or credit union. The Custodian will charge a $20.00
fee against your account, in addition to any loss sustained by the Fund, for any
payment check returned to the Custodian for insufficient funds. The Company
reserves the right to refuse to accept applications under circumstances or in
amounts considered disadvantageous to shareholders. If you place an order for
Fund shares through a securities broker, and you place your order in proper form
before 4:00 p.m. East Coast time on any business day in accordance with their
procedures, your purchase will be processed at the public offering price
calculated at 4:00 p.m. on that day, if the securities broker then transmits
your order to the Transfer Agent before the end of its business day (which is
usually 5:00 p.m. East Coast time). The securities broker must send to the
Transfer Agent immediately available funds in the amount of the purchase price
within three business days for the order.
8
<PAGE>
By Financial Service Organization
- ---------------------------------
If you are a client of a securities broker or other financial organization, you
should note that such organizations may charge a separate fee for administrative
services in connection with investments in Fund shares and may impose account
minimums and other requirements. These fees and requirements would be in
addition to those imposed by the Fund. If you are investing through a securities
broker or other financial organization, please refer to its program materials
for any additional special provisions or conditions that may be different from
those described in this Prospectus (for example, some or all of the services and
privileges described may not be available to you). Securities brokers and other
financial organizations have the responsibility of transmitting purchase orders
and funds, and of crediting their customers' accounts following redemptions, in
a timely manner in accordance with their customer agreements and this
Prospectus.
Telephone Purchases
- -------------------
In order to be able to purchase shares by telephone, your account authorizing
such purchases must have been established prior to your call. Your initial
purchase of shares may not be made by telephone. Shares purchased by telephone
will be purchased at the per share net asset value determined at the close of
business on the day that the transfer agent receives payment through the
Automatic Clearing House. Call the Transfer Agent for details.
You may make purchases by telephone only if you have an account at a bank that
is a member of the Automated Clearing House. Most transfers are completed within
three business days of your call. To preserve flexibility, the Company may
revise or eliminate the ability to purchase Fund shares by phone, or may charge
a fee for such service, although the Company does not currently expect to charge
such a fee.
Declaration Service Company, the Fund's transfer agent, employs certain
procedures designed to confirm that instructions communicated by telephone are
genuine. Such procedures may include, but are not limited to, requiring some
form of personal identification prior to acting upon telephonic instructions,
providing written confirmations of all such transactions, and/or tape recording
all telephonic instructions. Assuming procedures such as the above have been
followed, neither the Transfer Agent nor the Fund will be liable for any loss,
cost, or expense for acting upon telephone instructions that are believed to be
genuine. The Company shall have authority, as your agent, to redeem shares in
your account to cover any such loss. As a result of this policy, you will bear
the risk of any loss unless the Fund has failed to follow procedures such as the
above. However, if the Fund fails to follow such procedures, it may be liable
for such losses.
Wire Purchases
- --------------
If you purchase Fund shares by wire, you must complete and file an Account
Registration Form with the Transfer Agent before any of the shares purchased can
be redeemed. You should contact your bank (which will need to be a commercial
bank that is a member of the Federal Reserve System) for information on sending
funds by wire, including any charges that your bank may make for these services.
9
<PAGE>
Miscellaneous Purchase Information
- ----------------------------------
Federal regulations require that you provide a certified taxpayer identification
number whenever you open or reopen an account. Congress has mandated that if any
shareholder fails to provide and certify to the accuracy of the shareholder's
social security number or other taxpayer identification number, the Company will
be required to withhold a percentage, currently 31%, of all dividends,
distributions and payments, including redemption proceeds, to such shareholder
as a backup withholding procedure.
For economy and convenience, share certificates will not be issued.
The public offering price for Class C shares of the Fund is based upon the
Fund's net asset value per share. Net asset value per share is calculated by
adding the value of Fund investments, cash and other assets, subtracting Fund
liabilities, and then dividing the result by the number of shares outstanding.
The assets of the Fund are valued at market value or, if market quotes cannot be
readily obtained, fair value is used as determined by the Board of Directors.
The net asset value of the Fund's shares is computed on all days on which the
New York Stock Exchange is open for business at the close of regular trading
hours on the Exchange, currently 4:00 p.m. East Coast time.
HOW TO SELL (REDEEM) YOUR SHARES
You may sell (redeem) your shares at any time. You may request the sale of your
shares either by mail, by telephone or by wire.
By Mail
- -------
Sale requests should be mailed via U.S. mail or overnight courier service to:
Declaration Service Company
555 North Lane, Suite 6160
Conshohocken, PA 19428
The selling price of the shares being redeemed will be the Fund's per share net
asset value next calculated after receipt of all required documents in Good
Order. Payment of redemption proceeds will be made no later than the third
business day after the valuation date unless otherwise expressly agreed by the
parties at the time of the transaction.
Good Order means that the request must include:
- -----------------------------------------------
1. Your account number.
2. The number of shares to be sold (redeemed) or the dollar value of the
amount to be redeemed.
3. The signatures of all account owners exactly as they are registered on the
account.
4. Any required signature guarantees.
5. Any supporting legal documentation that is required in the case of estates,
trusts, corporations or partnerships and certain other types of accounts.
Signature Guarantees --
- -----------------------
A signature guarantee of each owner is required to redeem shares in the
following situations, for all size transactions:
10
<PAGE>
(i) if you change the ownership on your account;
(ii) when you want the redemption proceeds sent to a different address than is
registered on the account;
(iii) if the proceeds are to be made payable to someone other than the account's
owner(s);
(iv) any redemption transmitted by federal wire transfer to your bank; and
(v) if a change of address request has been received by the Company or
Declaration Service Company within 15 days previous to the request for
redemption.
In addition, signature guarantees are required for all redemptions of $2,500 or
more from any Fund shareholder account. A redemption will not be processed until
the signature guarantee, if required, is received in Good Order.
Signature guarantees are designed to protect both you and the Fund from fraud.
To obtain a signature guarantee, you should visit a bank, trust company, member
of a national securities exchange or other broker-dealer, or other eligible
guarantor institution. (Notaries public cannot provide signature guarantees.)
Guarantees must be signed by an authorized person at one of these institutions,
and be accompanied by the words "Signature Guarantee."
By Telephone
- ------------
You may redeem your shares in the Fund by calling the Transfer Agent at
1-800-___-____ if you elected to use telephone redemption on your account
application when you initially purchased shares. Redemption proceeds must be
transmitted directly to you or to your pre-designated account at a domestic
bank. You may not redeem by telephone if a change of address request has been
received by the Company or the Transfer Agent within 15 days previous to the
request for redemption. During periods of substantial economic or market
changes, telephone redemptions may be difficult to implement. If you are unable
to contact the Transfer Agent by telephone, shares may be redeemed by delivering
the redemption request in person or by mail. You should understand that with the
telephone redemption option, you may be giving up a measure of security that you
might otherwise have had were you to redeem your shares in writing. In addition,
interruptions in telephone service may mean that you will be unable to effect a
redemption by telephone if desired.
By Wire
- -------
You may request the redemption proceeds be wired to your designated bank if it
is a member bank or a correspondent of a member bank of the Federal Reserve
System. A $10 fee is charged for outgoing wires.
11
<PAGE>
Redemption At The Option Of The Fund
- ------------------------------------
If the value of the shares in your account falls to less than $500, the Company
may notify you that, unless your account is increased to $500 in value, it will
redeem all your shares and close the account by paying you the redemption
proceeds and any dividends and distributions declared and unpaid at the date of
redemption. You will have thirty days after notice to bring the account up to
$500 before any action is taken. This minimum balance requirement does not apply
to IRAs and other tax-sheltered investment accounts. This right of redemption
shall not apply if the value of your account drops below $500 as the result of
market action. The Company reserves this right because of the expense to the
Fund of maintaining very small accounts.
DIVIDENDS AND DISTRIBUTIONS
Dividends paid by the Fund are derived from its net investment income. Net
investment income will be distributed at least annually. The Fund's net
investment income is made up of dividends received from the stocks it holds, as
well as interest accrued and paid on any other obligations that might be held in
its portfolio.
The Fund realizes capital gains when it sells a security for more than it paid
for it. The Fund may make distributions of its net realized capital gains (after
any reductions for capital loss carryforwards), generally, once a year.
Unless you elect to have your distributions paid in cash, your distributions
will be reinvested in additional shares of the Fund. You may change the manner
in which your dividends are paid at any time by writing to Declaration Service
Company, 555 North Lane, Suite 6160, Conshohocken, PA 19428.
OPTIMAL FUNDS, INC.
Optimal Funds, Inc (the "Company") was organized on April 27, 1999 as a Maryland
corporation, and is a company of the type known as an open-end, diversified
management investment company. It did not begin operations until May, 1999 nor
commence offering its shares until that time. It is authorized to issue
500,000,000 shares of .001 cent par value common capital stock. The Company's
Articles of Incorporation permit its Board of Directors to classify any unissued
shares into one or more classes of shares (each a "mutual fund"). A mutual fund
permits an investor to pool his or her assets with those of others in order to
achieve economies of scale, take advantage of professional money managers and
enjoy other advantages traditionally reserved for large investors. The Board has
authorized the issuance of 10,000,000 shares of Company stock to be classified
as the Optimal Fund, which are offered by this prospectus. The Fund shares are
fully paid and non-assessable. They are entitled to such dividends and
distributions as may be paid with respect to the shares and shall be entitled to
such sums on liquidation of the Fund as shall be determined. Other than these
rights, they have no preference as to conversion, exchange, dividends,
retirement or other features and have no preemption rights. Shareholder meetings
will not be held unless required by Federal or State law or in connection with
an undertaking given by the Fund (See Statement of Additional Information).
MANAGEMENT OF THE FUND
The business affairs of the Fund are managed under the general supervision of a
Board of Directors.
12
<PAGE>
Investment Adviser
- ------------------
The Company has entered into an Investment Advisory Contract (the "Contract")
with Leveraged Index Management Company, (the "Adviser"), 213-G VT, Route 15,
Jericho, VT 05465. Mitchell M. Maynard is the president of and controls the
Adviser and is responsible for all its investment decisions, including the
day-to-day management of the Fund. Mr. Maynard also serves as the President and
as a Director of the Company. The Adviser is registered as a registered
investment adviser with the Securities and Exchange Commision. The Adviser
operates solely as an investment advisory firm, and manages the investment of
the assets of the Fund in accordance with the Fund's investment objectives,
policies, and restrictions.
Mitchell M. Maynard, the Fund's portfolio manager, has been offering and
providing investment services to the public for over 8 years. He founded the
Adviser in January, 1999 and has been its president and chief investment
professional since that time. The Adviser provides investment advice to
individuals and institutional clients in addition to advising the Fund. From
1992 through 1998, Mr. Maynard was president of MFAS, Inc., a financial planning
firm in Burlington, Vermont offering financial planning services to individuals
and institutions.
Mr. Maynard has been the creator of many financial programs that have been used
in his private practice.
Mr. Maynard holds the following licenses from the National Association of
Securities Dealers ("NASD"): Series 7, Series 24, Series 63,and Series 65.
Mr. Maynard has also completed the studies and ethical requirements to obtain
the designation of Certified Investment Management Consultant ("CIMC") and
Certified Funds Specialist ("CFS"). The "CIMC" designation is awarded by the
Institute of Investment Management Consultants. The "CFS" designation is awarded
by the Institute of Business and Finance.
The Adviser receives from the Fund, as compensation for its services, a fee,
accrued daily and payable monthly, at an annual rate of 0.50% of the Fund's net
assets.
Operating Services Agreement; the Company has also entered into an Operating
Services Agreement with the Adviser where the Adviser will provide, or arrange
to provide, essentially all other services needed to the Fund. These services
include transfer agent, accounting, distribution and custodial services. The
effect of the Investment Advisory Agreement and the Operating Services Agreement
is to cap the Fund's normal operating expenses. These contracts do not cover
expenses incurred by the Fund for taxes, interest, brokerage fees, legal
expenses for litigation, and other extraordinary expenses.
13
<PAGE>
The Adviser receives from the Fund, as compensation for its services, a fee,
accrued daily and payable monthly, at an annual rate of 0.95% of the Fund's net
assets.
Under these agreements, the Adviser furnishes at its own expense office space to
the Company and all necessary office facilities, equipment, and personnel for
managing the assets of the Fund. The Adviser also pays all expenses of marketing
shares of the Fund, and related bookkeeping.
FUND SERVICE PROVIDERS
The Fund could not function without the services provided by certain companies.
With the Board's permission, the Adviser and the Fund have entered into
contracts with the following companies. All fees charged by these companies will
be paid by the Adviser.
Custodian
- ---------
First Union National Bank, N.A., Philadelphia, PA, holds the investments and
other assets that the Fund owns. The Custodian is responsible for receiving and
paying for securities purchased, delivering against payment securities sold,
receiving and collecting income from investments, making all payments covering
expenses of the Fund, and performing other administrative duties, all as
directed by persons authorized by the Fund. The Custodian does not exercise any
supervisory function in such matters as the purchase and sale of portfolio
securities, payment of dividends, or payment of expenses of the Fund. Portfolio
securities of the Fund are maintained in the custody of the Custodian, and may
be entered in the Federal Reserve Book Entry System, or the security depository
system of The Depository Trust Company.
Transfer, Dividend Disbursing And Accounting Services Agent
- -----------------------------------------------------------
Declaration Service Company, 555 North Lane, Suite 6160, Conshohocken, PA 19428
provides transfer agency and dividend disbursing services for the Fund. This
means that its job is to maintain, accurately, the account records of all
shareholders in the Fund as well as to administer the distribution of income
earned as a result of investing in the Fund. Declaration Service Company also
provides accounting services to the Fund including portfolio accounting
services, expense accrual and payment services, valuation and financial
reporting services, tax accounting services and compliance control services.
FEDERAL TAXES
As with any investment, you should consider the tax implications of an
investment in the Fund. The following is only a short summary of the important
tax considerations generally affecting the Fund and its shareholders. You should
consult your tax adviser with specific reference to your own tax situation.
The Fund intends to distribute to shareholders, at least annually, usually in
December, substantially all net investment income and any net capital gains
realized from sales of the Fund's portfolio securities. Dividends from net
investment income and distributions from any net realized capital gains are
reinvested in additional shares of the Fund unless the shareholder has requested
in writing to have them paid by check.
Dividends from investment income and net short-term capital gains are generally
taxable to you as ordinary income. Capital gains may be taxed at different
rates, depending on how long the Fund held the securities it sold. Distributions
are taxable, whether received in cash or reinvested in shares of the Fund.
You will be advised annually of the source of distributions for federal income
tax purposes.
14
<PAGE>
If you fail to furnish your social security or other tax identification number
or to certify properly that it is correct, the Fund may be required to withhold
federal income tax at the rate of 31% (backup withholding) from your dividend,
capital gain and redemption payments. Dividend and capital gain payments may
also be subject to backup withholding if you fail to certify properly that you
are not subject to backup withholding due to the under-reporting of certain
income.
Taxable distributions generally are included in your gross income for the
taxable year in which they are received. However, dividends declared in October,
November and December and made payable to shareholders of record in such month
will be deemed to have been received on December 31st if paid by the Fund during
the following January.
Distributions by the Fund will result in a reduction in the fair market value of
the Fund's shares. Should a distribution reduce the fair market value below your
cost basis, such distribution would be taxable to you as ordinary income or as a
long-term capital gain, even though, from an investment standpoint, it may
constitute a partial return of capital. In particular, you should be careful to
consider the tax implications of buying shares of the Fund just prior to a
distribution. The price of such shares include the amount of any forthcoming
distribution so that you may receive a return of investment upon distribution
which will, nevertheless, be taxable.
A redemption of shares is a taxable event and, accordingly, a capital gain or
loss may be recognized. You should consult a tax Adviser regarding the effect of
federal, state, local, and foreign taxes on an investment in the Fund.
GENERAL INFORMATION
Total return for the Fund may be calculated on an average annual total return
basis or an aggregate total return basis. Average annual total return reflects
the average annual percentage change in value of an investment over the
measuring period. Aggregate total return reflects the total percentage change in
value of an investment over the measuring period. Both measures assume the
reinvestment of dividends and distributions.
Total return of the Fund may be compared to those of mutual funds with similar
investment objectives and to bond, stock or other relevant indices or to
rankings prepared by independent services or other financial or industry
publications that monitor mutual fund performance.
DISTRIBUTION FEE
The Fund has adopted a distribution plan (the "Distribution Plan") for its Class
C shares, pursuant to which the Fund may incur shareholder servicing expenses of
up to .25% per annum of the Fund's average daily net assets, and up to .75% per
annum of the Fund's average daily net assets on its Class C shares for
distribution services. These fees are available to brokers, dealers and other
persons who provide distribution and other services to the Fund to help sell
Class C shares.
The Distribution Plan provides that the Fund may finance activities which are
primarily intended to result in the sale of the Fund's shares, including but not
limited to, advertising, printing of prospectuses and reports for other than
existing shareholders, preparation and distribution of advertising materials and
sales literature, and payments to dealers and shareholder servicing agents.
15
<PAGE>
Because Distribution and Servicing fees are paid out of the Fund's assets on an
ongoing basis, over time these fees will increase the cost of your investment
and may cost you more than paying other types of sales charges.
16
<PAGE>
FOR MORE INFORMATION
STATEMENT OF ADDITIONAL BY MAIL:
INFORMATION (SAI)
Optimal Funds, Inc., c/o
The SAI contains more detailed Declaration Service Company
Information on all aspects of the 555 North Lane, Suite 6160
Fund. A current SAI, dated May 17, Conshohocken, PA 19428
1999, has been filed with the SEC
and is incorporated by reference BY PHONE: 1-800-___-____
into (is legally a part of) this
prospectus. ON THE INTERNET:
www_________.com
To request a free copy of the SAI,
Please contact the Fund: Or you may view or obtain these
documents from the SEC.
IN PERSON: at the SEC's Public
Reference Room in Washington, D.C.
BY PHONE: 1-800-SEC-0330
BY MAIL: Public Reference Section,
Securities and Exchange Commission,
Washington, D.C. 20549-6009
(duplicating fee required)
ON THE INTERNET: www.sec.gov
The Optimal Fund
c/o Declaration Service Company
555 North Lane, Suite 6160
Conshohocken, PA 19428
1-800-___-____
Investment Company Act No.
811-9219
17
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Dated May 17, 1999
THE OPTIMAL FUND
741 Cox Road
Moorestown NJ 08057
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Prospectus of The Optimal Fund, Inc., dated May 17,
1999. Requests for copies of the Prospectus should be made by writing to Optimal
Funds, Inc., 213-G VT, Route 15, Jericho, VT 05465 or by calling 800-___-____.
TABLE OF CONTENTS
Investment Policies and Restrictions Custodian
Investment Adviser Transfer Agent
Directors and Officers Administration
Performance Information Independent Accountants
Purchasing and Redeeming Shares Principal Holders of Securities
Tax Information Independent Auditors Report *
Portfolio Transactions Financial Statements *
Plan of Distribution
* to be filed by amendment
INVESTMENT POLICIES AND RESTRICTIONS
The Fund's investment objective and the manner in which the Fund pursues its
investment objective is discussed in the prospectus. The Fund's investment
limitations and restrictions are listed below:
The Fund will not:
1. To the extent of 75% of its assets (valued at time of investment), invest
more than 5% of its assets in securities of any one issuer, except in
obligations of the United States Government and its agencies and
instrumentalities;
2. Acquire securities of any one issuer that at the time of investment (a)
represent more than 10% of the voting securities of the issuer or (b) have
a value greater than 10% of the value of the outstanding securities of the
issuer;
3. Borrow money except from banks for temporary or emergency purposes in
amounts not exceeding 5% of the value of the Fund's assets at the time of
borrowing;
4. Underwrite the distribution of securities of other issuers, or acquire
"restricted" securities that, in the event of a resale, might be required
to be registered under the Securities Act of 1933;
1
<PAGE>
5. Make margin purchases on equity securities;
6. Invest in companies for the purpose of management or the exercise of
control;
7. Lend money (but this restriction shall not prevent the Fund from investing
in debt securities or repurchase agreements).
8. Acquire or retain any security issued by a company, an officer or director
of which is an officer or director of the Company or an officer, director
or other affiliated person of the Advisor.
9. Invest in oil, gas or other mineral exploration or development programs,
although it may invest in marketable securities of companies engaged in
oil, gas or mineral exploration;
10. Purchase or sell real estate or real estate loans or real estate limited
partnerships, although it may invest in marketable securities of companies
that invest in real estate or interests in real estate.
11. Purchase warrants on securities.
12. Issue senior securities.
13. Invest in commodities, or futures and options on commodities.
14. Invest more than 25% of its net assets (valued at the time of investment)
in securities of any one industry.
Restrictions 1 through 14 listed above are fundamental policies, and may be
changed only with the approval of a "majority of the outstanding voting
securities" of the Fund as defined in the Investment Company Act of 1940.
The Fund has also adopted the following restrictions that may be changed by the
Board of Directors without shareholder approval:
The Fund may not:
a. Invest more than 15% of its net assets in securities that are not readily
marketable;
b. Acquire securities of other investment companies except (a) by purchase in
the open market, where no commission or profit to a sponsor or dealer
results from such purchase other than the customary broker's commission and
(b) where acquisition results from a dividend or merger, consolidation or
other reorganization (in addition to this investment restriction, the
Investment Company Act of 1940 provides that the Fund may neither purchase
more than 3% of the voting securities of any one investment company nor
invest more than 10% of the Funds assets (valued at time of investment) in
all investment company securities purchased by the Fund);
c. Pledge, mortgage or hypothecate its assets, except for temporary or
emergency purposes and then to an extent not greater than 5% of its total
assets at cost;
2
<PAGE>
INVESTMENT ADVISER
Information on the Fund's investment Adviser, Leveraged Index Management
Company, is set forth in the prospectus.
The adviser is a Vermont Corporation. Mitchell Maynard is the President of and
controls the Adviser.
The Advisory Agreement provides that the adviser shall not be liable for any
loss suffered by the Fund or its shareholders as a consequence of any act or
omission in connection with services under the Agreement, except by reason of
the adviser's willful misfeasance, bad faith, gross negligence, or reckless
disregard of its obligations and duties under the Advisory Agreement.
