As filed with the Securities and Exchange Commission on February 3, 1999
1933 Act Registration No. ______________
1940 Act Registration No. ______________
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20546
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [ ]
and
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. [ ]
The Community Reinvestment Act Qualified Investment Fund
(Exact name of registrant as specified in Charter)
200 East Broward, Suite 1125
Fort Lauderdale, FL 33301
(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:
Henry S. Hilles, Jr., 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.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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THE COMMUNITY REINVESTMENT ACT QUALIFIED INVESTMENT FUND
CROSS-REFERENCE SHEET
(As required by Rule 495)
<TABLE>
<CAPTION>
Item No. on Form N-1A Caption or Subheading in Prospectus
or Statement of Additional Information
PART A - INFORMATION REQUIRED IN A PROSPECTUS
<S> <C>
1. Front and Back Cover Pages Cover Page; Back Cover Page
2. Risk/Return Summary: Investments Risk/Return Summary - Investment Objective,
Risks, and Performance Principal Investment Strategy, Principal Risks
3. Risk/Return Summary: Fee Table Risk/Return Summary - Fees and Expenses
4. Investment Objectives, Principal Risk/Return Summary - Investment Objective,
Investment Strategies, and Related Principal Investment Strategy, Principal Risk;
Risks Investment Objective and Policies; Fund
Investments; and Risk Factors
5. Management's Discussion of Not Applicable
Fund Performance
6. Management, Organization and Investment Advisor
Capital Structure
7. Shareholder Information Pricing of Fund Shares; Purchasing Shares;
Redeeming Shares; Dividends and Distributions;
Federal Taxes
8. Distribution Arrangements Distribution Plan
9. Financial Highlights Information Not Applicable
PART B - INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
10. Cover Page and Table of Contents Cover Page; Table of Contents
11. Fund History The Fund and Its Shares
12. Description of the Fund and its Investment Policies and Restrictions
Investments and Risks
13. Management of the Fund Trustees and Officers
14 Control Persons and Principal Investment Advisor
Holders of Securities
15. Investment Advisory and Other Investment Advisor; Distributor; Distribution Plan;
Services Custodian; Servicing Agent; Independent
Accountants
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16. Brokerage Allocation and Other Portfolio Transactions
Practices
17. Capital Stock and Other The Fund and Its Shares
Securities
18. Purchase, Redemption and Pricing The Fund and Its Shares
of Shares
19. Taxation of the Fund Tax Information
20. Underwriters Distributor
21. Calculation of Performance Data Performance Information
22. Financial Statements Not Applicable
</TABLE>
PART C
Information required to be included in PART C is set forth under the appropriate
Item, so numbered, in PART C of the Registration Statement.
<PAGE>
SUBJECT TO COMPLETION
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
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)
INVESTMENT TEST CREDIT UNDER THE COMMUNITY REINVESTMENT ACT
OF 1977.
PROSPECTUS
_____________, 1999
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE
FUND'S SHARES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. IT IS A
CRIMINAL OFFENSE TO STATE OTHERWISE.
<PAGE>
TABLE OF CONTENTS
PAGE
RISK/RETURN SUMMARY............................................................1
Investment Objective..................................................1
Principal Investment Strategy.........................................1
Principal Risks.......................................................1
Fees and Expenses.....................................................2
INVESTMENT OBJECTIVE AND POLICIES..............................................3
FUND INVESTMENTS...............................................................5
RISK FACTORS...................................................................7
FEDERAL TAXES..................................................................8
PRICING OF FUND SHARES.........................................................9
PURCHASING SHARES..............................................................9
Purchase Inquiries....................................................9
Exchange of Securities................................................9
Purchases By Wire Transfer............................................9
Purchases by Check...................................................10
REDEEMING SHARES..............................................................10
DIVIDENDS AND DISTRIBUTIONS...................................................11
INVESTMENT ADVISOR............................................................11
DISTRIBUTION PLAN.............................................................12
-i-
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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) investment test credit 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 financial institutions that are subject to
the CRA to receive investment test credit under the CRA with respect to shares
of the Fund held by them.
