As filed with the Securities and Exchange Commission on June 8, 1999
1933 Act Registration No. 333-71703
1940 Act Registration No. 811-09221
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20546
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. 2 [X]
Post-Effective Amendment No. [ ]
and
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 2 [X]
The Community Reinvestment Act Qualified Investment Fund
(Exact name of registrant as specified in Charter)
1751 Cypress Creek Road
Fort Lauderdale, FL 33309
(Address of Principal Executive Offices and Zip Code)
954-356-0330
(Registrant's Telephone Number, including Area Code)
Terence P. Smith
Declaration Service Company
555 North Lane, Suite 6160
Conshohocken, PA 19428
(Name and Address of Agent for Service)
Copy to:
Michael P. Malloy, Esquire
Drinker Biddle & Reath LLP
1345 Chestnut Street
Philadelphia, Pennsylvania, 19107
Approximate Date of Proposed Public Offering: As soon as practicable after this
Registration Statement becomes effective.
This Registration Statement shall hereafter become effective in accordance with
the provisions of Section 8(a) of the Securities Act of 1933.
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THE COMMUNITY REINVESTMENT ACT QUALIFIED INVESTMENT FUND
THE FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE FINANCIAL INSTITUTIONS WITH (1) A
HIGH LEVEL OF CURRENT INCOME AND (2) INVESTMENTS THAT WILL BE DEEMED TO BE
QUALIFIED UNDER THE COMMUNITY REINVESTMENT ACT OF 1977.
PROSPECTUS
June 8, 1999
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE
FUND'S SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. IT
IS A CRIMINAL OFFENSE TO STATE OTHERWISE.
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TABLE OF CONTENTS
PAGE
RISK/RETURN SUMMARY............................................................1
Investment Objective...........................................................1
Principal Investment Strategy..................................................1
Principal Risks................................................................1
Fees and Expenses..............................................................3
INVESTMENT OBJECTIVE AND POLICIES..............................................4
Investment Objective...........................................................4
Principal Investment Strategy..................................................4
Community Reinvestment Act of 1977.............................................4
Investment Policies............................................................6
FUND INVESTMENTS...............................................................7
RISK FACTORS...................................................................8
FEDERAL TAXES..................................................................9
PRICING OF FUND SHARES........................................................10
PURCHASING SHARES.............................................................10
Purchase Inquiries............................................................10
Exchange of Securities........................................................10
Purchases By Wire Transfer....................................................11
Purchases by Check............................................................11
REDEEMING SHARES..............................................................12
DIVIDENDS AND DISTRIBUTIONS...................................................13
INVESTMENT ADVISOR............................................................13
DISTRIBUTION PLAN.............................................................13
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RISK/RETURN SUMMARY
INVESTMENT OBJECTIVE
The Fund's investment objective is to provide financial institutions with (1) a
high level of current income and (2) investments that will be deemed to be
qualified under the Community Reinvestment Act of 1977, as amended (the "CRA").
PRINCIPAL INVESTMENT STRATEGY
The Fund's principal investment strategy is to invest in mortgage-related and
other debt securities that will cause shares of the Fund to be deemed to be
qualified under the CRA, so that financial institutions that are subject to the
CRA may receive investment test or similar credit under the CRA with respect to
shares of the Fund held by them.
PRINCIPAL RISKS
There is no assurance that shares of the Fund will be deemed to be qualified
investments under the CRA. The Fund's investment adviser, CRAFund Advisors, Inc.
(the "Advisor"), believes that shares of the Fund will be deemed qualified
investments under the CRA and will cause financial institutions to receive CRA
credit with respect to shares of the Fund owned by them. This judgment is based
on written responses that the Office of the Comptroller of the Currency (the
"OCC") has provided to other pooled investment vehicles, and other interpretive
pronouncements of the Federal Financial Institutions Examination Council. The
Advisor believes that these responses and interpretations have established that
interests in a pooled or commingled investment fund may be deemed qualified
under the CRA if the fund holds underlying investments that would be so
qualified. In light of these pronouncements and interpretations, an opinion of
legal counsel has not been obtained as to whether shares of the Fund would be
deemed to be qualified under the CRA. The Fund has requested the OCC to consider
whether federal examiners of financial institutions may determine that financial
institutions holding shares of the Fund will receive CRA investment test credit.
There is no assurance that the Fund will receive a response from the OCC. The
OCC has stated that it no longer intends to amplify existing interpretations of
the CRA by responding to specific entities such as the Fund. The Fund believes
that it is the first pooled investment vehicle to register under the Securities
Act of 1933 and make a public offering of shares to financial institutions to
provide them with CRA credit.
The Fund's goal of holding securities that will allow shares of the Fund to be
deemed qualified under the CRA will cause the Advisor to take this factor into
account in determining which securities the Fund will purchase and sell.
Accordingly, portfolio decisions will not be exclusively based on the investment
characteristics of the securities, which may or may not have an adverse effect
on the Fund's investment performance. For example, the Fund may hold short-term
investments that produce relatively low yields pending the selection of
long-term investments believed to be CRA-qualified. In addition, the Fund may
sell securities for CRA purposes at times when such sales may not be desirable
for investment purposes. Such sales
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could occur, for example, if a financial institution redeems its shares of the
Fund, or if investments that have been designated to specific shareholders for
CRA-qualifying purposes are ultimately determined not to be, or to have ceased
to be, CRA-qualifying. See "INVESTMENT OBJECTIVE AND POLICIES - Community
Reinvestment Act of 1977."
The Fund is new and begins its public offering with this Prospectus. The Advisor
is also new, having been organized to provide investment advice to the Fund. Its
associated personnel have substantial experience in fixed income and
CRA-qualifying investments, but have no experience in managing a mutual fund.
All mutual funds are affected by changes in the economy and swings in investment
markets. You could lose money if the Fund's investments fall in value.
The prices of fixed income debt securities tend to move in the opposite
direction to interest rates. When rates are rising, the prices of debt
securities tend to fall. When rates are falling, the prices of debt securities
tend to rise.
The value of debt securities also depends on the ability of issuers to make
principal and interest payments. If an issuer cannot meet its payment
obligations or if its credit rating is lowered, the value of its debt securities
will fall. The ability of a state or local government issuer to make payments
can be affected by many factors, including economic conditions, the flow of tax
revenues and changes in the level of federal, state or local aid. Some municipal
obligations are payable only from limited revenue sources or private entities.
Prepayments of principal on mortgage-backed securities may tend to increase due
to refinancing of mortgages as interest rates decline. When this occurs, the
Fund may lose a portion of its principal investment to the extent the Fund paid
any premium for a security. In addition, the Fund's yield may be affected by
reinvestment of prepayments at lower rates than the original investment.
The Fund is a non-diversified investment company. Compared to a diversified
investment company, the Fund may invest a greater percentage of its assets in
the securities of a particular issuer. A change in value of such securities will
affect the value of the Fund's portfolio more than it would affect a diversified
investment company.
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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)
Maximum Sales Charge (Load) Imposed on Purchases NONE
Maximum Deferred Sales Charge (Load) NONE
Maximum Sales Charge (Load) Imposed on Reinvested Dividends NONE
Redemption Fee (as a percentage of amount redeemed) 1.00%
Exchange Fee NONE
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
Management Fees 0.50%
Distribution (12b-1) Fees 0.25%*
Other Expenses** 0.19%
Total Annual Fund Operating Expenses 0.94%
* If you hold your shares for a substantial period of time, distribution fees
may total more than the economic equivalent of the maximum front-end sales
charge currently allowed by the Conduct Rules of the National Association
of Securities Dealers, Inc.
** Based on estimated amounts for the current fiscal year.
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 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 remain the same. Although your actual costs may be
higher or lower, based on these assumptions, your costs would be:
One Year* Three Years*
--------- ------------
$194 $382
* Includes the imposition of a 1% redemption fee.
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You would pay the following expenses if you did not redeem your shares at the
end of each period:
One Year* Three Years*
--------- ------------
$94 $282
Actual annual returns may be greater or less than the annual 5% return assumed
in the Example.
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
- --------------------
The Fund's investment objective is to provide financial institutions with (1) a
high level of current income and (2) investments that will be deemed to be
qualified under the CRA. The Fund's Board of Trustees may change the investment
objective without shareholder approval.
PRINCIPAL INVESTMENT STRATEGY
- -----------------------------
The Fund's principal investment strategy is to invest in mortgage-related and
other debt securities that will cause shares of the Fund to be qualified under
the CRA, so that financial institutions that are subject to the CRA may receive
investment test or similar credit under the CRA with respect to shares of the
Fund held by them. The Advisor believes that securities held by the Fund will
provide returns that are competitive with those of similar securities that are
not CRA-qualified.
COMMUNITY REINVESTMENT ACT OF 1977
- ----------------------------------
The CRA requires the federal bank regulatory agencies to encourage most banks
and similar institutions that are insured by the Federal Deposit Insurance
Corporation to help meet the credit needs of their local communities, including
low and moderate income neighborhoods. Larger retail institutions receive an
overall CRA rating based on their evaluated performance in three areas: lending,
service and investments. For an institution with $250 million or more in assets
or for an institution whose holding company has $1 billion or more in assets,
the investment test comprises 25% of the overall CRA rating. While smaller banks
are subject only to a lending test, they can use their qualified investments to
enhance their overall rating. Banks that are designated as limited purpose or
wholesale banks for CRA purposes can elect to be evaluated partially or totally
on their qualified investment performance.
In most cases, qualified investments are required to be responsive to the credit
and community development needs of a financial institution's assessment
(geographical) area or a broader statewide or regional area that includes the
institution's assessment area. For such a financial institution to receive CRA
investment test credit with respect to the Fund's shares, the Fund must hold
CRA-qualifying investments that relate to the financial institution's assessment
(geographical) area. Institutions that have been designated by their regulators
as "wholesale" or
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"limited purpose" under the CRA may receive credit for qualified investments
wholly outside of their assessment (geographical) area, provided they have
otherwise adequately addressed their assessment area needs. Although each
shareholder of the Fund will indirectly own an undivided interest in all the
Fund's investments, the Fund will designate specific securities to specific
shareholders for CRA-qualifying purposes.
Investments are not designated as CRA-qualifying at the time of issuance by any
governmental agency. Accordingly, the Advisor must evaluate whether each
potential investment may be CRA-qualifying with respect to a specific
shareholder. The final determinations of whether securities are CRA-qualifying
are made by the federal bank regulatory agencies during their periodic
examinations of these institutions. There is no assurance that the agencies will
concur with the Advisor's evaluation of securities as CRA-qualifying. Securities
that are determined to qualify at the time of an examination may not qualify in
subsequent examinations. If the Advisor became aware that a security acquired
for CRA-qualifying purposes was not likely to produce CRA investment test
credit, for example due to a change in circumstances pertaining to the security,
ordinarily the Fund would sell that security and attempt to acquire a
replacement security that the Advisor deemed to be CRA-qualifying.
In determining whether a particular investment is a qualified investment, the
Advisor will consider whether the investment has as its primary purpose
community development. The Advisor will consider whether such investment (1)
provides affordable housing for low-or-moderate income individuals, (2) provides
community services targeted to low-or-moderate income individuals, (3) funds
activities that (a) finance businesses or farms that meet the size eligibility
standards of the Small Business Administration's Development Company or Small
Business Investment Company programs or have annual revenues of $1 million or
less and (b) promote economic development, or (4) funds activities that
revitalize or stabilize low-or-moderate income areas. An activity may be deemed
to promote economic development if it supports permanent job creation,
retention, and/or improvement for persons who are currently low-or-moderate
income, or supports permanent job creation, retention, and/or improvement in
low-or-moderate income areas targeted for redevelopment by federal, state, local
or tribal governments. The Advisor maintains documentation, readily available to
a financial institution or an examiner, supporting its judgment that a security
would be a qualifying investment for CRA investment test credit purposes.
The Fund will require time after selling shares to acquire a significant volume
of investments in particular geographic areas relevant to shareholders. The
length of time will depend upon the depth of the market for CRA-qualified
investments in the relevant areas. In some cases, the Advisor expects that
CRA-qualified investments will be immediately available. In others, it may take
weeks or months - in rare cases, as long as two or three years - to acquire a
significant volume of CRA-qualified investments in a particular area. The
Advisor believes that investments in the Fund during these time periods will be
considered CRA-qualified provided the purpose of the Fund includes serving the
investing institution's assessment area(s) and the Fund is likely to achieve a
significant volume of investments in the region after a reasonable period of
time. As the Fund continues to operate, it may dispose of securities that were
acquired for CRA-
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qualifying purposes, in which case the Advisor will normally attempt to acquire
a replacement security that would be CRA-qualifying.
INVESTMENT POLICIES
- -------------------
Under normal circumstances, the Fund will invest primarily in securities which
have a rating in the highest category assigned by a nationally recognized
statistical rating organization ("Rating Agency"), for example, AAA by Standard
& Poor's Ratings Group and/or Aaa by Moody's Investors Services, Inc., or which
are deemed by the Advisor to be of comparable quality to securities so rated, or
which are credit-enhanced by one or more entities with one of the above credit
ratings.
The Fund may also invest up to 25% of its net assets in investment grade
securities that are rated in the second or third highest rating categories
assigned by a Rating Agency, or which are deemed by the Advisor to be of
comparable quality to securities so rated, or which are credit-enhanced by one
or more entities with one of the above credit ratings.
Under normal circumstances, the Fund will invest at least 90% of its net assets
in CRA-qualifying securities. Such securities would include single-family,
multi-family and economic development loan-backed securities. As a result, the
Fund will invest primarily in securities issued by the Federal National Mortgage
Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"), and
Government National Mortgage Association ("GNMA").
The Fund may also invest in taxable municipal bonds whose primary purpose is
community development.
The Fund may invest in certificates of deposit that are insured by the Federal
Deposit Insurance Corporation ("FDIC") and are issued by financial institutions
that are (1) certified as Community Development Financial Institutions, or (2)
minority- or women-owned and primarily lend or facilitate lending in low- or
moderate-income areas or to low- or moderate-income individuals to promote
community development. The Fund may also invest in certain securities issued by
the Small Business Administration.
The Fund may temporarily hold investments that are not part of its principal
investment strategy to try to avoid losses during unfavorable market conditions
or pending the acquisition of investments believed to be CRA-qualified. These
investments may include cash (which will not earn any income), money market
instruments, debt securities issued or guaranteed by the U.S. Government or its
agencies and repurchase agreements. This strategy could prevent the Fund from
achieving its investment objective and could reduce the Fund's return and affect
its performance during a market upswing.
The Fund may sell securities that it has held for less than one year. When it
does so, the Fund may realize short-term capital gains, which are taxed at
higher rates than long-term capital gains.
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FUND INVESTMENTS
GNMA securities and U.S. Treasury bills, notes and bonds are direct obligations
of the U.S. Government and are backed by the full faith and credit of the U.S.
Government. Accordingly, these securities carry minimal credit risk.
FNMA and FHLMC securities are issued by U.S. Government-sponsored enterprises.
These securities are not backed by the full faith and credit of the U.S.
Government, but generally enjoy a very high level of creditworthiness.
Taxable municipal bonds are rated as to their creditworthiness by various Rating
Agencies. The Fund will invest only in these securities if they conform to the
credit qualifications described above under "INVESTMENT OBJECTIVE AND POLICIES -
Investment Policies."
The Fund may invest in mortgage-backed securities ("MBSs"), such as those issued
by GNMA, FHLMC and FNMA, which generally pay monthly payments consisting of both
interest and principal. The value of MBSs are based on the underlying pools of
mortgages that serve as the asset base for the securities. The value of MBSs
will be significantly influenced by changes in interest rates because mortgage
backed pool valuations fluctuate with interest rate changes. Specifically, when
interest rates decline, many borrowers refinance existing loans, resulting in
principal prepayments which leads to early payment of the securities. Prepayment
of an investment in MBSs can result in a loss to the Fund to the extent of any
premium paid for MBSs. In addition, a decline in interest rates that leads to
prepayment of MBSs may result in a reinvestment requirement at a time when the
interest rate environment presents less attractive investment alternatives.
Certificates of deposit ("CDs") are promissory notes issued by banks and other
financial institutions for fixed periods of time at fixed rates of interest. The
Fund may invest in CDs issued by Community Development Financial Institutions or
other eligible depositories. Early withdrawal of CDs may result in penalties
being assessed against the holder of the CD.
The Fund may invest in repurchase agreements with broker-dealers, banks and
other financial institutions, provided that the Fund's custodian always has
possession of the securities serving as collateral for the repurchase agreements
or has proper evidence of book entry receipt of said securities. In a repurchase
agreement, the Fund purchases securities subject to the seller's simultaneous
agreement to repurchase those securities from the Fund at a specified time
(usually one day) and price. The repurchase price reflects an agreed-upon
interest rate during the time of investment. All repurchase agreements entered
into by the Fund must be collateralized by U.S. Government securities, the
market values of which equal or exceed 102% of the principal amount of the
Fund's investment. If an institution with whom the Fund has entered into a
repurchase agreement enters insolvency proceedings, the resulting delay, if any,
in the Fund's ability to liquidate the securities serving as collateral could
cause the Fund some loss if the securities declined in value prior to
liquidation. To minimize the risk of such loss, the Fund will enter into
repurchase agreements only with institutions and dealers the Advisor considers
creditworthy under guidelines approved by the Fund's Board of Trustees.
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The Fund may also engage in reverse repurchase transactions in which the Fund
sells its securities and simultaneously agrees to repurchase the securities at a
specified time and price. Reverse repurchase transactions are considered to be
borrowings by the Fund.
The Fund may purchase securities on a when-issued basis, and it may purchase or
sell securities for delayed-delivery. These transactions occur when securities
are purchased or sold by the Fund with payment and delivery taking place at some
future date. The Fund may enter into such transactions when, in the Advisor's
opinion, doing so may secure an advantageous yield and/or price to the Fund that
might otherwise be unavailable. The Fund has not established any limit on the
percentage of assets it may commit to such transactions, but the Fund will
maintain a segregated account with its custodian consisting of cash, cash
equivalents, U.S. Government securities or other high-grade liquid debt
securities in an amount equal to the aggregate fair market value of its
commitments to such transactions. A risk of investing in this manner is that the
yield or price obtained in a transaction may be less favorable than the yield or
price available in the market when the security delivery takes place.
For further information concerning the Fund's investment policies and
restrictions, see "Investment Policies and Restrictions" in the Fund's Statement
of Additional Information.
RISK FACTORS
The following information supplements the information set forth in "RISK/RETURN
SUMMARY - Principal Risks" and "FUND INVESTMENTS" above.
Your investment in the Fund is not a deposit or obligation of, or insured or
guaranteed by, any entity or person, including the U.S. Government and the FDIC.
The Fund may be particularly appropriate for banks and other financial
institutions that are subject to the CRA. The value of the Fund's investments
will vary from day-to-day, reflecting changes in market conditions, interest
rates and other political and economic factors. There is no assurance that the
Fund can achieve its investment objective, since all investments are inherently
subject to market risk. There also can be no assurance that the Fund's
investments will receive investment test credit under the CRA with respect to
the Fund's shares.
Changes in laws, regulations or the interpretation of laws and regulations could
pose risks to the successful realization of the Fund's investment objectives. It
is not known what changes, if any, will be made to the CRA over the life of the
Fund. CRA regulations play an important part in influencing the readiness and
capacities of financial institutions to originate CRA-qualifying securities.
Changes in the CRA might impact upon Fund operations and might pose a risk to
the successful realization of the Fund's investment objectives.