The Advisory Agreement expires on May 15, 2001, but may be continued from year
to year so long as its continuance is approved annually (a) by the vote of a
majority of the Directors of the Fund who are not "interested persons" of the
Fund or the adviser cast in person at a meeting called for the purpose of voting
on such approval, and (b) by the Board of Directors as a whole or by the vote of
a majority (as defined in the 1940 Act) of the outstanding shares of the Fund.
The Agreement will terminate automatically in the event of its assignment (as
defined in the 1940 Act).
DIRECTORS AND OFFICERS
The board of directors has overall responsibility for conduct of the Company's
affairs. The day-to-day operations of the Fund are managed by the Adviser
subject to the bylaws of the Company and review by the Board of Directors. The
directors of the Company, including those directors who are also officers, are
listed below:
3
<PAGE>
<TABLE>
<CAPTION>
Position Principal Occupation for the
Name, Age, with Fund Last Five Years
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Mitchell M. Maynard* President, President and controlling shareholder
(Age 32) Director of Leveraged Index Management Company,
an investment advisory firm, since
January, 1999. From January, 1992
through December, 1998, was president of
MFAS, Inc., an investment advisory firm
in Burlington, Vermont. Mr. Maynard has
his Series 7, 63, 24, and 65 securities
licenses. He also has obtained his
Certified Fund Specialist and Certified
Investment management Consultant
designations. Mr. Maynard attended
Riverside City College in Riverside, CA
from 1984 -1986.
Judith E. Liskin-Gasparro* Director Assistant Professor of Spanish, University
(Age 52) of Iowa, Iowa City, Iowa, since 1993.
Graduate of Bryn Mawr College, Bryn
Mawr, PA in 1969. Masters degree from
Princeton University, Princeton, NJ in
1971.
Ellyn M. Mack* Director Surgical Assistant, John D. Carlson,
(Age 55) DMD, Middlebury, VT, since January,
1994. Attaended New Paltz Teacher's
College, New Paltz, NY from 1961-1962.
Christine Bechade Director Product Services Manager for Cognex
(Age __) Corporation, Natick, MA, since 1997.
From 1994 through 1997, Senior Financial
Analyst with Coca-Cola Enterprises.
Served ina number of positions for
Coca-Cola from 1988 through 1997.
Presently attending Northeastern
University majoring in accounting.
Attended University of Vermont from 1986
through 1988.
Elaine A. Bernasconi Director Customer Service Manager for Accent
(Age __) Lamp and Shade Company, Newton, MA since
1995. Store Manager for Brooks Store in
Burlington, VT from 1994 through 1995.
Undergraduate degree from University of
Vermont, 1988.
</TABLE>
* Indicates an "interested person" as defined in the Investment Company Act of
1940.
The Company was organized as a Maryland Corporation on April 27, 1999. The table
below sets forth the compensation anticipated to be paid by the Company to each
of the directors of the Company during its first fiscal year ending April 30,
2000.
4
<PAGE>
Compensation Pension Annual Total Compensation
Name of Director from Corp. Benefits Benefits Paid to Director
- --------------------------------------------------------------------------------
Mitchell M. Maynard 0.00 0.00 0.00 0.00
Judith E.
Liskin-Gasparro 0.00 0.00 0.00 0.00
Ellyn M. Mack 0.00 0.00 0.00 0.00
Christine Bechade ---- ---- ---- ----
Elaine A. Bernasconi ---- ---- ---- ----
PRINCIPAL HOLDERS OF SECURITIES
The Adviser intends to purchase all of the outstanding shares of the Fund prior
to the effective date of the Fund's registration and will be deemed initially to
control the Fund.
The Company will call a meeting of shareholders for the purpose of voting upon
the question of removal of a director or directors when requested in writing to
do so by record holders of at least 10% of the Fund's outstanding common shares.
The Corporation's bylaws contain procedures for the removal of directors by its
stockholders. At any meeting of stockholders, duly called and at which a quorum
is present, the stockholders may by the affirmative vote of the holders of a
majority of the votes entitled to be cast thereon, remove any director or
directors from office and may elect a successor or successors to fill any
resulting vacancies for the unexpired terms of the removed directors.
PERFORMANCE INFORMATION
From time to time the Fund may quote total return figures. "Total Return" for a
period is the percentage change in value during the period of an investment in
Fund shares, including the value of shares acquired through reinvestment of all
dividends and capital gains distributions. "Average Annual Total Return" is the
average annual compounded rate of change in value represented by the Total
Return Percentage for the period.
[n]
Average Annual Total Return is computed as follows: P(1+T) = ERV
Where: P = a hypothetical initial investment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of shares at the end of the period
Yield. The Fund may advertise performance in terms of a 30-day yield quotation.
The 30-day yield quotation is computed by dividing the net investment income per
share earned during the period by the maximum offering price per share on the
last day of the period, according to the following formula:
Yield = 2[(a-b/cd + 1)6 - 1]
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursement)
c = the average daily number of shares outstanding during the period
that they were entitled to receive dividends
d = the maximum offering price per share on the last day of the period
5
<PAGE>
The Fund's performance is a function of conditions in the securities markets,
portfolio management, and operating expenses. Although information such as that
shown above is useful in reviewing the Fund's performance and in providing some
basis for comparison with other investment alternatives, it should not be used
for comparison with other investments using different reinvestment assumptions
or time periods.
In sales literature, the Fund's performance may be compared with that of market
indices and other mutual funds. In addition to the above computations, the Fund
might use comparative performance as computed in a ranking determined by Lipper
Analytical Services, Morningstar, Inc., or that of another service.
PURCHASING AND REDEEMING SHARES
Purchases and redemptions are discussed in the Fund's prospectus.
Redemptions will be made at net asset value. The Fund's net asset value is
determined on days on which the New York Stock Exchange is open for trading.
TAX INFORMATION
Taxation Of The Fund. The Fund intends to qualify as a "regulated investment
company" under Subchapter M of the Internal Revenue Code. To qualify as a
regulated investment company, the Fund must, among other things, derive at least
90% of its gross income from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of stock, securities,
or other income derived with respect to its business of investing in such stock
or securities.
If the Fund qualifies as a regulated investment company and distributes at least
90% of its net investment income, the Fund will not be subject to Federal income
tax on the income so distributed. However, the Fund would be subject to
corporate income tax on any undistributed income other than tax-exempt income
from municipal securities.
Taxation Of The Shareholder. Taxable distributions generally are included in a
shareholder's gross income for the taxable year in which they are received.
However, dividends declared in October, November and December and made payable
to shareholders of record in such month will be deemed to have been received on
December 31st if paid by the Fund during the following January.
Distributions by the Fund will result in a reduction in the fair market value of
the Fund's shares. Should a distribution reduce the fair market value below a
shareholder's cost basis, such distribution would be taxable to the shareholder
as ordinary income or as a long-term capital gain, even though, from an
investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implications of
buying shares of the Fund just prior to a distribution. The price of such shares
include the amount of any forthcoming distribution so that those investors may
receive a return of investment upon distribution which will, nevertheless, be
taxable to them.
A redemption of shares is a taxable event and, accordingly, a capital gain or
loss may be recognized. Each investor should consult a tax advisor regarding the
effect of federal, state, local, and foreign taxes on an investment in the Fund.
6
<PAGE>
Dividends. A portion of the Fund's income may qualify for the dividends-received
deduction available to corporate shareholders to the extent that the Fund's
income is derived from qualifying dividends. Because the Fund may earn other
types of income, such as interest, income from securities loans, non-qualifying
dividends, and short-term capital gains, the percentage of dividends from the
Fund that qualifies for the deduction generally will be less than 100%. The Fund
will notify corporate shareholders annually of the percentage of Fund dividends
that qualifies for the dividend received deductions.
A portion of the Fund's dividends derived from certain U.S. Government
obligations may be exempt from state and local taxation. Short-term capital
gains are distributed as dividend income. The Fund will send each shareholder a
notice in January describing the tax status of dividends and capital gain
distributions for the prior year.
Capital Gain Distribution. Long-term capital gains earned by the Fund from the
sale of securities and distributed to shareholders are federally taxable as
long-term capital gains, regardless of the length of time shareholders have held
their shares. If a shareholder receives a long-term capital gain distribution on
shares of the Fund, and such shares are held six months or less and are sold at
a loss, the portion of the loss equal to the amount of the long-term capital
gain distribution will be considered a long-term loss for tax purposes.
Short-term capital gains distributed by the Fund are taxable to shareholders as
dividends, not as capital gains.
PORTFOLIO TRANSACTIONS
The Fund will generally purchase and sell securities without regard to the
length of time the security has been held. Accordingly, it can be expected that
the rate of portfolio turnover may be substantial. Since investment decisions
are based on the anticipated contribution of a security to the Fund's investment
objective, the rate of portfolio turnover is not a factor when the Adviser
believes a change is in order to achieve those objectives. The Fund expects that
its annual portfolio turnover rate will not exceed 100% under normal conditions.
However, there can be no assurance that the Fund will not exceed this rate, and
the portfolio turnover rate may vary from year to year.
High portfolio turnover in any year will result in the payment by the Fund of
above-average transaction costs and could result in the payment by shareholders
of above-average amounts of taxes on realized investment gains. Distributions to
shareholders of such investment gains, to the extent they consist of short-term
capital gains, will be considered ordinary income for federal income tax
purposes.
Decisions to buy and sell securities for the Fund are made by the Adviser
subject to review by the Corporation's Board of Directors. In placing purchase
and sale orders for portfolio securities for the Fund, it is the policy of the
Adviser to seek the best execution of orders at the most favorable price. In
selecting brokers to effect portfolio transactions, the determination of what is
expected to result in the best execution at the most favorable price involves a
number of largely judgmental considerations. Among these are the Adviser's
evaluation of the broker's efficiency in executing and clearing transactions.
Over-the-counter securities are generally purchased and sold directly with
principal market makers who retain the difference in their cost in the security
and its selling price. In some instances, the Adviser feels that better prices
are available from non-principal market makers who are paid commissions
directly.
7
<PAGE>
CUSTODIAN
First Union National Bank, N.A., acts as custodian for the Fund. As such, it
holds all securities and cash of the Fund, delivers and receives payment for
securities sold, receives and pays for securities purchased, collects income
from investments and performs other duties, all as directed by officers of the
Company. The Custodian does not exercise any supervisory function over
management of the Fund, the purchase and sale of securities or the payment of
distributions to shareholders.
TRANSFER AGENT
Declaration Service Company ("DSC"), 555 North Lane, Suite 6160, Conshohocken,
PA 19428, acts as transfer, dividend disbursing, and shareholder servicing agent
for the Fund pursuant to a written agreement with the Company and the Adviser,
dated April 17, 1999. Under the agreement, DSC is responsible for administering
and performing transfer agent functions, dividend distribution, shareholder
administration, and maintaining necessary records in accordance with applicable
rules and regulations.
All fees charged by the transfer agent will be paid by the Adviser. For the
services to be rendered as transfer agent, The Adviser shall pay DSC an annual
fee, paid monthly, based on the average net assets of the Fund, as determined by
valuations made as of the close of each business day of the month.
ADMINISTRATION
DSC also acts as Administrator to the Fund pursuant to a written agreement with
the Company and the Adviser, dated April 17, 1999. The Administrator supervises
all aspects of the operations of the Fund except those performed by the Fund's
investment adviser under the Fund's investment advisory agreement. The
Administrator is responsible for:
(a) calculating the Fund's net asset value
(b) preparing and maintaining the books and accounts specified in Rule 31a-1
and 31a-2 of the Investment Company Act of 1940
(c) preparing financial statements contained in reports to stockholders of the
Fund
(d) preparing the Fund's federal and state tax returns
(e) preparing reports and filings with the Securities and Exchange Commission
(f) preparing filings with state Blue Sky authorities
(g) maintaining the Fund's financial accounts and records
For the services to be rendered as Administrator, The Adviser shall pay mutual
Shareholder Services an annual fee, paid monthly, based on the average net
assets of the Fund, as determined by valuations made as of the close of each
business day of the month.
DISTRIBUTOR
Declaration Distributors, Inc., 555 North Lane, Suite 6160, Conshohocken, PA
19428, will act s principal underwriter of the Fund's shares, pursuant to a
written agreement between the Company, the Adviser, and the DDI dated April 17,
1999. The Adviser shall pay an annual flat fee of $20,000 to DDI, such fee to
paid in equal monthly installments.
8
<PAGE>
INDEPENDENT ACCOUNTANTS
Sanville & Company, 1514 Old York Road, Abbington, PA 19001, a certifed public
accounting firm offering audit and accounting services to mutual funds
nationwide, has been selected as the independent accountants for the Fund. As
such, Sanville & Company performs audits of the Fund's financial statements.
FINANCIAL STATEMENTS
This is a new fund without an operating history, so it has no financial
statements at this time. An amendment to the registration statement will be
filed when required by law to include a report of its operations.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution, or "12b-1 Plan" under which it may
finance activities primarily intended to sell shares. Under the 12b-1 Plan, the
Fund may pay a distribution fee at an annual rate of up to 0.25% of average
daily net assets of the Fund to the Adviser for services primarily intended to
sell shares, and servicing fees of up to 0.75% of average daily net assets of
the Fund for providing certain shareholder services. These services include,
among other things, processing new shareholder account applications, preparing
and transmitting to the Fund's Transfer Agent computer processable tapes of all
transactions by customers, and serving as the primary source of information to
customers in answering questions concerning the Fund and their transactions with
the Fund.
Payments under the 12b-1 Plan are not tied exclusively to the distribution
and/or shareholder servicing expenses actually incurred by the Adviser, and such
payments may exceed the expenses actually incurred. The Company's Board of
Directors evaluates the Plan on a regular basis.
You should be aware that, over time, 12b-1 fees will increase the costs of your
investment, and may eventually cost you more than other types of sales charges.
The Board of Directors, including those Directors that are not affiliated with
the Company, Adviser or any of the Company's service providers, and who have no
interest in the Plan, approved the Plan after finding, based on their reasonable
business judgement, that the Plan would likely benefit the Fund and its
shareholders.
In approving the Plan, the Board determined that there is a reasonable
likelihood that the Plan would benefit the Company, the Fund and its
shareholders. In doing so, the Board considered several factors, including that
the Plan would (i) enable investors to choose the purchasing option best suited
to their individual situations, thereby encouraging current shareholders to make
additional investments in the Fund and attracting new investors and assets to
Trust to the benefit of the Fund and its shareholders, (ii) facilitate
distribution of the Fund's shares, (iii) help maintain the competitive position
of the Company in relation to other funds that have implemented or are seeking
to implement similar distribution arrangements; and (iv) permit possible
economies of scale through increased Fund size.
9
<PAGE>
PART C
------
OTHER INFORMATION
Item 23. Financial Statements and Exhibits
(a) Articles of Incorporation---Attached as Exhibit 23(A)
(b) By-Laws--- Attached as Exhibit 23(B)
(c) Instruments defining rights of Shareholders---None, See Articles of
Incorporation
(d) Investment Advisory Contracts--- Attached as Exhibit 23(D)
(e) Underwriting Contracts---Attached as Exhibit 23(E)
(f) Bonus or Profit Sharing Contracts--- None
(g) Custodian Agreements--- Attached as Exhibit 23(G)
(h) Other Material Contracts--- Attached as Exhibit 23(H)(1), 23(H)(2),
and 23(H)(3)
(i) Legal Opinion--- Attached as Exhibit 23(I)
(j) Other opinions--- *
(k) Omitted Financial statements--- None
(l) Initial Capital Agreements--- Attached as Exhibit 23(L)
(m) Rule 12b-1 Plan--- Attached as Exhibit 23(M)
(n) Financial Data Schedule--- Not Applicable
* To be filed by amendment
Item 24. Persons Controlled by or Under Common Control With Registrant
-------------------------------------------------------------
See Caption "Principal Holders of Securities" in the Statement of
Additional Information
Item 25. Indemnification
---------------
(a) General. The Articles of Amendment and Restatement of Charter
(the "Articles") of the Corporation provide that to the fullest
extent permitted by Maryland and federal statutory and decisional
law, as amended or interpreted, no director or officer of this
Corporation shall be personally liable to the Corporation or the
holders of Shares for money damages for breach of fiduciary duty
as a director and each director and officer shall be indemnified
by the Corporation; provided, however, that nothing herein shall
be deemed to protect any director or officer of the Corporation
against any liability to the Corporation or the holders of Shares
to which such director or officer would otherwise be subject by
reason of breach of the director's or officer's duty of loyalty
to the Corporation or its stockholders, for acts or omissions not
in good faith or which involved intentional misconduct or a
knowing violation of law or for any transaction from which the
director derived any improper personal benefit.
<PAGE>
The By-Laws of the Corporation provide that the Corporation shall
indemnify any individual who is a present or former director or
officer of the Corporation and who, by reason of his or her
position was, is or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative
(hereinafter collectively referred to as a "Proceeding") against
judgments, penalties, fines, settlements and reasonable expenses
actually incurred by such director or officer in connection with
such Proceeding, to the fullest extent that such indemnification
may be lawful under Maryland law.
(b) Disabling Conduct. The By-Laws provide that nothing therein shall
be deemed to protect any director or officer against any
liability to the Corporation or its shareholders to which such
director or officer would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her
office (such conduct hereinafter referred to as "Disabling
Conduct").
The By-Laws provide that no indemnification of a director or
officer may be made unless: (1) there is a final decision on the
merits by a court or other body before whom the Proceeding was
brought that the director or officer to be indemnified was not
liable by reason of Disabling Conduct; or (2) in the absence of
such a decision, there is a reasonable determination, based upon
a review of the facts, that the director or officer to be
indemnified was not liable by reason of Disabling Conduct, which
determination shall be made by: (i) the vote of a majority of a
quorum of directors who are neither "interested persons" of the
Corporation as defined in Section 2(a)(19) of the Investment
Company Act of 1940, nor parties to the Proceeding; or (ii) an
independent legal counsel in a written opinion.
(c) Standard of Conduct. Under Maryland law, the Corporation may not
indemnify any director if it is proved that: (1) the act or
omission of the director was material to the cause of action
adjudicated in the Proceeding and (i) was committed in bad faith
or (ii) was the result of active and deliberate dishonesty; or
(2) the director actually received an improper personal benefit;
or (3) in the case of a criminal proceeding, the director had
reasonable cause to believe that the act or omission was
unlawful. No indemnification may be made under Maryland law
unless authorized for a specific proceeding after a determination
has been made, in accordance with Maryland law, that
indemnification is permissible in the circumstances because the
requisite standard of conduct has been met.
<PAGE>
(d) Required Indemnification. Maryland law requires that a director
or officer who is successful, on the merits or otherwise, in the
defense of any Proceeding shall be indemnified against reasonable
expenses incurred by the director or officer in connection with
the Proceeding. In addition, under Maryland law, a court of
appropriate jurisdiction may order indemnification under certain
circumstances.
(e) Advance Payment. The By-Laws provide that the Corporation may pay
any reasonable expenses so incurred by any director or officer in
defending a Proceeding in advance of the final disposition
thereof to the fullest extent permissible under Maryland law. In
accordance with the By-Laws, such advance payment of expenses
shall be made only upon the undertaking by such director or
officer to repay the advance unless it is ultimately determined
that such director or officer is entitled to indemnification, and
only if one of the following conditions is met: (1) the director
or officer to be indemnified provides a security for his
undertaking; (2) the Corporation shall be insured against losses
arising by reason of any lawful advances; or (3) there is a
determination, based on a review of readily available facts, that
there is reason to believe that the director or officer to be
indemnified ultimately will be entitled to indemnification, which
determination shall be made by: (i) a majority of a quorum of
directors who are neither "interested persons" of the
Corporation, as defined in Section 2(a)(19) of the Investment
Company Act of 1940, nor parties to the Proceeding; or (ii) an
independent legal counsel in a written opinion.
(f) Insurance. The By-Laws provide that, to the fullest extent
permitted by Maryland law and Section 17(h) of the Investment
Company Act of 1940, the Corporation may purchase and maintain
insurance on behalf of any officer or director of the
Corporation, against any liability asserted against him or her
and incurred by him or her in and arising out of his or her
position, whether or not the Corporation would have the power to
indemnify him or her against such liability.
<PAGE>
Item 26. Business and Other Connections of Investment Adviser
----------------------------------------------------
None
Item 27. Principal Underwriter
---------------------
Declaration Distributors, Inc., 555 North Lane, Suite 6160,
Conshohocken, PA 19428
Item 28. Location of Accounts and Records
--------------------------------
The books and records of the Fund, other than the accounting and
transfer agency (including dividend disbursing) records, are
maintained by the Fund at 213-G VT, Route 15, Jericho, VT 05465; the
Fund's accounting and transfer agency records are maintained at
Declaration Service Company, 555 North Lane, Suite 6160, Conshohocken,
PA 19428.
Item 29. Management Services
-------------------
There are no management service contracts not described in Part A or
Part B of Form N-1A.
Item 30. Undertakings
------------
Not Applicable
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, hereunto duly
authorized in Jericho, Vermont on the 29th day of April, 1999.
OPTIMAL FUNDS, INC.
By: /s/ Mitchell M. Maynard
-------------------------
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated:
NAME TITLE DATE
/s/ Mitchell M. Maynard President & Director April 29, 1999
/s/ Judith E. Liskin-Gasparro Director April 29, 1999
/s/ Ellyn M. Mack Director April 29, 1999
/s/ Christine Bechade Director April 29, 1999
/s/ Elaine A. Bernasconi Director April 29, 1999
<PAGE>
EXHIBIT INDEX
Exhibit 23(A)--- Articles of Incorporation of Registrant
Exhibit 23(B)--- By-Laws of Registrant
Exhibit 23(D)--- Investment Advisory Agreement between Registrant and Leveraged
Index Management Company
Exhibit 23(E)--- Distribution Agreement between Registrant, Leveraged Index
Management Company, and Declaration Distributors, Inc.
Exhibit 23(G)--- Custodian Agreement between Registrant, Leveraged Index
Management Company, and First Union National Bank, N.A.
Exhibit 23(H)(1) Operating Services Agreement between Registrant and Leveraged
Index Management Company
Exhibit 23(H)(2) Investment Company Services Agreement between Registrant,
Leveraged Index Management Company, and Declaration Service
Company
Exhibit 23(H)(3) Power of Attorney
Exhibit 23(I)--- Legal Opinion of The Law Offices of David D. Jones, P.C.