PRINCIPAL RISKS
The Fund has requested the Office of the Comptroller of the Currency (the "OCC")
to consider whether federal examiners of financial institutions may determine
that financial institutions holding shares of the Fund will receive CRA
investment credit. There is no assurance that the Fund will receive a response
from the OCC, or that examiners will make favorable determinations in specific
cases.
The Fund is new and begins its public offering with this Prospectus. The Fund's
investment adviser, CRAFund Advisors, Inc. (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 can't 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 higher or lower rates than the original
investment.
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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 a
particular issuer. To the extent that it does so, a change in value of the
security will affect the value of the Fund's portfolio more than it would affect
a diversified investment company.
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 (estimated) 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
The Fund's investment objective is to provide financial institutions with (1) a
high level of current income and (2) investment test credit under the CRA. The
Fund's Board of Trustees may change the investment objective without shareholder
approval.
The Fund's principal investment strategy is to invest in mortgage-related and
other debt securities that will cause financial institutions that are subject to
the CRA to receive investment test 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.
The CRA requires federal financial regulatory agencies to encourage most
regulated financial institutions to help meet the credit needs of their local
communities, including low-to-moderate income neighborhoods. Such institutions
receive an overall 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. Limited purpose and wholesale banks
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 including 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 or a broader statewide or regional area. Institutions that
are subject to the CRA that have been designated by their regulator as
"wholesale" or "limited purpose" 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.
3
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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 federal financial regulatory agencies during their periodic
examinations of these institutions. There is no assurance that such examiners
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.
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 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 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.
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 Rating 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% if its net assets in securities rated in the
second, third or fourth 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. Such securities, along with those in the highest rating
category, are considered to be "investment grade."
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").
4
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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.
The Fund will require time after selling shares to acquire a significant volume
of investments in certain geographic areas relevant to shareholders. 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 reasonably certain to
achieve a significant volume of investments in the region after a reasonable
period of time.
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."
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.
5
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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. 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.
6
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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.
The Fund's goal of holding securities that will allow its shareholders to obtain
CRA investment credit with respect to the Fund's shares 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, as
noted above, 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
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.
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 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.
7
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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.
8
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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. 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 by an independent pricing
service which relies primarily 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. 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. 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 transfer 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 Bank, N.A.
ABA #
For Account of The Community Reinvestment Act Qualified Investment Fund
Acct. #
For further credit (Your Name)
Acct. # (Your Acct. No.)
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Before making an initial investment by wire transfer, you must first telephone
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:
SunCoast Capital Group, Ltd., 200 E. Broward Blvd., Fort Lauderdale, FL 33301.
These documents must be received before any shares may be redeemed from the
account. 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.,
200 E. Broward Blvd., Fort Lauderdale, FL 33301. 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.
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.
10
<PAGE>
Redemption requests must be in writing and sent to The Community Reinvestment
Act Qualified Investment Fund, c/o SunCoast Capital Group, Ltd., 200 E. Broward
Blvd., Fort Lauderdale, FL 33301. 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.
Further documentation, such as copies of corporate resolutions and instruments
of authority, 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.
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
The Advisor is a registered investment adviser founded in November 1998, with
headquarters at 200 East Broward Blvd., Suite 1125, Fort Lauderdale, Florida
33301.
The Advisor was organized to provide investment advice to the Fund. It currently
has no other clients. Its personnel, except Kenneth H. Thomas, are employees of
SunCoast, a registered broker-dealer. Principal shareholders of SunCoast own 75%
of the outstanding stock of the Advisor. SunCoast serves as distributor of the
Fund's shares and receives payments pursuant to the Fund's distribution plan.
See "Distribution Plan" below.
11
<PAGE>
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.
12
<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 the Fund toll-free at
1-800-355-3553 or writing to:
The Community Reinvestment Act Qualified Investment Fund
c/o SunCoast Capital Group, Ltd.
200 E. Broward Blvd.
Fort Lauderdale, FL 33301
or on the Internet at www.____________.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 ________________.
13
<PAGE>
SUBJECT TO COMPLETION
THE INFORMATION IN THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT COMPLETE
AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
STATEMENT OF ADDITIONAL INFORMATION IS NOT AN OFFER TO SELL THESE SECURITIES AND
IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.
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 ____________, 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.,
200 E. BROWARD BLVD., FORT LAUDERDALE, FL 33301, BY TOLL-FREE PHONE REQUEST AT
1-800-733-5933, OR ON THE INTERNET AT WWW.__________ .COM.