Many investments purchased by the Fund will have one or more forms of credit
enhancement. An investor in a credit enhanced debt instrument typically relies
upon the credit rating of the credit enhancer to evaluate an issue's credit
quality and appropriate pricing level. There can be no assurance that the credit
rating of a public or private entity used as a credit enhancer on a
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Fund investment will remain unchanged over the period of the Fund's ownership of
that investment.
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 Advisor 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 Advisor
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. The Advisor will also consider the Y2K problem in evaluating securities
that the Fund holds or may acquire.
FEDERAL TAXES
The Fund intends to qualify each year as a regulated investment company under
applicable federal tax provisions. In any fiscal year in which the Fund
qualifies as a regulated investment company and distributes to shareholders all
of its net investment income and net capital gains, the Fund generally will not
have to pay any federal tax.
Generally, all ordinary and capital gains distributions to you will be taxable
whether they are reinvested or received in cash, unless you are exempt from
taxation or entitled to a tax deferral. Early each calendar year, you will be
notified as to the amount and federal tax status of all distributions paid to
you from the prior year. Such distributions may also be subject to state or
local taxes.
The Fund's investment strategies will generally cause its annual distributions
to consist primarily of ordinary income. You will generally not be eligible for
any dividends received deduction with respect to Fund distributions.
You may recognize gain or loss on redemptions of Fund shares based on the
difference between your redemption proceeds and your basis in the shares.
Certain restrictions on loss recognition may apply, however, such as the "wash
sale" limitation, which disallows a loss on a sale of stock or securities if
substantially identical stock or securities are purchased within 30 days before
or after the sale.
You should note that if you purchase Fund shares just prior to a capital gain
distribution, the purchase price will reflect the amount of the upcoming
distribution, but you will be taxable on the entire amount of the distribution
received, even though, as an economic matter, the distribution simply
constitutes a return of capital. This is known as "buying into a dividend."
This is a brief summary of the tax laws that affect your investment in the Fund.
Please see the section entitled "Tax Information" in the Statement of Additional
Information for more information, and consult with your own tax advisor, since
every investor's tax situation is unique.
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PRICING OF FUND SHARES
The price of the Fund's shares is based on the Fund's net asset value (NAV). The
NAV per share is determined as of the close of trading (normally 4:00 p.m.
Eastern Time) every day the New York Stock Exchange is open for trading. The
Fund will not price its shares on national holidays or other days when the New
York Stock Exchange is closed for trading. NAV per share is calculated by
dividing the total value of the Fund's assets after subtracting liabilities by
the number of shares outstanding. The Fund's portfolio securities are valued at
market value based on dealer bid quotations. Securities for which quotations are
not available and any other assets are valued at fair value as determined in
good faith by the Advisor, subject to the review and supervision of the Fund's
Board of Trustees.
PURCHASING SHARES
Shares of the Fund are sold at the NAV per share next determined after receipt
of a purchase order by the Fund. See "Purchases By Wire Transfer" and "Purchases
By Check" below. The minimum initial investment is $250,000. There is no minimum
requirement for subsequent purchases. Shares are sold without any front-end
sales charge, which means that the full amount of your purchase price will be
invested in Fund shares. The Fund imposes no deferred sales charges; however,
the Fund will charge a 1% fee for redemptions of shares. See "REDEEMING SHARES"
below.
PURCHASE INQUIRIES. If you are considering investing in the Fund, contact Neil
M. Solomon at the Fund's distributor, SunCoast Capital Group, Ltd. ("SunCoast"),
toll-free at 1-800-733-5933. Mr. Solomon will provide information concerning
your investment options and can provide all materials and procedures required to
open an account. New accounts can be opened through an exchange of securities,
by wire transfer, or by check purchase. These options also are available to
existing shareholders and are discussed further below.
EXCHANGE OF SECURITIES. The Fund may issue its shares in exchange for securities
owned by an investor. The Fund will issue its shares only in exchange for
securities that the Advisor believes are CRA-qualified and that the Fund intends
to hold. To determine the number of Fund shares that will be issued in the
exchange, the investor's securities will be valued at the mean between their bid
and asked quotations, which differs from the method used for valuing the Fund's
portfolio securities. See "PRICING OF FUND SHARES" above. This method of valuing
exchanged securities benefits both existing shareholders and the investor
exchanging the securities ("Purchaser"). The Purchaser will receive a greater
number of Fund shares by exchanging securities at the mean between the bid price
and asked price than it would if it liquidated the securities at the lower bid
price and then purchased Fund shares with the cash proceeds. This benefit may
provide the Purchaser with an incentive to go through the additional procedures
associated with an exchange. On the other hand, if the Fund purchased the same
type of securities with cash, it would pay the higher asked price. In either
case, the Fund must value the securities for purposes of determining the NAV per
share in accordance with its valuation policies. See "PRICING OF FUND SHARES"
above. Thus, the Purchaser benefits by receiving a greater number of Fund shares
while the existing shareholders benefit from the Fund's
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acquisition of securities at a lower price than it would otherwise pay. In
addition, both the Purchaser and the Fund avoid incurring any brokerage
transaction costs.
To discuss arrangements for purchasing Fund shares in exchange for your
securities, contact Neil M. Solomon at SunCoast toll-free at 1-800-733-5933.
PURCHASES BY WIRE TRANSFER. You may purchase shares by making a wire transfer of
federal funds to Declaration Service Company, the Fund's servicing agent. You
must include the full name in which your account is registered and the Fund
account number, and should address the wire transfer as follows:
First Union National Bank
ABA # 031201467
For Account of The Community Reinvestment Act Qualified Investment Fund
Acct. # 2000003245873
For further credit (Your Name)
Acct. # (Your Acct. No.)
Before making an initial investment by wire transfer, you must first call Neil
M. Solomon at SunCoast at 1-800-733-5933 to request an account number and
furnish the Fund with your taxpayer identification number. In addition, you must
promptly forward a completed new account application with signature(s) of
authorized officer(s) and appropriate corporate resolutions or other evidence of
authority to: Neil M. Solomon, SunCoast Capital Group, Ltd., 1751 West Cypress
Creek Road, Fort Lauderdale, FL 33309. The Fund will not be responsible for the
consequence of delays in the wire transfer system. See "Purchase Inquiries"
above.
PURCHASES BY CHECK. You can purchase shares by sending a check to The Community
Reinvestment Act Qualified Investment Fund, c/o SunCoast Capital Group, Ltd.,
1751 West Cypress Creek Road, Fort Lauderdale, FL 33309, Attention: Neil M.
Solomon, including the name in which the account is registered and the account
number. Initial share purchases must be accompanied by a completed new account
application with signature(s) of authorized officer(s) and appropriate corporate
resolutions or other evidence of authority. See "Purchase Inquiries" above.
Checks are accepted subject to collection. If shares are purchased by check and
redeemed within seven business days of purchase, the Fund may hold redemption
proceeds until the purchase check has cleared, a period of up to fifteen days.
You will receive a statement showing the number of shares purchased, the net
asset value at which your shares were purchased, and the new balance of Fund
shares owned each time you purchase shares of the Fund. The Fund does not issue
share certificates. All full and fractional shares will be carried on the books
of the Fund.
All applications to purchase shares of the Fund are subject to acceptance by
authorized officers of the Fund and are not binding until accepted. The Fund
reserves the right to reject purchase orders.
11
<PAGE>
REDEEMING SHARES
You may redeem your shares in the Fund at any time and for any reason. Upon
receipt by the Fund of a redemption request and any other required documents in
proper form, your shares of the Fund will be redeemed at their next determined
NAV, less a redemption fee equal to 1% of the NAV of the redeemed shares. The
redemption fee is not a sales charge. It is retained by the Fund and is not paid
to the Advisor or the Fund's distributor. The purpose of the redemption fee is
to allocate transaction costs associated with redemptions to investors making
those redemptions, thus protecting shareholders who hold their shares for longer
periods. These costs include, among others, those additional expenses that may
be incurred in selling CRA-qualified securities related specifically to the
redeeming shareholder's geographical area.
Redemption requests must be in writing and sent to The Community Reinvestment
Act Qualified Investment Fund, c/o SunCoast Capital Group, Ltd., 1751 West
Cypress Creek Road, Fort Lauderdale, FL 33309, Attention: Neil M. Solomon. To be
in proper form, your redemption request must:
o Specify the number of shares or dollar amount to be redeemed, if less
than all shares are to be redeemed; and
o Be signed by the authorized representative(s) exactly as their names
appear on the account.
The Fund will not process a redemption request unless it has received a
completed new account application and other documentation described in
"PURCHASING SHARES - Purchases by Wire Transfer" and "PURCHASING SHARES
Purchases by Check" above. Further documentation may be requested to evidence
the authority of the person or entity making the redemption request.
When you redeem your shares, they may be worth more or less than you paid for
them, depending upon the value of the Fund's portfolio securities at the time of
redemption.
Payment for shares redeemed is made within seven days after receipt by the Fund
of a request for redemption in proper form. The Fund will normally pay
redemption proceeds in cash but reserves the right to deliver securities owned
by the Fund instead of cash. The Fund reserves the right to suspend or postpone
redemptions during any period when (a) trading on any of the major U.S. stock
exchanges is restricted, as determined by the Securities and Exchange Commission
("SEC"), or that the major exchanges are closed for other than customary weekend
and holiday closings, (b) the SEC has by order permitted such suspension, or (c)
an emergency, as determined by the SEC, exists making disposal of portfolio
securities or valuation of net assets of the Fund not reasonably practicable.
The Fund may redeem all shares held by a shareholder whose account value is less
than the minimum initial investment as a result of redemptions.
12
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to pay dividends from net investment income and distribute any
net capital gains at least annually, usually in December. Dividends and
distributions are reinvested in additional shares unless you indicate in the
account application or otherwise in writing that you want to have dividends and
distributions paid in cash.
INVESTMENT ADVISOR
CRAFund Advisors, Inc. is a registered investment adviser founded in November
1998, with headquarters at 1751 West Cypress Creek Road, Fort Lauderdale,
Florida 33309.
The Advisor was organized to provide investment advice to the Fund. It currently
has no other clients. Its personnel, except Kenneth H. Thomas, Ph.D., are
employees of the Fund's distributor or SunCoast Capital Group, Inc., which is
the principal stockholder of the Fund's distributor. Todd J. Cohen, Peter Cooper
and David A. Zwick collectively own all of the outstanding stock of SunCoast
Capital Group, Inc. and 75% of the outstanding stock of the Advisor. The Fund's
distributor may act as broker for the Fund and will receive payments pursuant to
the Fund's distribution plan. See "DISTRIBUTION PLAN" below.
Todd J. Cohen is the Fund's portfolio manager and will choose the securities to
purchase for the Fund. Mr. Cohen is President of SunCoast. He oversees
SunCoast's fixed income securities trading operations. Although Mr. Cohen has
substantial experience in trading fixed income securities, managing a mutual
fund is a new position for him.
In managing the Fund's investment portfolio, Mr. Cohen will consult with Kenneth
H. Thomas, Ph.D. Dr. Thomas is President of K. H. Thomas Associates, a sole
proprietorship engaged in consulting with financial institutions. Dr. Thomas has
counseled many banks and thrifts regarding their CRA compliance, and has
authored two books on the subject. Dr. Thomas is also a Lecturer in Finance at
the Wharton School of Business of the University of Pennsylvania.
Under the terms of an investment advisory agreement, the Advisor, subject to the
supervision of the Fund's Board of Trustees, will manage the investment
operations of the Fund in accordance with the Fund's investment policies. The
Fund will pay to the Advisor monthly a fee equal to an annual rate of 0.50% of
the Fund's average daily net assets.
DISTRIBUTION PLAN
The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended. The distribution plan allows the
Fund to pay fees for the sale and distribution of its shares. Because they are
paid from Fund assets on an on-going basis, over time these fees will increase
the cost of your investment and may cost you more than paying other types of
sales charges. Under the distribution plan, the Fund will pay SunCoast up to
0.25% per year of the Fund's average daily net assets for activities primarily
intended to result in sales of the Fund's shares.
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<PAGE>
WHERE TO FIND MORE INFORMATION
You will find more information about the Fund in the following documents:
Annual and semi-annual reports
The Fund will prepare annual and semi-annual reports to shareholders. Such
reports will contain more information about the Fund and a discussion about the
market conditions and investment strategies that had a significant effect on the
Fund's performance during the last fiscal year.
Statement of Additional Information (SAI)
The SAI contains detailed information about the Fund and its policies. By law,
it is incorporated by reference into (considered to be part of) this prospectus.
You can get a free copy of these documents, request other information about the
Fund and make shareholder inquiries by calling Neil M. Solomon at the Fund
toll-free at 1-800-733-5933 or writing to:
The Community Reinvestment Act Qualified Investment Fund
c/o SunCoast Capital Group, Ltd.
1751 West Cypress Creek Road
Fort Lauderdale, FL 33309
Attention: Neil M. Solomon
or on the Internet at www.CRAFUND.com
You can write to the SEC Public Reference Section and ask them to mail you
information about the Fund, including the SAI. The SEC will charge you a
duplicating fee for this service. You can also visit the Public Reference Room
to review and copy the documents. For information about the operation of the
Public Reference Room, call the SEC.
Public Reference Section of the SEC
Washington, DC 20549-6009
1-800-SEC-0330
Reports and other information about the Fund are also available on the SEC's
website at www.sec.gov.
The Fund's Investment Company Act File No. is 811-09221.
<PAGE>
THE COMMUNITY REINVESTMENT ACT QUALIFIED INVESTMENT FUND
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. IT RELATES TO
AND SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE COMMUNITY
REINVESTMENT ACT QUALIFIED INVESTMENT FUND, DATED JUNE 8, 1999. YOU MAY OBTAIN A
COPY OF THE PROSPECTUS, FREE OF CHARGE, BY WRITING TO THE COMMUNITY REINVESTMENT
ACT QUALIFIED INVESTMENT FUND, C/O SUNCOAST CAPITAL GROUP, LTD., 1751 WEST
CYPRESS CREEK ROAD, FORT LAUDERDALE, FL 33309, ATTENTION: NEIL M. SOLOMON, BY
TOLL-FREE PHONE REQUEST AT 1-800-733-5933, OR ON THE INTERNET AT
WWW.CRAFUND.COM.
STATEMENT OF ADDITIONAL INFORMATION
June 8, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
DEFINED TERMS..................................................................1
THE FUND AND ITS SHARES........................................................1
INVESTMENT POLICIES AND RESTRICTIONS...........................................2
Investment Quality.............................................................2
U.S. Government Agency Securities..............................................2
Zero Coupon Bonds..............................................................3
Repurchase Agreements and Reverse Repurchase Agreements........................3
Taxable Municipal Bonds........................................................3
Other Securities...............................................................4
Securities Lending.............................................................4
Liquidity......................................................................4
Illiquid Securities............................................................5
Investment Restrictions........................................................5
INVESTMENT ADVISOR.............................................................7
TRUSTEES AND OFFICERS..........................................................8
PERFORMANCE INFORMATION.......................................................10
TAX INFORMATION...............................................................12
PORTFOLIO TRANSACTIONS........................................................12
DISTRIBUTOR...................................................................13
DISTRIBUTION PLAN.............................................................13
CUSTODIAN.....................................................................14
SERVICING AGENT...............................................................14
COUNSEL.......................................................................15
FINANCIAL STATEMENTS..........................................................15
APPENDIX A...................................................................A-1
i
<PAGE>
DEFINED TERMS
In this Statement of Additional Information, the terms listed below have the
following meanings:
Advisor - CRAFund Advisors, Inc., investment adviser to the Fund.
- -------
CRA - The Community Reinvestment Act of 1977, as amended.
- ---
Fund - The Community Reinvestment Act Qualified Investment Fund.
- ----
Investment Company Act - The Investment Company Act of 1940, as amended.
- ----------------------
Prospectus - The prospectus for the Fund as described on the front cover page of
- ----------
this Statement of Additional Information.
THE FUND AND ITS SHARES
The Fund was organized on January 15, 1999, as a business trust under the laws
of the State of Delaware. The Fund is registered as an open-end, management
investment company under the Investment Company Act.
The Fund offers a single class of shares of beneficial interest. Shares when
issued will be fully paid and nonassessable. All shares represent an equal
proportionate interest in the assets belonging to the Fund (subject to the
Fund's liabilities). Shareholders have no preemptive or other similar rights to
subscribe to any additional shares of the Fund or other securities issued by the
Fund or the Fund's Trustees.
Shareholders have the power to vote only: (a) for the election of one or more
Trustees in order to comply with the provisions of the Investment Company Act;
(b) with respect to any contract required by the Investment Company Act to be
approved by shareholders; (c) with respect to termination of the Fund to the
extent required by applicable law; (d) with respect to any plan adopted pursuant
to Rule 12b-1 under the Investment Company Act, and related matters, to the
extent required by the Investment Company Act; and (e) with respect to such
additional matters relating to the Fund as may be required by the Fund's
Agreement and Declaration of Trust, the Fund's bylaws or as the Trustees may
consider necessary or desirable. Each whole share is entitled to one vote and
each fractional share is entitled to a proportionate fractional vote. There is
no cumulative voting in the election of Trustees. Shares may be voted in person
or by proxy.
All dividends and other distributions will be distributed pro rata to the Fund's
shareholders in proportion to the number of shares they held on the record date
established for payment of the dividend or other distribution. In the event of a
liquidation of the Fund, shareholders will be entitled to distribution of Fund
assets remaining after the payment of all Fund liabilities. Such assets will be
distributed to shareholders in proportion to the number of shares held by them.
<PAGE>
The Fund reserves the right to pay redemption proceeds wholly or partly in
securities or other assets. The Fund may postpone the payment of redemption
proceeds and may suspend the right of redemption during any period or at any
time when and to the extent permissible under the Investment Company Act. The
Fund may redeem shares involuntarily if the Trustees determine that failure to
do so may have materially adverse consequences to shareholders. In the event of
an involuntary redemption, shareholders would have no further rights other than
to receive the redemption price. In addition, the Fund may redeem some or all
shares held by:
(1) a shareholder whose account value is less than the minimum required
investment amount as a result of redemptions;
(2) all shareholders of the Fund if the value of all shares is less than
the minimum amount established by the Board of Trustees; or
(3) any shareholder to reimburse the Fund for any loss or expense it has
sustained or incurred resulting from:
(a) the shareholder's failure to make full payment for share
purchases;
(b) any defective redemption request;
(c) indebtedness incurred in connection with facilitating (i) requests
pending receipt of collected funds from investments sold on the date of the
shareholder's redemption request, (ii) redemption requests when the
shareholder has also notified the Fund of its intention to deposit funds in
its account on the date of the redemption request, or (iii) the purchase of
investments pending receipt of collected funds when the shareholder has
notified the Fund of its intention to deposit funds in its accounts on the
date of the purchase of the investments; or
(d) a transaction effected for the benefit of the shareholder.
INVESTMENT POLICIES AND RESTRICTIONS
The following investment information supplements that set forth in the
Prospectus, which describes the Fund's principal investment strategies and the
types of securities in which the Fund primarily invests.
INVESTMENT QUALITY. The Fund invests primarily in securities rated in the
highest rating category assigned by a nationally recognized statistical rating
organization ("Rating Agency"), e.g., AAA by Standard & Poor's Ratings Group
and/or Aaa by Moody's Investor Services, Inc. The Fund may also invest up to 25%
of its net assets in other "investment grade" securities that are rated in the
second or third highest rating category assigned by a Rating Agency. See
Appendix A for more information on the ratings of Rating Agencies.
U.S. GOVERNMENT AGENCY SECURITIES. The Fund invests primarily in securities
issued by the Government National Mortgage Association ("GNMA"), Federal
National Mortgage Association
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<PAGE>
("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC"). GNMA obligations
are guaranteed by GNMA and are backed by the full faith and credit of the U.S.