Exhibit 23(L)--- Subscription Agreement between Registrant and Mr. Mitchell M.
Maynard
Exhibit 23(M)--- Distribution Plan Pursuant to Rule 12b-1
EXHIBIT 23(A)
ARTICLES OF INCORPORATION OF REGISTRANT
ARTICLES OF INCORPORATION
OF
OPTIMAL FUNDS, INC.
FIRST: The undersigned, Vera M. Norris, whose post office address is 11
East Chase St., Baltimore, MD 21202 being at least eighteen years of age, does
hereby form a corporation under the General Laws of the State of Maryland.
SECOND: The name of the corporation (which is hereinafter called the
Corporation) is:
OPTIMAL FUNDS, INC.
THIRD: The purpose or purposes of the corporation shall be: Regulated
Investment Company
FOURTH: The post office address of the principal office of the Corporation
in Maryland is 11 East Chase Street, Baltimore, MD 21202. The name and post
office address of the resident agent is CSC-Lawyers Incorporating Service
Company, at the same address. Said resident agent is a domestic corporation of
the State of Maryland.
FIFTH: The total number of shares of stock that the Corporation has
authority to issue is
Five Hundred Million (500,000,000) at 0.0001 par value
SIXTH: THE NUMBER OF DIRECTORS OF THE Corporation shall be 1 which number
may be increased or decreased pursuant to the by-laws of the Corporation, and so
long as there are less than three (3) stockholders, the number of directors may
be less than three (3) but not less than the number of stockholders, and the
name (s) of the director (s) who shall act until their successors are duly
chosen and qualified is (are):
MITCHELL M. MAYNARD
SEVENTH: the duration of the Corporation shall be perpetual.
IN WITNESS WHEREOF, I have signed these Articles of Incorporation on April
27, 1999, and severally acknowledged the same to be my act.
Vera M. Norris, Incorporator
ACTION OF SOLE INCORPORATOR
OPTIMAL FUNDS, INC.
-------------------------------------
The undersigned, without a meeting, being the sole incorporator of the
Corporation, does hereby elect the persons listed below to serve as director(s)
of the corporation until the first annual meeting of shareholders and until
their successors are elected and qualify:
MITCHELL M. MAYNARD
/s/ Vera M. Norris
Vera M. Norris
Incorporator
Dated: April 27, 1999
Vmn
EXHIBIT 23(B)
BY-LAWS OF REGISTRANT
BY-LAWS OF
Optimal Funds, Inc.
ARTICLE I
Offices
Section 1. Principal Office. The principal office of the Corporation in the
State of Maryland shall be in the City of Baltimore.
Section 2. Other Offices. The Corporation may have such other offices in
such places as the Board of Directors may from time to time determine.
ARTICLE II
Meetings of Shareholders
Section 1. Annual Meeting. Subject to this Article II, an annual meeting of
Shareholders for the election of Directors and the transaction of such other
business as may properly come before the meeting shall be held at such time and
place as the Board of Directors shall select. The Corporation shall not be
required to hold an annual meeting of its Shareholders in any year in which the
election of directors is not required to be acted upon under the Investment
Company Act of 1940.
Section 2. Special Meetings. Special meetings of Shareholders may be called
at any time by the President, the Secretary or by a majority of the Board of
Directors and shall be held at such time and place as may be stated in the
notice of the meeting.
Special meetings of the Shareholders shall be called by the Secretary upon
receipt of written request of the holders of shares entitled to cast not less
than 10% of the votes entitled to be cast at such meeting, provided that (1)
such request shall state the purposes of such meeting and the matters proposed
to be acted on, and (2) the Shareholders requesting such meeting shall have paid
to the Corporation the reasonably estimated cost of preparing and mailing the
notice thereof, which the Secretary shall determine and specify to such
Shareholders. No special meeting shall be called upon the request of
Shareholders to consider any matter which is substantially the same as a matter
voted upon at any special meeting of the Shareholders held during the preceding
12 months, unless requested by the holders of a majority of all shares entitled
to be voted at such meeting.
Section 3. Place of Meetings. Meetings of Shareholders shall be held at a
location within the Continental United States as the Board of Directors may from
time to time determine.
Section 4. Notice of Meetings; Waiver of Notice. Notice of the place, date
and time of the holding of each Shareholders' meeting and, if the meeting is a
special meeting, the purpose or purposes of the meeting, shall be given
personally or by mail, not less that ten (10) nor more that ninety (90) days
before the date of such meeting, to each Shareholder entitled to vote at such
meeting and to each other shareholder entitled to notice of the meeting. Notice
by mail shall be deemed to be duly given when deposited in the United States
mail addressed to the shareholder at his or her address as it appears on the
records of the Corporation, with postage thereon prepaid.
Notice of any meeting of Shareholders shall be deemed waived by any
shareholder who shall attend such meeting in person or by proxy, or who shall,
either before or after the meeting, submit a signed waiver of notice which is
filed with the records of the meeting.
1
<PAGE>
Section 5. Quorum, Adjournment of Meetings. The presence at any
Shareholders' meeting, in person or by proxy, of Shareholders of one third of
the shares of the stock of the Corporation thereat shall be necessary and
sufficient to constitute a quorum for the transaction of business, except for
any matter which, under applicable statutes or regulatory requirements, requires
approval by a separate vote of one or more classes of stock, in which case the
presence in person or by proxy of Shareholders of one third of the shares of
stock of each class required to vote as a class on the matter shall constitute a
quorum. The holders of a majority of shares entitled to vote at the meeting and
present in person or by proxy, whether or not sufficient to constitute a quorum,
or, any officer present entitled to preside or act as Secretary of such meeting,
may adjourn the meeting without determining the date of a new meeting, or
without notice to a date not more than 120 days after the original record date.
Any business that might have been transacted at the meeting originally called
and so adjourned may be transacted at any such subsequent meeting at which a
quorum is present.
Section 6. Organization. At each meeting of the Shareholders, the Chairman
of the Board (if one has been designated by the Board), or in his or her absence
or inability to act, the President, or in the absence or inability to act of the
Chairman of the Board and the President, the Vice President, shall act as
chairman of the meeting; provided, however, that if no such officer is present
or able to act, a chairman of the meeting shall be elected by a majority of the
Shareholders, present in person or by proxy, at the meeting. The Secretary, or
in his or her absence or inability to act, any person appointed by the chairman
of the meeting, shall act as secretary of the meeting and keep the minutes
thereof.
Section 7. Order of Business. The order of business at all meetings of the
Shareholders shall be as determined by the chairman of the meeting.
Section 8. Voting. Except as otherwise provided by statute or the Articles
of Incorporation, each holder of record of shares of stock of the Corporation
having voting power shall be entitled at each meeting of the Shareholders to one
vote for every full share of such stock, with a fractional vote for any
fractional shares, standing in his or her name on the record of Shareholders of
the Corporation as of the record date determined pursuant to Section 9 of this
Article, or if such record date shall not have been so fixed, then at the later
of (i) the close of business on the day on which notice of the meeting is mailed
or (ii) the thirtieth day before the meeting.
Each shareholder entitled to vote at any meeting of Shareholders may
authorize another person or persons to act for him or her by a proxy signed by
such shareholder or his or her attorney-in-fact. No proxy shall be valid after
the expiration of eleven months from the date thereof, unless otherwise provided
in the proxy. Every proxy shall be revocable at the pleasure of the shareholder
executing it, except in those cases where such proxy states that it is
irrevocable and where law permits an irrevocable proxy. Except as otherwise
provided by statute, the Articles of Incorporation or these By-Laws, any
corporate action to be taken by vote of the Shareholders shall be authorized by
a majority of the total votes validly cast at a meeting of Shareholders at which
a quorum is present.
If a vote shall be taken on any question other than the election of
directors, which shall be by written ballot, then unless required by statute or
these By-Laws, or determined by the chairman of the meeting to be advisable, any
such vote need not be by ballot. On a vote by ballot, each ballot shall be
signed by the shareholder voting, or by his or her proxy, if there be such
proxy, and shall state the number of shares voted.
Section 9. Fixing of Record Date. The Board of Directors may fix a time not
less that 10 nor more than 90 days prior to the date of any meeting of
Shareholders or prior to the last day on which the consent or dissent of
Shareholders may be effectively expressed for any purpose without a meeting, as
the time as of which Shareholders entitled to notice of and to vote at such a
meeting or whose consent or dissent is required or may be expressed for any
purpose, as the case may be, shall be determined; and all persons who were
holders of record of voting stock at such time and no other shall be entitled to
notice of and to vote at such meeting or to express their consent or dissent, as
the case may be. If no record date has been fixed, the record date for the
determination of Shareholders entitled to notice of or to vote at a meeting of
Shareholders shall be the later of the close of business on the day on which
notice of the meeting is mailed or the thirtieth day before the meeting, or, if
notice is waived by all Shareholders, at the close of business on the tenth day
next preceding the day on which the meeting is held. The Board of Directors may
fix a record date for determining Shareholders entitled to receive payment of a
dividend or distribution, but such date shall be not more that 90 days before
the date on which such payment is made. If no record date has been fixed, the
record date for determining Shareholders entitled to receive dividends or
distributions shall be the close of business on the day on which the resolution
of the Board of Directors declaring the dividend or distribution is adopted, but
the payment shall not be made more than 60 days after the date on which the
resolution is adopted.
2
<PAGE>
Section 10. Consent of Shareholders in Lieu of Meeting. Except as otherwise
provided by statute or the Articles of Incorporation, any action required to be
taken at any meeting of Shareholders, or any action which may be taken at any
meeting of such Shareholders, may be taken without a meeting, without prior
notice and without a vote, if the following are filed with the records of
Shareholders meetings: (i) a unanimous written consent which sets forth the
action and is signed by each shareholder entitled to vote on the matter, and
(ii) a written waiver of any right to dissent signed by each shareholder
entitled to notice of the meeting but not entitled to vote thereat.
ARTICLE III
Board of Directors
Section 1. General Powers. The business and affairs of the Corporation
shall be managed under the direction of the Board of Directors and all powers of
the Corporation may be exercised by or under the authority of the Board of
Directors.
Section 2. Number of Directors. The number of directors shall be fixed from
time to time by resolution of the Board of Directors adopted by a majority of
the Directors then in office; provided, however, that the number of Directors
shall in no event be less that three (3) nor more than fifteen (15) except that
the Corporation may have less than three (3) but not less than one (1) Director
if there is no stock outstanding, and may have a number of Directors no fewer
than the number of Shareholders so long as there are fewer than three (3)
Shareholders. Any vacancy created by an increase in Directors may be filled in
accordance with Section 6 of this Article III. No reduction in the number of
Directors shall have the effect of removing any Director from office prior to
the expiration of his or her term unless such Director is specifically removed
pursuant to Section 5 of this Article III at the time of such decrease.
Directors need not be Shareholders.
Section 3. Election and Term of Directors. Directors shall be elected
annually, by written ballot at the annual meeting of Shareholders or a special
meeting held for that purpose; provided, however, that if no annual meeting of
the Shareholders of the Corporation is required to be held in a particular year
pursuant to Section 1 of Article II of these By-Laws, Directors shall be elected
at the next annual meeting held. The term of office of each Director shall be
from the time of his or her election and qualification until the election of
Directors next succeeding his or her election and until his or her successor
shall have been elected and shall have qualified.
Section 4. Resignation. A director of the Corporation may resign at any
time by giving written notice of his or her resignation to the Board, or the
Chairman of the Board, or the President, or the Secretary. Any such resignation
shall take effect at the time specified therein or, if the time when it shall
become effective shall not be specified therein, immediately upon its receipt;
and, unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
Section 5. Removal of Directors. Any Director of the Corporation may be
removed by the Shareholders by a vote of a majority of the shares entitled to be
cast for the election of Directors.
Section 6. Vacancies. If any vacancies shall occur in the Board of
Directors (i) by reason of death, resignation, removal or otherwise, the
remaining directors shall continue to act, and, subject to the provisions of the
Investment Company Act of 1940, such vacancies (if not previously filled by the
Shareholders) may be filled by a majority of the remaining Directors, although
less than a quorum, and (ii) by reason of an increase in the authorized number
of Directors, such vacancies (if not previously filled by the Shareholders) may
be filled only by a majority vote of the entire Board of Directors.
Section 7. Offices, Records, Places of Meetings. The Directors may have one
or more offices and may keep the books of the Corporation outside the State of
Maryland, and within or without the United States of America, at any office or
offices of the Corporation or at any other place as they may from time to time
by resolution determine; and in the case of meetings of the Board of Directors,
such meetings may be held at any place, within or without the United States of
America, as the Board may from time to time by resolution determine, or as shall
be specified or fixed in the respective notices or waivers of notice thereof.
Section 8. Regular Meetings. The Board of Directors from time to time may
provide by resolution for the holding of regular meetings and fix their time and
place as the Board of Directors may determine. Notice of such regular meetings
need not be in writing, provided that notice of any change in the time or place
of such fixed regular meetings shall be communicated promptly to each Director
not present at the meeting at which such change was made, in the manner provided
in Section 9 of this Article III for notice of special meetings. Members of the
Board of Directors or any committee designated thereby may participate in a
meeting of such Board or committee by telephone conference or other
communications method by means of which all persons participating in the meeting
can hear each other at the same time, and participation by such means shall
constitute presence in person at a meeting, subject to the requirements of the
Investment Company Act of 1940.
3
<PAGE>
Section 9. Special Meetings. Special meetings of the Board of Directors may
be held at any time or place and for any purpose when called by the President,
the Secretary or two or more of the Directors. Notice of special meetings,
stating the time and place, shall be communicated to each Director personally by
telephone or transmitted to him or her by mail, telegraph, telefax, telex,
cable, e-mail or wireless at least one day before the meeting.
Section 10. Waiver of Notice. No notice of any meeting of the Board of
Directors or a committee of the Board need be given to any Director who is
present at the meeting or who waives notice of such meeting in writing (which
waiver shall be filed with the records of such meeting), either before or after
the time of the meeting.
Section 11. Quorum and Voting. At all meetings of the Board of Directors,
the presence of one third of the entire Board of Directors shall constitute a
quorum unless there are only two or three Directors, in which case two Directors
shall constitute a quorum. If there is only one Director, the sole Director
shall constitute a quorum. At any adjourned meeting at which a quorum was
present, any business may be transacted at a subsequent meeting, at which a
quorum is present, which might have been transacted at the meeting as originally
called.
Section 12. Organization. The Board may, by resolution adopted by a
majority of the entire Board, designate a Chairman of the Board, who shall
preside at each meeting of the Board. In the absence or inability of the
Chairman of the Board to preside at a meeting, the President, or, in his or her
absence or inability to act, another Director chosen by a majority of the
Directors present, shall act as chairman of the meeting and preside thereat. The
Secretary (or, in his or her absence or inability to act, any person appointed
by the Chairman) shall act as secretary of the meeting and keep the minutes
thereof.
Section 13. Written Consent of Directors in Lieu of a Meeting. Subject to
the provisions of the Investment Company Act of 1940, as amended, any action
required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting if all members of the Board
or committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of the proceedings of the Board or
committee.
Section 14. Compensation. Directors may receive compensation for services
to the Corporation in their capacities as directors or otherwise in such manner
and in such amounts as may be fixed from time to time by the Board, subject to
any limitations on such compensation as provided in the Investment Company Act
of 1940.
ARTICLE IV
Committees
Section 1. Organization. By resolution adopted by the Board of Directors,
the Board may designate one or more committees, including an Executive
Committee, composed of two or more Directors. The Board of Directors shall elect
the Chairmen of such committees. The Board of Directors shall have the power at
any time to change the members of such committees and to fill vacancies in the
committees. The Board may delegate to these committees any of its powers, except
the power to authorize the issuance of stock, declare a dividend or distribution
on stock, recommend to Shareholders any action requiring shareholder approval,
amend these By-Laws, or approve any merger or share exchange which does not
require shareholder approval. If the Board of Directors has given general
authorization for the issuance of stock, a committee of the Board, in accordance
with a general formula or method specified by the Board by resolution or by
adoption of a stock option or other plan, may fix the terms of stock subject to
classification or reclassification and the terms on which any stock may be
issued, including all terms and conditions required or permitted to be
established or authorized by the Board of Directors.
Section 2. Proceedings and Quorum. In the absence of an appropriate
resolution of the Board of Directors, each committee may adopt such rules and
regulations governing its proceedings, quorum and manner of acting as it shall
deem proper and desirable. In the event any member of any committee is absent
from any meeting, the members thereof present at the meeting, whether or not
they constitute a quorum, may appoint a member of the Board of Directors to act
in the place of such absent member.
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ARTICLE V
Officers, Agents and Employees
Section 1. General. The officers of the Corporation shall be a President, a
Secretary and a Treasurer, and may include one or more Vice Presidents,
Assistant Secretaries or Assistant Treasurers, and such other officers as may be
appointed in accordance with the provisions of Section 8 of this Article.
Section 2. Election, Tenure and Qualifications. The officers of the
Corporation, except those appointed as provided in Section 8 of this Article V,
shall be elected by the Board of Directors at its first meeting and thereafter
annually at an annual meeting. If any officers are not chosen at any annual
meeting, such officers may be chosen at any subsequent regular or special
meeting of the Board. Except as otherwise provided in this Article V, each
officer chosen by the Board of Directors shall hold office until the next annual
meeting of the Board of Directors and until his or her successor shall have been
elected and qualified. Any person may hold one or more offices of the
Corporation except the offices of President and Vice President.
Section 3. Removal and Resignation. Whenever in the judgment of the Board
of Directors the best interest of the Corporation will be served thereby, any
officer may be removed from office by the vote of a majority of the members of
the Board of Directors at any regular meeting or at a special meeting called for
such purpose. Any officer may resign his office at any time by delivering a
written resignation to the Board of Directors, the President, the Secretary, or
any Assistant Secretary. Unless otherwise specified therein, such resignation
shall take effect upon delivery.
Section 4. President. The president shall be the chief executive officer of
the Corporation.. Subject to the supervision of the Board of Directors, he or
she shall have general charge of the business, affairs and property of the
Corporation, and general supervision over its officers, employees and agents.
Except as the Board of Directors may otherwise order, he or she may sign in the
name and on behalf of the Corporation all deeds, bonds, contracts, or
agreements. He or she shall exercise such other powers and perform such other
duties as from time to time may be assigned to him or her by the Board of
Directors.
Section 5. Vice president. The Board of Directors may from time to time
elect one or more Vice Presidents who shall have such powers and perform such
duties as from time may be assigned to them by the Board of Directors or the
President. At the request or in the absence or disability of the President, the
Vice President (or, if there are two or more Vice Presidents then the more
senior of such officers present and able to act) may perform all the duties of
the President and, when so acting, shall have all the powers of and be subject
to all the restrictions upon the President. Any Vice President may perform such
duties as the Board of Directors may assign.
Section 6. Treasurer and Assistant Treasurer. The Treasurer shall be the
principal financial and accounting officer of the Corporation and shall have
general charge of the finances and books of account of the Corporation. Except
as otherwise provided by the Board of Directors, he or she shall have general
supervision of the funds and property of the Corporation and of the performance
by the Custodian of its duties with respect thereto. He or she shall render to
the Board of Directors whenever directed by the Board, an account of the
financial condition of the Corporation and of all his or her transactions as
Treasurer; and as soon as possible after the close of each fiscal year, he or
she shall make and submit to the Board of Directors a like report for such
fiscal year. He or she shall perform all acts incidental to the Office of
Treasurer, subject to the control of the Board of Directors.
Any Assistant Treasurer may perform such duties of the Treasurer as the
Treasurer or the Board of Directors may assign, and, in the absence of the
Treasurer, the Assistant Treasurer (or if there are two or more Assistant
Treasurers, then the more senior of such officers present and able to act) may
perform all the duties of the Treasurer.
Section 7. Secretary and Assistant Secretaries. The Secretary shall attend
to the giving and serving of all notices of the Corporation and shall record all
proceedings of the meetings of the Shareholders and Directors in books to be
kept for that purpose. He or she shall keep in safe custody the seal of the
corporation, and shall have charge of the records for the Corporation, including
the stock books and such other books and papers as the Board of Directors may
direct and such books, reports, certificates and other documents required by law
to be kept, all of which shall at all reasonable times be open to inspection by
any Director. He or she shall perform such other duties as appertain to his or
her office or as may be required by the Board of Directors.
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Any Assistant Secretary may perform such duties of the Secretary as the
Secretary or the Board of Directors may assign, and, in the absence of the
Secretary, he or she (or if there are two or more Assistant Secretaries, then
the more senior of such officers present and able to act) may perform all the
duties of the Secretary.
Section 8. Subordinate Officers. The Board of Directors from time to time
may appoint such other officers or agents as it may deem advisable, each of whom
shall have such title, hold office for such period, have such authority and
perform such duties as the Board of Directors may determine. The Board of
Directors may from time to time delegate to one or more officers or agents the
power to appoint any such subordinate officers or agents and to prescribe their
rights, terms of office, authorities and duties.
Section 9. Remuneration. The salaries or other compensation of the officers
of the Corporation shall be fixed from time to time by resolution of the Board
of Directors, except that the Board of Directors may by resolution delegate to
any person or group of persons the power to fix the salaries or other
compensation of any subordinate officers or agents appointed in accordance with
the provisions of Section 8 of this Article V.
Section 10. Surety Bonds. The Board of Directors may require any officer or
agent of the Corporation to execute a bond (including, without limitation, any
bond required by the Investment Company Act of 1940, as amended, and the rules
and regulations of the Securities and Exchange Commission) to the Corporation in
such sum and with such surety or sureties as the Board of Directors may
determine, conditioned upon the faithful performance of his or her duties to the
Corporation, including responsibility for negligence and for the accounting of
any of the Corporation's property, funds or securities that may come into his or
her hands.
ARTICLE VI
Indemnification
The Corporation shall indemnify (a) its Directors and officers, whether
serving the Corporation or, at its request, any other entity, to the full extent
required or permitted by (i) Maryland law now or hereafter in force, including
the advance of expenses under the procedures and to the full extent permitted by
law, and (ii) the Investment Company Act of 1940, as amended, and (b) other
employees and agents to such extent as shall be authorized by the Board of
Directors and as permitted by law. The foregoing rights of indemnification shall
not be exclusive of any other rights to which those seeking indemnification may
be entitled. The Board of Directors may take such action as is necessary to
carry out these indemnification provisions and is expressly empowered to adopt,
approve and amend from time to time such resolutions or contracts implementing
such provisions or such further indemnification arrangements as may be permitted
by law.