STATEMENT OF ADDITIONAL INFORMATION
_________________, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
DEFINED TERMS...............................................................
THE FUND AND ITS SHARES.....................................................
INVESTMENT POLICIES AND RESTRICTIONS........................................
Investment Quality.................................................
U.S. Government Agency Securities..................................
Zero Coupon Bonds..................................................
Repurchase Agreements and Reverse Repurchase Agreements............
Taxable Municipal Bonds............................................
Other Securities...................................................
Securities Lending.................................................
Liquidity..........................................................
Illiquid Securities................................................
Investment Restrictions............................................
INVESTMENT ADVISOR..........................................................
TRUSTEES AND OFFICERS.......................................................
PERFORMANCE INFORMATION.....................................................
TAX INFORMATION.............................................................
PORTFOLIO TRANSACTIONS......................................................
DISTRIBUTOR.................................................................
DISTRIBUTION PLAN...........................................................
CUSTODIAN...................................................................
SERVICING AGENT.............................................................
INDEPENDENT ACCOUNTANTS.....................................................
COUNSEL ....................................................................
APPENDIX A..................................................................
-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.
1
<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 Rating 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, i.e., securities rated
in the second, third or fourth highest rating category assigned by a Rating
Agency. See Appendix A for more information on the ratings of Rating Agencies.
2
<PAGE>
U.S. GOVERNMENT AGENCY SECURITIES. The Fund invests primarily in securities
issued by the Government National Mortgage Association ("GNMA"), Federal
National Mortgage Association ("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 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.
3
<PAGE>
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 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 other than the real estate industry;
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.
6
<PAGE>
INVESTMENT ADVISOR
The Advisor, located at 200 E. Broward Blvd., Fort Lauderdale, FL 33301, 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 dated as of ______________, 1999
(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 .50% of the Fund's average daily net assets. While it is
expected that the Fund's total operating expenses will not exceed 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 1.00% of its average daily net
assets in the event the Fund's expenses are higher than expected. 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 Advisory Agreement will terminate automatically in
the event of its assignment (as defined in the Investment Company Act).
7
<PAGE>
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 since
November Trustee and Chairman 1998; President, K.H. Thomas Associates (financial
6255 Chapman Field Drive institution consulting) since August 1975; Lecturer,
Miami, FL 33156 The Wharton School of Business of the University of
Age 51 Pennsylvania since September 1970.
David A. Zwick* Secretary, Treasurer and Director, SunCoast Capital
Trustee and President Group, Ltd. (broker-dealer) since December 1992;
c/o SunCoast Capital Group, Ltd. Director, the Advisor since November 1998.
200 East Broward Blvd., Suite 1125
Fort Lauderdale, FL 33301
Age 32
Todd J. Cohen* President and Director, the Advisor since November
Trustee 1998; President, SunCoast Capital Group, Ltd.
c/o SunCoast Capital Group, Ltd. (broker-dealer) since December 1992.
200 East Broward Blvd., Suite 1125
Fort Lauderdale, FL 33301
Age 33
Neil M. Solomon Vice President, Secretary and Treasurer, the Advisor
Treasurer since November 1998; Vice President and Chief Financial
c/o SunCoast Capital Group, Ltd. Officer, SunCoast Capital Group, Ltd. (broker-dealer)
200 East Broward Blvd., Suite 1125 since July 1996; Controller, Costa Cruise Lines, May
Fort Lauderdale, FL 33301 1994 to July 1996; Associate - Audit, Coopers &
Age 28 Lybrand, May 1992 to May 1994.
Michael P. Malloy Partner, Drinker Biddle & Reath LLP (law firm) since
Secretary 1993
Drinker Biddle & Reath LLP
1345 Chestnut Street, Suite 1100
Philadelphia, PA 19107
Age 39
</TABLE>
* 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. [Table to be completed by amendment]
8
<PAGE>
<TABLE>
<CAPTION>
Pension or
Retirement
Aggregate Benefits Accrued Estimated Annual Total
Name of Compensation as Part of Fund Benefits Upon Compensation
Person/Position from the Fund Expenses Retirement Paid to Trustees
<S> <C> <C> <C> <C>
$12,000 N/A N/A $12,000
</TABLE>
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.