Treasury. FNMA obligations are guaranteed by FNMA and are supported by FNMA's
ability to borrow directly from the U.S. Treasury. FHLMC obligations are
guaranteed by FHLMC and are supported by FHLMC's ability to borrow directly from
the U.S. Treasury.
ZERO COUPON BONDS. The Fund may invest in zero coupon bonds. Zero coupon bonds
do not make interest payments; instead, they are sold at a discount from their
face value and are redeemed at face value when they mature. Because zero coupon
bonds do not pay current income, their prices can be very volatile when interest
rates change. In calculating its dividend, the Fund takes into account as income
a portion of the difference between a zero coupon bond's purchase price and its
face value.
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS. Unless a repurchase
agreement has a remaining maturity of seven days or less or may be terminated on
demand upon notice of seven days or less, the repurchase agreement will be
considered illiquid and will be subject to the Fund's 15% limit on investments
in illiquid securities as stated below. Repurchase agreements are considered to
be loans under the Investment Company Act.
Reverse repurchase agreements involve the risk that the market value of the
securities sold by the Fund may decline below the repurchase price. The Fund
would pay interest on amounts obtained pursuant to a reverse repurchase
agreement. Whenever the Fund enters into a reverse repurchase agreement, it will
place in a segregated custodial account liquid assets such as cash or liquid
portfolio securities until the repurchase date that are equal in value to the
repurchase price (including accrued interest). The Fund will monitor the account
to ensure such equivalent value is maintained. Reverse repurchase agreements are
considered to be borrowings by the Fund under the Investment Company Act.
TAXABLE MUNICIPAL BONDS. The Fund may invest in taxable municipal bonds that are
designed primarily to finance community development. The two principal
classifications of taxable municipal bonds which may be held by the Fund are
"general obligation" bonds and "revenue" bonds. General obligation bonds are
generally secured by the issuer's pledge of its full faith, credit and taxing
power for the payment of principal and interest. Revenue bonds are generally
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax or other
specific revenue source such as the user of the facility being financed.
The Fund may also invest in "moral obligation" bonds, which are normally issued
by special purpose public authorities. If the issuer of moral obligation bonds
is unable to meet its debt service obligations from current revenues, it may
draw on a reserve fund, the restoration of which is a moral commitment but not a
legal obligation of the state or municipality which created the issuer.
There are, of course, variations in the quality of taxable municipal bonds, both
within a particular category and between categories, and the yields on taxable
municipal bonds depend upon a
3
<PAGE>
variety of factors, including general market conditions, the financial condition
of the issuer, general conditions of the taxable municipal bond market, the size
of a particular offering, the maturity of the obligation, and the rating of the
issue. The ratings of a Rating Agency represent its opinion as to the quality of
taxable municipal bonds. It should be emphasized that these ratings are general
and are not absolute standards of quality. Taxable municipal bonds with the same
maturity, interest rate and rating may have different yields. Taxable municipal
bonds of the same maturity and interest rate with different ratings may have the
same yield. Subsequent to its purchase by the Fund, an issue of taxable
municipal bonds may cease to be rated or its rating may be reduced below the
minimum rating required for purchase by the Fund.
The payment of principal and interest on most taxable municipal bonds purchased
by the Fund will depend upon the ability of the issuers to meet their
obligations. Each state, the District of Columbia, each of their political
subdivisions, agencies, instrumentalities and authorities and each multistate
agency of which a state is a member is a separate "issuer" as that term is used
in this Statement of Additional Information. An issuer's obligations under its
taxable municipal bonds are subject to the provisions of bankruptcy, insolvency
and other laws affecting the rights and remedies of creditors, such as the
federal Bankruptcy Code and laws, if any, which may be enacted by federal or
state legislatures extending the time for payment of principal or interest, or
both, or imposing other constraints upon enforcement of such obligations or upon
the ability of municipalities to levy taxes. The power or ability of an issuer
to meet its obligations for the payment of interest on and principal of its
taxable municipal securities may be materially adversely affected by litigation
or other conditions.
OTHER SECURITIES. As the universe of CRA-qualified securities expands, the Fund
may purchase qualified securities that the Advisor believes are consistent with
the achievement of the Fund's investment objective. The Fund and its
shareholders will bear the risks associated with investments in any such
securities. The Advisor will invest only in securities that meet the credit
standards set forth in the Prospectus and this Statement of Additional
Information and that the Advisor believes will not be inconsistent with the
Fund's objective of providing financial institutions with investment test credit
under the CRA.
SECURITIES LENDING. The Fund may lend its portfolio securities to financial
institutions such as banks and broker/dealers in accordance with the investment
limitations described below. Such loans involve risks of delay in receiving
additional collateral or in recovering the securities loaned or even loss of
rights in the collateral, should the borrower of the securities fail
financially. Any portfolio securities purchased with cash collateral will be
subject to possible depreciation in value. The Fund will continue to accrue
interest on the securities loaned and will also earn income on the loans. Any
cash collateral received by the Fund will be invested in high quality,
short-term money market instruments. Loans will generally be short term, will be
made only to borrowers that the Advisor deems to be of good standing and only
when, in the Advisor's judgment, the income to be earned from the loan justifies
the attendant risk.
LIQUIDITY. To maintain liquidity, the Fund may hold a portion of its net assets
in repurchase agreements or other short-term instruments and/or cash. Under
normal conditions, the Fund will hold no more than 10% of its net assets in such
instruments.
4
<PAGE>
ILLIQUID SECURITIES. The Fund will not invest more than 15% of the value of its
net assets in illiquid securities, including repurchase agreements with
remaining maturities in excess of seven days, time deposits with maturities in
excess of seven days, restricted securities, non-negotiable time deposits and
other securities which are not readily marketable.
Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"),
allows for a broader institutional trading market for securities otherwise
subject to restrictions on resale to the general public. Rule 144A establishes a
"safe harbor" from the registration requirements of the Securities Act for
resales of certain securities to qualified institutional buyers. The Fund's
investment in Rule 144A securities could have the effect of increasing the level
of illiquidity of the Fund during any period that qualified institutional buyers
were no longer interested in purchasing these securities. For purposes of the
15% limitation on purchases of illiquid securities described above, Rule 144A
securities will not be considered to be illiquid if the Advisor has determined,
in accordance with guidelines established by the Fund's Board of Trustees, that
an adequate trading market exists for such securities.
INVESTMENT RESTRICTIONS. The following investment restrictions are fundamental
policies of the Fund 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:
The Fund will not:
1. Make loans, except that the Fund (i) may purchase or hold debt
instruments in accordance with its investment objective and policies,
and may enter into repurchase agreements with respect to portfolio
securities, and (ii) may lend portfolio securities against collateral
consisting of cash or securities which are consistent with the Fund's
permitted investments, where the value of the collateral is equal at
all times to at least 100% of the value of the securities loaned.
2. Borrow money or issue senior securities, except that the Fund may
borrow from domestic banks for temporary purposes and may engage in
reverse repurchase transactions to the extent permitted by the
Investment Company Act; or mortgage, pledge, or hypothecate any assets
except in connection with any such borrowing and in amounts not in
excess of the lesser of the dollar amounts borrowed or, subject to any
limitations imposed by the Investment Company Act. The Fund will not
purchase securities while borrowings (including reverse repurchase
agreements) in excess of 5% of its total assets are outstanding.
3. Act as an underwriter within the meaning of the Securities Act of
1933; except insofar as the Fund might be deemed to be an underwriter
upon disposition of restricted portfolio securities; and except to the
extent that the purchase of securities directly from the issuer
thereof in accordance with the Fund's investment objective, policies
and limitations may be deemed to be underwriting.
5
<PAGE>
4. Purchase or sell real estate; except that the Fund may purchase
securities that are secured by real estate and may purchase securities
of issuers which deal in real estate or interests therein; however,
the Fund will not purchase or sell interests in real estate limited
partnerships.
5. Purchase any securities which would cause 25% or more of the value of
the Fund's total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business
activities in the same industry, although this limitation does not
apply to mortgage-backed securities; provided, however, that there is
no limitation with respect to obligations issued or guaranteed by the
U.S. Government, any state, territory or possession of the U.S.
Government, the District of Columbia or any of their authorities,
agencies, or instrumentalities (including U.S. Government-sponsored
enterprises) or political subdivisions, including municipal bonds.
6. Purchase or sell commodities or commodity contracts, or invest in
futures contracts or options related thereto.
The Fund has also adopted the following restrictions which may be changed by the
Board of Trustees without shareholder approval:
The Fund may not:
7. Invest in companies for the purpose of exercising management or
control.
8. Purchase foreign securities.
9. Invest in or sell put options, call options, straddles, spreads, or
any combination thereof.
10. Purchase securities on margin (except such short-term credits as may
be necessary for the clearance of purchases), make short sales of
securities, or maintain a short position.
11. Purchase securities of other investment companies except in connection
with a merger, consolidation, reorganization, or acquisition of
assets, or as is permitted by the Investment Company Act.
If a percentage limitation is satisfied at the time of investment, a later
increase in such percentage resulting from a change in the value of the Fund's
portfolio securities generally will not constitute a violation of the
limitation. With respect to borrowings, if a Fund's asset coverage at
6
<PAGE>
any time falls below that required by the 1940 Act, the Fund will reduce its
borrowings in the manner required by the 1940 Act to the extent necessary to
satisfy the asset coverage requirement.
INVESTMENT ADVISOR
The Advisor, located at 1751 West Cypress Creek Road, Fort Lauderdale, FL 33309,
was organized under the laws of the State of Florida as an investment advisory
corporation in 1998. The Advisor is also registered with the Securities and
Exchange Commission as an investment adviser under the Investment Advisers Act
of 1940, as amended.
The following persons are affiliated persons of both the Fund and the Advisor:
Todd J. Cohen is Trustee of the Fund and President and Director of the Advisor.
Kenneth H. Thomas, Ph.D., is Trustee and Chairman of the Fund and Vice President
and Director of the Advisor. David A. Zwick is Trustee and President of the Fund
and Director of the Advisor. Neil M. Solomon is Treasurer of the Fund and Vice
President, Treasurer and Secretary of the Advisor.
The Advisor provides investment advisory services to the Fund pursuant to an
investment advisory agreement with the Fund (the "Advisory Agreement"). Under
the terms of the Advisory Agreement, the Advisor provides a continuous
investment program for the Fund, including investment research and management
with respect to all securities and investments and cash equivalents in the Fund.
The Advisor determines what securities and other investments will be purchased,
retained or sold by the Fund and implements such determinations through the
placement of orders for the execution of portfolio transactions with or through
brokers or dealers as the Advisor may select.
For the services provided and expenses assumed under the Advisory Agreement, the
Advisor is entitled to receive advisory fees, computed daily and paid monthly,
at the annual rate of 0.50% of the Fund's average daily net assets. While it is
expected that the Fund's total operating expenses will not exceed the annual
rate of 1.00% of the Fund's average daily net assets, the Advisor has
voluntarily agreed to waive advisory fees and/or reimburse other expenses to the
extent necessary to limit the total operating expenses of the Fund to this rate
in the event the Fund's expenses are higher than expected. Any waiver of fees or
reimbursement of expenses will be made on an estimated monthly basis. The
Advisor may recoup amounts previously waived or reimbursed to the extent that
actual fees and expenses for a specific month are less than the annual rate of
1.00% of the Fund's average daily net assets, but any such recoupment will be
limited to the fiscal year with respect to which the amounts were waived or
reimbursed. During the Fund's first fiscal year ending May 31, 2000, such
recoupment may include the Fund's organizational expenses to the extent that
they have been paid by the Advisor and not previously reimbursed by the Fund.
The Advisor may revise or discontinue this commitment at any time upon written
notice to the Fund's Board of Trustees. The Advisory Agreement provides that the
Advisor 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 Advisory Agreement, except by reason of the Advisor's willful
misfeasance, bad faith, gross negligence, or reckless disregard of its
obligations and duties under the Advisory Agreement.
The Advisory Agreement has an initial term of two years and will continue in
effect from year to year as long as such continuance is approved at least
annually (i) by the vote of a majority of Trustees who are not parties to the
Advisory Agreement or interested persons (as defined in the Investment Company
Act) of any such party, cast in person at a meeting called for the purpose of
voting on such approval; and (ii) by the Board of Trustees, or by a vote of the
majority of the outstanding voting securities of the Fund (as defined in the
Investment Company Act). The
7
<PAGE>
Advisory Agreement will terminate automatically in the event of its assignment
(as defined in the Investment Company Act).
The Advisor intends to purchase substantially all of the shares of the Fund
prior to the effective date of the Fund's registration statement and will be
deemed initially to control the Fund.
TRUSTEES AND OFFICERS
The Board of Trustees of the Fund manages the business and affairs of the Fund
in accordance with the laws of the State of Delaware and the Fund's Agreement
and Declaration of Trust and its bylaws. The Trustees and officers of the Fund
are listed below:
<TABLE>
<CAPTION>
Name, Age, Address, Position with Fund Principal Occupation for the Last Five Years
- -------------------------------------- --------------------------------------------
<S> <C>
Kenneth H. Thomas, Ph.D.* Vice President and Director, the Advisor
Trustee and Chairman since November 1998; President, K.H. Thomas
6255 Chapman Field Drive Associates (financial institution
Miami, FL 33156 consulting) since August 1975; Lecturer,
Age 51 The Wharton School of Business of the
University of Pennsylvania since
September 1970.
David A. Zwick* Secretary, Treasurer and Director,
Trustee and President SunCoast Capital Group, Ltd.
c/o SunCoast Capital Group, Ltd. (broker-dealer) since December 1992;
1751 West Cypress Creek Road Director, the Advisor since November
Fort Lauderdale, FL 33309 1998.
Age 32
Todd J. Cohen* President and Director, the Advisor
Trustee since November 1998; President, SunCoast
c/o SunCoast Capital Group, Ltd. Capital Group, Ltd. (broker-dealer)
1751 West Cypress Creek Road since December 1992.
Fort Lauderdale, FL 33309
Age 33
D. Keith Cobb Retired Private Investor; Vice Chairman
Trustee and Chief Executive Officer, Alamo Rent
2521 Del Lago Drive A Car, Inc. (auto rentals), 1995-1997;
Ft. Lauderdale, FL 33316 National Managing Partner - Financial
Age 58 Services, KPMG Peat Marwick (certified
public accountants), 1993-1995;
Director, Dispatch Management Systems,
Inc.; Director, RHR International;
Director, Laundromax, Inc.; Director,
Renaissance Cruises, Inc.; Director,
Federal Reserve Bank of Atlanta, Miami
Branch.
8
<PAGE>
Burton Emmer Assistant to Chief Executive Officer,
Trustee CHS Electronics, Inc., October 1998
CHS Electronics, Inc. to present; Partner, Grant Thornton LLP
2000 NW 84th Avenue (certified public accountants), August
Miami, FL 33122 1979 to August 1998.
Age 62
Jack M. Guttentag Professor Emeritus, University of
Trustee Pennsylvania, 1996 to present; Jacob
GHR Systems, Inc. Safra Professor of International
998 Old Eagle School Road, Suite 1206 Banking, University of Pennsylvania,
Wayne, PA 19087-1861 1962 to 1996; Chairman, GHR Systems,
Age 75 Inc.
Heinz Riehl President, Riehl World Training &
Trustee Consulting, Inc. (bank consulting), 1996
Riehl World Training & Consulting, Inc. to present; Faculty Member, New York
25-13 Old Kings Highway North University, 1982 to present; Senior Vice
Darien, CT 06820 President, Citibank, until 1996; Member,
Age 62 Foreign Exchange Committee, New York
Federal Reserve Bank, 1980-1995.
John E. Taylor President and CEO, National Community
Trustee Reinvestment Coalition, December 1993 to
National Community Reinvestment Coalition present; Director, America Works
733 15th Street, NW, Suite 540 Partnership
Washington, DC 20005
Age 49
Neil M. Solomon Vice President, Secretary and Treasurer,
Treasurer the Advisor since November 1998; Vice
c/o SunCoast Capital Group, Ltd. President and Chief Financial Officer,
1751 West Cypress Creek Road SunCoast Capital Group, Ltd.
Fort Lauderdale, FL 33309 (broker-dealer) since July 1996;
Age 28 Controller, Costa Cruise Lines, May 1994
to July 1996; Associate - Audit, Coopers
& Lybrand, May 1992 to May 1994.
Michael P. Malloy Partner, Drinker Biddle & Reath LLP (law
Secretary firm) since 1993
Drinker Biddle & Reath LLP
1345 Chestnut Street, Suite 1100
Philadelphia, PA 19107
Age 39
</TABLE>
9
<PAGE>
* May be deemed to be an "interested person" of the Fund as defined in the
Investment Company Act.
The table below sets forth the compensation that the Fund expects to pay to each
of the Trustees who are not interested persons of the Fund during the Fund's
first fiscal year.
Aggregate Total
Compensation Compensation
Name of Person/Position from the Fund Paid to Trustees
- ----------------------- ------------- ----------------
D. Keith Cobb $12,000 $12,000
Trustee
Todd J. Cohen $0 $0
Trustee
Burton Emmer $12,000 $12,000
Trustee
Jack M. Guttentag $12,000 $12,000
Trustee
Heinz Riehl $12,000 $12,000
Trustee
John E. Taylor $12,000 $12,000
Trustee
Kenneth H. Thomas, Ph.D. $0 $0
Chairman and Trustee
David A. Zwick $0 $0
President and Trustee
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 for the period.
10
<PAGE>
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 a hypothetical $1,000 payment at
the beginning of the applicable period
The formula for calculating Aggregate Total Return is as follows:
Aggregate Total Return = [(ERV/P) - 1]
The Fund may also 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:
6
Yield = 2[(a-b/cd + 1) - 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 were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period
The Fund imposes no sales charges, although a 1% redemption fee will be charged
at the time shares are redeemed. The redemption fee is not reflected in the
Fund's performance calculations. Income taxes are not taken into account. 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 reports or other communications to investors or in advertising material, the
Fund may describe general economic and market conditions affecting the Fund and
may compare its performance with (1) that of other mutual funds as listed in the
rankings prepared by Lipper Analytical Services, Inc. or similar investment
services that monitor the performance of mutual funds or as set forth in the
publications listed below, (2) one or more benchmark indices, or (3) other
appropriate indices of investment securities or with data developed by the
Advisor derived from such indices. Performance information may also include
evaluation of the Fund by nationally recognized ranking services and information
as reported in financial publications such as Business Week, Fortune,
Institutional Investor, Money Magazine, Forbes, Barron's, The Wall Street
Journal, The New York Times, or other national, regional or local publications.
11
<PAGE>
In reports or other communications to investors or in advertising, the Fund may
also describe the general biography or work experience of the portfolio
manager(s) of the Fund and may include quotations attributable to the portfolio
manager(s) describing approaches taken in managing the Fund's investments,
research methodology, underlying stock selection or the Fund's investment
objective. The Fund may also discuss the continuum of risk and return relating
to different investments. In addition, the Fund may from time to time compare
its expense ratios to those of investment companies with similar objective and
policies, as advertised by Lipper Analytical Services, Inc. or similar
investment services that monitor mutual funds.
TAX INFORMATION
The Fund intends to qualify as a regulated investment company under Subchapter M
of the Internal Revenue Code, and to distribute its income to shareholders each
year, so that the Fund itself generally will be relieved of federal income and
excise taxes. If the Fund were to fail to so qualify: (1) the Fund would be
taxed at regular corporate rates without any deduction for distributions to
shareholders; and (2) shareholders would be taxed as if they received ordinary
dividends, although corporate shareholders could be eligible for the dividends
received deduction.