ARTICLE VII
Capital Stock
Section 1. Stock Certificates. The interest of each shareholder of the
Corporation may be evidenced by certificates for shares of stock in such form as
the Board of Directors may from time to time prescribe. The certificates
representing shares of stock shall be signed by or in the name of the
Corporation by the President or a Vice President and countersigned by the
Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer.
Certificates may be sealed with the actual corporate seal or a facsimile of it
or in any other form. Any or all of the signatures of the seal on the
certificate may be manual or facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate shall be issued, it may be issued by the Corporation
with the same effect as if such officer, transfer agent or registrar were still
in office at the date of issue unless written instructions of the Corporation to
the contrary are delivered to such officer, transfer agent or registrar.
Section 2. Stock Ledgers. The stock ledgers of the Corporation, containing
the names and addresses of the Shareholders and the number of shares held by
them respectively, shall be kept at the principal offices of the Corporation or,
if the Corporation employs a transfer agent, at the offices of the transfer
agent of the Corporation.
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Section 3. Transfers of Shares. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation only by the
registered holder thereof, or by his or her attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary or with a transfer
agent or transfer clerk, and on surrender of the certificate or certificates, if
issued, for such shares properly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, with such proof of the
authenticity of the signature as the Corporation or its agents may reasonably
require and the payment of all taxes thereon. Except as otherwise provided by
law, the Corporation shall be entitled to recognize the exclusive right of a
person in whose name any share or shares stand on the record of Shareholders as
the owner of such share or shares for all purposes, including, without
limitation, the rights to receive dividends or other distributions, and to vote
as such owner, and the Corporation shall not be bound to recognize any equitable
or legal claim to or interest in any such share or shares on the part of any
other person. The Board may make such additional rules and regulations, not
inconsistent with these By-Laws, as it may deem expedient concerning the issue,
transfer and registration of certificates for shares of stock of the
Corporation.
Section 4. Transfer Agents and Registrars. The Board of Directors may from
time to time appoint or remove transfer agents and/or registrars of transfers of
shares of stock of the Corporation, and it may appoint the same person as both
transfer agent and registrar. Upon any such appointment being made all
certificates representing shares of capital stock thereafter issued shall be
countersigned by one of such transfer agents or by one of such registrars of
transfers or by both and shall not be valid unless so countersigned. If the same
person shall be both transfer agent and registrar, only one countersignature by
such person shall be required.
Section 5. Lost, Destroyed or Mutilated Certificates. The holder of any
certificates representing shares of stock of the Corporation shall immediately
notify the Corporation of any loss, destruction or mutilation of such
certificate, and the Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it which the owner thereof shall
allege to have been lost or destroyed or which shall have been mutilated, and
the Board may, in its discretion, require such owner or his or her legal
representatives to give to the Corporation a bond in such sum, limited or
unlimited, and in such form and with such surety or sureties, as the Board in
its absolute discretion shall determine, to indemnify the Corporation against
any claim that may be made against it on account of the alleged loss or
destruction of any certificate, or issuance of a new certificate. Anything
herein to the contrary notwithstanding, the Board, in its absolute discretion,
may refuse to issue any such new certificate, except pursuant to legal
proceedings under the laws of the State of Maryland.
ARTICLE VIII
Seal
The seal of the Corporation shall be circular in form and shall bear, in
addition to any other emblem or device approved by the Board of Directors, the
name of the Corporation, the year of its incorporation and the words "Corporate
Seal" and "Maryland." The Board of Directors may otherwise alter the form of the
seal. Said seal may be used by causing it or a facsimile thereof to be impressed
or affixed or in any other manner reproduced. Any Officer or Director of the
Corporation shall have the authority to affix the corporate seal of the
Corporation to any document requiring the same.
ARTICLE IX
Fiscal Year
The fiscal year of the Corporation shall be determined by resolution of the
Board of Directors.
ARTICLE X
Depositories and Custodians
Section 1. Depositories. The funds of the Corporation shall be deposited
with such banks or other depositories as the Board of Directors of the
Corporation may from time to time determine.
Section 2. Custodians. All securities and other investments shall be
deposited in the safe keeping of such banks or other companies as the Board of
Directors of the Corporation may from time to time determine. Every arrangement
entered into with any bank or other company for the safe keeping of the
securities and investments of the Corporation shall contain provisions complying
with the Investment Company Act of 1940, as amended, and the general rules and
regulations thereunder.
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ARTICLE XI
Execution of Instruments
Section 1. Checks, Notes, Drafts, etc. Checks, notes, drafts, acceptances,
bills of exchange and other orders or obligations for the payment of money shall
be signed by such officer or officers or person or persons as the Board or these
By-Laws provide.
Section 2. Sale or Transfer of Securities. Stock certificates, bonds or
other securities owned by the Corporation may be held on behalf of the
Corporation by a Custodian selected by the Board of Directors, and may be
transferred or otherwise disposed of only as allowed pursuant to these By-Laws
and pursuant to authorization by the Board; and when so authorized to be held on
behalf of the Corporation or sold, transferred or otherwise disposed of, may be
transferred from the name of the Corporation by the signature of the President,
any Vice President or the Treasurer, or pursuant to any procedure approved by
the Board of Directors, subject to applicable law.
ARTICLE XII
Independent Public Accountants
The Corporation shall employ an independent public accountant or a firm of
independent public accountants as its accountants to examine the accounts of the
Corporation and to sign and certify financial statements filed by the
Corporation.
ARTICLE XIII
Amendments
These By-Laws or any of them may be amended, altered or repealed at any
regular meeting of the Shareholders or at any special meeting of the
Shareholders at which a quorum is present or represented, provided that notice
of the proposed amendment, alteration or repeal be contained in the notice of
such special meeting. These By-Laws may also be amended, altered or repealed by
the affirmative vote of a majority of the Board of Directors, except any
particular By-Law which is specified as not subject to alteration or repeal by
the Board of Directors, subject to the requirements of the Investment Company
Act of 1940, as amended.
EXHIBIT 23(D)
INVESTMENT ADVISORY AGREEMENT BETWEEN REGISTRANT AND LEVERAGED
INDEX MANAGEMENT COMPANY
INVESTMENT ADVISORY AGREEMENT
OPTIMAL FUNDS, INC.
This Agreement is made and entered into as of the 1st day of May, 1999, by
and between Optimal Funds, Inc., a Maryland corporation (the "Fund"), and
Leveraged Index Management Company, a Vermont corporation (hereinafter referred
to as "Adviser").
WHEREAS, the Fund is a diversified, open-end management investment company,
registered under the Investment Company Act of 1940, as amended (the "Act"), and
authorized to issue shares representing interests in the Optimal Fund (the
"Portfolio"); and
WHEREAS, Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, and engages in the business of asset
management; and
WHEREAS, the Fund desires to retain Adviser to render certain investment
management services to the Fund and Adviser is willing to render such services;
NOW THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Obligations of the Adviser
(a) Services. Adviser agrees to perform the following services (the
"Services") for the Fund:
(1) manage the investment and reinvestment of the Portfolio's assets;
(2) continuously review, supervise, and administer the investment
program of the Portfolio;
(3) determine, in its discretion, the securities to be purchased,
retained or sold (and implement those decisions);
(4) provide the Fund with records concerning Adviser's activities
which the Fund is required to maintain; and
(5) render regular reports to the Fund's officers and directors
concerning Adviser's discharge of the foregoing responsibilities.
Adviser shall discharge the foregoing responsibilities subject to the
control of the officers and the directors of the Fund and in compliance
with such policies as the directors may from time to time establish, and in
compliance with the objectives, policies, and limitations of the Portfolio
set forth in the Fund's prospectus and statement of additional information,
as amended from time to time, and with all applicable laws and regulations.
All Services to be furnished by Adviser under this Agreement may be
furnished through the medium of any directors, officers or employees of
Adviser or through such other parties as Adviser may determine from time to
time.
Adviser agrees, at its own expense or at the expense of one or more of its
affiliates, to render the Services and to provide the office space,
furnishings, equipment and personnel as may be reasonably required in the
judgment of the Board of Directors of the Fund to perform the Services on
the terms and for the compensation provided herein. Adviser shall authorize
and permit any of its officers, directors and employees, who may be elected
as directors or officers of the Fund, to serve in the capacities in which
they are elected.
Except to the extent expressly assumed by Adviser herein and except to the
extent required by law to be paid by Adviser, the Fund shall pay all costs
and expenses in connection with its operation and organization.
(b) Books and Records. All books and records prepared and maintained by
Adviser for the Fund under this Agreement shall be the property of the
Fund and, upon request therefor, Adviser shall surrender to the Fund
such of the books and records so requested.
2. Portfolio Transactions.
Adviser is authorized to select the brokers or dealers that will execute
the purchases and sales of portfolio securities for the Portfolio and is
directed to use its best efforts to obtain the best net results as
described in the Fund's prospectus from time to time. Adviser may, in its
discretion, purchase and sell portfolio securities from and to brokers and
dealers who provide the Portfolio with research, analysis, advice and
similar services, and Adviser may pay to these brokers and dealers, in
return for research and analysis, a higher commission or spread than may be
charged by other brokers and dealers, provided that Adviser determines in
good faith that such commission is reasonable in terms either of that
particular transaction or of the overall responsibility of Adviser to the
Fund and its other clients and that the total commission paid by the Fund
will be reasonable in relation to the benefits to the Portfolio over the
long-term. Adviser will promptly communicate to the officers and the
directors of the Fund such information relating to portfolio transactions
as they may reasonably request.
3. Compensation of Adviser.
The Fund will pay to Adviser on the last day of each month a fee at an
annual rate equal to 0.50% of the daily average net asset value of the
Portfolio, such fee to be computed daily based upon the net asset value of
the Portfolio as determined by a valuation made in accordance with the
Fund's procedure for calculating Portfolio net asset value as described in
the Fund's Prospectus and/or Statement of Additional Information. During
any period when the determination of a Portfolio's net asset value is
suspended by the directors of the Fund, the net asset value of a share of
that Portfolio as of the last business day prior to such suspension shall,
for the purpose of this Paragraph 3, be deemed to be net asset value at the
close of each succeeding business day until it is again determined.
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4. Status of Investment Adviser.
The services of Adviser to the Fund are not to be deemed exclusive, and
Adviser shall be free to render similar services to others so long as its
services to the Fund are not impaired thereby. Adviser shall be deemed to
be an independent contractor and shall, unless otherwise expressly provided
or authorized, have no authority to act for or represent the Fund in any
way or otherwise be deemed an agent of the Fund. Nothing in this Agreement
shall limit or restrict the right of any director, officer or employee of
Adviser, who may also be a director, officer, or employee of the Fund, to
engage in any other business or to devote his or her time and attention in
part to the management or other aspects of any other business, whether of a
similar nature or a dissimilar nature.
5. Permissible Interests.
Directors, agents, and stockholders of the Fund are or may be interested in
Adviser (or any successor thereof) as directors, partners, officers, or
stockholders, or otherwise, and directors, partners, officers, agents, and
stockholders of Adviser are or may be interested in the Fund as directors,
stockholders or otherwise; and Adviser (or any successor) is or may be
interested in the Fund as a stockholder or otherwise.
6. Liability of Investment Adviser.
Adviser assumes no responsibility under this Agreement other than to render
the services called for hereunder in good faith. Adviser shall not be
liable for any error of judgment or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates, except a loss
resulting from a breach of fiduciary duty with respect to receipt of
compensation for services (in which case any award of damages shall be
limited to the period and the amount set forth in Section 36(b)(3) of the
Investment Company Act of 1940 or a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance
of, or from reckless disregard by it of its obligations and duties under,
this Agreement.
7. Term.
This Agreement shall remain in effect until no later than April 30, 2001,
and from year to year thereafter provided such continuance is approved at
least annually by (1) the vote of a majority of the Board of Directors of
the Fund or (2) a vote of a "majority" (as that term is defined in the
Investment Company Act of 1940) of the Fund's outstanding securities,
provided that in either event the continuance is also approved by the vote
of a majority of the directors of the Fund who are not parties to this
Agreement or "interested persons" (as defined in the Act) of any such
party, which vote must be cast in person at meeting called for the purpose
of voting on such approval; provided, however, that;
(a) the Fund may, at any time and without the payment of any penalty,
terminate this Agreement upon 60 days written notice to Adviser;
(b) the Agreement shall immediately terminate in the event of its
assignment (within the meaning of the Act and the Rules thereunder);
and
(c) Adviser may terminate this Agreement without payment of penalty on 60
days written notice to the Fund; and
(d) the terms of paragraph 6 of this Agreement shall survive the
termination of this Agreement.
8. Notices.
Except as otherwise provided in this Agreement, any notice or other
communication required by or permitted to be given in connection with this
Agreement will be in writing and will be delivered in person or sent by
first class mail, postage prepaid or by prepaid overnight delivery service
to the respective parties as follows:
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If to the Fund: If to the Adviser:
Optimal Funds, Inc Leveraged Index Management Company
213 G VT Route 15 213 G VT Route 15
Jericho, VT 05465 Jericho, VT 05465
Mr. Mitchell M. Maynard Mr. Mitchell M. Maynard
President President
9. Amendments.
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, and no amendment of this Agreement shall be effective until
approved by vote of the holders of a majority of the Fund's outstanding
voting securities.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day and the year first written above.
Optimal Funds, Inc. Leveraged Investment Management Company
By: _____________________ By: __________________________
Mitchell M. Maynard Mitchell M. Maynard
President President
ATTEST: ATTEST:
- -------------------------- ------------------------------
Secretary Secretary
[Corporate Seal] [Corporate Seal]
EXHIBIT 23(E)
DISTRIBUTION AGREEMENT BETWEEN REGISTRANT,
LEVERAGED INDEX MANAGEMENT COMPANY, AND DECLARATION DISTRIBUTORS, INC.
DISTRIBUTION AGREEMENT
OPTIMAL FUNDS, INC.
THIS DISTRIBUTION AGREEMENT (the "Agreement") is made as of the 1st day of
May, 1999 by and among Optimal Funds, Inc. (the "Fund"), a Maryland corporation,
Leveraged Index Management Company (the "Adviser"), a Vermont corporation, and
Declaration Distributors, Inc. (the "Distributor"), a Pennsylvania corporation.
WITNESSETH THAT:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act")
and has registered its shares of common stock (the "Shares") under the
Securities Act of 1933, as amended (the "1933 Act") in one or more distinct
series of Shares (the "Portfolio" or "Portfolios");
WHEREAS, the Adviser has been appointed investment adviser to the Fund;
WHEREAS, the Distributor is a broker-dealer registered with the U.S.
Securities and Exchange Commission (the "SEC") and a member in good standing of
the National Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Fund, the Adviser and the Distributor desire to enter into
this Agreement pursuant to which the Distributor will provide distribution
services to the Portfolios of the Fund identified on Schedule A, as may be
amended from time to time, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Fund, the Adviser and the Distributor,
intending to be legally bound hereby, agree as follows:
1. Appointment of Distributor.
The Fund hereby appoints the Distributor as its exclusive agent for the
distribution of the Shares, and the Distributor hereby accepts such appointment
under the terms of this Agreement. The Fund shall not sell any Shares to any
person except to fill orders for the Shares received through the Distributor;
provided, however, that the foregoing exclusive right shall not apply:
(i) to Shares issued or sold in connection with the merger or consolidation of
any other investment company with the Fund or the acquisition by purchase
or otherwise of all or substantially all of the assets of any investment
company or substantially all of the outstanding shares of any such company
by the Fund;
(ii) to Shares which may be offered by the Fund to its shareholders for
reinvestment of cash distributed from capital gains or net investment
income of the Fund; or
(iii) to Shares which may be issued to shareholders of other funds who exercise
any exchange privilege set forth in the Fund's Prospectus.
Notwithstanding any other provision hereof, the Fund may terminate, suspend, or
withdraw the offering of the Shares whenever, in its sole discretion, it deems
such action to be desirable, and the Distributor shall process no further orders
for Shares after it receives notice of such termination, suspension or
withdrawal.
2. Fund Documents.
The Fund has provided the Administrator with properly certified or authenticated
copies of the following Fund related documents in effect on the date hereof:
(a) the Fund's organizational documents, including Articles of Incorporation
and by-laws;
(b) the Fund's Registration Statement on Form N-1A, including all exhibits
thereto;
(c) the Fund's most current Prospectus and Statement of Additional Information;
and
(d) resolutions of the Fund's Board of Directors authorizing the appointment of
the Distributor and approving this Agreement.
The Fund shall promptly provide to the Distributor copies, properly certified or
authenticated, of all amendments or supplements to the foregoing. The Fund shall
provide to the Distributor copies of all other information which the Distributor
may reasonably request for use in connection with the distribution of Shares,
including, but not limited to, a certified copy of all financial statements
prepared for the Fund by its independent public accountants. The Fund shall also
supply the Distributor with such number of copies of the current Prospectus,
Statement of Additional Information and shareholder reports as the Distributor
shall reasonably request.
3. Distribution Services.
The Distributor shall sell and repurchase Shares as set forth below, subject to
the registration requirements of the 1933 Act and the rules and regulations
thereunder, and the laws governing the sale of securities in the various states
("Blue Sky Laws"):
a. The Distributor, as agent for the Fund, shall sell Shares to the public
against orders therefor at the public offering price, as determined in
accordance with the Fund's then current Prospectus and Statement of
Additional Information.
b. The net asset value of the Shares shall be determined in the manner
provided in the then current Prospectus and Statement of Additional
Information. 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.
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c. Upon receipt of purchase instructions, the Distributor shall transmit such
instructions to the Fund or its transfer agent for registration of the
Shares purchased.
d. The Distributor shall also have the right to take, as agent for the Fund,
all actions which, in the Distributor's judgment, are necessary to effect
the distribution of Shares.
e. Nothing in this Agreement shall prevent the Distributor or any "affiliated
person" from buying, selling or trading any securities for its or their own
account or for the accounts of others for whom it or they may be acting;
provided, however, that the Distributor expressly agrees that it shall not
for its own account purchase any Shares of the Fund except for investment
purposes and that it shall not for its own account sell any such Shares
except for redemption of such Shares by the Fund, and that it shall not
undertake activities which, in its judgment, would adversely affect the
performance of its obligations to the Fund under this Agreement.
f. The Distributor, as agent for the Fund, shall repurchase Shares at such
prices and upon such terms and conditions as shall be specified in the
Prospectus.
4. Distribution Support Services.
In addition to the sale and repurchase of Shares, the Distributor shall perform
the distribution support services set forth on Schedule B attached hereto, as
may be amended from time to time.
Such distribution support services shall include: Review of sales and marketing
literature and submission to the NASD; NASD recordkeeping; and quarterly reports
to the Fund's Board of Directors. Such distribution support services may also
include: fulfillment services, including telemarketing, printing, mailing and
follow-up tracking of sales leads; and licensing Adviser or Fund personnel as
registered representatives of the Distributor and related supervisory
activities.
5. Reasonable Efforts.
The Distributor shall use all reasonable efforts in connection with the
distribution of Shares. The Distributor shall have no obligation to sell any
specific number of Shares and shall only sell Shares against orders received
therefor. The Fund shall retain the right to refuse at any time to sell any of
its Shares for any reason deemed adequate by it.
6. Compliance.
In furtherance of the distribution services being provided hereunder, the
Distributor and the Fund agree as follows:
a. The Distributor shall comply with the Rules of Conduct of the NASD and the
securities laws of any jurisdiction in which it sells, directly or
indirectly, Shares.
b. The Distributor shall require each dealer with whom the Distributor has a
selling agreement to conform to the applicable provisions of the Fund's
most current Prospectus and Statement of Additional Information, with
respect to the public offering price of the Shares.
c. The Fund agrees to furnish to the Distributor sufficient copies of any
agreements, plans, communications with the public or other materials it
intends to use in connection with any sales of Shares in a timely manner in
order to allow the Distributor to review, approve and file such materials
with the appropriate regulatory authorities and obtain clearance for use.
The Fund agrees not to use any such materials until so filed and cleared
for use by appropriate authorities and the Distributor.
d. The Distributor, at its own expense, shall qualify as a broker or dealer,
or otherwise, under all applicable Federal or state laws required to permit
the sale of Shares in such states as shall be mutually agreed upon by the
parties; provided, however that the Distributor shall have no obligation to
register as a broker or dealer under the Blue Sky Laws of any jurisdiction
if it determines that registering or maintaining registration in such
jurisdiction would be uneconomical.
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<PAGE>
e. The Distributor shall not, in connection with any sale or solicitation of a
sale of the Shares, or make or authorize any representative, service
organization, broker or dealer to make, any representations concerning the
Shares except those contained in the Fund's most current Prospectus
covering the Shares and in communications with the public or sales
materials approved by the Distributor as information supplemental to such
Prospectus.
7. Expenses.
Expenses shall be allocated as follows:
a. The Fund shall bear the following expenses: preparation, setting in type,
and printing of sufficient copies of the Prospectus and Statement of
Additional Information for distribution to existing shareholders;
preparation and printing of reports and other communications to existing
shareholders; distribution of copies of the Prospectus, Statement of
Additional Information and all other communications to existing
shareholders; registration of the Shares under the Federal securities laws;
qualification of the Shares for sale in the jurisdictions mutually agreed
upon by the Fund and the Distributor; transfer agent/shareholder servicing
agent services; supplying information, prices and other data to be
furnished by the Fund under this Agreement; and any original issue taxes or
transfer taxes applicable to the sale or delivery of the Shares or
certificates therefor.
b. The Adviser shall pay all other expenses incident to the sale and
distribution of the Shares sold hereunder, including, without limitation:
printing and distributing copies of the Prospectus, Statement of Additional
Information and reports prepared for use in connection with the offering of
Shares for sale to the public; advertising in connection with such
offering, including public relations services, sales presentations, media
charges, preparation, printing and mailing of advertising and sales
literature; data processing necessary to support a distribution effort;
distribution and shareholder servicing activities of broker-dealers and
other financial institutions; filing fees required by regulatory
authorities for sales literature and advertising materials; any additional
out-of-pocket expenses incurred in connection with the foregoing and any
other costs of distribution.