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.
9
<PAGE>
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.
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.
10
<PAGE>
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 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 not execute principal portfolio transactions with SunCoast
Capital Group, Ltd. ("SunCoast"), which is the Fund's distributor and an
affiliate of the Advisor. The Advisor may execute agency transactions through
SunCoast subject to the requirements of applicable law and to review of the
transactions by the Fund's Board of Trustees, provided that the Advisor believes
that such executions will provide the Fund with the best available price and
execution.
DISTRIBUTOR
SunCoast, located at 200 E. Broward Blvd., Fort Lauderdale, FL 33301 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.
11
<PAGE>
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 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.
12
<PAGE>
CUSTODIAN
First Union National Bank (the "Custodian") 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.
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
[Disclosure of compensation arrangement under the Investment Company Services
Agreement will be filed by amendment]
INDEPENDENT ACCOUNTANTS
________________________ will serve as the Fund's independent auditors for its
first fiscal 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.
13
<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 rated "DD" is a
defaulted debt obligation, and the rating "DP" represents preferred stock with
dividend arrearages.
A - 3
<PAGE>
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
(b) Bylaws
(c) None
(d) Form of Investment Management Agreement
(e) Distribution Agreement *
(f) None
(g) Custodian Agreement *
(h) Investment Services Agreement *
(i) Opinion and Consent of Counsel*
(j) None
(k) None
(l) Share Purchase Agreement*
(m) Distribution Plan*
(n) Financial Data Schedule*
(o) Not Applicable
* To be filed by amendment
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.
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:
<PAGE>
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.
Item 27. Principal Underwriters.
- -------- -----------------------
SunCoast Capital Group, Ltd., 200 East Broward Blvd., Suite 1125, Fort
Lauderdale, FL 33301 is the Fund's principal underwriter. SunCoast does not act
as principal underwriter, depositor, or investment adviser to any other
investment company.
2
<PAGE>
Item 28. Location of Accounts and Records.
- -------- ---------------------------------
Declaration Service Company
555 North Lane, Suite 6160
Conshohocken, PA 19428
CRAFund Advisors, Inc.
200 East Broward Blvd., Suite 1125
Fort Lauderdale, FL 33301
Item 29. Management Services.
- -------- --------------------
Not applicable
Item 30. Undertakings.
- -------- -------------
None
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Registration to be
signed on its behalf by the undersigned, thereto duly authorized, in the City of
Fort Lauderdale and State of Florida on the 3rd day of February, 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
--------- ----- ----
Trustee and Chairman February 3, 1999
- ---------------------
Kenneth H. Thomas
/s/ David A. Zwick Trustee and President February 3, 1999
- ---------------------
David A. Zwick
/s/ Todd J. Cohen Trustee February 3, 1999
- ---------------------
Todd J. Cohen
/s/ Neil M. Solomon Treasurer February 3, 1999
- ---------------------
Neil M. Solomon
4
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
(a) Agreement and Declaration of Trust dated January 14, 1999
(b) Bylaws
(d) Form of Investment Management Agreement
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THE COMMUNITY REINVESTMENT ACT
QUALIFIED INVESTMENT FUND
AGREEMENT AND DECLARATION OF TRUST
Dated: January 14, 1999
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TABLE OF CONTENTS
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ARTICLE I NAME AND DEFINITIONS......................................1
Section 1.1 Name......................................................1
Section 1.2 Definitions...............................................1
ARTICLE II BENEFICIAL INTEREST.......................................2
Section 2.1 Shares of Beneficial Interest.............................2
Section 2.2 Issuance of Shares........................................3
Section 2.3 Register of Shares and Share Certificates.................3
Section 2.4 Transfer of Shares........................................4
Section 2.5 Treasury Shares...........................................4
Section 2.6 Establishment of Series and Classes.......................4
Section 2.7 Investment in the Trust...................................5
Section 2.8 Assets and Liabilities Belonging to Series, etc...........5
Section 2.9 No Preemptive Rights......................................6
Section 2.10 Conversion Rights.........................................6
Section 2.11 Legal Proceedings.........................................7
Section 2.12 Status of Shares..........................................7