PORTFOLIO TRANSACTIONS
Debt securities are generally traded in the over-the-counter market. 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 (mark-up). In some instances, the Advisor feels that better prices
are available from non-principal market makers that are paid commissions
directly.
Decisions to buy and sell securities for the Fund are made by the Advisor
subject to overall review by the Fund's Board of Trustees. The Advisor places
orders pursuant to its investment determinations for the Fund either directly
with the issuer or with a broker or dealer. In executing portfolio transactions
and selecting brokers or dealers, the Advisor uses its best efforts to seek on
behalf of the Fund the best overall terms available. In assessing the best
overall terms available for any transaction, the Advisor considers all factors
that it deems relevant, including the breadth of the market in the security, the
price of the security, the financial condition and execution capability of the
broker or dealer, and the reasonableness of the commission, if any, both for the
specific transaction and on a continuing basis. When the Fund purchases or sells
securities through brokers on an agency basis, in evaluating the best overall
terms available, and in selecting the broker to execute a particular
transaction, the Advisor may also consider the brokerage and research services
(as those terms are defined in Section 28(e) of the Securities Exchange Act of
1934) provided to the Fund and/or other accounts over which the Advisor or an
affiliate of the Advisor exercises investment discretion. The Advisor is
authorized to pay to a broker who provides such brokerage and research services
a commission for executing a portfolio transaction for the Fund which is in
excess of the amount of commission another broker would have charged for
effecting that transaction if, but only if, the Advisor determines in good faith
that such commission was reasonable in relation to the value of the brokerage
and research
12
<PAGE>
services provided by such broker, viewed in terms of that particular transaction
or in terms of the overall responsibilities of the Advisor to the Fund.
In addition, the Advisor is authorized to take into account the sale of shares
of the Fund in allocating to brokers or dealers purchase and sale orders for the
Fund's portfolio securities, provided that the Advisor believes that the quality
of the transaction and the commission are comparable to what they would be with
other qualified firms. The Advisor will make investment decisions for the Fund
independently from those of other clients of the Advisor. However, the same
security may be held in the portfolio of the Fund and one or more other clients
when the same security is believed suited for the investment objectives of the
Fund and such other client(s). Should two or more clients of the Advisor
simultaneously be engaged in the purchase or sale of the same security, to the
extent possible, the transactions will be allocated as to price and amount in a
manner fair and equitable to each client and the Fund.
The Advisor may execute portfolio transactions through SunCoast Capital Group,
Ltd. ("SunCoast"), which is the Fund's distributor and an affiliate of the
Advisor. The Advisor will do so only if it believes that SunCoast will provide
the Fund with the best available price and execution. Such transactions will be
subject to the requirements of applicable law and will be reviewed by the Fund's
Board of Trustees. SunCoast may not engage in portfolio transactions with the
Fund when it acts as principal.
DISTRIBUTOR
SunCoast, located at 1751 West Cypress Creek Road, Fort Lauderdale, FL 33309
serves as principal underwriter for the Fund's shares. The following persons are
affiliated persons (as defined in the Investment Company Act) of both the Fund
and SunCoast: David A. Zwick is Trustee and President of the Fund and Treasurer,
Secretary, Director and Shareholder of SunCoast; Todd J. Cohen is Trustee of the
Fund and President and Shareholder of SunCoast; and Neil M. Solomon is Treasurer
of the Fund and Vice President and Chief Financial Officer of SunCoast.
Shares of the Fund are sold on a continuous basis. The distribution agreement
between the Fund and SunCoast requires SunCoast to use all reasonable efforts in
connection with the distribution of the Fund's shares. However, SunCoast has no
obligation to sell any specific number of shares and will only sell shares for
orders it receives.
DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act. The Distribution Plan authorizes the Fund to pay
SunCoast annual fees of up to .25% of the average daily net assets of the Fund
in consideration for distribution and other services and the assumption of
related expenses. Amounts paid to SunCoast may be used to cover expenses that
are related to (a) distribution of the Fund's shares, (b) ongoing servicing
and/or maintenance of the accounts of the Fund's shareholders, (c) payments to
institutions for selling the Fund's shares, and (d) sub-transfer agency,
sub-accounting, administrative or similar services related to
13
<PAGE>
the Fund's shares. The Fund may pay SunCoast the full fee provided for by the
Distribution Plan even if SunCoast's costs for providing its services are less
than the full amount. Certain officers, directors and/or shareholders of
SunCoast are also interested persons (as defined in the Investment Company Act)
of the Fund and may be considered to have a direct or indirect financial
interest in the Distribution Plan.
The Distribution Plan has been approved by the Board of Trustees of the Fund,
including a majority of the Trustees who are not interested persons of the Fund
(as defined in the Investment Company Act) and who have no direct or indirect
financial interest in the operation of the Distribution Plan or in any agreement
related thereto (the "Disinterested Trustees"). In approving the Distribution
Plan, the Trustees considered various factors and determined that there is a
reasonable likelihood that the Distribution Plan would benefit the Fund and its
shareholders. The Distribution Plan may be terminated by a vote of a majority of
the Disinterested Trustees. The Trustees review quarterly a written report of
the amounts expended pursuant to the Distribution Plan and the purposes for
which such expenditures were made. The Distribution Plan may be amended by a
vote of the Trustees, provided that any material amendments also require the
vote of a majority of the Disinterested Trustees. Any amendment to materially
increase the costs that the Fund's shares bear under the Distribution Plan
requires approval by a majority of the outstanding voting shares (as defined in
the Investment Company Act). For so long as the Distribution Plan is in effect,
selection and nomination of Disinterested Trustees will be committed to the
discretion of the Disinterested Trustees. Any agreement related to the
Distribution Plan may be terminated at any time without the payment of any
penalty by a vote of a majority of the Disinterested Trustees. The Distribution
Plan will continue in effect for successive one-year periods, provided that each
such continuance is specifically approved by a majority of the Board of
Trustees, including a majority of the Disinterested Trustees.
CUSTODIAN
First Union National Bank (the "Custodian"), with offices at 123 South Broad
Street, Philadelphia, PA 19109, acts as custodian for the Fund. As such, the
Custodian 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 Fund. The Custodian does not exercise any supervisory function
over the management of the Fund, the purchase and sale of securities or the
payment of distributions to shareholders.
14
<PAGE>
SERVICING AGENT
Declaration Service Company ("DSC"), with principal business offices at 555
North Lane, Suite 6160, Conshohocken, PA 19428, provides accounting,
administrative, transfer agency, dividend disbursing agency, and shareholder
servicing agency services for the Fund pursuant to an investment company
services agreement (the "Services Agreement"). Under the Services Agreement, DSC
is responsible for a wide variety of functions, including but not limited to:
o Fund accounting services
o Financial statement preparation
o Valuation of the Fund's portfolio securities
o Pricing the Fund's shares
o Assistance in preparing tax returns
o Preparation and filing of required regulatory reports
o Communications with shareholders
o Coordination of Board and shareholder meetings
o Monitoring the Fund's legal compliance
o Maintaining shareholder account records
Under the Services Agreement, the Fund pays DSC for Fund accounting and
administration services at the annual rate of 0.10% of the first $75 million of
average annual assets, plus 0.075% of the next $75 million of average annual
assets, plus 0.04% of the next $150 million of average annual assets, plus 0.03%
of average annual assets in excess of $300 million. The Fund also pays DSC
$10,000 per year for transfer agency and shareholder services fees. Fees payable
under the Services Agreement are subject to a minimum annual fee of $60,000
during the first year.
COUNSEL
Drinker Biddle & Reath LLP (of which Michael P. Malloy, Secretary of the Fund,
is a partner), 1345 Chestnut Street, Suite 1100, Philadelphia, PA 19107, is
counsel to the Fund and will pass upon certain legal matters on its behalf.
FINANCIAL STATEMENTS
KPMG LLP, with offices at 1600 Market Street, 12th Floor, Philadelphia, PA
19103, will serve as the Fund's independent auditors for its first fiscal year.
An audited Statement of Assets and Liabilities with notes thereto for the Fund
as of June 3, 1999, and the report of KPMG LLP with respect thereto are set
forth below.
15
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholder and Board of Trustees of
The Community Reinvestment Act Qualified Investment Fund
We have audited the accompanying statement of assets and liabilities of The
Community Reinvestment Act Qualified Investment Fund as of June 3, 1999 and the
related statement of operations for the period then ended. These financial
statements are the responsibility of the fund's management. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of cash owned with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Community Reinvestment Act
Qualified Investment Fund as of June 3, 1999, and the results of its operations
for the period then ended, in conformity with generally accepted accounting
principles.
KPMG LLP /s/
Philadelphia, Pennsylvania
June 3, 1999
16
<PAGE>
THE COMMUNITY REINVESTMENT ACT QUALIFIED INVESTMENT FUND
Statement of Assets and Liabilities
June 3, 1999
Assets:
Cash on deposit with custodian $100,000
--------
Total Assets 100,000
--------
Liabilities:
Accrued expenses _
--------
Total Liabilities _
--------
Net Assets:
Applicable to 10,000 shares, no par value $100,000
========
Net asset value per share: $ 10.00
========
See accompanying Notes to Financial Statements.
17
<PAGE>
THE COMMUNITY REINVESTMENT ACT QUALIFIED INVESTMENT FUND
Statement of Operations
For the period ended June 3, 1999
Organizational expenses $ 148,003
Expense reduction (148,003)
---------
Net income $ --
=========
See accompanying Notes to Financial Statements.
18
<PAGE>
THE COMMUNITY REINVESTMENT ACT QUALIFIED INVESTMENT FUND
Notes to Financial Statements
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Community Reinvestment Act Qualified Investment Fund (the Fund) was
organized as a business trust under the laws of the State of Delaware. The Fund
is registered as an open-end, management investment company under the Investment
Company Act of 1940.
The Fund offers a single class of shares of beneficial interest. Shares when
issued will be fully paid and nonassessable. All shares represent an equal
proportionate interest in the assets belonging to the Fund (subject to the
Fund's liabilities). Shareholders have no preemptive or other similar rights to
subscribe to any additional shares of the Fund or other securities issued by the
Fund.
The Fund's investment objective is to provide financial institutions with a high
level of current income and investments that will be deemed to be qualified
under the Community Reinvestment Act of 1977, as amended (the CRA).
The Fund's principal investment strategy is to invest in mortgage-related and
other debt securities that will cause shares of the Fund to be deemed to be
qualified under the CRA, so that financial institutions that are subject to the
CRA may receive investment test or similar credit under the CRA with respect to
shares of the Fund held by them.
The inception of the Fund was June 3, 1999.
FEES AND TRANSACTIONS WITH RELATED PARTIES
CRAFund Advisors, Inc. (the Advisor) is the investment adviser to the Fund. The
Advisor will receive fees at an annual rate of 0.50% of the Fund's average daily
net assets, computed daily and payable monthly.
The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The Distribution Plan authorizes the Fund to pay
SunCoast Capital Group, Ltd. (SunCoast) annual fees of up to 0.25% of the
average daily net assets of the Fund in consideration for distribution and other
services and the assumption of related expenses. Amounts paid to SunCoast may be
used to cover expenses that are related to distribution of the Fund's shares,
ongoing servicing and/or maintenance of the accounts of the Fund's shareholders,
payments to institutions for selling the Fund's shares, and sub-transfer agency,
sub-accounting, administrative or similar services related to the Fund's shares.
The Advisor has voluntarily agreed to waive advisory fees and/or reimburse other
expenses to the extent necessary to limit the total operating expenses of the
Fund to the annual rate of 1.00% of its average daily net assets. The Advisor
may recoup amounts previously waived or reimbursed to the extent that actual
fees and expenses for a specific month are less than the annual rate of 1.00% of
the Fund's average daily net assets, but any such recoupment will be limited to
the fiscal year with respect to which the amounts were waived or reimbursed.
During the Fund's first fiscal year ending May 31, 2000, such recoupment may
include the Fund's organizational expenses to the extent that they have been
paid by the Advisor and not previously reimbursed by the Fund. Such
organizational expenses incurred and assumed by the Advisor at the inception of
the Fund were $148,003. The Advisor may revise or discontinue this commitment at
any time upon written notice to the Fund's Board of Trustees.
Legal fees incurred will be paid to a law firm of which the Secretary of the
Fund is a partner.
19
<PAGE>
APPENDIX A
----------
CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS
- ----------------------------------------------
The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:
"AAA" - An obligation rated "AAA" has the highest rating assigned by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is extremely strong.
"AA" - An obligation rated "AA" differs from the highest rated
obligations only in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.
"A" - An obligation rated "A" is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher-rated categories. However, the obligor's capacity to meet
its financial commitment on the obligation is still strong.
"BBB" - An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
Obligations rated "BB," "B," "CCC," "CC" and "C" are regarded as
having significant speculative characteristics. "BB" indicates the least degree
of speculation and "C" the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.
"BB" - An obligation rated "BB" is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to the obligor's inadequate capacity to meet its financial commitment on the
obligation.
"B" - An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB," but the obligor currently has the capacity to meet its
financial commitment on the obligation. Adverse business, financial or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.
"CCC" - An obligation rated "CCC" is currently vulnerable to
nonpayment, and is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitment on the obligation.
In the event of adverse business, financial, or economic conditions, the obligor
is not likely to have the capacity to meet its financial commitment on the
obligation.
A-1
<PAGE>
"CC" - An obligation rated "CC" is currently highly vulnerable to
nonpayment.
"C" - The "C" rating may be used to cover a situation where a
bankruptcy petition has been filed or similar action has been taken, but
payments on this obligation are being continued.
"D" - An obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation are not made on the date due
even if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The "D" rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments on an obligation are jeopardized.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.
"r" - This symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk - such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
"Aa" - Bonds are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than the "Aaa"
securities.
"A" - Bonds possess many favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
A-2
<PAGE>
"Baa" - Bonds are considered as medium-grade obligations, (i.e., they
are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of these
ratings provide questionable protection of interest and principal ("Ba"
indicates speculative elements; "B" indicates a general lack of characteristics
of desirable investment; "Caa" are of poor standing; "Ca" represents obligations
which are speculative in a high degree; and "C" represents the lowest rated
class of bonds). "Caa," "Ca" and "C" bonds may be in default.
Con. (---) - Bonds for which the security depends upon the completion
of some act or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b) earnings
of projects unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic
rating classification from "Aa" through "Caa." The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the
lower end of its generic rating category.
The following summarizes the long-term debt ratings used by Duff &
Phelps for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit quality. The
risk factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.
"AA" - Debt is considered to be of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to time
because of economic conditions.
"A" - Debt possesses protection factors which are average but
adequate. However, risk factors are more variable in periods of greater economic
stress.
"BBB" - Debt possesses below-average protection factors but such
protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.
"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of these
ratings is considered to be below investment grade. Although below investment
grade, debt rated "BB" is deemed likely to meet obligations when due. Debt rated
"B" possesses the risk that obligations will not be met when due. Debt rated
"CCC" is well below investment grade and has considerable uncertainty as to
timely payment of principal, interest or preferred dividends. Debt
A-3
<PAGE>
rated "DD" is a defaulted debt obligation, and the rating "DP" represents
preferred stock with dividend arrearages.
To provide more detailed indications of credit quality, the "AA," "A,"
"BBB," "BB" and "B" ratings may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major categories.
The following summarizes the ratings used by Fitch IBCA for corporate
and municipal bonds:
"AAA" - Bonds considered to be investment grade and of the highest
credit quality. These ratings denote the lowest expectation of credit risk and
are assigned only in case of exceptionally strong capacity for timely payment of
financial commitments. This capacity is highly unlikely to be adversely affected
by foreseeable events.
"AA" - Bonds considered to be investment grade and of very high credit
quality. These ratings denote a very low expectation of credit risk and indicate
very strong capacity for timely payment of financial commitments. This capacity
is not significantly vulnerable to foreseeable events.
"A" - Bonds considered to be investment grade and of high credit
quality. These ratings denote a low expectation of credit risk and indicate
strong capacity for timely payment of financial commitments. This capacity may,
nevertheless, be more vulnerable to changes in circumstances or in economic
conditions than is the case for higher ratings.
"BBB" - Bonds considered to be investment grade and of good credit
quality. These ratings denote that there is currently a low expectation of
credit risk. The capacity for timely payment of financial commitments is
considered adequate, but adverse changes in circumstances and in economic
conditions are more likely to impair this capacity.
"BB" - Bonds considered to be speculative. These ratings indicate that
there is a possibility of credit risk developing, particularly as the result of
adverse economic changes over time; however, business or financial alternatives
may be available to allow financial commitments to be met. Securities rated in
this category are not investment grade.
"B" - Bonds are considered highly speculative. These ratings indicate
that significant credit risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity for continued
payment is contingent upon a sustained, favorable business and economic
environment.
"CCC," "CC," "C" - Bonds have high default risk. Default is a real
possibility, and capacity for meeting financial commitments is solely reliant
upon sustained, favorable business or economic developments. "CC" ratings
indicate that default of some kind appears probable, and "C" ratings signal
imminent default.
A-4
<PAGE>
"DDD," "DD" and "D" - Bonds are in default. Securities are not meeting
obligations and are extremely speculative. "DDD" designates the highest
potential for recovery of amounts outstanding on any securities involved and "D"
represents the lowest potential for recovery.
To provide more detailed indications of credit quality, the Fitch IBCA
ratings from and including "AA" to "B" may be modified by the addition of a plus
(+) or minus (-) sign to show relative standing within these major rating
categories.
Thomson BankWatch assesses the likelihood of an untimely repayment of
principal or interest over the term to maturity of long term debt and preferred
stock which are issued by United States commercial banks, thrifts and non-bank
banks; non-United States banks; and broker-dealers. The following summarizes the
rating categories used by Thomson BankWatch for long-term debt ratings:
"AAA" - This designation indicates that the ability to repay principal
and interest on a timely basis is extremely high.
"AA" - This designation indicates a very strong ability to repay
principal and interest on a timely basis, with limited incremental risk compared
to issues rated in the highest category.
"A" - This designation indicates that the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
"BBB" - This designation represents the lowest investment-grade
category and indicates an acceptable capacity to repay principal and interest.
Issues rated "BBB" are more vulnerable to adverse developments (both internal
and external) than obligations with higher ratings.
"BB," "B," "CCC," and "CC" - These designations are assigned by
Thomson BankWatch to non-investment grade long-term debt. Such issues are
regarded as having speculative characteristics regarding the likelihood of
timely payment of principal and interest. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation.
"D" - This designation indicates that the long-term debt is in
default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC" may
include a plus or minus sign designation which indicates where within the
respective category the issue is placed.
A-5
<PAGE>
MUNICIPAL NOTE RATINGS
- ----------------------
A Standard and Poor's rating reflects the liquidity concerns and
market access risks unique to notes due in three years or less. The following
summarizes the ratings used by Standard & Poor's Ratings Group for municipal
notes:
"SP-1" - The issuers of these municipal notes exhibit a strong
capacity to pay principal and interest. Those issues determined to possess very
strong characteristics are given a plus (+) designation.
"SP-2" - The issuers of these municipal notes exhibit satisfactory
capacity to pay principal and interest, with some vulnerability to adverse
financial and economic changes over the term of the notes.
"SP-3" - The issuers of these municipal notes exhibit speculative
capacity to pay principal and interest.
Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG"). Such
ratings recognize the differences between short-term credit risk and long-term
risk. The following summarizes the ratings by Moody's Investors Service, Inc.
for short-term notes:
"MIG-1"/"VMIG-1" - This designation denotes best quality. There is
present strong protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.
"MIG-2"/"VMIG-2" - This designation denotes high quality, with margins
of protection that are ample although not so large as in the preceding group.
"MIG-3"/"VMIG-3" - This designation denotes favorable quality, with
all security elements accounted for but lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow and market
access for refinancing is likely to be less well established.