8. Compensation.
For the distribution and distribution support services provided by the
Distributor pursuant to the terms of the Agreement, the Adviser shall pay to the
Distributor the compensation set forth in Schedule A attached hereto, which
schedule may be amended from time to time.
The Adviser shall also reimburse the Distributor for its out-of-pocket expenses
related to the performance of its duties hereunder, including, without
limitation, telecommunications charges, postage and delivery charges, record
retention costs, reproduction charges and traveling and lodging expenses
incurred by officers and employees of the Distributor. The Adviser shall pay the
Distributor's monthly invoices for distribution fees and out-of-pocket expenses
within ten days of the respective month-end. If this Agreement becomes effective
subsequent to the first day of the month or terminates before the last day of
the month, the Fund shall pay to the Distributor a distribution fee that is
prorated for that part of the month in which this Agreement is in effect. All
rights of compensation and reimbursement under this Agreement for services
performed by the Distributor as of the termination date shall survive the
termination of this Agreement.
9. Use of Distributor's Name.
The Fund shall not use the name of the Distributor or any of its affiliates in
the Prospectus, Statement of Additional Information, sales literature or other
material relating to the Fund in a manner not approved prior thereto in writing
by the Distributor; provided, however, that the Distributor shall approve all
uses of its and its affiliates' names that merely refer in accurate terms to
their appointments or that are required by the Securities and Exchange
Commission (the "SEC") or any state securities commission; and further provided,
that in no event shall such approval be unreasonably withheld.
10. Use of Fund's Name.
Neither the Distributor nor any of its affiliates shall use the name of the Fund
or material relating to the Fund on any forms (including any checks, bank drafts
or bank statements) for other than internal use in a manner not approved prior
thereto by the Fund; provided, however, that the Fund shall approve all uses of
its name that merely refer in accurate terms to the appointment of the
Distributor hereunder or that are required by the SEC or any state securities
commission; and further provided, that in no event shall such approval be
unreasonably withheld.
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<PAGE>
11. Liability of Distributor.
The duties of the Distributor shall be limited to those expressly set forth
herein, and no implied duties are assumed by or may be asserted against the
Distributor hereunder. The Distributor shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which this Agreement relates, except to the extent of a loss
resulting from willful misfeasance, bad faith or negligence, or reckless
disregard of its obligations and duties under this Agreement. As used in this
Section 9 and in Section 10 (except the second paragraph of Section 10), the
term "Distributor" shall include directors, officers, employees and other agents
of the Distributor.
12. Indemnification of Distributor.
The Fund shall indemnify and hold harmless the Distributor against any and all
liabilities, losses, damages, claims and expenses (including, without
limitation, reasonable attorneys' fees and disbursements and investigation
expenses incident thereto) which the Distributor may incur or be required to pay
hereafter, in connection with any action, suit or other proceeding, whether
civil or criminal, before any court or administrative or legislative body, in
which the Distributor may be involved as a party or otherwise or with which the
Distributor may be threatened, by reason of the offer or sale of the Fund shares
prior to the effective date of this Agreement.
Any director, officer, employee, shareholder or agent of the Distributor who may
be or become an officer, director, employee or agent of the Fund, shall be
deemed, when rendering services to the Fund or acting on any business of the
Fund (other than services or business in connection with the Distributor's
duties hereunder), to be rendering such services to or acting solely for the
Fund and not as a director, officer, employee, shareholder or agent, or one
under the control or direction of the Distributor, even though receiving a
salary from the Distributor.
The Fund agrees to indemnify and hold harmless the Distributor, and each person,
who controls the Distributor within the meaning of Section 15 of the 1933 Act,
or Section 20 of the Securities Exchange Act of 1934, as amended ("1934 Act"),
against any and all liabilities, losses, damages, claims and expenses, joint or
several (including, without limitation, reasonable attorneys' fees and
disbursements and investigation expenses incident thereto) to which they, or any
of them, may become subject under the 1933 Act, the 1934 Act, the 1940 Act or
other Federal or state laws or regulations, at common law or otherwise, insofar
as such liabilities, losses, damages, claims and expenses (or actions, suits or
proceedings in respect thereof) arise out of or relate to any untrue statement
or alleged untrue statement of a material fact contained in a Prospectus,
Statement of Additional Information, supplement thereto, sales literature or
other written information prepared by the Fund and provided by the Fund to the
Distributor for the Distributor's use hereunder, or arise out of or relate to
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading. The
Distributor (or any person controlling the Distributor) shall not be entitled to
indemnity hereunder for any liabilities, losses, damages, claims or expenses (or
actions, suits or proceedings in respect thereof) resulting from (i) an untrue
statement or omission or alleged untrue statement or omission made in the
Prospectus, Statement of Additional Information, or supplement, sales or other
literature, in reliance upon and in conformity with information furnished in
writing to the Fund by the Distributor specifically for use therein or (ii) the
Distributor's own willful misfeasance, bad faith, negligence or reckless
disregard of its duties and obligations in the performance of this Agreement.
The Distributor agrees to indemnify and hold harmless the Fund, and each person
who controls the Fund within the meaning of Section 15 of the 1933 Act, or
Section 20 of the 1934 Act, against any and all liabilities, losses, damages,
claims and expenses, joint or several (including, without limitation reasonable
attorneys' fees and disbursements and investigation expenses incident thereto)
to which they, or any of them, may become subject under the 1933 Act, the 1934
Act, the 1940 Act or other Federal or state laws, at common law or otherwise,
insofar as such liabilities, losses, damages, claims or expenses arise out of or
relate to any untrue statement or alleged untrue statement of a material fact
contained in the Prospectus or Statement of Additional Information or any
supplement thereto, or arise out of or relate to any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, if based upon
information furnished in writing to the Fund by the Distributor specifically for
use therein.
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<PAGE>
The Distributor agrees to indemnify and hold harmless the Adviser, and each
person who controls the Adviser within the meaning of Section 15 of the 1933
Act, or Section 20 of the 1934 Act, against any and all liabilities, losses,
damages, claims and expenses, joint or several (including, without limitation
reasonable attorneys' fees and disbursements and investigation expenses incident
thereto) to which they, or any of them, may become subject under the 1933 Act,
the 1934 Act, the 1940 Act or other Federal or state laws, at common law or
otherwise, insofar as such liabilities, losses, damages, claims or expenses
arise out of or relate to any untrue statement or alleged untrue statement of a
material fact contained in the Prospectus or Statement of Additional Information
or any supplement thereto, or arise out of or relate to any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, if based upon
information furnished in writing to the Adviser by the Distributor specifically
for use therein.
A party seeking indemnification hereunder (the "Indemnitee") shall give prompt
written notice to the party from whom indemnification is sought ("Indemnitor")
of a written assertion or claim of any threatened or pending legal proceeding
which may be subject to indemnity under this Section; provided, however, that
failure to notify the Indemnitor of such written assertion or claim shall not
relieve the Indemnitor of any liability arising from this Section. The
Indemnitor shall be entitled, if it so elects, to assume the defense of any suit
brought to enforce a claim subject to this Indemnity and such defense shall be
conducted by counsel chosen by the Indemnitor and satisfactory to the
Indemnitee; provided, however, that if the defendants include both the
Indemnitee and the Indemnitor, and the Indemnitee shall have reasonably
concluded that there may be one or more legal defenses available to it which are
different from or additional to those available to the Indemnitor ("conflict of
interest"), the Indemnitor shall not have the right to elect to defend such
claim on behalf of the Indemnitee, and the Indemnitee shall have the right to
select separate counsel to defend such claim on behalf of the Indemnitee. In the
event that the Indemnitor elects to assume the defense of any suit pursuant to
the preceding sentence and retains counsel satisfactory to the Indemnitee, the
Indemnitee shall bear the fees and expenses of additional counsel retained by
it, except for reasonable investigation costs which shall be borne by the
Indemnitor. If the Indemnitor (i) does not elect to assume the defense of a
claim, (ii) elects to assume the defense of a claim but chooses counsel that is
not satisfactory to the Indemnitee or (iii) has no right to assume the defense
of a claim because of a conflict of interest, the Indemnitor shall advance or
reimburse the Indemnitee, at the election of the Indemnitee, reasonable fees and
disbursements of any counsel retained by Indemnitee, including reasonable
investigation costs.
13. Dual Employees.
The Adviser agrees that only its employees who are registered representatives of
the Distributor ("dual employees") shall offer or sell Shares of the Portfolios
and further agrees that the activities of any such employees as registered
representatives of the Distributor shall be limited to offering and selling
Shares. If there are dual employees, one employee of the Adviser shall register
as a principal of the Distributor and assist the Distributor in monitoring the
marketing and sales activities of the dual employees. The Adviser shall maintain
errors and omissions and fidelity bond insurance policies providing reasonable
coverage for its employees activities and shall provide copies of such policies
to the Distributor. The Adviser shall indemnify and hold harmless the
Distributor against any and all liabilities, losses, damages, claims and
expenses (including reasonable attorneys' fees and disbursements and
investigation costs incident thereto) arising from or related to the Adviser's
employees' activities as registered representatives of the Distributor,
including, without limitation, any and all such liabilities, losses, damages,
claims and expenses arising from or related to the breach by such dual employees
of any rules or regulations of the NASD or SEC.
14. Force Majeure.
The Distributor shall not be liable for any delays or errors occurring by reason
of circumstances not reasonably foreseeable and beyond its control, including,
but not limited, to acts of civil or military authority, national emergencies,
work stoppages, fire, flood, catastrophe, acts of God, insurrection, war, riot
or failure of communication or power supply. In the event of equipment
breakdowns which are beyond the reasonable control of the Distributor and not
primarily attributable to the failure of the Distributor to reasonably maintain
or provide for the maintenance of such equipment, the Distributor shall, at no
additional expense to the Fund, take reasonable steps in good faith to minimize
service interruptions, but shall have no liability with respect thereto.
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<PAGE>
15. Scope of Duties.
The Distributor and the Fund shall regularly consult with each other regarding
the Distributor's performance of its obligations and its compensation under the
foregoing provisions. In connection therewith, the Fund shall submit to the
Distributor at a reasonable time in advance of filing with the SEC copies of any
amended or supplemented Registration Statement of the Fund (including exhibits)
under the 1940 Act and the 1933 Act, and at a reasonable time in advance of
their proposed use, copies of any amended or supplemented forms relating to any
plan, program or service offered by the Fund. Any change in such materials that
would require any change in the Distributor's obligations under the foregoing
provisions shall be subject to the Distributor's approval. In the event that a
change in such documents or in the procedures contained therein increases the
cost or burden to the Distributor of performing its obligations hereunder, the
Distributor shall be entitled to receive reasonable compensation therefore.
16. Duration.
This Agreement shall become effective as of the date first above written, and
shall continue in force for two years from that date and thereafter from year to
year, provided continuance is approved at least annually by either (i) the vote
of a majority of the Directors of the Fund, or by the vote of a majority of the
outstanding voting securities of the Fund, and (ii) the vote of a majority of
those Directors of the Fund who are not interested persons of the Fund, and who
are not parties to this Agreement or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on the approval.
17. Termination.
This Agreement shall terminate as follows:
a. This Agreement shall terminate automatically in the event of its
assignment.
b. This Agreement shall terminate upon the failure to approve the continuance
of the Agreement after the initial two year term as set forth in Section 16
above.
c. This Agreement shall terminate at any time upon a vote of the majority of
the Directors who are not interested persons of the Fund or by a vote of
the majority of the outstanding voting securities of the Fund, upon not
less than 60 days prior written notice to the Distributor.
d. The Distributor may terminate this Agreement upon not less than 60 days
prior written notice to the Fund.
Upon the termination of this Agreement, the Adviser shall pay to the Distributor
such compensation and out-of-pocket expenses as may be payable for the period
prior to the effective date of such termination. In the event that the Fund
designates a successor to any of the Distributor's obligations hereunder, the
Distributor shall, at the expense and direction of the Fund, transfer to such
successor all relevant books, records and other data established or maintained
by the Distributor pursuant to the foregoing provisions.
Sections 7, 8, 9, 10, 11, 12, 13, 14, 15, 17, 21, 22, 24, 25 and 26 shall
survive any termination of this Agreement.
18. Amendment.
The terms of this Agreement shall not be waived, altered, modified, amended or
supplemented in any manner whatsoever except by a written instrument signed by
the Distributor, the Adviser and the Fund and shall not become effective unless
its terms have been approved by the majority of the Directors of the Fund or by
a "vote of a majority of the outstanding voting securities" of the Fund and by a
majority of those Directors who are not "interested persons" of the Fund or any
party to this Agreement.
19. Non-Exclusive Services.
The services of the Distributor rendered to the Fund are not exclusive. The
Distributor may render such services to any other investment company.
20. Definitions.
As used in this Agreement, the terms "vote of a majority of the outstanding
voting securities," "assignment," "interested person" and "affiliated person"
shall have the respective meanings specified in the 1940 Act and the rules
enacted thereunder as now in effect or hereafter amended.
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<PAGE>
21. Confidentiality.
The Distributor shall treat confidentially and as proprietary information of the
Fund all records and other information relating to the Fund and prior, present
or potential shareholders and shall not use such records and information for any
purpose other than performance of its responsibilities and duties hereunder,
except as may be required by administrative or judicial tribunals or as
requested by the Fund.
22. Notice.
Any notices and other communications required or permitted hereunder shall be in
writing and shall be effective upon delivery by hand or upon receipt if sent by
certified or registered mail (postage prepaid and return receipt requested) or
by a nationally recognized overnight courier service (appropriately marked for
overnight delivery) or upon transmission if sent by telex or facsimile (with
request for immediate confirmation of receipt in a manner customary for
communications of such respective type and with physical delivery of the
communication being made by one or the other means specified in this Section 20
as promptly as practicable thereafter). Notices shall be addressed as follows:
If to the Fund: If to the Adviser: If to the Distributor:
Optimal Funds, Inc. LIMCO Declaration Distributors, Inc.
213 G VT Route 15 213 G VT Route 15 555 North Lane, Suite 6160
Jericho, VT 05465 Jericho, VT 05465 Conshohocken, PA 19428
Attn: Mitchell M. Maynard Mitchell M. Maynard Attn: Terence P. Smith
President President Chief Executive Offficer
or to such other respective addresses as the parties shall designate by like
notice, provided that notice of a change of address shall be effective only upon
receipt thereof.
23. 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.
24. Governing Law.
This Agreement shall be administered, construed and enforced in accordance with
the laws of the Commonwealth of Pennsylvania to the extent that such laws are
not preempted by the provisions of any law of the United States heretofore or
hereafter enacted, as the same may be amended from time to time.
25. Entire Agreement.
This Agreement (including the Exhibits attached hereto) contains the entire
agreement and understanding of the parties with respect to the subject matter
hereof and supersedes all prior written or oral agreements and understandings
with respect thereto.
26. Miscellaneous.
Each party agrees to perform such further acts and execute such further
documents as are necessary to effectuate the purposes hereof. 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. This Agreement may be executed in two counterparts, each of which
taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day
and year first above written.
Optimal Funds, Inc. Leveraged Index Management Company
- ------------------------------ ----------------------------------
Mitchell M. Maynard Mitchell M. Maynard
President President
Declaration Distributors, Inc.
- ------------------------------
Terence P. Smith
Chief Executive Officer
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SCHEDULE A
Optimal Funds, Inc.
Portfolio and Fee Schedule
Portfolios covered by Distribution Agreement:
The Optimal Fund
Fees for distribution and distribution support services on behalf of the
Portfolios:
$20,000.00 per year.
Plus out-of-pocket expenses to include, but not limited to: travel, printing,
postage, telephone, registration fees for Adviser/Fund personnel, broker/dealer
and registered representative registration fees specific to Adviser/Fund, and
other miscellaneous items.
<PAGE>
SCHEDULE B
Optimal Funds, Inc.
Distribution Support Services
1. Provide national broker dealer for Fund registration.
2. Review and submit for approval to the NASD all advertising and promotional
materials.
3. Maintain all books and records required by the NASD.
4. Subject to approval of Distributor, license personnel as registered
representatives of the Distributor to distribute no load fund shares
sponsored by the Adviser.
5. Telemarketing services (additional cost- to be negotiated).
6. Fund fulfillment services, including sampling prospective shareholders
inquiries and related mailings (additional cost - to be negotiated).
EXHIBIT 23(G)
CUSTODIAN AGREEMENT BETWEEN
REGISTRANT, LEVERAGED INDEX MANAGEMENT COMPANY, AND
FIRST UNION NATIONAL BANK, N.A.
CUSTODY AGREEMENT
CUSTODIAN AGREEMENT
OPTIMAL FUNDS, INC.
THIS AGREEMENT, dated as of the 1st day of May, 1999 is by an between
Optimal Funds, Inc. (the "Company"), a corporation duly organized under the laws
of the state of Maryland, Leveraged Index Management Company, a corporation
organized under the laws of the state of Vermont (the "Adviser"), and First
Union National Bank, N.A. (the "Bank")
WHEREAS, the Company and the Adviser have entered into an Operating
Services Agreement wherein the Adviser is obligated to provide, or arrange to
provide, certain services to the Company, including custodial services, and;
WHEREAS, the Adviser desires to appoint the Bank to act as Custodian of the
Company's portfolio securities, cash and other property from time to time
deposited with or collected by the Bank for the Company, and the Company
consents to such appointment, and;
WHEREAS, the Bank is qualified and authorized to act as Custodian for the
Company and the separate series thereof (each a "Fund", and collectively, the
"Funds"), and is willing to act in such capacity upon the terms and conditions
herein set forth;
NOW THERFORE, in consideration of the premises and mutual covenants herein
contained, the parties hereto, intending to be legally bound, do hereby agree as
follows:
SECTION 1. The terms defined in this Section 1, wherever used in this Agreement,
or in any amendment or supplement hereto, shall have the meanings herein
specified unless the context otherwise requires.
Custodian: The term Custodian shall mean the Bank in its capacity as Custodian
under this Agreement.
Depository: The term depository means any depository service which acts as a
system for the central handling of securities where all securities of any
particular class or series of an issuer deposited within the system are treated
as fungible and may be transferred by bookkeeping entry without physical
delivery.
Proper Instructions: For purposes of this Agreement, the Custodian shall be
deemed to have Proper Instructions upon receipt of written (including
instructions received by means of computer terminals or facsimile
transmissions), telephone or telegraphic instructions from a person or persons
authorized from time to time by the Directors of the Company to give the
particular class of instructions. Telephone or telegraphic instructions shall be
confirmed in writing by such persons as said Directors shall have from time to
time authorized to give the particular instructions without awaiting receipt of
written confirmation, and the Custodian shall not be liable for the Company's
failure to confirm such instructions in writing.
Securities: The term Securities means stocks, bonds, rights, warrants and all
other negotiable or non-negotiable paper issued in certificated or book-entry
form commonly known as "Securities" in banking custom or practice.
Shareholder: The term Shareholder shall mean the registered owner from time to
time of the Shares of the Company in accordance with the registry records
maintained by the Company or any agent on the Company's behalf.
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SECTION 2. The Adviser hereby appoints the Custodian as Custodian of the
Company's cash, Securities and other property, to be held by the Custodian as
provided in this Agreement. The Custodian hereby accepts such appointment
subject to the terms and conditions hereinafter provided. The Bank shall open a
separate custodial account in the name of the Company on the books and records
of the Bank to hold the Securities of the Company deposited with, transferred to
or collected by the Bank for the account of each Fund of the Company, and a
separate cash account to which the Bank shall credit monies received by the Bank
for the account of or from each Fund of the Company. Such cash shall be
segregated from the assets of any and all other accounts of the Company and
shall be and remain the sole property of the Company.
SECTION 3. The Company shall from time to time file with the Custodian a
certified copy of each resolution of its Board of Directors authorizing certain
person or persons to give Proper Instructions and specifying the class of
instructions that may be given by each person to the Custodian under this
Agreement, together with certified signatures of such persons authorized to
sign, which shall constitute conclusive evidence of the authority of the
officers and signatories designated therein to act, and shall be considered in
full force and effect with the Custodian fully protected in acting in reliance
thereon until it receives written notice to the contrary; provided, however,
that if the certifying officer is authorized to give Proper Instructions, the
certification shall be also signed by a second officer of the Company.
SECTION 4. The Company will cause to be deposited with the Custodian hereunder
the applicable net asset value of the Shares sold from time to time whether
representing initial issue, other stock or reinvestments of dividends and/or
distributions payable to Shareholders.
SECTION 5. The Bank, acting as agent for the Company, is authorized, directed
and instructed, subject to the further provisions of this Agreement:
(a) to hold Securities issued only on bearer form in bearer form
(b) to register in the name of the nominee of the Bank, the Bank's
Depositories, or sub-custodians, (I) Securities issued only in registered
form, and (ii) Securities issued in both bearer and registered form, which
are freely interchangeable without penalty;
(c) to deposit any securities which are eligible foe deposit (I) with any
domestic or foreign Depository on such terms and conditions as such
Depository may require, including provisions for limitation or exclusion of
liability on the part of the Depository; and (ii) with any sub-custodian
which the Bank uses, including any subsidiary or affiliate of the Bank;
(d) (i) to credit for the account of the Company all proceeds received and
payable on or in respect of the assets maintained hereunder.