ARTICLE III THE TRUSTEES..............................................8
Section 3.1 Management of the Trust...................................8
Section 3.2 Term of Office of Trustees................................8
Section 3.3 Vacancies and Appointment of Trustees.....................8
Section 3.4 Temporary Absence of Trustee..............................9
Section 3.5 Number of Trustees........................................9
Section 3.6 Effect of Death, Resignation, Etc. of a Trustee...........9
Section 3.7 Ownership of Assets of the Trust..........................9
Section 3.8 Series Trustees..........................................10
Section 3.9 No Accounting............................................10
ARTICLE IV POWERS OF THE TRUSTEES...................................10
Section 4.1 Powers...................................................10
Section 4.2 Issuance and Repurchase of Shares........................14
Section 4.3 Trustees and Officers as Shareholders....................14
Section 4.4 Action by the Trustees and Committees....................14
Section 4.5 Chairman of the Trustees.................................15
Section 4.6 Principal Transactions...................................15
ARTICLE V INVESTMENT ADVISOR, INVESTMENT SUB-ADVISOR,
PRINCIPAL UNDERWRITER, ADMINISTRATOR,
TRANSFER AGENT, CUSTODIAN AND OTHER
CONTRACTORS..............................................15
Section 5.1 Certain Contracts........................................15
ARTICLE VI SHAREHOLDER VOTING POWERS AND MEETINGS...................17
Section 6.1 Voting...................................................17
Section 6.2 Meetings.................................................18
Section 6.3 Quorum and Required Vote.................................18
Section 6.4 Action by Written Consent................................19
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TABLE OF CONTENTS
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ARTICLE VII DISTRIBUTIONS AND REDEMPTIONS............................19
Section 7.1 Distributions............................................19
Section 7.2 Redemption by Shareholder................................20
Section 7.3 Redemption by Trust......................................20
Section 7.4 Net Asset Value..........................................21
ARTICLE VIII LIMITATION OF LIABILITY AND INDEMNIFICATION..............21
Section 8.1 Limitation of Liability..................................21
Section 8.2 Indemnification..........................................21
Section 8.3 Indemnification Determinations...........................22
Section 8.4 Indemnification Not Exclusive............................22
Section 8.5 Shareholders.............................................22
ARTICLE IX MISCELLANEOUS............................................23
Section 9.1 Trust Not a Partnership..................................23
Section 9.2 Trustees' Good Faith Action, Expert Advice,
No Bond or Surety........................................23
Section 9.3 Establishment of Record Dates............................24
Section 9.4 Dissolution and Termination of Trust or Series...........24
Section 9.5 Merger, Consolidation, Incorporation.....................25
Section 9.6 Filing of Copies, References, Headings...................26
Section 9.7 Applicable Law...........................................26
Section 9.8 Amendments...............................................26
Section 9.9 Fiscal Year..............................................27
Section 9.10 Provisions in Conflict with Law..........................27
Section 9.11 Allocation of Certain Expenses...........................27
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THE COMMUNITY REINVESTMENT ACT
QUALIFIED INVESTMENT FUND
AGREEMENT AND DECLARATION OF TRUST
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AGREEMENT AND DECLARATION OF TRUST of The Community Reinvestment Act
Qualified Investment Fund, a Delaware statutory business trust, made as of
January 14, 1999, by the undersigned Trustee.
WHEREAS, the undersigned Trustee desires to establish a trust for the
investment and reinvestment of funds contributed thereto;
WHEREAS, the Trustee desires that the beneficial interest in the trust
assets be divided into transferable shares of beneficial interest, as
hereinafter provided;
WHEREAS, the Trustee declares that all money and property contributed to
the trust established hereunder shall be held and managed in trust for the
benefit of the holders of the shares of beneficial interest issued hereunder and
subject to the provisions hereof;
NOW, THEREFORE, in consideration of the foregoing, the undersigned Trustee
hereby declares that all money and property contributed to the trust hereunder
shall be held and managed in trust under this Declaration of Trust ("Trust
Instrument") as herein set forth below.
ARTICLE I
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NAME AND DEFINITIONS
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Section 1.1 Name. The name of the trust established hereby is the "The
Community Reinvestment Act Qualified Investment Fund."