"MIG-4"/"VMIG-4" - This designation denotes adequate quality.
Protection commonly regarded as required of an investment security is present
and although not distinctly or predominantly speculative, there is specific
risk.
"SG" - This designation denotes speculative quality. Debt instruments
in this category lack of margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings described
under Commercial Paper Ratings for municipal notes.
A-6
<PAGE>
PART C
OTHER INFORMATION
Item 23. Exhibits
(a) Agreement and Declaration of Trust dated January 14, 1999, filed
electronically as an Exhibit and incorporated herein by reference to
Registrant's initial Registration Statement on Form N-1A (File Nos.
333-71703 and 811-09221) on February 3, 1999.
(b) Bylaws, filed electronically as an Exhibit and incorporated herein by
reference to Registrant's initial Registration Statement on Form N-1A (File
Nos. 333-71703 and 811-09221) on February 3, 1999.
(c) Articles II, VI, VII and VIII of Registrant's Agreement and Declaration of
Trust dated January 14, 1999 are incorporated herein by reference to
Exhibit (a).
(d) Investment Management Agreement between Registrant and CRAFund Advisors,
Inc., dated as of June 1, 1999
(e) Distribution Agreement between Registrant and SunCoast Capital Group, Ltd.
dated as of June 1, 1999
(f) None
(g) Form of Custodian Agreement between Registrant and First Union National
Bank
(h) Form of Investment Company Services Agreement between Registrant and
Declaration Service Company
(i) Opinion and Consent of Drinker Biddle & Reath LLP
(j) (1) Consent of KPMG LLP
(2) Consent of Drinker Biddle & Reath LLP
(k) None
(l) Share Purchase Agreement between Registrant and CRAFund Advisors, Inc.
dated as of June 1, 1999
(m) (1) Distribution Plan
(2) Form of Agreement to Distribution Plan
(n) None
(o) Not Applicable
Item 24. Persons Controlled by or under Common Control with Registrant.
No person is directly or indirectly controlled by, or under common control with
the Registrant.
<PAGE>
Item 25. Indemnification.
Section 3817 of Title 12 of the Delaware Code authorizes a business trust to
indemnify and hold harmless any trustee or beneficial owner or other person from
and against any and all claims and demands whatsoever, subject to such standards
and restrictions, if any, that are set forth in the business trust's governing
instrument. The Registrant's Agreement and Declaration of Trust provide the
following:
8.2. Indemnification. The Trust shall indemnify each of its Trustees and
officers and persons who serve at the Trust's request as directors, officers or
trustees of another organization in which the Trust has any interest as a
shareholder, creditor, or otherwise, and may indemnify any trustee, director or
officer of a predecessor organization (each a "Covered Person"), against all
liabilities and expenses (including amounts paid in satisfaction of judgments,
in compromise, as fines and penalties, and expenses including reasonable
accountants' and counsel fees) reasonably incurred in connection with the
defense or disposition of any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or legislative body, in which he
may be involved or with which he may be threatened, while as a Covered Person or
thereafter, by reason of being or having been such a Covered Person, except that
no Covered Person shall be indemnified against any liability to the Trust or its
Shareholders to which such Covered Person would otherwise be subject by reason
of bad faith, willful misfeasance, gross negligence or reckless disregard of his
duties involved in the conduct of such Covered Person's office (such willful
misfeasance, bad faith, gross negligence or reckless disregard being referred to
herein as "Disabling Conduct"). Expenses, including accountants' and counsel
fees so incurred by any such Covered Person (but excluding amounts paid in
satisfaction of judgments, in compromise or as fines or penalties), may be paid
from time to time by the Trust in advance of the final disposition of any such
action, suit or proceeding upon receipt of (a) an undertaking by or on behalf of
such Covered Person to repay amounts so paid to the Trust if it is ultimately
determined that indemnification of such expenses is not authorized under this
Article VIII and either (b) such Covered Person provides security for such
undertaking, (c) the Trust is insured against losses arising by reason of such
payment, or (d) a majority of a quorum of disinterested, non-party Trustees, or
independent legal counsel in a written opinion, determines, based on a review of
readily available facts, that there is reason to believe that such Covered
Person ultimately will be found entitled to indemnification.
8.3. Indemnification Determinations. Indemnification of a Covered Person
pursuant to Section 8.2 shall be made if (a) the court or body before whom the
proceeding is brought determines, in a final decision on the merits, that such
Covered Person was not liable by reason of Disabling Conduct or (b) in the
absence of such a determination, a majority of a quorum of disinterested,
non-party Trustees or independent legal counsel in a written opinion make a
reasonable determination, based upon a review of the facts, that such Covered
Person was not liable by reason of Disabling Conduct.
8.4. Indemnification Not Exclusive. The right of indemnification provided
by this Article VIII shall not be exclusive of or affect any other rights to
which any such Covered Person may be entitled. As used in this Article VIII,
"Covered Person" shall include such person's heirs, executors and
administrators, and a "disinterested, non-party Trustee" is a Trustee who is
neither an Interested Person of the Trust nor a party to the proceeding in
question.
Item 26. Business and Other Connections of Investment Advisor.
The Advisor has no other business or other connections.
Todd J. Cohen, President and Director of the Advisor, has served as President of
SunCoast Capital Group, Ltd. ("SunCoast"), the Registrant's distributor, since
December 1992. Kenneth H. Thomas, PhD., Vice President and Director of the
Advisor, has been President of K.H. Thomas Associates, a firm that provides
consulting services to financial institutions, since August 1975. Dr. Thomas has
also been a Lecturer at the Wharton School of Business of the University of
Pennsylvania since September 1970. David A. Zwick, a Director of the Advisor,
has served as Secretary, Treasurer and Director of SunCoast since December 1992.
Peter M. Cooper, a Director of the Advisor, has served as Executive, Trader, and
Director of SunCoast since June 1995.
2
<PAGE>
Item 27. Principal Underwriters.
SunCoast Capital Group, Ltd., ("SunCoast"), 1751 West Cypress Creek Road, Fort
Lauderdale, FL 33309 is the Fund's principal underwriter. SunCoast does not act
as principal underwriter, depositor, or investment adviser to any other
investment company.
Item 28. Location of Accounts and Records.
Declaration Service Company
555 North Lane, Suite 6160
Conshohocken, PA 19428
CRAFund Advisors, Inc.
1751 West Cypress Creek Road
Fort Lauderdale, FL 33309
Drinker Biddle & Reath LLP
1345 Chestnut Street
Philadelphia, PA 19107
Item 29. Management Services.
Not applicable
Item 30. Undertakings.
None
<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 amendment to its
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Fort Lauderdale and State of Florida on the 7th
day of June, 1999.
The Community Reinvestment Act Qualified Investment Fund
Registrant
/s/ David A. Zwick
---------------------
David A. Zwick
President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacity and on
the date indicated.
Signature Title Date
*Kenneth H. Thomas Trustee and Chairman June 7, 1999
- ----------------------------
Kenneth H. Thomas
/s/ David A. Zwick Trustee and President June 7, 1999
- ----------------------------
David A. Zwick
/s/ Todd J. Cohen Trustee June 7, 1999
- ----------------------------
Todd J. Cohen
*D. Keith Cobb Trustee June 7, 1999
- ----------------------------
D. Keith Cobb
*Burton Emmer Trustee June 7, 1999
- ----------------------------
Burton Emmer
*Jack M. Guttentag Trustee June 7, 1999
- ----------------------------
Jack M. Guttentag
*Heinz Riehl Trustee June 7, 1999
- ----------------------------
Heinz Riehl
*John E. Taylor Trustee June 7, 1999
- ----------------------------
John E. Taylor
/s/ Neil M. Solomon Treasurer June 7, 1999
- ----------------------------
Neil M. Solomon
/s/ Neil M. Solomon
- ----------------------------
*By: Neil M. Solomon
-------------------
Attorney-in-Fact
<PAGE>
THE COMMUNITY REINVESTMENT ACT
QUALIFIED INVESTMENT FUND
(the "Trust")
POWER OF ATTORNEY
-----------------
Know All Men by These Presents, that the undersigned, Kenneth H. Thomas, hereby
constitutes and appoints David A. Zwick and Neil M. Solomon, and either of them,
his true and lawful attorneys, to execute in his name, place, and stead, in his
capacity as Trustee or officer, or both, of the Trust, the Registration
Statement on Form N-1A of the Trust and any amendments thereto and all
instruments necessary or incidental in connection therewith, and to file the
same with the Securities and Exchange Commission; and said attorneys shall have
full power and authority to do and perform in his name and on his behalf, in any
and all capacities, every act whatsoever requisite or necessary to be done in
the premises, as fully and to all intents and purposes as he might or could do
in person, said acts of said attorneys, or either of them, being hereby ratified
and approved.
DATED: June 1, 1999
/s/ Kenneth H. Thomas
- -----------------------------
Kenneth H. Thomas
<PAGE>
THE COMMUNITY REINVESTMENT ACT
QUALIFIED INVESTMENT FUND
(the "Trust")
POWER OF ATTORNEY
-----------------
Know All Men by These Presents, that the undersigned, Todd J. Cohen, hereby
constitutes and appoints David A. Zwick and Neil M. Solomon, and either of them,
his true and lawful attorneys, to execute in his name, place, and stead, in his
capacity as Trustee or officer, or both, of the Trust, the Registration
Statement on Form N-1A of the Trust and any amendments thereto and all
instruments necessary or incidental in connection therewith, and to file the
same with the Securities and Exchange Commission; and said attorneys shall have
full power and authority to do and perform in his name and on his behalf, in any
and all capacities, every act whatsoever requisite or necessary to be done in
the premises, as fully and to all intents and purposes as he might or could do
in person, said acts of said attorneys, or either of them, being hereby ratified
and approved.
DATED: June 1, 1999
/s/ Todd J. Cohen
- -----------------------------
Todd J. Cohen
<PAGE>
THE COMMUNITY REINVESTMENT ACT
QUALIFIED INVESTMENT FUND
(the "Trust")
POWER OF ATTORNEY
-----------------
Know All Men by These Presents, that the undersigned, D. Keith Cobb, hereby
constitutes and appoints David A. Zwick and Neil M. Solomon, and either of them,
his true and lawful attorneys, to execute in his name, place, and stead, in his
capacity as Trustee or officer, or both, of the Trust, the Registration
Statement on Form N-1A of the Trust and any amendments thereto and all
instruments necessary or incidental in connection therewith, and to file the
same with the Securities and Exchange Commission; and said attorneys shall have
full power and authority to do and perform in his name and on his behalf, in any
and all capacities, every act whatsoever requisite or necessary to be done in
the premises, as fully and to all intents and purposes as he might or could do
in person, said acts of said attorneys, or either of them, being hereby ratified
and approved.
DATED: June 1, 1999
/s/ D. Keith Cobb
- -----------------------------
D. Keith Cobb
<PAGE>
THE COMMUNITY REINVESTMENT ACT
QUALIFIED INVESTMENT FUND
(the "Trust")
POWER OF ATTORNEY
-----------------
Know All Men by These Presents, that the undersigned, Burton Emmer, hereby
constitutes and appoints David A. Zwick and Neil M. Solomon, and either of them,
his true and lawful attorneys, to execute in his name, place, and stead, in his
capacity as Trustee or officer, or both, of the Trust, the Registration
Statement on Form N-1A of the Trust and any amendments thereto and all
instruments necessary or incidental in connection therewith, and to file the
same with the Securities and Exchange Commission; and said attorneys shall have
full power and authority to do and perform in his name and on his behalf, in any
and all capacities, every act whatsoever requisite or necessary to be done in
the premises, as fully and to all intents and purposes as he might or could do
in person, said acts of said attorneys, or either of them, being hereby ratified
and approved.
DATED: June 1, 1999
/s/ Burton Emmer
- -----------------------------
Burton Emmer
<PAGE>
THE COMMUNITY REINVESTMENT ACT
QUALIFIED INVESTMENT FUND
(the "Trust")
POWER OF ATTORNEY
-----------------
Know All Men by These Presents, that the undersigned, Jack M. Guttentag, hereby
constitutes and appoints David A. Zwick and Neil M. Solomon, and either of them,
his true and lawful attorneys, to execute in his name, place, and stead, in his
capacity as Trustee or officer, or both, of the Trust, the Registration
Statement on Form N-1A of the Trust and any amendments thereto and all
instruments necessary or incidental in connection therewith, and to file the
same with the Securities and Exchange Commission; and said attorneys shall have
full power and authority to do and perform in his name and on his behalf, in any
and all capacities, every act whatsoever requisite or necessary to be done in
the premises, as fully and to all intents and purposes as he might or could do
in person, said acts of said attorneys, or either of them, being hereby ratified
and approved.
DATED: June 1, 1999
/s/ Jack M. Guttentag
- -----------------------------
Jack M. Guttentag
<PAGE>
THE COMMUNITY REINVESTMENT ACT
QUALIFIED INVESTMENT FUND
(the "Trust")
POWER OF ATTORNEY
-----------------
Know All Men by These Presents, that the undersigned, Heinz Riehl, hereby
constitutes and appoints David A. Zwick and Neil M. Solomon, and either of them,
his true and lawful attorneys, to execute in his name, place, and stead, in his
capacity as Trustee or officer, or both, of the Trust, the Registration
Statement on Form N-1A of the Trust and any amendments thereto and all
instruments necessary or incidental in connection therewith, and to file the
same with the Securities and Exchange Commission; and said attorneys shall have
full power and authority to do and perform in his name and on his behalf, in any
and all capacities, every act whatsoever requisite or necessary to be done in
the premises, as fully and to all intents and purposes as he might or could do
in person, said acts of said attorneys, or either of them, being hereby ratified
and approved.
DATED: June 1, 1999
/s/ Heinz Riehl
- -----------------------------
Heinz Riehl
<PAGE>
THE COMMUNITY REINVESTMENT ACT
QUALIFIED INVESTMENT FUND
(the "Trust")
POWER OF ATTORNEY
-----------------
Know All Men by These Presents, that the undersigned, John E. Taylor, hereby
constitutes and appoints David A. Zwick and Neil M. Solomon, and either of them,
his true and lawful attorneys, to execute in his name, place, and stead, in his
capacity as Trustee or officer, or both, of the Trust, the Registration
Statement on Form N-1A of the Trust and any amendments thereto and all
instruments necessary or incidental in connection therewith, and to file the
same with the Securities and Exchange Commission; and said attorneys shall have
full power and authority to do and perform in his name and on his behalf, in any
and all capacities, every act whatsoever requisite or necessary to be done in
the premises, as fully and to all intents and purposes as he might or could do
in person, said acts of said attorneys, or either of them, being hereby ratified
and approved.
DATED: June 1, 1999
/s/ John E. Taylor
- -----------------------------
John E. Taylor
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
None.
(d) Investment Management Agreement between Registrant and CRAFund
Advisors, Inc. dated as of June 1, 1999
(e) Distribution Agreement between Registrant and SunCoast Capital Group,
Ltd. dated as of June 1, 1999
(g) Form of Custodian Agreement between Registrant and First Union
National Bank
(h) Form of Investment Company Services Agreement between Registrant and
Declaration Service Company
(i) Opinion and Consent of Drinker Biddle & Reath LLP
(j)(1) Consent of KPMG LLP
(j)(2) Consent of Drinker Biddle & Reath LLP
(l) Share Purchase Agreement between Registrant and Declaration Service
Company dated as of June 1, 1999
(m)(1) Distribution Plan
(m)(2) Form of Agreement to Distribution Plan
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of June 1, 1999 between THE COMMUNITY REINVESTMENT ACT
QUALIFIED INVESTMENT FUND, a Delaware business trust (the "Trust") and CRAFUND
ADVISORS, INC., a Delaware corporation (the "Manager").
WHEREAS, the Fund is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Manager is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Advisers Act"); and
WHEREAS, the Trust desires to retain the Manager to provide, or to arrange
for the provision of, investment advisory services to an investment portfolio of
the Trust and may retain the Manager to serve in such capacity to any additional
investment portfolios of the Trust, as now or hereafter may be identified in
Schedule A hereto (such investment portfolio and any such additional investment
portfolios together called the "Funds") and the Manager represents that it is
willing and possesses legal authority to so furnish such services without
violation of applicable laws and regulations;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Trust hereby appoints the Manager to act as the
investment manager to the Fund for the period and on the terms set forth in this
Agreement. The Manager accepts such appointment and agrees to furnish the
services herein set forth for the compensation herein provided. Additional
investment portfolios may from time to time be added to those covered by this
Agreement by the parties executing a new Schedule A which shall become effective
upon its execution and shall supersede any Schedule A having an earlier date.
2. MANAGEMENT. Subject to the supervision of the Trust's Board of Trustees,
the Manager will perform the following services:
(i) Provide a continuous investment program and strategy for the
Funds, including investment research and management with respect to all
securities and investments and cash equivalents in the Funds, determining
from time to time what securities and other investments will be invested,
reinvested, owned, held or traded by the Funds. The Manager will provide
the services under this Agreement in accordance with the particular Fund's
investment objective, policies and restrictions as stated in the Prospectus
of the Fund and resolutions of the Trust's Board of Trustees adopted from
time to time;
(ii) The Manager shall, to the extent requested by the Board of
Trustees, provide the personnel to act as officers of the Trust and pay the
salaries
<PAGE>
of such officers, and shall furnish office facilities and equipment, and
related services necessary for the operation of the Trust;
(iii) Transmit information concerning purchases and sales of the
Trust's portfolio securities to the custodian for proper settlement;
(iv) Supply the Trust and its Board of Trustees with reports and
statistical data as requested; and
(v) Prepare a quarterly brokerage allocation summary and monthly
security transaction listing for the Trust.
3. OTHER COVENANTS.
The Manager further agrees that:
(i) It will maintain its registration under the Advisers Act, adopt a
Code of Ethics and provide reports with respect thereto to the Board of
Trustees of the Trust, and will conform with all applicable Rules and
Regulations of the Securities and Exchange Commission;
(ii) It will place orders pursuant to its investment determinations
for the Trust either directly with the issuer or with any broker or dealer.
In executing portfolio transactions and selecting brokers or dealers, the
Manager will use its best efforts to seek on behalf of the Fund the best
overall terms available. In assessing the best overall terms available for
any transaction, the Manager shall consider all factors that it deems
relevant, including the breadth of the market in the security, the price of
the security, the financial condition and execution capability of the
broker or dealer, and the reasonableness of the commission, if any, both
for the specific transaction and on a continuing basis. In evaluating the
best overall terms available, and in selecting the broker dealer to execute
a particular transaction, the Manager may also consider the brokerage and
research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) provided to the Fund and/or other accounts
over which the Manager or an affiliate of the Manager exercises investment
discretion. The Manager is authorized to pay to a broker or dealer who
provides such brokerage and research services a commission for executing a
portfolio transaction for the Fund which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if, but only if, the Manager determines in good faith that such
commission was reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of
that particular transaction or in terms of the overall responsibilities of
the Manager to the Fund. In addition, the Manager is authorized to take
into account the sale of shares of the Trust in allocating to brokers or
dealers purchase and sale orders for the Fund's portfolio securities,
provided that the Manager believes that the quality of the transaction and
the commission are comparable to what they
- 2 -
<PAGE>
would be with other qualified firms. The Manager will make investment
decisions for the Trust independently from those of other clients of the
Manager. However, the same security may be held in the portfolio of more
than one client or Fund when the same security is believed suited for the
investment objectives of more than one client or Fund. Should two or more
clients of the Manager simultaneously be engaged in the purchase or sale of
the same security, to the extent possible, the transactions will be
allocated as to price and amount in a manner fair and equitable to each
client and Fund;
(iii) It will maintain or supervise the maintenance of all books and
records with respect to the securities transactions of the Trust and will
furnish the Trust's Board of Trustees with such periodic and special
reports as the Board may request;
(iv) It will treat confidentially and as proprietary information of
the Trust all records and other information relative to the Trust and
prior, present or potential shareholders, and will not use such records and
information for any purpose other than performance of its responsibilities
and duties hereunder (except after prior notification to and approval in
writing by the Trust, which approval may not be withheld where the Manager
would be exposed to civil or criminal contempt proceedings for failure to
comply, when requested to divulge such information by duly constituted
authorities); and
(v) All software code owned by the Manager or under its control, used
in the performance of its obligations under this Agreement, will be Year
2000 Compliant. For purposes of this paragraph, "Year 2000 Compliant" means
that the software will continue to operate after December 31, 1999 without
creating any logical or mathematical inconsistencies concerning any date
after December 31, 1999 and without decreasing the functionality of the
system applicable to dates prior to January 1, 2000 including, but not
limited to, making changes to (i) date and data century recognition; (ii)
calculations which accommodate same- and multi-century formulas and date
values; and (iii) input/output of date values which reflect century dates.