(ii) to debit the account of the Company for the cost of acquiring
Securities the Bank has received for the Company, against delivery of
such Securities to the Bank;
(iii) to present for payment Securities and other obligations (including
coupons) upon maturity, when called foe redemption, and when income
payments are due, and
(iv) to make exchanges of Securities which, in the Bank's opinion, are
purely ministerial as, for example, the exchange of Securities in
temporary for Securities in definitive form or the mandatory exchange
of certificates;
(e) to forward to the Company, and/or any other person designated by the
Company, all proxies and proxy materials received by the Bank in connection
with Securities held in the Company's account, which have been registered
in the name of the Bank's nominee , or being held by any Depository, or
sub-custodian, on behalf of the Bank;
(f) to sell any fractional interest of any Securities which the Bank has
received resulting from any stock dividend, stock split, distribution,
exchange, conversion or similar activity;
(g) to release the Company's name, address and aggregate share position to the
issuers of any domestic Securities in the account of the Company, provided
any such information to any issuer;
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<PAGE>
(h) to endorse and collect all checks, drafts or other orders for the payment
of money received by the Bank for the account of or from the Company;
(i) at the direction of the Company, to enroll designated Securities belonging
to the Company and held hereunder in a program for the automatic
reinvestment of all income and capital gains distributions on those
Securities in new shares (an "Automatic Reinvestment Program"), or instruct
any Depository holding such Securities to enroll those Securities in an
Automatic Reinvestment Program;
(j) At the direction of the Company, to receive, deliver and transfer
Securities and make payments and collections of monies in connection
therewith, enter purchase and sale orders and perform any other acts
incidental or necessary to the performance of the above acts with brokers,
dealer or similar agents selected by the Company, including any broker,
dealer or similar agent affiliated with the Bank, for the account and risk
of the Company in accordance with accepted industry practice in the
relevant market, provided, however, if it so determined that any
certificated Securities transferred to a Depository or sub-custodian, the
Bank, or the Banks nominee, the Bank's sole responsibility for such
Securities under this Agreement shall be to safekeep the Securities in
accordance with Section 11 hereof; and
(k) to notify the Company and/or any other person designated by the Company
upon receipt of notice by the Bank of any call for redemption, render
offer, subscription, rights, merger, consolidation, reorganization or
recapitalization which (I) appears in The Wall Street Journal (New York
edition), The Standard & Poor's Called Bond Record for Preferred Stocks,
Financial Daily Called Bond Service, The Kenny Services, any official
notifications from The Depository Trust Company and such other publications
or services to which the Bank may from time to time subscribe, (ii)
requires the Bank to act in response thereto and (iii) pertain to
Securities belonging to the Company and held hereunder which have been
registered in the name of the Bank's nominee or are being held by a
Depository or sub-custodian on behalf of the Bank. Notwithstanding anything
contained herein to the contrary, the Company shall have the sole
responsibility for monitoring the applicable dates on which Securities with
put option features must be exercised. All solicitation fees payable to the
Bank unless expressly agreed to the contrary in writing by the Bank.
Notwithstanding anything in this Section to the contrary, the Bank is authorized
to hold Securities for the Company which have transfer limitations imposed upon
them by the Securities Act of 1933, as amended , or represent shares of mutual
funds (I) in the name of the Company, (ii) in the name of the Bank's nominee, or
(iii) with any Depository or sub-custodian
Section 6. The Custodian's compensation shall be as set forth in Schedule A
hereto attached, or as shall be set forth in amendments to such schedule
approved by the Company and the Adviser and to the extent such compensation
relates to services provided hereunder to such Fund. All expenses and taxes
payable with respect to the Securities in the account of the Company including,
without limitation, commission charges on purchases and sales and the amount of
any loss or liability for stockholders' assessments or otherwise, claimed or
asserted against the Bank's nominee by reason of any registration hereunder
shall be charged to the Adviser.
SECTION 7. In connection with its functions under this Agreement, the Custodian
shall:
(a) render to the Company a daily report of all monies received or paid on
behalf of the Company; and
(b) create, maintain, and retain all records relating to its activities
and obligations under this Agreement in such manner as will meet the
obligations of the Company with respect to the Custodian's activities
in accordance with generally accepted accounting principles. All
records maintained by the Custodian in connection with the performance
of its duties under this Agreement will remain the property of the
Company, and in the event of termination of this Agreement, will be
relinquished to the Company.
SECTION 8. Any Securities deposited with any Depository or with any
sub-custodian will be represented in accounts in the name of the Bank which
include only property held by the Bank as Custodian for customers in which the
Bank acts in a fiduciary or agency capacity.
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Should any Securities which are forwarded to the Bank by the Company, and which
are subsequently deposited to the Bank's account in any Depository or with any
sub-custodian, or which the Company may arrange to deposit in the Bank's account
in any Depository or with any sub-custodian, not be deemed acceptable for
deposit by such Depository or sub-custodian, for any reason, and as a result
thereof there is a short position in the account of the Bank with the Depository
for such Security, the Company agrees to furnish the Bank immediately with like
Securities in acceptable form.
SECTION 9. The Company represents and warrants that: (I) it has the legal right,
power and authority to execute, deliver and perform this Agreement and to carry
out all of the transactions contemplated hereby; (ii) it has obtained all
necessary authorizations; (iii) the execution, delivery and performance of this
Agreement and the carrying out of any of the transactions contemplated and
performance of this Agreement and the carrying out of any of the transactions
contemplated hereby will not be in conflict with, result in a breach of or
constitute a default under any agreement or other instrument to which the
Company is a party of which is otherwise known to the Company; (iv) it does not
require the consent of approval of any governmental agency or instrumentality,
except any such consents and approvals which the Company has obtained; (v) the
execution and delivery of this Agreement by the Company will not violate any
law, regulation, charter, by-law, order of any court or governmental agency or
judgement applicable to the Company; and (vi) all persons executing this
Agreement on behalf of the Company are duly authorized to do so.
In the event any of the foregoing representation should become untrue, incorrect
or misleading, the Company agrees to notify the Bank immediately in writing
thereof.
The Adviser represents and warrants that: (I) it has the legal right, power and
authority to execute, deliver and perform this Agreement and to carry out all of
the transactions contemplated hereby; (ii) it has obtained all necessary
authorizations; (iii) the execution, delivery and performance of this Agreement
and the carrying out of any of the transactions contemplated and performance of
this Agreement and the carrying out of any of the transactions contemplated
hereby will not be in conflict with, result in a breach of or constitute a
default under any agreement or other instrument to which the Adviser is a party
of which is otherwise known to the Adviser; (iv) it does not require the consent
of approval of any governmental agency or instrumentality, except any such
consents and approvals which the Adviser has obtained; (v) the execution and
delivery of this Agreement by the Adviser will not violate any law, regulation,
charter, by-law, order of any court of governmental agency or judgement
applicable to the Adviser; and (vi) all persons executing this Agreement on
behalf of the Adviser are duly authorized to do so.
In the event any of the foregoing representation should become untrue, incorrect
or misleading, the Adviser agrees to notify the Bank immediately in writing
thereof.
SECTION 10. The Bank represents and warrants that: (I) it has the legal right,
power and authority to execute, deliver and perform this Agreement and to carry
out all of the transactions contemplated hereby; (ii) it has obtained all
necessary authorizations; (iii) the execution, delivery and performance of this
Agreement and the carrying out of any of the transactions contemplated hereby
will not be in conflict with, result in a breach of or constitute a default
under any agreement or other instrument to which the Bank is a party or which is
otherwise known to the Bank; (iv) it does not require the consent or approval of
any governmental agency or instrumentality, except any such consents or
approvals which the Bank has obtained; (v) the execution and delivery of this
Agreement by the Bank will not violate any law, regulation, charter, by-law,
order of any court or governmental agency or judgement applicable to the Bank;
and (vi) all persons executing this Agreement on behalf of the Bank and carrying
out the transactions contemplated hereby on behalf of the Bank are duly
authorized to do so. In the event that any of the foregoing representations
should become untrue, incorrect or misleading, the Bank agrees to notify the
Company and the Adviser immediately in writing thereof.
SECTION 11. All cash and Securities held by the Bank hereunder shall be kept
with the care exercised as to the Bank's own similar property. The Bank may at
its option insure itself against loss from any cause but shall be under no
obligation to insure for the benefit of the Company.
SECTION 12. No liability of any kind shall by attached to or incurred by the
Custodian by reason of its custody of the Company's assets held by it from time
to time under this Agreement, or otherwise by reason of its position as
Custodian hereunder except only for its own negligence, bad faith, or willful
misconduct in the performance of its duties as specifically set forth in the
this Agreement. Without limiting the generality of the foregoing sentence, the
Custodian:
(a) may rely upon the advice of counsel for the Company; and for any
action taken or suffered in good faith based upon such advice or
statements the Custodian shall not be liable to anyone;
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(b) shall not be liable for anything done or suffered to be done in good
faith in accordance with any request or advice of, or based upon
information furnished by, the Company or its authorized officers or
agents;
(c) is authorized to accept a certificate of the Secretary or Assistant
Secretary of the Company, or Proper Instructions, to the effect that a
resolution in the form submitted has been duly adopted by its Board of
Directors or by the Shareholders, as conclusive evidence that such
resolution has been duly adopted and is in full force and effect; and
(d) may rely and shall be protected in acting upon any signature, written
(including telegraph or other mechanical) instructions, request,
letter of transmittal, certificate, opinion of counsel, statement,
instrument, report, notice, consent, order, or other paper or document
reasonably believed by it to b genuine and to have been signed,
forwarded or presented by the purchaser, Company or other proper party
or parties.
SECTION 13. The Company, its successors and assigns do hereby fully indemnify
and hold harmless the Custodian its successors and assigns, from any and all
loss, liability, claims, demand, actions, suits and expenses of any nature as
the same may arise from the failure of the Company to comply with any law, rule,
regulation, or order of the United States, any state or any other jurisdiction,
governmental authority, body, or board relating to the sale, registration,
qualification of units of beneficial interest in the Company, or from the
failure of the Company to perform any duty or obligation under this Agreement.
Upon written request of the Custodian, the Company shall assume the entire
defense of any claim subject to the foregoing indemnity, or the joint defense
with the Custodian of such claim, as the Custodian shall request. The
indemnities and defense provisions of this Section 13 shall indefinitely survive
termination of this Agreement.
SECTION 14. This Agreement may be amended from time to time without notice to or
approval of the Shareholders by a supplemental agreement executed by the
Company, the Adviser and the Bank amending and supplementing this Agreement in
the manner mutually agreed.
SECTION 15. Either the Company or the Custodian may give one-hundred and twenty
days' (120) written notice to the other of the termination of this Agreement,
such termination to take effect at the time specified in the notice. In case
such notice of termination is given either by the Company or by the Custodian,
the Directors of the Company shall, by resolution duly adopted, promptly appoint
a successor Custodian, (the "Successor Custodian") which Successor Custodian
shall be a bank or a Trust company in good standing, with legal capacity to
accept custody of the cash and Securities of a mutual fund. Upon receipt of
Proper Instructions, the Custodian shall deliver such cash and Securities as it
may then be holding hereunder directly as above provided, the Custodian then
acting shall continue to act as Custodian under this Agreement.
Every Successor Custodian appointed hereunder shall execute and deliver an
appropriate written acceptance of its appointment and shall thereupon become
vested with the rights, powers, obligations and custody of its predecessor
Custodian. The Custodian ceasing to act shall nevertheless, upon request of the
Company and the Successor Custodian and upon payment of its charges and
disbursements, execute and instrument in form approved by its counsel
transferring to the Successor Custodian all the predecessor Custodian's rights,
duties, obligations and custody.
Subject to the provisions of Section 21 hereof, in case the Custodian shall
consolidate with or merge into any other corporation, the corporation remaining
after or resulting from such consolidation or merger shall ipso facto without
the execution or filing of any papers or other documents, succeed to and be
substituted for the Custodian with like effect as though originally named as
such, provided, however, in every case that said Successor corporation maintains
the qualifications set out in Section 17(f) of the Investment Company Act of
1940, as amended.
SECTION 16. This Agreement shall take effect when assets of the Company are
first delivered to the Custodian.
SECTION 17. This Agreement may be executed in two or more counterparts, each of
which when so executed shall be deemed to be an original, but such counterparts
shall together constitute but one and the same instrument.
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SECTION 18. A copy of the Articles of Incorporation of the Company is on file
with the Secretary of State of Maryland, and notice is hereby given that this
instrument is executed on behalf of the Company only, and that the obligations
of this instrument are not binding upon any of the Directors, officers or
Shareholders of the Company individually, but binding only upon the assets and
property of the Company. No Fund of the Company shall be liable for the
obligations of any other Fund of the Company.
SECTION 19. The Custodian shall create and maintain all records relating to its
activities and obligations under this Agreement in such manner as will meet the
obligations of the Company under the Investment Company Act of 1940, as amended,
with particular attention to Section 31 thereof and Rules 31a-1 and 31a-2
thereunder, applicable Federal and state tax laws and any other law or
administrative rules or procedures which may be applicable to the Company.
Subject to security requirements of the Custodian applicable to its own
employees having access to similar records within the Custodian, the books and
records of the Custodian pertaining to this Agreement shall be open to
inspection and audit at any reasonable times by officers of, attorneys for, and
auditors employed by, the Company.
SECTION 20. Any sub-custodian appointed hereunder shall be qualified under
Section 17(f) of the 1940 act and will perform its duties in accordance with the
requirements of this Agreement.
SECTION 21. Nothing contained in this Agreement is intended to or shall require
the Custodian in any capacity hereunder to perform any functions or duties on
any holiday or other day of special observance on which the Custodian is closed.
Functions or duties normally scheduled to be performed on such days shall be
performed on, and as of, the next business day the Custodian is open.
SECTION 22. This Agreement shall extent to and shall be binding upon the parties
hereto and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable by the Company without the written consent of
the Custodian, or by the Custodian without the written consent of the Company,
authorized or approved by a resolution of its Board of Directors.
SECTION 23. All communications (other that Proper Instructions which are to be
furnished hereunder to either party, or under any amendment hereto, shall be
sent by mail to the address listed below, provided that in the event that the
Bank, in its sole discretion, shall determine that an emergency exists, the Bank
may use such other means of communication as the Bank deems advisable.
To the Company: Optimal Funds, Inc.
213 G VT Route 15
Jericho, VT 05465
To the Adviser: Leveraged Index Management Company
213 G VT Route 15
Jericho, VT 05465
To the Bank: First Union National Bank N.A.
530 Walnut St.
Philadelphia, PA 19101-7618
SECTION 24. This Agreement, and any amendments hereto, shall be governed,
construed, and interpreted in accordance with the laws of The Commonwealth of
Pennsylvania applicable to agreements made and to be performed entirely within
such Commonwealth.
SECTION 25. Fees and expenses
As compensation for its services under this Agreement, the Custodian may retain
those fees which are specified in its published or otherwise generally
applicable fee schedule in effect at the time its services are being rendered.
The Company recognizes that this schedule might be changed from time to time
with prior notice to the Company.
Mutual Fund Custody Administrative Fees
1.0 basis points on the first $2.5 billion
.75 basis points on the next $2.5 billion
.50 basis points on the next $5.0 billion
.40 basis points on the remainder
Minimum Annual Fee: $3,500
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Transaction Fees
$ 4.00 per trade and maturity through Depository Trust Company via DepLink
$10.00 per trade and maturity through Depository Trust Company via non DepLink
$10.00 per trade and maturity clearing book entry through Federal Reserve
$30.00 per transaction for GIC contracts/Physical Securities
$10.00 per trade and maturity clearing through Participants Trust Company
$ 4.00 paydowns on mortgage-backed securities
$ 5.50 Fed wire charge on Repo collateral in/out
$ 5.50/$7.50 other wired transfers in/out
$ 5.50 dividend reinvestment
$ 2.50 Fed charge for sale/return of collateral
$ 8.00 future contracts
$15.00 options
IN WITNESS WHEREOF, The Company, the Adviser and the Custodian have caused this
Agreement to be signed by their respective officers as of the day and year first
above written.
OPTIMAL FUNDS, INC. LEVERAGED INDEX FIRST UNION
MANAGEMENT COMPANY NATIONAL BANK
- ----------------------- ---------------------- -----------------
By: Mitchell M. Maynard By: Mitchell M. Maynard By: Paul T. Cahill
President President Vice President
EXHIBIT 23(H)(1)
OPERATING SERVICES AGREEMENT BETWEEN REGISTRANT AND
LEVERAGED INDEX MANAGEMENT COMPANY
Operating Services Agreement
Optimal Funds, Inc.
This Agreement is made and entered into as of the 1st day of May, 1999, by
and between Optimal Funds, Inc., a Maryland corporation (the "Fund"), and
Leveraged Index Management Company, a Vermont corporation (hereinafter referred
to as "Manager").
WHEREAS, the Fund is a diversified, open-end management investment company,
registered under the Investment Company Act of 1940, as amended (the "Act"), and
authorized to issue shares representing interests in The Optimal Fund (the
"Portfolio"); and
WHEREAS, Manager is registered as an investment advisor under the
Investment Advisors Act of 1940, and engages in the business of asset management
and the provision of certain other administrative and record keeping services in
connection therewith; and
WHEREAS, the Fund wishes to engage Manager, to provide, or arrange for the
provision of, certain operational services which are necessary for the
day-to-day operations of the Portfolio in the manner and on the terms and
conditions hereinafter set forth, and Manager wishes to accept such engagement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the Fund and Manager agree as follows:
1. Obligations of Manager
(a) Services. The Fund hereby retains Manager to provide, or, upon receipt of
written approval of the Fund arrange for other companies to provide, the
following services to the Portfolio in the manner and to the extent that
such services are reasonably necessary for the operation of the Portfolio
(collectively, the "Services"):
(1) accounting services and functions, including costs and expenses of any
independent public accountants;
(2) non-litigation related legal and compliance services, including the
expenses of maintaining registration and qualification of the Fund and
the Portfolio under federal, state and any other applicable laws and
regulations;
(3) dividend disbursing agent, dividend reinvestment agent, transfer
agent, and registrar services and functions (including answering
inquiries related to shareholder Portfolio accounts);
(4) custodian and depository services and functions;
(5) distribution, marketing, and/or underwriting services;
(6) independent pricing services;
(7) preparation of reports describing the operations of the Portfolio,
including the costs of providing such reports to broker-dealers,
financial institutions and other organizations which render services
and assistance in connection with the distribution of shares of the
Portfolio;
(8) sub-accounting and recordkeeping services and functions (other than
those books and records required to be maintained by Manager under the
Investment Advisory Agreement between the Fund and Manager dated
August 15, 1998), including maintenance of shareholder records and
shareholder information concerning the status of their Portfolio
accounts by investment advisors, broker-dealers, financial
institutions, and other organizations on behalf of Manager;
(9) shareholder and board of directors communication services, including
the costs of preparing, printing and distributing notices of
shareholders' meetings, proxy statements, prospectuses, statements of
additional information, Portfolio reports, and other communications to
the Fund's Portfolio shareholders, as well as all expenses of
shareholders' and board of directors' meetings, including the
compensation and reimbursable expenses of the directors of the Fund;
(10) other day-to-day administrative services, including the costs of
designing, printing, and issuing certificates representing shares of
the Portfolio, and premiums for the fidelity bond maintained by the
Fund pursuant to Section 17(g) of the Act and rules promulgated
thereunder (except for such premiums as may be allocated to third
parties, as insureds thereunder).
(b) Exclusions from Service. Notwithstanding the provisions of Paragraph 1(a)
above, the Services shall not include and Manager will not be responsible
for any of the following:
(1) all brokers' commissions, issue and transfer taxes, and other costs
chargeable to the Fund or the Portfolio in connection with securities
transactions to which the Fund or the Portfolio is a party or in
connection with securities owned by the Fund or the Portfolio;
(2) the interest on indebtedness, if any, incurred by the Fund or the
Portfolio;
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(3) the taxes, including franchise, income, issue, transfer, business
license, and other corporate fees payable by the Fund or the Portfolio
to federal, state, county, city, or other governmental agents;
(4) the expenses, including fees and disbursements of counsel, in
connection with litigation by or against the Fund or the Portfolio;
and
(5) any other extraordinary expense of the Fund or Portfolio.
(c) Books and Records. All books and records prepared and maintained by
Manager for the Fund under this Agreement shall be the property of the
Fund and, upon request therefor, Manager shall surrender to the Fund
such of the books and records so requested.
(d) Staff and Facilities. Manager assumes and shall pay for maintaining
the staff, personnel, space, equipment and facilities necessary to
perform its obligations under this Agreement.
2. Obligations of the Fund
(a) Fee. The Fund will pay to Manager on the last day of each month a fee at an
annual rate equal to 0.95% of average net asset of the Portfolio, such fee
to be computed daily based upon the net asset value of the Portfolio as
determined by a valuation made in accordance with the Fund's procedure for
calculating Portfolio net asset value as described in the Fund's Prospectus
and/or Statement of Additional Information. During any period when the
determination of a Portfolio's net asset value is suspended by the
directors of the Fund, the net asset value of a share of that Portfolio as
of the last business day prior to such suspension shall, for the purpose of
this Paragraph 2(a), be deemed to be the net asset value at the close of
each succeeding business day until it is again determined.
(b) Information. The Fund will, from time to time, furnish or otherwise make
available to Manager such information relating to the business and affairs
of the Portfolio as Manager may reasonably require in order to discharge
its duties and obligations hereunder.
3. Term.
This Agreement shall remain in effect until no later than April 30, 2001, and
from year to year thereafter provided such continuance is approved at least
annually by (1) the vote of a majority of the Board of Directors of the Fund or
(2) a vote of a "majority" (as that term is defined in the Investment Company
Act of 1940) of the Fund's outstanding securities, provided that in either event
the continuance is also approved by the vote of a majority of the directors of
the Fund who are not parties to this Agreement or "interested persons" (as
defined in the Act) of any such party, which vote must be cast in person at a
meeting called for the purpose of voting on such approval; provided, however,
that;
(a) the Fund, at any time and without the payment of any penalty may
terminate this Agreement upon 120 days written notice to Manager;
(b) the Agreement shall immediately terminate in the event of its
assignment (within the meaning of the Act and the Rules thereunder);
and
(c) Manager may terminate this Agreement without payment of penalty on 120
days written notice to the Fund.
4. Notices.
Except as otherwise provided in this Agreement, any notice or other
communication required by or permitted to be given in connection with this
Agreement will be in writing and will be delivered in person or sent by first
class mail, postage prepaid or by prepaid overnight delivery service to the
respective parties as follows:
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If to the Fund: If to the Manager:
Optimal Funds, Inc. Leveraged Index Management Company
213 G VT Route 15 213 G VT Route 15
Jericho, VT 05465 Jericho, VT 05465
Attn: Mitchell M. Maynard Attn: Mitchell M. Maynard
President President
5. Miscellaneous
(a) Performance Review. Manager will permit representatives of the Fund,
including the Fund's independent auditors, to have reasonable access
to the personnel and records of Manager in order to enable such
representatives to monitor the quality of services being provided and
the level of fees due Manager pursuant to this Agreement. In addition,
Manager shall promptly deliver to the board of directors of the Fund
such information as may reasonably be requested from time to time to
permit the board of directors to make an informed determination
regarding continuation of this Agreement and the payments contemplated
to be made hereunder.
(b) Choice of Law. This Agreement shall be construed in accordance with
the laws of the State of Maryland and the applicable provisions of the
Act. To the extent the applicable law of the State of Maryland or any
of the provisions herein conflict with the applicable provisions of
the Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written.