Section 1.2 Definitions. Wherever used herein, unless otherwise required by
the context or specifically provided:
(a) "Act" means the Delaware Business Trust Act, 12 Del. C.ss.ss.3801
et seq., as from time to time amended;
(b) "By-laws" means the By-laws referred to in Section 4.1(e) hereof,
as from time to time amended;
(c) The terms "Affiliated Person," "Assignment," "Commission,"
"Interested Person" and "Principal Underwriter" shall have the meanings given
them in the 1940 Act. "Majority Shareholder Vote" shall have the same meaning as
the term "vote of a majority of the outstanding voting securities" is given in
the 1940 Act;
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(d) "Class" means any division of Shares within a Series, which Class
is or has been established in accordance with the provisions of Article II.
(e) "Net Asset Value" means the net asset value of each Series or
Class of the Trust determined in the manner provided in Section 7.4 hereof;
(f) "Outstanding Shares" means those Shares recorded from time to time
in the books of the Trust or its transfer agent as then issued and outstanding,
but shall not include Shares which have been redeemed or repurchased by the
Trust and which are at the time held in the treasury of the Trust;
(g) "Series" means a series of Shares of the Trust established in
accordance with the provisions of Section 2.6 hereof;
(h) "Shareholder" means a record owner of Outstanding Shares of the
Trust;
(i) "Shares" means the equal proportionate transferable units of
beneficial interest into which the beneficial interest of each Series of the
Trust or Class thereof shall be divided and may include fractions of Shares as
well as whole Shares;
(j) "Trust" refers to The Community Reinvestment Act Qualified
Investment Fund and reference to the Trust, when applicable to one or more
Series of the Trust, shall refer to any such Series;
(k) "Trustee" or "Trustees" means the person or persons who has or
have signed this Trust Instrument, so long as such person or persons shall
continue in office in accordance with the terms hereof, and all other persons
who may from time to time be duly qualified and serving as Trustees in
accordance with the provisions of Article III hereof, and reference herein to a
Trustee or to the Trustees shall refer to the individual Trustees in their
capacity as Trustees hereunder;
(l) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of one or
more of the Trust or any Series, or the Trustees on behalf of the Trust or any
Series.
(m) The "1940 Act" refers to the Investment Company Act of 1940 and
the Rules and Regulations thereunder, all as may be amended from time to time.
ARTICLE II
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BENEFICIAL INTEREST
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Section 2.1 Shares of Beneficial Interest. The beneficial interest in the
Trust shall be divided into such transferable Shares of one or more separate and
distinct Series and Classes within a Series as the Trustees shall from time to
time create and establish. The number of Shares of each Series and Class
authorized hereunder is unlimited. Each Share shall have no par value, unless
otherwise determined by the Trustees in connection with the creation and
establishment of a Series or Class. All Shares issued hereunder, including
without limitation, Class Shares issued in connection with a dividend in Shares
or a split or reverse split of Shares, shall be fully paid and nonassessable.
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Section 2.2 Issuance of Shares. The Trustees in their discretion may, from
time to time, without vote of the Shareholders, issue Shares of each Series and
Class to such party or parties and for such amount and type of consideration (or
for no consideration if pursuant to a Share dividend or split-up), subject to
applicable law, including cash or securities (including Shares of a different
Series or Class), at such time or times and on such terms as the Trustees may
deem appropriate, and may in such manner acquire other assets (including the
acquisitions of assets subject to, and in connection with, the assumption of
liabilities) and businesses. In connection with any issuance of Shares, the
Trustees may issue fractional Shares and Shares held in the treasury. The
Trustees may from time to time divide or combine the Shares into a greater or
lesser number without thereby changing the proportionate beneficial interests in
the Trust. The Trustees may classify or reclassify any unissued Shares or any
Shares previously issued and reacquired of any Series or Class into one or more
Series or Classes that may be established and designated from time to time.
Any Trustee, officer or other agent of the Trust, and any organization in
which any such person is interested, may acquire, own, hold and dispose of
Shares of any Series or Class of the Trust to the same extent as if such person
were not a Trustee, officer or other agent of the Trust; and the Trust may issue
and sell or cause to be issued and sold and may purchase Shares of any Series or
Class from any such person or any such organization subject only to the general
limitations, restrictions or other provisions applicable to the sale or purchase
of Shares of such Series or Class generally.