4. SUB-ADVISOR. It is understood that the Manager may from time to time
employ or associate with itself such person or persons as the Manager believes
to be fitted to assist it in the performance of this Agreement (each a
"Sub-Advisor"); provided, however, that the compensation of such person or
persons shall be paid by the Manager and that the Manager shall be as fully
responsible to the Trust for the acts and omissions of any such person as it is
for its own acts and omissions; and provided further, that the retention of any
Sub-Advisor shall be approved as may be required by the 1940 Act. In the event
that any Sub-Advisor appointed hereunder is terminated, the Manager may provide
investment advisory services pursuant to this Agreement to the Trust without
further shareholder approval.
5. SERVICES NOT EXCLUSIVE. The investment management services furnished by
the Manager hereunder are deemed not to be exclusive, and the Manager shall be
free to
- 3 -
<PAGE>
furnish similar services to others so long as its services under this Agreement
are not impaired thereby. The Manager will for all purposes herein be deemed to
be an independent contractor and will, unless otherwise expressly authorized,
have no authority to act for or represent the Trust in any way or otherwise be
deemed to be its agent.
6. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Manager hereby agrees that all records which it
maintains for the Trust are the property of the Trust and further agrees to
surrender promptly to the Trust any of such records upon the Trust's request.
The Manager further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act the records required to be maintained by Rule 31a-1 under the
1940 Act, and to permit the Trust access to the Manager's records upon the
Trust's request.
7. EXPENSES. During the term of this Agreement, the Manager will pay all
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities (including brokerage commissions, if any)
purchased for the Trust.
8. COMPENSATION. For the services provided and the expenses assumed
pursuant to this Agreement, the Trust will pay the Manager and the Manager will
accept as full compensation therefor a fee as set forth on Schedule A hereto.
The obligations of the Trust to pay the above-described fee to the Manager will
begin as of the date of the initial public sale of shares in the Trust;
provided, however, that the Manager may from time to time waive some or all of
such fees until such time as it notifies the Trust that it has terminated such
waiver. Upon any termination of this Agreement before the end of any month, the
fee for such part of a month shall be prorated according to the proportion which
such period bears to the full monthly period and shall be payable upon the date
of termination of this Agreement.
For the purpose of determining fees payable to the Advisor, the value
of the net assets of a Fund shall be computed in the manner described in the
Trust's Declaration of Trust or in the Prospectus or Statement of Additional
Information of the Fund as from time to time is in effect.
9. LIMITATION OF LIABILITY. The Manager shall not be liable for any error
of judgment or mistake of law or for any loss suffered by the Trust in
connection with the performance of this Agreement, except a loss resulting from
a breach of fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Manager in the performance of its duties or from
reckless disregard by it of its obligations and duties under this Agreement. Any
person, even though also an officer, partner, employee, or agent of the Manager,
who may be or become an officer, director, employee or agent of the Trust shall
be deemed, when rendering service to the Trust or acting on any business of the
Trust (other than services or business in connection with the Manager's duties
as investment advisor hereunder), to be rendering such services to or acting
solely for the Trust and not as an officer, partner, employee or agent or one
under the control or direction of the Manager even though paid by it.
- 4 -
<PAGE>
10. DURATION AND TERMINATION. This Agreement will become effective on the
date first written above, and unless sooner terminated as provided herein, shall
continue in effect until May 31, 2001. Thereafter, if not terminated, this
Agreement shall continue in effect for successive annual periods, provided such
continuance is specifically approved at least annually (a) by the vote of a
majority of those members of the Trust's Board of Trustees who are not
interested persons of any party to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval, and (b) by the Trust's Board
of Trustees or by vote of a majority of the outstanding voting securities of the
particular Fund. Notwithstanding the foregoing, this Agreement may be terminated
at any time, without the payment of any penalty, by the Trust (by vote of the
Trust's Board of Trustees or by vote of a majority of the outstanding voting
securities of the particular Fund), or by the Manager on sixty days' written
notice. This Agreement will immediately and automatically terminate in the event
of its assignment. (As used in this Agreement, the terms "majority of the
outstanding voting securities," "interested persons" and "assignment" shall have
the same meaning as such terms in the 1940 Act.)
11. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
amended 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. No amendment of this Agreement shall be effective until approved in
accordance with the requirements of the 1940 Act.
12. MISCELLANEOUS. Any notice made pursuant to this Agreement shall be
given in writing, addressed and delivered or mailed postage prepaid,
return-receipt requested, to the other party to this Agreement at its principal
place of business. Notice given by a party's attorney shall be deemed to be
notice given by the party. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provisions of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by Maryland law.
- 5 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
THE COMMUNITY REINVESTMENT ACT
QUALIFIED INVESTMENT FUND
By: /s/ David Zwick
---------------------------
Authorized Officer
CRAFUND ADVISORS, INC.
By: /s/ Kenneth H. Thomas
---------------------------
Authorized Officer
- 6 -
<PAGE>
SCHEDULE A
TO THE
INVESTMENT MANAGEMENT AGREEMENT
BETWEEN
THE COMMUNITY REINVESTMENT ACT QUALIFIED INVESTMENT FUND
AND
CRAFUND ADVISORS, INC.
DATED AS OF JUNE 1, 1999
NAME OF FUND COMPENSATION* DATE
------------ ------------- ----
The Community Reinvestment Act Annual Rate of 0.50% of such June 1, 1999
Qualified Investment Fund Fund's average net assets
*All Fees are computed daily and paid monthly.
CRAFUND ADVISORS, INC. THE COMMUNITY REINVESTMENT ACT
QUALIFIED INVESTMENT FUND
By: /s/ Kenneth H. Thomas By: /s/ David Zwick
----------------------------- ---------------------------
Name: Kenneth H. Thomas Name: David Zwick
--------------------------- -------------------------
Title: V.P. Title: President
-------------------------- ------------------------
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT (the "Agreement") is made as of the 1st day of
June, 1999 by and between The Community Reinvestment Act Qualified Investment
Fund, a Delaware business trust (the "Fund"), and SunCoast Capital Group, Ltd.,
a Florida limited partnership (the "Distributor").
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 beneficial interest (the "Shares") under the
Securities Act of 1933, as amended (the "1933 Act"), in one or more distinct
series of Shares (each, a "Portfolio," collectively, the "Portfolios");
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");
WHEREAS, the Fund and the Distributor desire to enter into this Agreement
pursuant to which the Distributor will provide distribution services to each
Portfolio identified on Schedule A, as it 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 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 Shares
received through the Distributor; provided, however, that
<PAGE>
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 issued by the Fund to its
shareholders for reinvestment of dividends and/or distributions in lieu of
payment of such dividends and/or distribution in cash; or (iii) to Shares which
may be issued to shareholders of other funds who exercise any exchange privilege
set forth in a Portfolio'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 documents in effect on the
date hereof: (i) the Fund's Agreement and Declaration of Trust dated as of
January 14, 1999, and By-Laws; (ii) the Fund's Registration Statement on Form N-
1A, including all exhibits thereto; (iii) the current prospectus and statement
of additional information for each Portfolio (collectively, the "Prospectus");
and (iv) resolutions of the Fund's Board of Trustees 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.
2
<PAGE>
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, which shall be
determined as set forth in the Prospectus.
b. 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.
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 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" of the Distributor 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.
3
<PAGE>
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/COMPENSATION. In addition to the sale and
repurchase of Shares, the Distributor shall, at its own expense, except as
otherwise provided by any plan adopted by the Fund under Rule 12b-1 under the
1940 Act (a "12b-1 Plan"), finance appropriate activities which it deems
reasonable which are primarily intended to result in the sale of Shares,
including but not limited to, advertising, compensation of underwriters, dealers
and sales personnel, the printing and mailing of prospectuses and shareholder
reports to other than existing shareholders, the printing and mailing of sales
literature and the distribution support services set forth on Schedule B
attached hereto, as it may be amended from time to time.
5. REASONABLE EFFORTS. The Distributor shall use 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 appropriate 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 all rules of the NASD and the
securities laws of any jurisdiction in which it sells, directly or indirectly,
Shares.
4
<PAGE>
b. The Distributor shall require each dealer with whom the Distributor
has a selling agreement to conform to the applicable provisions of the
Prospectus, with respect to the public offering price of the Shares.
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/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.
e. The Distributor shall not, in connection with any sale or
solicitation of a sale of the Shares, make or authorize any representative,
service organization, broker or dealer to make, any representations concerning
the Shares except those contained in the Prospectus offering the Shares and in
communications with the public or sales materials approved by the Distributor as
information supplemental to such Prospectus.
5
<PAGE>
7. EXPENSES. Expenses shall be allocated as follows:
a. The Fund shall bear the following expenses: (i) preparation,
setting in type, and printing of sufficient copies of the Prospectus for
distribution to existing shareholders; (ii) preparation and printing of reports
and other communications to existing shareholders; (iii) distribution of copies
of the Prospectus and all other communications to existing shareholders; (iv)
registration of the Shares under the Federal securities laws; (v) qualification
of the Shares for sale in the jurisdictions mutually agreed upon by the Fund and
the Distributor; (vi) transfer agent/shareholder servicing agent services; (vii)
supplying information, prices and other data to be furnished by the Fund under
this Agreement; and (viii) any original issue taxes or transfer taxes applicable
to the sale or delivery of the Shares or certificates therefor.
b. The Distributor shall pay all other expenses incident to the sale
and distribution of the Shares sold hereunder, including, without limitation:
(i) printing and distributing copies of the Prospectus and reports prepared for
use in connection with the offering of Shares for sale to the public; (ii)
advertising in connection with such offering, including public relations
services, sales presentations, media charges, preparation, printing and mailing
of advertising and sales literature; (iii) data processing necessary to support
a distribution effort; (iv) distribution and shareholder servicing activities of
broker/dealers and other financial institutions; (v) filing fees required by
regulatory authorities for sales literature and advertising materials; (vi) any
additional out-of-pocket expenses incurred in connection with the foregoing; and
(vii) any other costs of distribution.
8. PAYMENT OF FEES. The Fund shall pay the Distributor any distribution
fees payable under a 12b-1 Plan in the manner provided by such 12b-1 Plan. If
this Agreement
6
<PAGE>
becomes effective subsequent to the first day of the month or terminates before
the last day of the month, any fee payable shall be prorated for that part of
the month in which this Agreement is in effect. Payment for distribution
services are payable solely from the assets of the particular Portfolio for
which such services are rendered, and the Distributor agrees that it will not
seek payment for such services from the assets of any other Portfolio of the
Fund. 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, sales literature or
other material relating to the Fund in a manner not approved prior thereto in
writing by the Distributor, which approval shall not be unreasonably withheld;
provided, however, that the Distributor hereby approves all uses of its and its
affiliates' names that merely refer in accurate terms to their appointments or
that are required by the SEC or any state securities commission.
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, which approval shall not
be unreasonably withheld; provided, however, that the Fund hereby approves 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.
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
7
<PAGE>
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 11 and in Section 12
(except the second paragraph of Section 12), the term "Distributor" shall
include directors, partners, officers, employees and other agents of the
Distributor.
12. INDEMNIFICATION OF DISTRIBUTOR. Any director, partner, officer,
employee or shareholder of the Distributor who may be or become an officer or
trustee 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, partner,
officer, employee or shareholder, 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, actions,
proceedings and expenses (including, without limitation, reasonable attorneys'
fees) (collectively, "Losses") 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 Losses arise out of any
untrue statement or alleged untrue statement of a material fact contained in the
Prospectus, 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 any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
8
<PAGE>
the statements therein not misleading; provided, however, that the Distributor
(or any person controlling the Distributor) shall not be entitled to indemnity
hereunder for any Losses resulting from (i) an untrue statement or omission or
alleged untrue statement or omission made in the Prospectus, supplement thereto,
or sales literature or other written information prepared by the Fund 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 Losses 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
Losses arise out of any untrue statement or alleged untrue statement of a
material fact contained in the Prospectus or any supplement thereto, or arise
out of 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.
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
9
<PAGE>
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 conflict of interest, the Indemnitor shall advance to or
reimburse the Indemnitee, at the election of the Indemnitee, reasonable fees and
disbursements of any counsel retained by the Indemnitee, including reasonable
investigation costs.
13. YEAR 2000 COMPLIANCE. The Distributor agrees to perform comprehensive
date testing on the systems it utilizes to provide the services hereunder to
simulate the transition from December 31, 1999 to January 1, 2000. These tests
shall be intended to identify any operational issues regarding the accurate
processing of date/time data before, on, and after January 1, 2000, including
leap year calculations. The Distributor agrees to use all commercially
reasonable efforts to implement all necessary updates and changes for such
systems, if any, to accommodate
10
<PAGE>
the year 2000 if not making such updates or changes would have a material or
significant adverse effect on the services to be performed by the Distributor
hereunder, and shall have substantially tested such upgrades and changes by
March 31, 1999. Distributor agrees to provide the Fund quarterly updates on the
status of its year 2000 readiness project and to make its personnel reasonably
available to address any questions or concerns.
Promptly upon becoming aware of such, the Distributor agrees to use
all commercially reasonable efforts to cure any defect or deficiency that
relates to the processing of date/time data before, on, and after January 1,
2000, including leap year calculations, in any system the Distributor utilizes
to provide services hereunder if not curing such defect or deficiency would have
a material or significant adverse effect on the services to be performed by the
Distributor hereunder.
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.
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
11
<PAGE>
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.
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 (i) either the Board of Trustees 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 Trustees of the Fund 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 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 this 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 Trustees 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.
12
<PAGE>
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 Fund shall pay to the
Distributor such compensation 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. 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 authorized
representatives of the Distributor and the Fund and shall not become effective
unless its terms have been approved by (i) either the majority of the Trustees
of the Fund, or by a vote of majority of the outstanding voting securities of
the Fund, and (ii) by a majority of those Trustees who are not parties to this
Agreement or interested persons of such party, cast in person at a meeting
called for the purpose of approving such waiver, alternation, modification,
amendment or supplement.
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.
13
<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. MATTERS RELATING TO THE FUND AS A DELAWARE BUSINESS TRUST. The
Community Reinvestment Act Qualified Investment Fund is a business trust
organized under the laws of the State of Delaware and under an Agreement and
Declaration of Trust dated as of January 14, 1999, as may be amended from time
to time, to which reference is hereby made. The obligations of "The Community
Reinvestment Act Qualified Investment Fund" entered into in the name or on
behalf thereof by any of the Trustees, officers, employees or agents are made
not individually, but in such capacities, and are not binding upon any of the
Trustees, officers, employees, agents or shareholders of the Fund personally,
but bind only the assets of the Fund and all persons dealing with any Portfolio
of the Fund must look solely to the assets of the Fund belonging to such
Portfolio for the enforcement of any claims against the Fund.
23. 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
14
<PAGE>
communication being made by one or the other means specified in this Section 23
as promptly as practicable thereafter). Notices shall be addressed as follows:
(a) If to the Fund:
The Community Reinvestment Act Qualified
Investment Fund
1751 West Cypress Creek Road
Fort Lauderdale, FL 33309
ATTN: President
(b) if to the Distributor:
SunCoast Capital Group, Ltd.
1751 West Cypress Creek Road
Fort Lauderdale, FL 33309
ATTN: President
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.
24. 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.
25. GOVERNING LAW. This Agreement shall be administered, construed and
enforced in accordance with the laws of the State of Delaware 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.
26. ENTIRE AGREEMENT. This Agreement (including the Schedules attached
hereto) contains the entire agreement and understanding of the parties with
respect to the subject matter
15
<PAGE>
hereof and supersedes all prior written or oral agreements and understandings
with respect thereto.
27. 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 hereto have duly executed this
Agreement as of the day and year first above written.
THE COMMUNITY REINVESTMENT
ACT QUALIFIED INVESTMENT FUND
By: /s/ David Zwick
---------------------------------
Title: President
------------------------------
SUNCOAST CAPITAL GROUP, LTD.
By: /s/ Todd J. Cohen
---------------------------------
Title: President
------------------------------
16
<PAGE>
SCHEDULE A
TO THE DISTRIBUTION AGREEMENT BETWEEN
THE COMMUNITY REINVESTMENT ACT QUALIFIED INVESTMENT FUND
AND SUNCOAST CAPITAL GROUP, LTD.
June 1, 1999
Portfolios covered by Distribution Agreement:
The Community Reinvestment Act Qualified Investment Fund
<PAGE>
SCHEDULE B
TO THE DISTRIBUTION AGREEMENT BETWEEN
THE COMMUNITY REINVESTMENT ACT QUALIFIED INVESTMENT FUND
AND SUNCOAST CAPITAL GROUP, LTD.
June 1, 1999
Distribution Support Services
1. Provide national broker/dealer for Fund registration.
2. Review and submit for approval all advertising and promotional materials.
3. Maintain all books and records required by the NASD.
4. Monitor Distribution Plan and report to Board of Trustees.
5. Prepare quarterly reports to the Board of Trustees relating to distribution
activities.
6. License personnel as registered representatives of the Distributor.
7. Telemarketing services.
8. Fund fulfillment services, including sampling prospective shareholders
inquiries and related mailings.
CUSTODIAN AGREEMENT
The Community Reinvestment Act Qualified Investment Fund
This agreement dated as of the ____ day of ____________ by and between The
Community Reinvestment Act Qualified Investment Fund (the "Trust"), a business
trust duly organized under the laws of the State of Delaware and First Union
National Bank (the "Bank").
WHEREAS, the Trust desires to appoint the Bank to act as Custodian of its
portfolio securities, cash and other property from time to time deposited with
or collected by the Bank for the Trust;
WHEREAS, the Bank is qualified and authorized to act as Custodian for the
Trust and the Trust's fund and any future funds (each, a "Fund"), and is willing
to act in such capacity upon the terms and conditions herein set forth;
NOW THEREFORE, in consideration of the premises and of the mutual covenants
herein contained, the parties hereto, intending to be legally bound, do hereby
agree as follows:
SECTION 1. The terms as defined in this Section wherever used in this Agreement,
or in any amendment or supplement hereto, shall have 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 received Proper Instructions upon receipt of written (including
instructions received by means of computer terminals of facsimile
transmissions), telephone or telegraphic instructions from a person or persons
authorized from time to time by the Trustees of the Trust to give the particular
class of instructions. Telephone or telegraphic instructions shall be confirmed
in writing by such persons as said Trustees shall have from time to time
authorized to give the particular class of instructions in question. The
Custodian may act upon telephone or telegraphic instructions without awaiting
receipt of written confirmation, and shall not be liable for the Trust'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.