Optimal Funds, Inc. Leveraged Index Management Company
- ------------------------------ ------------------------------
By: Mitchell M. Maynard By: Mitchell M. Maynard
President President
ATTEST: ATTEST:
By: __________________________ By: __________________________
Secretary Secretary
EXHIBIT 23(H)(2)
INVESTMENT COMPANY SERVICES AGREEMENT BETWEEN REGISTRANT,
LEVERAGED INDEX MANAGEMENT COMPANY, AND DECLARATION SERVICE COMPANY
INVESTMENT COMPANY SERVICES AGREEMENT
OPTIMAL FUNDS, INC.
THIS AGREEMENT, dated as of the 1st day of May, 1999, made by and between
Optimal Funds, Inc. ("Fund"), a corporation operating as an open-end, management
investment company registered under the Investment Company Act of 1940, as
amended (the "Act"), duly organized and existing under the laws of the State of
Maryland, Leveraged Index Management Company ("Adviser"), a corporation duly
organized under the laws of Vermont, and Declaration Service Company
("Declaration"), a corporation duly organized under the laws of the Commonwealth
of Pennsylvania (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Fund is authorized by its Articles of Incorporation and By-
Laws to issue separate series of shares representing interests in separate
investment portfolios which are identified on Schedule "C" attached hereto and
which Schedule "C" may be amended from time to time by mutual agreement of the
Fund and Declaration; and
WHEREAS, the Fund and the Adviser have entered into an "Operating Services
Agreement" dated as of April 17, 1999, authorizing the Adviser to provide
certain investment company services to the Fund, and which further authorizes
the Adviser to enter into this Investment Company Services Agreement (hereafter
"Agreement") on behalf of the Fund; and
WHEREAS, the Parties desire to enter into an agreement whereby Declaration
will provide the services to the Fund as specified herein and set forth in
particular in Schedule "A" which is attached hereto and made a part hereof.
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, and in exchange for good and valuable consideration, the
sufficiency and receipt of which are hereby acknowledged, the Parties hereto,
intending to be legally bound, do hereby agree as follows:
GENERAL PROVISIONS
Section 1. Appointment.
The Adviser hereby appoints Declaration as servicing agent to the Fund and
Declaration hereby accepts such appointment. In order that Declaration may
perform its duties under the terms of this Agreement, the Board of Directors of
the Fund shall direct the officers, investment adviser, legal counsel,
independent accountants and custodian of the Fund to cooperate fully with
Declaration and, upon request of Declaration, to provide such information,
documents and advice relating to the Fund which Declaration requires to execute
its responsibilities hereunder. In connection with its duties, Declaration shall
be entitled to rely, and will be held harmless by the Fund when acting in
reasonable reliance, upon any instruction, advice or document relating to the
Fund as provided to Declaration by any of the aforementioned persons on behalf
of the Fund. All fees charged by any such persons acting on behalf of the Fund
will be deemed an expense of the Fund.
Any services performed by Declaration under this Agreement will conform to the
requirements of:
(a) the provisions of the Act and the Securities Act of 1933, as amended, and
any rules or regulations in force thereunder;
(b) any other applicable provision of state and federal law;
(c) the provisions of the Articles of Incorporation and the by-laws of the
Fund, as amended from time to time and delivered to Declaration;
(d) any policies and determinations of the Board of Directors of the Fund which
are communicated to Declaration; and
(e) the policies of the Fund as reflected in the Fund's registration statement
as filed with the U.S. Securities and Exchange Commission.
Nothing in this Agreement will prevent Declaration or any officer thereof from
providing the same or comparable services for or with any other person, firm or
corporation. While the services supplied to the Fund may be different than those
supplied to other persons, firms or corporations, Declaration will provide the
Fund equitable treatment in supplying services. The Fund recognizes that it will
not receive preferential treatment from Declaration as compared with the
treatment provided to other Declaration clients.
Section 2. Duties and Obligations of Declaration.
Subject to the provisions of this Agreement, Declaration will provide to the
Fund the specific services as set forth in Schedule "A" attached hereto.
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Section 3. Definitions. For purposes of this Agreement:
"Certificate" will mean any notice, instruction, or other instrument in
writing, authorized or required by this Agreement. To be effective, such
Certificate shall be given to and received by the custodian and shall be
signed on behalf of the Fund by any two of its designated officers, and the
term Certificate shall also include instructions communicated to the
custodian by Declaration.
"Custodian" will refer to that agent which provides safekeeping of the
assets of the Fund.
"Instructions" will mean communications containing instructions transmitted
by electronic or telecommunications media including, but not limited to,
Industry Standardization for Institutional Trade Communications,
computer-to-computer interface, dedicated transmission line, facsimile
transmission (which may be signed by an officer or unsigned) and tested
telex.
"Oral Instruction" will mean an authorization, instruction, approval, item
or set of data, or information of any kind transmitted to Declaration in
person or by telephone, telegram, telecopy or other mechanical or
documentary means lacking original signature, by a person or persons
reasonably identified to Declaration to be a person or persons so
authorized by a resolution of the Board of Directors of the Fund to give
Oral Instructions to Declaration on behalf of the Fund.
"Shareholders" will mean the registered owners of the shares of the Fund in
accordance with the share registry records maintained by Declaration for
the Fund.
"Shares" will mean the issued and outstanding shares of the Fund.
"Signature Guarantee" will mean the guarantee of signatures by an "eligible
guarantor institution" as defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Eligible guarantor
institutions include banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations. Broker-dealers guaranteeing signatures must be
members of a clearing corporation or maintain net capital of at least
$100,000. Signature guarantees will be accepted from any eligible guarantor
institution which participates in a signature guarantee program.
"Written Instruction" will mean an authorization, instruction, approval,
item or set of data or information of any kind transmitted to Declaration
in an original writing containing an original signature or a copy of such
document transmitted by telecopy including transmission of such signature
reasonably identified to Declaration to be the signature of a person or
persons so authorized by a resolution of the Board of Directors of the
Fund, or so identified by the Fund to give Written Instructions to
Declaration on behalf of the Fund.
Concerning Oral and Written Instructions For all purposes under this
Agreement, Declaration is authorized to act upon receipt of the first of
any Written or Oral Instruction it receives from the Fund or its agents. In
cases where the first instruction is an Oral Instruction that is not in the
form of a document or written record, a confirmatory Written Instruction or
Oral Instruction in the form of a document or written record shall be
delivered. In cases where Declaration receives an Instruction, whether
Written or Oral, to enter a portfolio transaction onto the Fund's records,
the Fund shall cause the broker/dealer executing such transaction to send a
written confirmation to the Custodian.
Declaration shall be entitled to rely on the first Instruction received. For any
act or omission undertaken by Declaration in compliance therewith, it shall be
free of liability and fully indemnified and held harmless by the Fund, provided
however, that in the event a Written or Oral Instruction received by Declaration
is countermanded by a subsequent Written or Oral Instruction received prior to
acting upon such countermanded Instruction, Declaration shall act upon such
subsequent Written or Oral Instruction. The sole obligation of Declaration with
respect to any follow-up or confirmatory Written Instruction or Oral Instruction
in documentary or written form shall be to make reasonable efforts to detect any
such discrepancy between the original Instruction and such confirmation and to
report such discrepancy to the Fund. The Fund shall be responsible and bear the
expense of its taking any action, including any reprocessing, necessary to
correct any discrepancy or error. To the extent such action requires Declaration
to act, the Fund shall give Declaration specific Written Instruction as to the
action required. The Fund will file with Declaration a certified copy of each
resolution of the Fund's Board of Directors authorizing execution of Written
Instructions or the transmittal of Oral Instructions as provided above.
2
<PAGE>
Section 4. Indemnification.
(a) Declaration, its directors, officers, employees, shareholders, and agents
will be liable for any loss suffered by the Fund resulting from the willful
misfeasance, bad faith, gross negligence or reckless disregard on the part
of Declaration in the performance of its obligations and duties under this
Agreement.
(b) Any director, officer, employee, shareholder or agent of Declaration, who
may be or become an officer, director, employee or agent of the Fund, will
be deemed, when rendering services to the Fund, or acting on any business
of the Fund (other than services or business in connection with
Declaration' duties hereunder), to be rendering such services to or acting
solely for the Fund and not as a director, officer, employee, shareholder
or agent of, or under the control or direction of Declaration even though
such person may be receiving compensation from Declaration.
(c) The Fund agrees to indemnify and hold Declaration harmless, together with
its directors, officers, employees, shareholders and agents from and
against any and all claims, demands, expenses and liabilities (whether with
or without basis in fact or law) of any and every nature which Declaration
may sustain or incur or which may be asserted against Declaration by any
person by reason of, or as a result of:
(i) any action taken or omitted to be taken by Declaration except claims,
demands, expenses and liabilities arising from willful misfeasance,
bad faith, negligence or reckless disregard on the part of
Declaration in the performance of its obligations and duties under
this Agreement; or
(ii) any action taken or omitted to be taken by Declaration in reliance
upon any Certificate, instrument, order or stock certificate or other
document reasonably believed by Declaration to be genuine and signed,
countersigned or executed by any duly authorized person, upon the
Oral Instructions or Written Instructions of an authorized person of
the Fund, or upon the written opinion of legal counsel for the Fund
or Declaration; or
(iii) the offer or sale of shares of the Fund to any person, natural or
otherwise, which is in violation of any state or federal law.
If a claim is made against Declaration as to which Declaration may seek
indemnity under this Section, Declaration will notify the Fund promptly
after receipt of any written assertion of such claim threatening to
institute an action or proceeding with respect thereto and will notify the
Fund promptly of any action commenced against Declaration within ten (10)
days after Declaration has been served with a summons or other legal
process. Failure to notify the Fund will not, however, relieve the Fund
from any liability which it may have on account of the indemnity under this
Section so long as the Fund has not been prejudiced in any material respect
by such failure.
The Fund and Declaration will cooperate in the control of the defense of
any action, suit or proceeding in which Declaration is involved and for
which indemnity is being provided by the Fund to Declaration. The Fund may
negotiate the settlement of any action, suit or proceeding subject to
Declaration's approval, which will not be unreasonably withheld.
Declaration reserves the right, but not the obligation, to participate in
the defense or settlement of a claim, action or proceeding with its own
counsel. Costs or expenses incurred by Declaration in connection with, or
as a result of such participation, will be borne solely by the Fund if:
(i) Declaration has received an opinion of counsel from counsel to the
Fund stating that the use of counsel to the Fund by Declaration would
present an impermissible conflict of interest;
(ii) the defendants in, or targets of, any such action or proceeding
include both Declaration and the Fund, and legal counsel to
Declaration has reasonably concluded that there are legal defenses
available to it which are different from or additional to those
available to the Fund or which may be adverse to or inconsistent with
defenses available to the Fund (in which case the Fund will not have
the right to direct the defense of such action on behalf of
Declaration); or
(iii) the Fund authorizes Declaration to employ separate counsel at the
expense of the Fund.
(d) The terms of this Section will survive the termination of this Agreement.
Section 5. Representations and Warranties.
(a) Declaration represents and warrants that:
(i) it is a corporation duly organized and existing and in good standing
under the laws of Pennsylvania;
(ii) it is empowered under applicable laws and by its Certificate of
Incorporation and by-laws to enter into and perform this Agreement;
(iii) all requisite corporate proceedings have been taken to authorize
Declaration to enter into and perform this Agreement;
(iv) it has and will continue to have access to the facilities, personnel
and equipment required to fully perform its duties and obligations
hereunder;
(v) no legal or administrative proceedings have been instituted or
threatened which would impair Declaration's ability to perform its
duties and obligations under this Agreement;
(vi) its entrance into this Agreement shall not cause a material breach or
be in material conflict with any other agreement or obligation of
Declaration or any law or regulation applicable to it;
(vii) it is registered as a transfer agent under Section 17A(c)(2) of the
Exchange Act;
(viii)this Agreement has been duly authorized by Declaration and, when
executed and delivered, will constitute valid, legal and binding
obligation of Declaration, enforceable in accordance with its terms.
(b) The Fund represents and warrants that:
(i) it is a corporation duly organized and existing and in good standing
under the laws of the State of Maryland;
(ii) it is empowered under applicable laws and by its Articles of
Incorporation and by-laws to enter into and perform this Agreement;
(iii) all requisite proceedings have been taken to authorize the Fund to
enter into and perform this Agreement;
(iv) no legal or administrative proceedings have been instituted or
threatened which would impair the Fund's ability to perform its
duties and obligations under this Agreement;
(v) the Fund's entrance into this Agreement shall not cause a material
breach or be in material conflict with any other agreement or
obligations of the Fund, or any law or regulation applicable to
either;
(vi) the Shares are properly registered or otherwise authorized for
issuance and sale;
(vii) this Agreement has been duly authorized by the Fund and, when
executed and delivered, will constitute valid, legal and binding
obligation of the Fund, enforceable in accordance with its terms.
3
<PAGE>
(c) The Adviser represents and warrants that:
(i) it is a corporation duly organized and existing and in good standing
under the laws of the State of Vermont;
(ii) it is empowered under applicable laws and by its Articles of
Incorporation and by-laws to enter into and perform this Agreement;
(iii) all requisite proceedings have been taken to authorize the Adviser to
enter into and perform this Agreement;
(iv) no legal or administrative proceedings have been instituted or
threatened which would impair the Adviser's ability to perform its
duties and obligations under this Agreement;
(v) the Adviser's entrance into this Agreement shall not cause a material
breach or be in material conflict with any other agreement or
obligations of the Adviser, or any law or regulation applicable to
either;
(vi) this Agreement has been duly authorized by the Adviser and, when
executed and delivered, will constitute valid, legal and binding
obligation of the Adviser, enforceable in accordance with its terms.
(d) Delivery of Documents
The Fund will furnish or cause to be furnished to Declaration the following
documents;
(i) current Prospectus and Statement of Additional Information;
(ii) most recent Annual Report;
(iii) most recent Semi-Annual Report for registered investment companies on
Form N-SAR;
(iv) certified copies of resolutions of the Fund's Board of Directors
authorizing the execution of Written Instructions or the transmittal
of Oral Instructions and those persons authorized to give those
Instructions.
(e) Record Keeping and Other Information
Declaration will create and maintain all records required of it pursuant to its
duties hereunder and as set forth in Schedule "A" in accordance with all
applicable laws, rules and regulations, including records required by Section
31(a) of the Act. All such records will be the property of the Fund and will be
available during regular business hours for inspection, copying and use by the
Fund. Where applicable, such records will be maintained by Declaration for the
periods and in the places required by Rule 31a-2 under the Act. Upon termination
of this Agreement, Declaration will deliver all such records to the Fund or such
person as the Fund may designate.
In case of any request or demand for the inspection of the Share records of the
Fund, Declaration shall notify the Fund and secure instructions as to permitting
or refusing such inspection. Declaration may, however, exhibit such records to
any person in any case where it is advised by its counsel that it may be held
liable for failure to do so.
Section 6. Compensation.
The Adviser agrees to pay Declaration compensation for its services, and to
reimburse it for expenses at the rates, times, manner and amounts as set forth
in Schedule "B" attached hereto and incorporated herein by reference and as will
be set forth in any amendments to such Schedule "B" agreed upon in writing by
the Parties.
Upon receipt of an invoice therefor, the Adviser agrees to pay such fees within
ten (10) business days. In addition, the Adviser agrees to reimburse Declaration
for any out-of-pocket expenses paid by Declaration on behalf of the Fund within
ten (10) calendar days of the Fund's receipt of an invoice therefor. In the
event Adviser is unable to pay such invoices for services or out- of- pocket
expenses, for any reason, the Fund agrees to pay Declaration the full amount(s)
due within ten (10) additional business days.
4
<PAGE>
For the purpose of determining fees payable to Declaration, the value of the
Fund's net assets will be computed at the times and in the manner specified in
the Fund's Prospectus and Statement of Additional Information then in effect.
During the term of this Agreement, should the Fund seek services or functions in
addition to those outlined below or in Schedule "A" attached hereto, a written
amendment to this Agreement specifying the additional services and corresponding
compensation will be executed by the Parties.
In the event that Adviser is more than thirty (30) days delinquent in its
payments of monthly billings in connection with this Agreement (with the
exception of specific amounts which may be contested in good faith by the Fund),
this Agreement may be terminated upon thirty (30) days' written notice by
Declaration. The Adviser must notify Declaration in writing of any contested
amounts within ten (10) days of receipt of a billing for such amounts. Disputed
amounts are not due and payable while they are being disputed.
Section 7. Days of Operation.
Nothing contained in this Agreement is intended to or will require Declaration,
in any capacity hereunder, to perform any functions or duties on any holiday,
day of special observance or any other day on which the New York Stock Exchange
("NYSE") is closed. Functions or duties normally scheduled to be performed on
such days will be performed on and as of the next succeeding business day on
which the NYSE is open. Notwithstanding the foregoing, Declaration will compute
the net asset value of the Fund on each day required pursuant to Rule 22c-1
promulgated under the Act.
Section 8. Acts of God, etc.
Declaration will not be liable or responsible for delays or errors caused by
acts of God or by reason of circumstances beyond its control including, acts of
civil or military authority, national emergencies, labor difficulties,
mechanical breakdown, insurrection, war, riots, or failure or unavailability of
transportation, communication or power supply, fire, flood or other catastrophe.
In the event of equipment failures beyond Declaration's control, Declaration
will, at no additional expense to the Fund, take reasonable steps to minimize
service interruptions but will have no liability with respect thereto. The
foregoing obligation will not extend to computer terminals located outside of
premises maintained by Declaration. Declaration has entered into and maintains
in effect agreements making reasonable provision for emergency use of electronic
data processing equipment to the extent appropriate equipment is available.
Section 9. Inspection and Ownership of Records.
In the event of a request or demand for the inspection of the records of the
Fund, Declaration will use its best efforts to notify the Fund and to secure
instructions as to permitting or refusing such inspection. Declaration may,
however, make such records available for inspection to any person in any case
where it is advised in writing by its counsel that it may be held liable for
failure to do so after notice to the Fund.
Declaration recognizes that the records it maintains for the Fund are the
property of the Fund and will be surrendered to the Fund upon written notice to
Declaration as outlined under Section 10(c) below. The Fund is responsible for
the payment in advance of any fees owed to Declaration. Declaration agrees to
maintain the records and all other information of the Fund in a confidential
manner and will not use such information for any purpose other than the
performance of Declaration' duties under this Agreement.
Section 10. Duration and Termination.
(a) The initial term of this Agreement will be for the period of two (2) years,
commencing on the date hereinabove first written (the "Effective Date") and
will continue thereafter subject to termination by either Party as set
forth in subsection (c) below.
(b) The fee schedules set forth in Schedule "B" attached hereto will be fixed
for the initial term commencing on the Effective Date of this Agreement and
will continue thereafter subject to their review and any adjustment.
5
<PAGE>
(c) After the initial term of this Agreement, a Party may give written notice
to the other (the day on which the notice is received by the Party against
which the notice is made shall be the "Notice Date") of a date on which
this Agreement shall be terminated ("Termination Date"). The Termination
Date shall be set on a day not less than ninety (90) days after the Notice
Date. The period of time between the Notice Date and the Termination Date
is hereby identified as the "Notice Period". Any time up to, but not later
than fifteen (15) days prior to the Termination Date, the Adviser or the
Fund will pay to Declaration such compensation as may be due as of the
Termination Date and will likewise reimburse Declaration for any
out-of-pocket expenses and disbursements reasonably incurred or expected to
be incurred by Declaration up to and including the Termination Date.
(d) In connection with the termination of this Agreement, if a successor to any
of Declaration' duties or responsibilities under this Agreement is
designated by the Fund by written notice to Declaration, Declaration will
promptly, on the Termination Date and upon receipt by Declaration of any
payments owed to it as set forth in Section 10(c) above, transfer to the
successor, at the Adviser's expense, all records which belong to the Fund
and will provide appropriate, reasonable and professional cooperation in
transferring such records to the named successor.
(e) Should the Fund desire to move any of the services outlined in this
Agreement to a successor service provider prior to the Termination Date,
Declaration shall make a good faith effort to facilitate the conversion on
such prior date, however, there can be no guarantee that Declaration will
be able to facilitate a conversion of services prior to the end of the
Notice Period. Should services be converted to a successor service provider
prior to the end of the Notice Period, or if the Fund is liquidated or its
assets merged or purchased or the like with another entity, payment of fees
to Declaration shall be accelerated to a date prior to the conversion or
termination of services and calculated as if the services had remained at
Declaration until the expiration of the Notice Period and shall be
calculated at the asset levels on the Notice Date.
(f) Notwithstanding any other provisions of Paragraph 10, in the event the Fund
deregisters as an Investment Company with the United States Securities and
Exchange Commission ("SEC"), this Agreement may be terminated by the Fund
upon ninety (90) days written notice to Declaration. The Termination Date
shall be ninety (90) days after the receipt of such notice by Declaration.
Any time up to, but not later than fifteen (15) days prior to the
Termination Date, the Adviser or the Fund will pay to Declaration such
compensation as may be due as of the Termination Date and will likewise
reimburse Declaration for any out- of- pocket expenses and disbursements
reasonably incurred or expected to be incurred by Declaration up to and
including the Termination Date.
(g) Notwithstanding the foregoing, this Agreement may be terminated at any time
by either Party in the event of a material breach by the other Party
involving negligence, willful misfeasance, bad faith or a reckless
disregard of its obligations and duties under this Agreement provided that
such breach shall have remained unremedied for sixty (60) days or more
after receipt of written specification thereof.
Section 11. Rights of Ownership.
All computer programs and procedures developed to perform services required to
be provided by Declaration under this Agreement are the property of Declaration.
All records and other data except such computer programs and procedures are the
exclusive property of the Fund and all such other records and data will be
furnished to the Fund in appropriate form as soon as practicable after
termination of this Agreement for any reason.
Section 12. Amendments to Documents.
The Fund will furnish Declaration written copies of any amendments to, or
changes in, the Articles of Incorporation, by-laws, Prospectus or Statement of
Additional Information in a reasonable time prior to such amendments or changes
becoming effective. In addition, the Fund agrees that no amendments will be made
to the Prospectus or Statement of Additional Information of the Fund which might
have the effect of changing the procedures employed by Declaration in providing
the services agreed to hereunder or which amendment might affect the duties of
Declaration hereunder unless the Fund first obtains Declaration' approval of
such amendments or changes.