Section 2.3 Register of Shares and Share Certificates. A register shall be
kept at the principal office of the Trust or an office of the Trust's transfer
agent which shall contain the names and addresses of the Shareholders of each
Series and Class, the number of Shares of that Series and Class thereof held by
them respectively and a record of all transfers thereof. As to Shares for which
no certificate has been issued, such register shall be conclusive as to who are
the holders of the Shares and who shall be entitled to receive dividends or
other distributions or otherwise to exercise or enjoy the rights of
Shareholders. No Shareholder shall be entitled to receive payment of any
dividend or other distribution, nor to have notice given to him as herein or in
the By-laws provided, until he has given his address to the transfer agent or
such other officer or agent of the Trust as shall keep the said register for
entry thereon. The Trustees, in their discretion, may authorize the issuance of
share certificates and promulgate appropriate rules and regulations as to their
use. In the event that one or more certificates are issued, whether in the name
of a Shareholder or a nominee, such certificate or certificates shall constitute
evidence of ownership of Shares for all purposes, including transfer, assignment
or sale of such Shares, subject to such limitations as the Trustees may, in
their discretion, prescribe.
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Section 2.4 Transfer of Shares. Except as otherwise provided by the
Trustees, Shares shall be transferable on the records of the Trust only by the
record holder thereof or by his agent thereunto duly authorized in writing, upon
delivery to the Trustees or the Trust's transfer agent of a duly executed
instrument of transfer, together with a Share certificate, if one is
outstanding, and such evidence of the genuineness of each such execution and
authorization and of such other matters as may be required by the Trustees. Upon
such delivery the transfer shall be recorded on the register of the Trust. Until
such record is made, the Shareholder of record shall be deemed to be the holder
of such Shares for all purposes hereunder and neither the Trustees nor the
Trust, nor any transfer agent or registrar nor any officer, employee or agent of
the Trust shall be affected by any notice of the proposed transfer.
Section 2.5 Treasury Shares. Shares held in the treasury shall, until
reissued pursuant to Section 2.2 hereof, not confer any voting rights on the
Trustees, nor shall such Shares be entitled to any dividends or other
distributions declared with respect to the Shares.
Section 2.6 Establishment of Series and Classes. The Trust shall consist of
one or more Series and Classes and separate and distinct records shall be
maintained by the Trust for each Series and Class. The Trustees shall have full
power and authority, in their sole discretion, and without obtaining any prior
authorization or vote of the Shareholders of any Series or Class of the Trust,
to establish and designate and to change in any manner any initial or additional
Series or Classes and to fix such preferences, voting powers, rights and
privileges of such Series or Classes as the Trustees may from time to time
determine, to divide or combine the Shares or any Series or Classes into a
greater or lesser number, to classify or reclassify any issued Shares or any
Series or Classes into one or more Series or Classes of Shares, and to take such
other action with respect to the Shares as the Trustees may deem desirable.
Unless another time is specified by the Trustees, the establishment and
designation of any Series or Class shall be effective upon the adoption of a
resolution by the Trustees setting forth such establishment and designation and
the preferences, powers, rights and privileges of the Shares of such Series or
Class, whether directly in such resolution or by reference to, or approval of,
another document that sets forth such relative rights and preferences of such
Series (or Class) including, without limitation, any registration statement of
the Trust, or as otherwise provided in such resolution. The Trust may issue any
number of Shares of each Series or Class and need not issue certificates for any
Shares.
All references to Shares in this Trust Instrument shall be deemed to be
Shares of any or all Series or Classes as the context may require. All
provisions herein relating to the Trust shall apply equally to each Series and
Class of the Trust except as the context otherwise requires.
All Shares of each Class of a particular Series shall represent an equal
proportionate interest in the assets belonging to that Series (subject to the
liabilities belonging to the Series, and, in the case of each Class, to the
liabilities belonging to that Class), and each Share of any Class of a
particular Series shall be equal to each other Share of that Class; but the
provisions of this sentence shall not restrict any distinctions permissible
under this Section 2.6.