<PAGE>
SHAREHOLDERS: The term Shareholders shall mean the registered owners from time
to time of the Shares of the Trust in accordance with the registry records
maintained by the Trust or agents on its behalf.
SECTION 2. The Trust hereby appoints the Custodian as Custodian of the Trust'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 Trust on the books and records of the Bank
to hold the Securities of the Trust deposited with, transferred to or collected
by the Bank for the account of each Fund of the Trust, 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 Trust. Such cash shall be segregated from
the assets of others and shall be and remain the sole property of the Trust.
SECTION 3. The Trust shall from time to time file with the Custodian a certified
copy of each resolution of its Board of Trustees authorizing the 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 Trust.
SECTION 4. The Trust will cause to be deposited with the Custodian hereunder the
applicable net asset value of 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 Trust, is authorized, directed and
instructed subject to the further provisions of this Agreement.
(a) to hold Securities issued only 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 for deposit (i) with any
domestic 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 Trust all proceeds received and
payable on or in respect of the assets maintained hereunder,
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(ii) to debit the account of the Trust for the cost of acquiring
Securities the Bank has received for the Trust, against delivery
of such Securities to the Bank,
(iii)to present for payment Securities and other obligations
(including coupons) upon maturity, when called for 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 form for Securities in definitive form or the mandatory
exchange of certificates;
(e) to forward to the Trust, and/or any other person designated by the
Trust, all proxies and proxy materials received by the Bank in
connection with Securities held in the Trust's account, which have
been registered in the name of the Bank's nominee, or are 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 Trust's name, address and aggregate share position to
the issuers of any domestic Securities in the account of the Trust, or
provide any such information to any issuer;
(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
Trust;
(i) upon the receipt of Proper Instructions, to enroll designated
Securities belonging to the Trust 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) upon the receipt of Proper Instructions, 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, dealers or similar agents selected by the Trust,
including any broker, dealer or similar agent affiliated with the
Bank, for the account and risk of the Trust in accordance with
accepted industry practice in the relevant market, provided, however,
if it is determined that any certificated Securities shall be
transferred to a Depository or, upon the receipt of Proper
Instructions, to a sub-custodian or nominee of the Bank, the Bank's
sole responsibilities for such Securities under this Agreement shall
be to safekeep the Securities in accordance with Section 11 hereof and
to use its best efforts to carry out the other provisions of this
Agreement; and
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(k) to notify the Trust and/or any other person designated by the Trust
upon receipt of notice by the Bank of any call for redemption, tender
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 Trust 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 Trust
shall have the sole responsibility for monitoring the applicable dates
on which Securities with put option features must be exercised.
Notwithstanding anything in this Section to the contrary, the Bank is authorized
to hold Securities for the Trust which have transfer limitations imposed upon
them by the Securities Act of 1993, as amended, or represent shares of mutual
funds (i) in the name of the Trust, (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 Trust and to the extent such compensation relates to services
provided hereunder to the Trust. All expenses and taxes payable with respect to
the Securities in the account of the Trust 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 or against the Bank's nominee by reason of any registration
hereunder shall be charged to the Trust.
SECTION 7. In connection with its functions under this Agreement, the Custodian
shall:
(a) promptly after the close of business on each day, furnish the Trust
with a summary of transfers to or from the accounts of each Fund and
all monies received or paid on behalf of each Fund during such day,
either hereunder or with any sub-custodian appointed in accordance
with this Agreement; and furnish the Trust monthly with a detailed
statement of the Securities and money held by the Custodian for each
Fund;
(b) use commercially reasonable efforts to ensure that the computer
software and hardware that are owned by the Bank and used by the Bank
to provide the services under this Agreement are 2000 compliant or
will be made 2000 compliant before December 31, 1999. As used herein,
the term "2000 Compliant" means that the Custodian's computer software
and hardware will function without material error caused by the
introduction of dates falling on or after January 1, 2000; and
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(c) 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 Trust with respect to said 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
Trust and in the event of termination of this Agreement will be
relinquished to the Trust.
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.
Should any Securities which are forwarded to the Bank by the Trust, and which
are subsequently deposited to the Bank's account in any Depository or with any
sub-custodian, or which the Trust 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 Trust agrees to furnish the Bank as soon as possible with
like Securities in acceptable form.
SECTION 9. The Trust 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 Trust is a party or which
is otherwise known to the Trust; (iv) it does not require the consent or
approval of any governmental agency or instrumentality, except any such consents
and approvals which the Trust has obtained; (v) the execution and delivery of
this Agreement by the Trust will not violate any law, regulation, charter,
by-law, order of any court or governmental agency or judgment applicable to the
Trust; and (vi) all persons executing this Agreement on behalf of the Trust and
carrying out the transactions contemplated hereby on behalf of the Trust are
duly authorized to do so.
In the event any of the foregoing representations should become untrue,
incorrect or misleading, the Trust 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 and
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 judgment applicable to the Bank;
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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
Trust 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 Trust.
SECTION 12. No liability of any kind shall be attached to or incurred by the
Custodian by reason of its custody of the Trust'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 Custodian
Agreement. Without limiting the generality of the foregoing sentence, the
Custodian:
(a) may rely upon the advice of counsel for the Trust; and for any action
taken or suffered in good faith based upon such advice or statements
the Custodian shall not be liable to anyone;
(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 Trust or its authorized officers or
agents;
(c) is authorized to accept a certificate of the Secretary or Assistant
Secretary of the Trust, or Proper Instructions, to the effect that a
resolution in the form submitted has been duly adopted by its Board of
Trustees 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 be genuine and to have been signed,
forwarded or presented by the purchaser, Trust or other proper party
or parties.
SECTION 13. The Trust, 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 Trust 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 Trust, or from the failure of the Trust to
perform any duty or obligation under this Agreement.
Upon written request of the Custodian, the Trust 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
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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 Trust
and the Bank and amending and supplementing this Agreement in the manner
mutually agreed.
SECTION 15. Either the Trust or the Custodian may give one hundred twenty (120)
days' 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 Trust or by the Custodian, the
Trustees of the Trust shall, by resolution duly adopted, promptly appoint a
successor Custodian (the "Successor Custodian") which Successor Custodian shall
be a bank, trust company, or a bank and trust company in good standing, with
legal capacity to accept custody of the cash and Securities of a mutual fund.
Upon receipt of written notice from the Trust of the appointment of such
Successor Custodian and upon receipt of Proper Instructions, the Custodian shall
deliver such cash and Securities as it may then be holding hereunder directly
and only to the Successor Custodian. Unless or until a Successor Custodian has
been appointed 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
Trust and the Successor Custodian and upon payment of its charges and
disbursements, execute an 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 of 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 Trust 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.
SECTION 18. The Certificate of Trust of the Trust is on file with the Secretary
of State of Delaware, and notice is hereby given that this instrument is
executed on behalf of the Trustees of the Trust as Trustees and not individually
and that the obligations of this instrument are not binding
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upon any of the Trustees, officers or Shareholders of the Trust individually,
but binding only upon the assets and property of the Trust. No Fund of the Trust
shall be liable for the obligations of any other Fund of the Trust.
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 Trust under the Investment Company Act of 1940, as amended
(the "1940 Act"), including but not limited to Section 31 thereof and Rules 31
a-1 and 31 a-2 thereunder, applicable Federal and state tax laws and any other
law or administrative rules or procedures which may be applicable to the Trust.
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 Trust.
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 extend to and shall be binding upon the parties
hereto and their respective successors and assigns; provided , however, that
this Agreement shall not be assignable by the Trust without the written consent
of the Custodian, or by the Custodian without the written consent of the Trust,
authorized or approved by a resolution of its Board of Trustees.
SECTION 23. All communications (other than 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 communications as the Bank deems advisable.
To the Trust: The Community Reinvestment Act Qualified
Investment Fund
1751 West Cypress Creek Road
Fort Lauderdale, FL 33309
To the Bank: First Union National Bank
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.
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SECTION 25. Fees and Expenses
As compensation for its services under this Agreement, Agent 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. Customer
recognizes that this schedule might be changed from time to time with prior
notice to Customer.
MUTUAL FUND CUSTODY ADMINISTRATIVE FEES
1.00 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 ADMINISTRATIVE FEE: $3,500
TRANSACTION FEES
$ 4.00 per trade and maturity through Depository Trust Company via DepLink
$10.00 per trade and maturity through Depository Trusty 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 Futures contracts
$15.00 Options
IN WITNESS WHEREOF, the Trust and the Custodian have caused this Agreement to be
signed by their respective officers as of the day and year first above written.
By: THE COMMUNITY REINVESTMENT ACT
QUALIFIED INVESTMENT FUND
------------------------------
Name:
Title:
By: FIRST UNION NATIONAL BANK
------------------------------
Name: Paul T. Cahill
Title: Vice President
INVESTMENT COMPANY SERVICES AGREEMENT
The Community Reinvestment Act Qualified Investment Fund
This AGREEMENT, dated as of the ____ day of _____________, 1999, made by
and between The Community Reinvestment Act Qualified Investment Fund, (the
"Fund"), a business trust 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 Delaware, 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 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 of 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:
<PAGE>
GENERAL PROVISIONS
Section 1. Appointment. The Fund hereby appoints Declaration as servicing
agent and Declaration hereby accepts such appointment. In order that Declaration
may perform its duties under the terms of this Agreement, the Board of Trustees
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.
Declaration shall, for all purposes herein, be deemed to be an independent
contractor and, unless otherwise expressly provided or authorized, shall have no
authority to act for or represent the Fund in any way and shall not be deemed to
be an agent 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 as
amended from time to time and delivered to Declaration;
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(d) any policies and determinations of the Board of Trustees 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.
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.
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"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 signed by an officer 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 Trustees 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
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authorized by a resolution of the Board of Trustees 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
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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 Trustees authorizing execution of Written Instructions
or the transmittal of Oral Instructions as provided above.
Section 4. Indemnification.
(a) 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'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 of, or under the control or direction of Declaration even though such
person may be receiving compensation from Declaration.
(b) The Fund agrees to indemnify and hold Declaration harmless,
together with its directors, officers, employees, shareholders and agents
(collectively, "Declaration Indemnified Parties") 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 any Declaration Indemnified Party may
sustain or incur or which may be asserted against any Declaration Indemnified
Party 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 the failure of
Declaration to comply with
6
<PAGE>
the terms of this Agreement or applicable federal or state laws or regulations,
or which arise out of Declaration's negligence, bad faith, or willful
misconduct; 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 as to which any Declaration Indemnified Party may seek
indemnity under this Section, such party 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 such party within ten (10) days after such party
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 such Declaration Indemnified Parties will cooperate in the
control of the defense of any such action, suit or proceeding and for which
indemnity is being provided by the Fund. The Fund may negotiate the settlement
of any action, suit or proceeding subject to the approval of such Declaration
Indemnified Parties, which will not be unreasonably withheld. Each such
Declaration Indemnified Party 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
7
<PAGE>
expenses incurred by such Declaration Indemnified Party in connection with, or
as a result of such participation, will be borne solely by the Fund if:
(i) such Declaration Indemnified Party has received an opinion
from counsel to the Fund stating that the use of counsel to the Fund by such
Declaration Indemnified Party would present an impermissible conflict of
interest;
(ii) the defendants in, or targets of, any such action or
proceeding include both a Declaration Indemnified Party and the Fund, and legal
counsel to a Declaration Indemnified Party 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 the Declaration Indemnified
Party); or
(iii) the Fund authorizes a Declaration Indemnified Party to
employ separate counsel at the expense of the Fund.
(c) Declaration agrees to indemnify and hold the Fund harmless,
together with its trustees, officers, employees, shareholders and agents
(collectively, "Fund Indemnified Parties") 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 any Fund Indemnified Party may sustain or incur or
which may be asserted against any Fund Indemnified Party by any person by reason
of, or as a result of the failure of Declaration to comply with the terms of
this Agreement or applicable federal or state laws or regulations or which arise
out of Declaration's negligence, bad faith, or willful misconduct, except
claims, demands, expenses and liabilities arising from willful misfeasance, bad
faith, negligence or reckless disregard on the part of the Fund in the
performance of its obligations and duties under this Agreement.
8
<PAGE>
If a claim is made as to which any Fund Indemnified Party may seek
indemnity under this Section, such party will notify Declaration promptly after
receipt of any written assertion of such claim threatening to institute an
action or proceeding with respect thereto and will notify Declaration promptly
of any action commenced against such party within ten (10) days after such party
has been served with a summons or other legal process. Failure to notify
Declaration will not, however, relieve Declaration from any liability which it
may have on account of the indemnity under this Section so long as Declaration
has not been prejudiced in any material respect by such failure.
Such Fund Indemnified Parties and Declaration will cooperate in the control
of the defense of any such action, suit or proceeding and for which indemnity is
being provided by Declaration. Declaration may negotiate the settlement of any
action, suit or proceeding subject to the approval of such Fund Indemnified
Parties, which will not be unreasonably withheld. Each such Fund Indemnified
Party 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 such Fund Indemnified Party in connection with, or as a
result of such participation, will be borne solely by Declaration if:
(i) such Fund Indemnified Party has received an opinion from
counsel to Declaration stating that the use of counsel to Declaration by such
Fund Indemnified Party would present an impermissible conflict of interest;
(ii) the defendants in, or targets of, any such action or
proceeding include both Declaration and a Fund Indemnified Party and legal
counsel to such Fund Indemnified Party has reasonably concluded that there are
legal defenses available to it which are
9
<PAGE>
different from or additional to those available to Declaration or which may be
adverse to or inconsistent with defenses available to Declaration (in which case
Declaration will not have the right to direct the defense of such action on
behalf of such Fund Indemnified Party); or
(iii) Declaration authorizes such Fund Indemnified Party to
employ separate counsel at the expense of Declaration.
(d) The terms of this Section 4 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;
10
<PAGE>
(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 Delaware;
(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.
11
<PAGE>
(c) Delivery of Documents
The Fund will furnish or cause to be furnished to Declaration the
following documents as soon as such documents are available:
(i) current Prospectus and Statement of Additional Information;
and
(ii) certified copies of resolutions of the Fund's Board of
Trustees authorizing the execution of Written Instructions or the transmittal of
Oral Instructions and those persons authorized to give those Instructions.
(d) 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 3la-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 Fund 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
12
<PAGE>
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, Declaration is authorized to
collect such fees by debiting the Fund's custody account. In addition, the Fund
agrees promptly to reimburse Declaration for any out-of-pocket expenses paid by
Declaration on behalf of the Fund.
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.
If this Agreement becomes effective subsequent to the first day of a month
or terminates before the last day of a month, Declaration's compensation for
that part of the month in which this Agreement is in effect shall be prorated in
a manner consistent with the calculation of the fees as set forth above.
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 the Fund 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 to the
Fund by Declaration. The Fund must notify Declaration in writing of any
contested amounts within five (5) days of receipt of a billing for such amounts.
Disputed amounts are not due and payable while they are being disputed.
13
<PAGE>
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 shall
notify the Fund and secure instructions as to permitting or refusing such
inspection. Declaration may, however, make such
14
<PAGE>
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's duties under this Agreement.
Declaration will use commercially reasonable efforts to ensure that the
computer software and hardware that are owned and used by Declaration to provide
services under this Agreement are 2000 compliant or will be 2000 compliant
before December 31, 1999. As used herein, the term "2000 Compliant" means that
the Custodian's computer software and hardware will function without material
error caused by the introduction of dates falling on or after January 1, 2000.
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 and will continue
thereafter subject to the Parties' review and any adjustment.
15
<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 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's 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 Fund'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
16
<PAGE>
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 and after the
passage of one (1) year from the Effective Date, in the event the Fund
reorganizes into another entity, liquidates or otherwise ceases to exist, 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 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 gross 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
17
<PAGE>
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 Declaration of Trust,
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's approval of such amendments or changes.
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 nonpublic 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.
18
<PAGE>
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 Declaration:
--------------- ------------------
The Community Reinvestment Act Declaration Service Company.
Qualified Investment Fund 555 North Lane, Suite 6160
1751 West Cypress Creek Road Conshohocken, PA 19428
Fort Lauderdale, FL 33309 Attention: Terence P. Smith
Attention: David A. Zwick President
President
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
in writing.
Section 16. Authorization. Each Party represents and warrants to the other
that the execution and delivery of this Agreement by the undersigned officer of
such Party has been duly and validly authorized; and when duly executed, this
Agreement will constitute a valid and legally binding enforceable obligation of
such Party.
19
<PAGE>
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 the Fund without the
written consent of Declaration or by Declaration without the written consent of
the Fund.
Section 19. Governing Law. This Agreement will be governed by the laws of
the State of Pennsylvania and the exclusive venues of any action arising under
this Agreement will be Montgomery County, Commonwealth of Pennsylvania or any
federal court with jurisdiction.
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.
20
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement, together
with Schedules "A," "B" and "C", to be signed by their duly authorized officers
as of the day and year first above written.
The Community Reinvestment Act Declaration Service Company
Qualified Investment Fund
- ---------------------------- ----------------------------
By: David A. Zwick By: Terence P. Smith
President President
<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 advisor 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 advisor with the beginning cash balance available for
investment purposes.
o Update the cash availability throughout the day as required by the advisor.
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 advisor, 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 advisor.
o Compute the net asset value of each Portfolio.
o Report applicable net asset value and performance data to performance
tracking organizations.
<PAGE>
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 Prepare and file the Fund's Federal and state tax returns subject to review
by the Fund's independent accountants.
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.
<PAGE>
ADMINISTRATIVE SERVICES PROVIDED BY DECLARATION SERVICE COMPANY
- --------------------------------------------------------------------------------
o Provide overall day-to-day Fund administrative management, including
coordination of investment advisor, custodian, transfer agency, distribution
and pricing and accounting services.
o Preparation of filing of all Federal and State reports, including:
. Fund's post-effective amendments under the Securities Act of 1933 and the
Investment Company Act of 1940.
. Form N-SAR - Semi-Annual report for Registered Investment Companies.
. The Fund's Annual and Semi-Annual Report.
. Rule 24f-2 Notice - filing regarding sale(s) of securities.
. Rule 17g-1 filing with the SEC regarding Fidelity Bond coverage.
. Ongoing monitoring and filing of State Blue Sky registrations.
o Prepare and file such reports, applications and documents as may he 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 advisor, custodian, transfer agent/shareholder servicing agent,
distributor, and accounting services agent.
o Prepare and maintain materials for trustees/management meetings including
agendas.
o Coordinate shareholder meetings, including assisting Fund counsel in
preparation of proxy materials, preparation of minutes and tabulation of
results.
<PAGE>
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 Obtain and keep in effect fidelity bonds and Trustees and officers/errors and
omissions insurance policies for the Fund in accordance with the requirements
of Rules 17g-1 and 17d-1(7) under the 1940 Act as such bonds and policies are
approved by the Fund's Board of Trustees.
o Prepare such reports relating to the business and affairs of the Portfolio
(not otherwise appropriately prepared by the Fund's investment adviser,
counsel or auditors) as the Trustees of the Fund may from time to time
reasonably request in connection with the performance of their duties.
o Provide reviews and quarterly compliance reports to the Trustees regarding
all applicable regulatory and operating requirements.
o Answer such correspondence and inquiries from Shareholders, securities
brokers and others relating to its duties hereunder and such other
correspondence and inquiries from time to time on such terms as may be
mutually agreed upon between the Administrator and the Fund.
o Prepare and distribute to appropriate parties notices announcing the
declaration of dividends and other distributions to shareholders.
o Provide other administrative services as may be agreed from time to time in
writing by the Fund or Administrator.
<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 dg ,
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:
. Name and address, including zip code.
. Balance of Shares.
. Number of Shares, issuance date of each share outstanding and cancellation
date of each share no longer outstanding, if issued.