6
<PAGE>
Section 13. Confidentiality.
Both Parties hereto agree that any non-public information obtained hereunder
concerning the other Party is confidential and may not be disclosed to any other
person without the consent of the other Party, except as may be required by
applicable law or at the request of the U.S. Securities and Exchange Commission
or other governmental agency. Declaration agrees that it will not use any
non-public information for any purpose other than performance of its duties or
obligations hereunder. The obligations of the Parties under this Section will
survive the termination of this Agreement. The Parties further agree that a
breach of this Section would irreparably damage the other Party and accordingly
agree that each of them is entitled, without bond or other security, to an
injunction or injunctions to prevent breaches of this provision.
Section 14. Notices.
Except as otherwise provided in this Agreement, any notice or other
communication required by or permitted to be given in connection with this
Agreement will be in writing and will be delivered in person or sent by first
class mail, postage prepaid or by prepaid overnight delivery service to the
respective parties as follows:
If to the Fund: If to the Adviser: If to the Distributor:
Optimal Funds, Inc. LIMCO Declaration Distributors, Inc.
213 G VT Route 15 213 G VT Route 15 555 North Lane, Suite 6160
Jericho, VT 05465 Jericho, VT 05465 Conshohocken, PA 19428
Attn: Mitchell M. Maynard Mitchell M. Maynard Attn: Terence P. Smith
President President Chief Executive Offficer
Section 15. Amendment.
No provision of this Agreement may be amended or modified in any manner except
by a written agreement properly authorized and executed by the Parties. This
Agreement may be amended from time to time by supplemental agreement executed by
the Parties and the compensation stated in Schedule "B" attached hereto may be
adjusted accordingly as mutually agreed upon.
Section 16. Authorization.
The Parties represent and warrant to each other that the execution and delivery
of this Agreement by the undersigned officer of each Party has been duly and
validly authorized; and when duly executed, this Agreement will constitute a
valid and legally binding enforceable obligation of each Party.
Section 17. Counterparts.
This Agreement may be executed in two or more counterparts, each of which when
so executed will be deemed to be an original, but such counterparts will
together constitute but one and the same instrument.
Section 18. Assignment.
This Agreement will extend to and be binding upon the Parties hereto and their
respective successors and assigns; provided, however, that this Agreement will
not be assignable by any of the parties without the written consent of the other
parties, which consents shall be authorized or approved by a resolution by its
respective Boards of Directors.
Section 19. Governing Law.
This Agreement will be governed by the laws of the State of Pennsylvania.
Section 20. Severability.
If any part, term or provision of this Agreement is held by any court to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions will be considered severable and not be affected and the rights and
obligations of the parties will be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid, provided that the basic agreement is not thereby materially impaired.
7
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement consisting of
twenty (20) typewritten pages, together with Schedules "A," "B" and "C" (Pages
14-21, attached), to be signed by their duly authorized officers as of the day
and year first above written.
Optimal Funds, Inc. Declaration Service Leveraged Index Management
Company Company
- ------------------- ------------------ --------------------------
By: Mitchell M. Maynard By: Terence P. Smith By: Mitchell M. Maynard
President Chief Executive Officer President
8
<PAGE>
SCHEDULE A
Accounting Services Provided by Declaration Service Company
- --------------------------------------------------------------------------------
o Journalize each Portfolio's investment, capital share and income and expense
activities.
o Verify investment buy/sell trade tickets when received from the adviser and
transmit trades to the Fund's custodian for proper settlement.
o Maintain individual ledgers for investment securities.
o Maintain historical tax lots for each security.
o Reconcile cash and investment balances of each Portfolio with the custodian,
and provide the adviser with the beginning cash balance available for
investment purposes.
o Update the cash availability throughout the day as required by the adviser.
o Post to and prepare each Portfolio's Statement of Assets and Liabilities and
Statement of Operations.
o Calculate expenses payable pursuant to the Fund's various contractual
obligations.
o Control all disbursements from the Fund on behalf of each Portfolio and
authorize such disbursements upon instructions of the Fund.
o Calculate capital gains and losses.
o Determine each Portfolio's net income.
o At the Portfolio's expense, obtain security market prices or if such market
prices are not readily available, then obtain such prices from services
approved by the adviser, and in either case calculate the market or fair
value of each Portfolio's investments.
o Where applicable, calculate the amortized cost value of debt instruments.
o Transmit or mail a copy of the portfolio valuations to the adviser.
o Compute the net asset value of each Portfolio.
<PAGE>
o Report applicable net asset value and performance data to performance
tracking organizations.
o Compute each Portfolio's yields, total returns, expense ratios and portfolio
turnover rate.
o Prepare and monitor the expense accruals and notify Fund management of any
proposed adjustments.
o Prepare monthly financial statements, which will include, without limitation,
the Schedule of Investments, the Statement of Assets and Liabilities, the
Statement of Operations, the Statement of Changes in Net Assets, the Cash
Statement, and the Schedule of Capital Gains and Losses.
o Prepare monthly security transactions listings.
o Prepare monthly broker security transactions summaries.
o Supply various Fund and Portfolio statistical data as requested on an ongoing
basis.
o Assist in the preparation of support schedules necessary for completion of
Federal and state tax returns.
o Assist in the preparation and filing of the Fund's annual and semiannual
reports with the SEC on Form N-SAR.
o Assist in the preparation and filing of the Fund's annual and semiannual
reports to shareholders and proxy statements.
o Assist with the preparation of amendments to the Fund's Registration
Statements on From N-1A and other filings relating to the registration of
shares.
o Monitor each Portfolio's status as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended from time to
time ("Code").
o Determine the amount of dividends and other distributions payable to
shareholders as necessary to, among other things, maintain the qualification
as a regulated investment company of each Portfolio of the Fund under the
Code.
o Provide other accounting services as may be agreed upon from time to time in
writing by the Fund and Declaration.
Administrative Services Provided by Declaration Service Company
- --------------------------------------------------------------------------------
o Provide overall day-to-day Fund administrative management, including
coordination of investment adviser, custodian, transfer agency, distribution
and pricing and accounting services.
o Preparation and filing of all Federal and State reports including:
o Fund's post-effective amendments under the Securities Act of 1933 and the
Investment Company Act of 1940.
o Form N-SAR - Semi-Annual report for Registered Investment Companies.
o The Fund's Annual and Semi-Annual Report.
o Rule 24f-2 Notice - filing regarding sale(s) of securities.
o Rule 17g-1 filing with the SEC regarding Fidelity Bond coverage.
o Ongoing monitoring and filing of State Blue Sky registrations.
<PAGE>
o Prepare and file such reports, applications and documents as may be necessary
or desirable to register the Fund's shares with the Federal and state
securities authorities, and monitor the sale of Fund shares for compliance
with Federal and state securities laws.
o Prepare and file reports to shareholders, including the annual report to
shareholders, and coordinate mailing Prospectuses, notices, proxy statements,
proxies and other reports to shareholders.
o Assist with layout and printing of shareholder communications, including
Prospectuses and reports to shareholders.
o Administer contracts on behalf of the Fund with, among others, the Fund's
investment adviser, custodian, transfer agent/shareholder servicing agent,
distributor, and accounting services agent.
o Prepare and maintain materials for directors/management meetings including,
agendas, minutes, attendance records and minute books.
o Coordinate shareholder meetings, including assisting Fund counsel in
preparation of proxy materials, preparation of minutes and tabulation of
results.
o Monitor and pay Fund bills, maintain Fund budget and report budget expenses
and variances to Fund management.
o Monitor the Fund's compliance with the investment restrictions and
limitations imposed by the 1940 Act and state Blue Sky laws and applicable
regulations thereunder, the fundamental and non-fundamental investment
policies and limitations set forth in the Fund's Prospectuses and Statement
of Additional Information, and the investment restrictions and limitations
necessary for each Portfolio of the Fund to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended,
or any successor statute.
o Prepare and distribute to appropriate parties notices announcing the
declaration of dividends and other distributions to shareholders.
o Provide administrative services as may be agreed from time to time in writing
by Declaration.
Blue Sky Administration
- --------------------------------------------------------------------------------
o Produce and mail the following required filings:
o Initial Filings - produce all required forms and follow-up on any
comments, including notification of SEC effectiveness.
o Renewals - produce all renewal documents and mail to states, includes
follow-up to ensure all is in order to continue selling in states.
o Sales Reports - produce all the relevant sales reports for the states and
complete necessary documents to properly file sales reports with states.
o Annual Report Filings - file copies of all annual reports with states. o
Prospectus Filings - file all copies of Definitive SAI & Prospectuses with
the states.
o Post-Effective Amendment Filing - file all Post-Effective Amendments with
the states, as well as, any other required documents.
o On demand additional states - complete filing for any states that you would
like to add.
o Amendments to current permits - file in a timely manner any amendment to
registered share amounts.
o Update and file hard copy of all data pertaining to individual permits.
<PAGE>
Transfer Agent, Shareholder Servicing Agent and Dividend Disbursing Agent
Services provided by Declaration Service Company
- --------------------------------------------------------------------------------
o Examine and process new accounts, subsequent payments, liquidations,
exchanges, transfers, telephone transactions, check redemptions automatic
withdrawals, and wire order trades.
o Reinvest or pay dividends and make other distributions.
o Answer investor and dealer telephone and/or written inquiries, except as
otherwise agreed by the Transfer Agent and the Fund.
o Process and confirm address changes.
o Process standard account record changes as required, i.e. Dividend Codes,
etc.
o Microfilm and/or store source documents for transactions, such as account
applications and correspondence.
o Perform backup withholding for those accounts in accordance with Federal
regulations.
o Solicit missing taxpayer identification numbers.
o Provide remote access inquiry to Fund records via Fund supplied hardware
(fund responsible for connection line and monthly fee).
o Maintain the following shareholder information in such a manner as the
Transfer Agent shall determine:
o Name and address, including zip code.
o Balance of Shares.
o Number of Shares, issuance date of each share outstanding and cancellation
date of each share no longer outstanding, if issued.
o Balance of dollars available for redemption.
o Dividend code (daily accrual, monthly reinvest, monthly cash or quarterly
cash).
o Type of account code.
o Establishment date indicating the date an account was opened, carrying
forward pre-conversion data as available.
o Original establishment date for accounts opened by exchange.
o W-9 withholding status and periodic reporting.
o State of residence code.
o Social security or taxpayer identification number, and indication of
certification.
o Historical transactions on the account for the most recent 18 months, or
other period as mutually agreed to from time to time.
o Indication as to whether phone transaction can be accepted for this
account. Beneficial owner code, i.e. male, female, joint tenant, etc.
o Provide the following reports and statements:
o Prepare daily journals for Fund reflecting all shares and dollar activity
for the previous day.
o Supply information monthly for Fund's preparation of Blue Sky reporting.
o Supply monthly purchase, redemption and liquidation information for use in
Fund's N-SAR report.
o Provide monthly average daily balance reports for the Fund.
<PAGE>
o Prepare and mail copies of summary statements to dealers and investment
advisers.
o Mail transaction confirmation statements daily to investors.
o Address and mail four periodic financial reports (material must be
adaptable to Transfer Agent's mechanical equipment as reasonably specified
by the Transfer Agent).
o Mail periodic statement to investors.
o Compute, prepare and furnish all necessary reports to governmental
authorities: Forms 1099R, 1099DIV, 1099B, 1042 and 1042S.
o Enclose various marketing material as designated by the Fund in statement
mailings, i.e. monthly and quarterly statements (material must be
adaptable to mechanical equipment as reasonably specified by the Transfer
Agent).
o Prepare and mail confirmation statements to dealers daily.
o Prepare certified list of stockholders for proxy mailing.
<PAGE>
SCHEDULE B
Compensation Schedule for Services Provided by Declaration Service Company
Per Portfolio
0.20% on first $25 million of average annual assets
0.15% on next $25 million of average annual assets
0.10% on next $50 million of average annual assets
0.075% on next $300 million of average annual assets
0.030% in excess of $400 million of average annual assets
Transfer Agent/ Shareholder Services:
$ 12.00 per Shareholder Account
Minimum annual fees:
Year one (1) $ 60,000
Year two (2) $ 71,000
Year three (3) $ 82,000
Thereafter $ 93,000
Plus out-of-pocket expenses to include, but not limited to: wire fees, Fund/SERV
and Networking fees, bank service charges, printing, copying, postage, courier,
account statement/ confirmation (including programming costs for specialized
statements/ confirmations), portfolio price quotation service, asset allocation
charges, travel, telephone, registration fees, and other standard miscellaneous
items.
Additional classes of shares per portfolio
Each category of fee ( including annual minimums) increases by 50% for the
second class of shares per portfolio, and by 25% for each additional class of
shares per portfolio.
<PAGE>
SCHEDULE C
The Optimal Street Funds, Inc.
Portfolios covered by this Agreement:
The Optimal Fund
EXHIBIT 23(H)(3)
POWER OF ATTORNEY
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below consititutes and appoints Mitchell M. Maynard as his true and lawful
attorney-in-fact and agent, with full power of substitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Given and signed in Boston, Massachusetts, on May 1, 1999.
By: _________________ By: _________________
Elaine A. Bernasconi Ellyn M. Mack
By: _________________ By: _________________
Judith E. Liskin-Gasparro Christine Bechade
EXHIBIT 23(I)
OPINION AND CONSENT OF COUNSEL
THE LAW OFFICES OF DAVID D. JONES, P.C.
518 Kimberton, # 134
Phoenixville, PA 19460
(610) 718-5382 (phone)
(610) 528-5391 (fax)
[email protected] (e-mail)
Optimal Funds, Inc. April 27, 1999
213-G VT, Route 15
Jericho, VT 05465
Dear Sirs:
As counsel to Optimal Funds, Inc. (the "Company"), a corporation organized under
the laws of the State of Maryland, I have been asked to render my opinion with
respect to the issuance of an indefinite number of shares of beneficial interest
of the Company (the "Shares") representing proportionate interests in the
Optimal Fund (the "Fund"). The Shares of the Fund are a series of the Company
consisting of one class of shares, Class C, all as more fully described in the
Prospectus and Statement of Additional Information contained in the Registration
Statement on Form N-1A, to which this opinion is an exhibit, to be filed with
the Securities and Exchange Commission.
I have examined the Company's Articles of Incorporation, the Prospectus and
Statement of Additional Information contained in the Registration Statement, and
such other documents, records and certificates as deemed necessary for the
purposes of this opinion.
Based on the foregoing, I am of the opinion that the Shares, when issued,
delivered and paid for in accordance with the terms of the Prospectus and
Statement of Additional Information, will be legally issued, fully paid, and
non-assessable by the Company.
Further, I give my permission to use this opinion for whatever purposes needed
by the Company.
Very Truly Yours,
David D. Jones
Attorney & Counselor at Law
EXHIBIT 23(L)
SUBSCRIPTION AGREEMENT BETWEEN REGISTRANT AND MR. MITCHELL M. MAYNARD
SUBSCRIPTION AGREEMENT
Optimal Funds, Inc.
213-G VT, Route 15
Jericho, VT 05465
Gentlemen:
The undersigned ("Subscriber") hereby subscribes for and agrees to acquire
from Optimal Funds, Inc., a corporation incorporated under the laws of the State
of Maryland (the "Corporation"), the number of shares of $.0001 par value Common
stock of The Optimal Fund (the "Shares") of the Corporation shown below in
consideration of a cash contribution of $100,000 ($10.00 per share).
Subscriber hereby represents and warrants to the Corporation that:
(a) Subscriber hereby acknowledges and agrees that the shares will be
issued in reliance upon the exemption from registration contained in
Section 4(2) of the Securities Act of 1933 (the "Securities Act"), and
that such Shares will or may also be issued in reliance upon the
exemptions from registration contained in relevant sections of the
Maryland Securities Act and/or comparable exemptions contained in the
securities laws of other jurisdictions to the extent applicable, and
that the transfer of such shares may be restricted or limited as a
condition to the availability of such exemptions.
(b) The shares are being purchased for investment for the account of the
undersigned and without the intent of participating directly or
indirectly in a distribution of such Shares, and the Shares will not
be transferred except in a transaction that is in compliance with any
and all applicable securities laws.
(c) Subscriber has been supplied with, or has had access to, all
information, including financial statements and other financial
information, of the Corporation, to which a reasonable investor would
attach significance in making investment decisions, and has had the
opportunity to ask questions of, and receive answers from,
knowledgeable individuals concerning the Corporation and the Shares.
(d) Subscriber understands that no registration statement or prospectus
with respect to the corporation or the shares is yet effective, and
Subscriber has made his own inquiry and analysis with respect to the
Corporation and the shares.
(e) Subscriber personally, or together with his purchaser representative,
has such knowledge and experience in financial and business matters to
be capable of evaluating the merits and risks of an investment in the
Corporation and the Shares.
(f) Subscriber is financially able to bear the economic risk of this
investment, can afford to hold the shares for an indefinite period and
can afford a complete loss of this investment
Dated as of the _______ day of May, 1999
Shares of
The Optimal Fund Subscribed Purchase Amount
10,000 $100,000
SUBSCRIBED BY:
-------------------------------------
Mitchell M. Maynard
ACCEPTED BY:
OPTIMAL FUNDS, INC.
-------------------------------------
MITCHELL M. MAYNARD
President
EXHIBIT 23(M)
DISTRIBUTION PLAN PURSUANT TO RULE 12B-1
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
Adopted May 1, 1999
RECITALS
1. OPTIMAL FUNDS, INC, a corporation organized under the laws of the State
of Maryland (the "Company") is engaged in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "Act").
2. The Company operates as a "series company" within the meaning of Rule
18f-2 under the Act and is authorized to issue shares of beneficial interest in
various series (collectively the "Funds").
3. Funds of the Company may utilize Fund assets to pay for sales or
promotional services or activities that have been or will be provided in
connection with distribution of shares of the Funds if such payments are made
pursuant to a Plan adopted and continued in accordance with Rule 12b-1 under the
Act.
4. The Optimal Fund, a series of the Company (the "Fund") by virtue of such
arrangement may be deemed to act as a distributor of its shares as provided in
Rule 12b-1 under the Act and desires to adopt a Plan pursuant to such Rule (the
"Plan").
5. The Directors as a whole, and the Directors who are not interested
persons of the Company (as defined in the Act) and who have no direct or
indirect financial interest in the operation of this Plan and any agreements
relating to it (the "Qualified Directors"), having determined, in the exercise
of reasonable business judgement and in light of their fiduciary duties under
state law and under Section 36(a) and (b) of the Act, that there is a reasonable
likelihood that this Plan will benefit the Fund and its shareholders, and have
approved the Plan by votes cast in person at a meeting called for the purpose of
voting on this Plan and agreements related thereto.
6. The shareholder(s) of the Fund have approved the Plan.
PLAN PROVISIONS
SECTION 1. EXPENDITURES
(a) Purposes. Fund assets may be utilized to pay for promotional services
related to the distribution of Fund shares, including personal services provided
to prospective and existing Fund shareholders, which include the costs of:
printing and distribution of prospectuses and promotional materials; making
slides and charts for presentations; assisting shareholders and prospective
investors in understanding and dealing with the Fund; and travel and
out-of-pocket expenses (e.g. copy and long distance telephone charges) related
thereto.
(b) Amounts. The Fund will pay to Leveraged Index Management Company (the
"Adviser") a monthly Distribution fee at an annual rate of 0.25% of the net
assets of the Class C Shares of the Fund, and a Servicing fee at an annual rate
of 0.75% of the net assets of the Class C Shares of the Fund, such fees to be
computed daily based on the daily average net assets of the Class C Shares of
the Fund. The Adviser shall utilize such fees to pay for sales and promotional
services related to the distribution of Fund shares, including personal services
provided to prospective and existing Fund shareholders.
SECTION 2. TERM AND TERMINATION
(a) Initial Term. This Plan shall become effective on May 1, 1999 and shall
continue in effect for a period of one year thereafter unless terminated or
otherwise continued or discontinued as provided in this Plan.
(b) Continuation of the Plan. The Plan and any related agreements shall
continue in effect for periods of one year thereafter for so long as such
continuance is specifically approved at least annually by votes of a majority of
both (a) the Directors of the Company and (b) the Qualified Directors, cast in
person at a meeting called for the purpose of voting on this Plan and such
related agreements.
<PAGE>
(c) Termination of the Plan. This Plan may be terminated at any time by
vote of a majority of the Qualified Directors, or by vote of a majority of the
outstanding voting securities of the Fund.
SECTION 3. AMENDMENTS
This Plan may not be amended to increase materially the amount of
distribution expenditures provided for in Section 1 hereof unless such amendment
is approved by a vote of the majority of the outstanding voting securities of
the Fund, and no material amendment to the Plan shall be made unless approved in
the manner provided for annual renewal in Section 2(b) hereof.
SECTION 4. INDEPENDENT DIRECTORS
While this Plan is in effect with respect to the Fund, the selection and
nomination of Directors who are not interested persons of the Company (as
defined in the Act) shall be committed to the discretion of the Directors who
are not interested persons.
SECTION 5. QUARTERLY REPORTS
The Treasurer of the Company shall provide to the Directors and the
Directors shall review, at least quarterly, a written report of the amounts
accrued and the amounts expended under this Plan for distribution, along with
the purposes for which such expenditures were made.
SECTION 6. RECORDKEEPING
The Company shall preserve copies of this Plan and any related agreements
and all reports made pursuant to Section 5 hereof, for a period of not less than
six years from the date of this Plan, the agreements or such report, as the case
may be, the first two years in an easily accessible place.
SECTION 7. AGREEMENTS RELATED TO THIS PLAN
Agreements with persons providing distribution services to be paid for or
reimbursed under this Plan shall provide that:
(a) the agreement will continue in effect for a period of one year and
will continue thereafter only if specifically approved by vote of a
majority of the Directors of the Company;
(b) the agreement may be terminated at any time, without payment of any
penalty, by vote of a majority of (i) the Qualified Directors or (ii)
the outstanding voting securities of the Fund, on not more than sixty
(60) days' written notice to any other party to the agreement;
(c) the agreement will terminate automatically in the event of an
assignment; and
(d) in the event the agreement is terminated or otherwise discontinued, no
further payments will be made by the Fund after the effective date of
such action.