. Balance of dollars available for redemption.
. Dividend code (daily accrual, monthly reinvest, monthly cash or quarterly
cash).
. Type of account code.
. Establishment date indicating the date an account was opened, carrying
forward pre-conversion data as available.
. Original establishment date for accounts opened by exchange.
. W-9 withholding status and periodic reporting.
. State of residence code.
<PAGE>
. Social security or taxpayer identification number, and indication of
certification.
. Historical transactions on the account for the most recent 18 months, or
other period as mutually agreed to from time to time.
. 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:
. Prepare daily journals for Fund reflecting all shares and dollar activity
for the previous day.
. Supply information monthly for Funds preparation of Blue Sky reporting.
. Supply monthly purchase, redemption and liquidation information for use in
Fund's N-SAR report.
. Provide monthly average daily balance reports for the Fund.
. Prepare and mail copies of summary statements to dealers and investment
advisors.
. Mail transaction confirmation statements daily to investors.
. Address and mail four periodic financial reports (material must be
adaptable to Transfer Agent's mechanical equipment as reasonably specified
by the Transfer Agent).
. Mail periodic statement to investors.
. Compute, prepare and furnish all necessary reports to governmental
authorities: Forms 1099R, 1099DIV, 1099B, 1042 and 1042S. 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
Fund Accounting, Fund Administration
- ------------------------------------
As a percentage of aggregate annual average assets for all classes of shares of
all Portfolios:
0.10% on first $75 million of average annual assets
0.075% on next $75 million of average annual assets
0.04% on next $150 million of average annual assets
0.03% in excess of $300 million of average annual assets
Transfer Agent/Shareholder Services, per Portfolio
- --------------------------------------------------
$10,000 Annual Fee
Minimum Annual Fee, per Portfolio
- ---------------------------------
$60,000 for the first class of shares during each of the first two years of
the Agreement
$30,000 additional for a second class of shares during each of the first
two years of the Agreement
$15,000 additional for each additional class of shares during each of the
first two years of the Agreement
Plus out-of-pocket expenses to include, but not limited to: wire fees, bank
services charges, printing, copying, postage, courier, account
statement/confirmation (including programming costs for specialized
statements/confirmations), Fund/SERV Fund specific costs, 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 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 COMMUNITY REINVESTMENT ACT QUALIFIED INVESTMENT FUND
Portfolios covered by this Agreement:
The Community Reinvestment Act Qualified Investment Fund
DRINKER BIDDLE & REATH LLP
1345 CHESTNUT STREET
PHILADELPHIA, PA 19107
June 7, 1999
The Community Reinvestment Act Qualified Investment Fund
1751 West Cypress Creek Road
Ft. Lauderdale, FL 33309
RE: Registration Statement on Form N-1A
-----------------------------------
Ladies and Gentlemen:
We have acted as counsel to The Community Reinvestment Act Qualified
Investment Fund, a Delaware business trust (the "Trust"), in connection with the
preparation and filing with the Securities and Exchange Commission of the
Trust's Registration Statement on Form N-1A and Pre-Effective Amendments Nos. 1
and 2 thereto under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended.
The Trust is authorized to issue an unlimited number of shares of
beneficial interest (the "Shares"), with no par value. The Board of Trustees of
the Trust has the power to create and establish one or more series or classes of
Shares and to classify or reclassify any unissued Shares with respect to such
series or classes.
We have reviewed the Trust's Agreement and Declaration of Trust, By-Laws,
actions of its trustees and initial shareholder, and such other legal and
factual matters as we have deemed appropriate. We have assumed that the Shares
have been or will be issued against payment therefor as described in the Trust's
Prospectus.
The opinion is based exclusively on the Delaware Business Trust Act and the
federal law of the United States of America.
Based upon the foregoing, it is our opinion that the Shares of the Trust,
when issued as described in the prospectus for the Trust, will be validly
issued, fully paid and non-assessable by the Trust, and that the holders of the
Shares of the Trust will be entitled to the same limitation of personal
liability extended to stockholders of private corporations for profit organized
under the general corporation law of the State of Delaware (except that we
express no opinion as to such holders who are also trustees of the Trust).
<PAGE>
The Community Reinvestment Act Qualified Investment Fund
June 7, 1999
Page 2
We hereby consent to the filing of this opinion as an exhibit to
Pre-Effective Amendment No. 2 the Trust's Registration Statement on Form N-1A.
Very truly yours,
/s/ Drinker Biddle & Reath LLP
DRINKER BIDDLE & REATH LLP
EXHIBIT (j)(1)
Independent Auditors' Consent
-----------------------------
To the Trustees
The Community Reinvestment Act Qualified Investment Fund:
We consent to the use of our report dated June 3, 1999 incorporated by reference
herein and to the references to our firm under the heading of "Financial
Statements" in the Statement of Additional Information in the Registration
Statement.
KPMG LLP /s/
Philadelphia, PA
June 3, 1999
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the reference to our Firm
under the caption "Counsel" in the Statement of Additional Information that is
included in Pre-Effective Amendment No. 2 to the Registration Statement on Form
N-1A under the Securities Act of 1933, as amended, and the Investment Company
Act of 1940, as amended, of The Community Reinvestment Act Qualified Investment
Fund. This consent does not constitute a consent under Section 7 of the
Securities Act of 1933, and in consenting to the use of our name and the
reference to our Firm under such caption we have not certified any part of
Pre-Effective Amendment No. 2 and do not otherwise come within the categories of
persons whose consent is required under Section 7 or the rules and regulations
of the Securities and Exchange Commission thereunder.
/s/ Drinker Biddle & Reath LLP
--------------------------------
Philadelphia, Pennsylvania Drinker Biddle & Reath LLP
June 7, 1999
SHARE PURCHASE AGREEMENT
The Community Reinvestment Act Qualified Investment Fund, a Delaware
business trust (the "Trust"), and CRAFund Advisors, Inc., a Delaware corporation
("Buyer"), hereby agree as follows:
1. The Trust hereby offers Buyer and Buyer hereby purchases, in
consideration for the payment of $100,000.00, 10,000 shares of beneficial
interest of the Trust for a purchase price of $10.00 per share.
2. Buyer acknowledges that the shares purchased hereunder have not been
registered under the federal securities laws and that the Trust is relying on
certain exemptions from such registration requirements. Buyer represents and
warrants that it is acquiring such shares solely for investment purposes and
that Buyer has no present intention to redeem, sell or otherwise dispose of the
shares.
3. This Agreement shall be governed by the laws of the State of Delaware.
The Trust is a business trust organized under the laws of Delaware and under a
Declaration of Trust, including any and all amendments thereto. The obligations
of "The Community Reinvestment Act Qualified Investment Fund" entered into in
the name or on behalf thereof by any of the Trustees, officers, employees or
agents are made not individually, but in such capacities, and are not binding
upon any of the Trustees, officers, employees, agents or shareholders of the
Trust
<PAGE>
personally but bind only the assets of the Trust, and all persons dealing with
the Trust must look solely to the assets of the Trust for the enforcement of any
claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the 1st day of June, 1999.
(SEAL)
THE COMMUNITY REINVESTMENT ACT
QUALIFIED INVESTMENT FUND
By: /s/ David Zwick
-------------------------
Name: David Zwick
-----------------------
Title: President
----------------------
CRAFUND ADVISORS, INC.
By: /s/ Todd J. Cohen
-------------------------
Name: Todd J. Cohen
-----------------------
Title: President
----------------------
THE COMMUNITY REINVESTMENT ACT
QUALIFIED INVESTMENT FUND
DISTRIBUTION PLAN
This Distribution Plan (the "Plan") has been adopted by the Board of
Trustees of The Community Reinvestment Act Qualified Investment Fund (the
"Fund") in connection with the shares of the Fund. The Plan has been adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended (the
"1940 Act").
Section 1. Distribution Payments. (a) The Fund may pay the Fund's
distributor (the "Distributor") (or any other person) an amount (a "Distribution
Payment") of up to 0.25% annually of the average daily net assets attributable
to the outstanding shares of the Fund. The Distribution Payment shall be
calculated and accrued daily, paid monthly and shall be in consideration for
distribution and other services and the assumption of related expenses
(including the payment of commissions and transaction fees) in conjunction with
the shares of the Fund. In determining the amounts payable on behalf of the Fund
under the Plan, the net asset value of the shares shall be computed in the
manner specified in the Fund's then current Prospectus and Statement of
Additional Information describing the Fund's shares.
(b) Payments to the Distributor under subsection (a) above shall be used to
cover expenses that are related to (a) the distribution of shares of the Fund,
(b) ongoing servicing and/or maintenance of the accounts of shareholders of the
Fund, (c) payments to institutions for selling shares of the Fund, and (d)
sub-transfer agency, sub-accounting, administrative or similar services related
to shares of the Funds.
Section 2. Expenses Allocated; Compliance. Amounts paid by the Fund under
the Plan must be for distribution services rendered for or on behalf of the
holders of the Fund's shares. However, joint distribution financing or other
services rendered with respect to such shares (which may involve other
investment funds or companies that are affiliated persons of the Fund or
affiliated persons of the Distributor) is authorized to the extent permitted by
law.
Section 3. Reports to Fund. So long as this Plan is in effect, the
Distributor shall provide the Fund's Board of Trustees, and the Trustees shall
review, at least quarterly, a written report of the amounts expended pursuant to
the Plan and the purposes for which such expenditures were made.
Section 4. Approval of Plan. This Plan will become effective with respect
to the Fund's shares on the date the public offering of the Fund's shares
commences provided this Plan has been approved by a majority of the Board of
Trustees, including a majority of those trustees who are not "interested
persons" (as defined in the 1940 Act) of the Fund and who have no direct or
indirect financial interest in the operation of the Plan or in any agreements
entered into in connection with the Plan (the "Disinterested Trustees"),
pursuant to a vote cast in person
<PAGE>
at a meeting called for the purpose of voting on the approval of the Plan.
Section 5. Continuance of Plan. Unless sooner terminated in accordance with
the terms hereof, this Plan shall remain in effect for one year following its
adoption and thereafter for so long as its continuance is specifically approved
at least annually by the Fund's Board of Trustees in the manner described in
Section 4 hereof.
Section 6. Amendments. This Plan may be amended at any time by the Board of
Trustees provided that (a) any amendment to increase materially the costs which
the shares of the Fund may bear pursuant to the Plan shall be effective only
upon approval by a vote of a majority of the outstanding shares affected by such
matter, and (b) any material amendments of the terms of the Plan shall become
effective only upon approval in the manner described in Section 4 hereof.
Section 7. Termination. This Plan is terminable without penalty at any time
by (a) a vote of a majority of the Disinterested Trustees, or (b) a vote of a
majority of the outstanding shares of the Fund.
Section 8. Selection/Nomination of Trustees. While this Plan is in effect,
the selection and nomination of Disinterested Trustees shall be committed to the
discretion of the Disinterested Trustees.
Section 9. Miscellaneous. The captions in this Plan are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
Adopted: ______________
THE COMMUNITY REINVESTMENT ACT
QUALIFIED INVESTMENT FUND
(the "Trust")
1751 West Cypress Creek Road
Ft. Lauderdale, FL 33309
AGREEMENT
to
DISTRIBUTION PLAN
Ladies and Gentlemen:
We wish to enter into this Agreement with you concerning the provision of
certain services relating to the Trust.
The terms and conditions of this Agreement are as follows:
Section 1. You agree to provide* (a) reasonable assistance in connection
with the distribution of shares; (b) the following administrative support
services to your customers who may from time to time own of record or
beneficially the Trust's shares ("Shares")*: (i) processing dividend and
distribution payments from the Trust on behalf of customers; (ii) providing
periodic statements to your customers showing their positions in the Shares;
(iii) arranging for bank wires; (iv) responding to routine customer inquiries
relating to services performed by you; (v) providing sub-accounting with respect
to the Shares beneficially owned by your customers or the information necessary
for sub-accounting; (vi) if required by law, forwarding shareholder
communications from the Trust (such as proxies, shareholder reports, annual and
semi-annual financial statements and dividend, distribution and tax notices) to
your customers; (vii) forwarding to customers proxy statements and proxies
containing any proposals regarding this Agreement or the Distribution Plan
related hereto; (viii) aggregating and processing purchase, exchange, and
redemption requests from customers and placing net purchase, exchange, and
redemption orders for your customers; (ix) providing customers with a service
that invests the assets of their accounts in the Shares pursuant to specific or
pre-authorized instructions; (x) establishing and maintaining accounts and
records relating to transactions in the Shares; (xi) assisting customers in
changing dividend or distribution options, account designations and addresses;
or (xii) other similar services if requested by the Trust; or (c) sub-transfer
agency, sub-accounting, administrative or similar services related to shares of
the Trust.
- -------------------------------
* Services may be added or deleted in a particular Agreement.
<PAGE>
Section 2. You will provide such office space and equipment, telephone
facilities and personnel (which may be any part of the space, equipment and
facilities currently used in your business, or any personnel employed by you) as
may be reasonably necessary or beneficial in order to provide the aforementioned
services.
Section 3. Neither you nor any of your officers, employees or agents are
authorized to make any representations concerning the Trust or its Shares except
those contained in our then current prospectus for such shares, copies of which
will be supplied by SunCoast Capital Group, Ltd. ("SunCoast"), the Trust's
distributor, to you, or in such supplemental literature or advertising as may be
authorized by the Trust in writing.
Section 4. For all purposes of this Agreement you will be deemed to be an
independent contractor, and will have no authority to act as agent for the Trust
in any matter or in any respect. You will not engage in activities pursuant to
this Agreement which constitute acting as a broker or dealer under applicable
law unless you have obtained any licenses required by law. By your written
acceptance of this Agreement, you agree to and do release, indemnify and hold us
harmless from and against any and all direct or indirect liabilities or losses
resulting from requests, directions, actions or inactions of or by you or your
officers, employees or agents regarding your responsibilities hereunder or the
purchase, redemption, transfer or registration of the Shares by or on behalf of
customers. You and your employees will, upon request, be available during normal
business hours to consult with the Trust or its designees concerning the
performance of your responsibilities under this Agreement.
Section 5. In consideration for the services and facilities provided by you
hereunder, the Trust will pay to you, and you will accept as full payment
therefore, a fee at the annual rate specified on Appendix A and based upon the
average daily net assets of the Trust's shares owned of record or beneficially
by your customers from time to time for which you provide services hereunder,
which fee will be computed daily and payable monthly. The fee rate may be
prospectively increased or decreased by the Trust, in its sole discretion, at
any time upon notice to you. Further, the Trust may, in its discretion and
without notice, suspend or withdraw the sale of such Shares, including the sale
of such Shares to you for the account of any customer(s).
Section 6. Any person authorized to direct the disposition of monies paid
or payable by the Trust pursuant to this Agreement will provide to the Trust's
Board of Trustees, and the Trustees will review, at least quarterly, a written
report of the amounts so expended and the entities to whom such expenditures
were made. In addition, you will furnish the Trust or its designees with such
information as the Trust or its designees may reasonably request (including,
without limitation, periodic certifications confirming the provision to
customers of some or all of the services described herein), and will otherwise
cooperate with the Trust and its designees (including, without limitation, any
auditors designated by the Trust), in connection with the preparation of reports
to the Trust's Board of Trustees concerning this Agreement and the monies paid
or payable by the Trust pursuant hereto, as well as any other reports or filings
that may be required by law.
Section 7. We may enter into other similar Agreements with any other person
or persons without your consent.
2
<PAGE>
Section 8. By your written acceptance of this Agreement, you represent,
warrant and agree that: (i) the compensation payable to you hereunder, together
with any other compensation you receive from customers for services contemplated
by this Agreement, will be fully disclosed to your customers, will be authorized
by your customers and will not be excessive or unreasonable under the laws and
instruments governing your relationships with your customers; (ii) if you are
subject to the provisions of the Glass-Steagall Act and other laws governing,
among other things, the conduct of activities by federally chartered and
supervised banks and other affiliated banking organizations, you will perform
only those activities which are consistent with your statutory and regulatory
obligations and will act solely as agent for, upon the order of, and for the
account of, your customers; and (iii) (a) you are a member of the National
Association of Securities Dealers, Inc. ("NASD"), that such membership has not
been suspended, and that you agree to maintain membership in the NASD, or (b)
you will not engage in activity which would require you to be licensed as a
broker/dealer under applicable laws or (c) you are a foreign broker/dealer not
eligible for membership in the NASD, and are fully licensed and legally
empowered to act as a securities broker-dealer under the laws of each
jurisdiction in which you conduct such business. You further agree to abide by
all applicable laws, including without limitation, all applicable provisions of
the Investment Company Act of 1940, as amended (the "1940 Act"), the Securities
Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended,
and all applicable rules and regulations thereunder.
Section 9. This Agreement will become effective on the date a fully
executed copy of this Agreement is received by the Trust or its designee. This
Agreement may be terminated at any time, without the payment of any penalty by
the Trust (which termination may be by vote of a majority of the members of the
Board of Trustees of the Trust and who have no direct or indirect financial
interest in the operation of the Distribution Plan or in any related agreements
to the Distribution Plan ("Disinterested Trustees") or by a majority of the
outstanding voting securities of the Trust) on notice to you. This Agreement
will terminate in the event of its assignment (as defined the 1940 Act).
Section 10. All notices and other communications to either you or the Trust
will be duly given if mailed, telegraphed, telexed or transmitted by similar
telecommunications device to the appropriate address shown in this Agreement.
Section 11. This Agreement will be construed in accordance with the laws of
the State of Delaware and is non-assignable by the parties hereto.
Section 12. This Agreement, or form thereof, has been approved by vote of a
majority of (i) the Trust's Board of Trustees and (ii) the Disinterested
Trustees, cast in person at a meeting called for the purpose of voting on such
approval.
Section 13. The Trust is a business trust organized under Delaware law and
under an Agreement and Declaration of Trust, to which reference is hereby made,
and to any and all amendments thereto. The obligations of "The Community
Reinvestment Act Qualified Investment Fund" entered into in the name or on
behalf thereof by any of the Trustees, officers, employees or agents are made
not individually, but in such capacities, and are not binding upon
3
<PAGE>
any of the Trustees, officers, employees, agents or shareholders of the Trust
personally, but bind only the assets of the Trust and all persons dealing with
the Trust must look solely to the assets of the Trust for the enforcement of any
claims against the Trust.
Section 14. You represent and warrant that all services rendered and all
computer systems used in the performance of your obligations under this
Agreement shall be Year 2000 Compliant. "Year 2000 Compliant" means that the
services and systems are designed to and shall:
(a) operate in the year 2000 and later with four digit year date
capability;
(b) operate fault-free in the processing of date and date-dependant data
before, during and after January 1, 2000, including but not limited to
accepting date input, providing date output, and performing date
calculations, comparison and sequencing;
(c) function accurately and without interruption before, during, and after
January 1, 2000, without any adverse effect on operations and associated
with the advent of the new century;
(d) store and provide output of date information in ways that are
unambiguous as to century.
The representations and warranties contained herein may not be disclaimed or
limited by operation of law.
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly return it
to the Trust's designee, SunCoast Capital Group, Ltd., 1751 West Cypress Creek
Road, Ft. Lauderdale, FL 33309.
Very truly yours,
THE COMMUNITY REINVESTMENT
ACT QUALIFIED INVESTMENT FUND
By:____________________________________
(name) (title)
Date:
Accepted and Agreed to:
_______________________________________
By:____________________________________
Authorized Officer, Title
Date:
_______________________________________
Taxpayer Identification Number
5
<PAGE>
APPENDIX A
NAME OF FUND FEE
- ------------ ---
The Community Reinvestment Act
Qualified Investment Fund _______