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Section 2.7 Investment in the Trust. The Trustees shall accept investments
in any Series of the Trust or Class, if the Series has been divided into
Classes, from such persons and on such terms as they may from time to time
authorize. At the Trustees' discretion, such investments, subject to applicable
law, may be in the form of cash or securities in which the affected Series is
authorized to invest, valued as provided in Section 7.4 hereof. Unless the
Trustees otherwise determine, investments in a Series shall be credited to each
Shareholder's account in the form of full Shares at the Net Asset Value per
Share next determined after the investment is received. Without limiting the
generality of the foregoing, the Trustees may, in their sole discretion, (a) fix
the Net Asset Value per Share of the initial capital contribution, (b) impose
sales or other charges upon investments in the Trust or (c) issue fractional
Shares.
Section 2.8 Assets and Liabilities Belonging to Series, etc. All
consideration received by the Trust for the issue or sale of Shares of a
particular Series, together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment of such proceeds
in whatever form the same may be, shall be held and accounted for separately
from the other assets of the Trust and of every other Series and may be referred
to herein as "assets belonging to" that Series. The assets belonging to a
particular Series shall belong to that Series for all purposes, and to no other
Series, subject only to the rights of creditors of that Series. In addition, any
assets, income, earnings, profits or funds, or payments and proceeds with
respect thereto, which are not readily identifiable as belonging to any
particular Series shall be allocated by the Trustees between and among one or
more of the Series in such manner as the Trustees, in their sole discretion,
deem fair and equitable. If there are classes of Shares within a Series, the
assets belonging to the Series shall be further allocated to each Class in the
proportion that the "assets belonging to" the Class (calculated in the same
manner as with determination of assets "belonging to" the Series) bears to the
assets of all Classes within the Series. Each such allocation shall be
conclusive and binding upon the Shareholders of all Series and Classes for all
purposes, and such assets, income, earnings, profits or funds, or payments and
proceeds with respect thereto shall be assets belonging to that Series or Class,
as the case may be. The assets belonging to a particular Series and Class shall
be so recorded upon the books of the Trust, and shall be held by the Trustees in
trust for the benefit of the holders of Shares of that Series or Class, as the
case may be.
The assets belonging to each Series shall be charged with the liabilities
of that Series and all expenses, costs, charges and reserves attributable to
that Series. Any general liabilities, expenses, costs, charges or reserves of
the Trust which are not readily identifiable as belonging to any particular
Series shall be allocated and charged by the Trustees between or among any one
or more of the Series in such manner as the Trustees in their sole discretion
deem fair and equitable. Each such allocation shall be conclusive and binding
upon the Shareholders of all Series for all purposes. The liabilities, expenses,
costs, charges and reserves allocated and so charged to a Series are herein
referred to as "liabilities belonging to" that Series. Except as provided in the
next sentence or otherwise required or permitted by applicable law or any rule
or order of the Commission, the "liabilities belonging to" such
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Series shall be allocated to each Class of a Series in the proportion that the
assets belonging to such Class bear to the assets belonging to all Classes in
the Series. To the extent permitted by rule or order of the Commission, the
Trustees may allocate all or a portion of any liabilities belonging to a Series
to a particular Class or Classes (collectively, "Class Expenses") as the
Trustees may from time to time determine is appropriate. In addition, all
liabilities, expenses, costs, charges and reserves belonging to a Class shall be
allocated to such Class.
Without limitation of the foregoing provisions of this Section 2.8, but
subject to the right of the Trustees in their discretion to allocate general
liabilities, expenses, costs, charges or reserves as herein provided, the debts,
liabilities, obligations and expenses incurred, contracted for or otherwise
existing with respect to a particular Series shall be enforceable against the
assets belonging to such Series only, and not against the assets of the Trust
generally or any other Series. Notice of this limitation on inter-Series
liabilities shall be set forth in the certificate of trust of the Trust (whether
originally or by amendment) as filed or to be filed in the Office of the
Secretary of State of the State of Delaware pursuant to the Act, and upon the
giving of such notice in the certificate of trust, the statutory provisions of
Section 3804 of the Act relating to limitations on inter-Series liabilities (and
the statutory effect under Section 3804 of setting forth such notice in the
certificate of trust) shall become applicable to the Trust and each Series. Any
person extending credit to, contracting with or having any claim against any
Series may satisfy or enforce any debt, liability, obligation or expense
incurred, contracted for or otherwise existing with respect to that Series from
the assets of that Series only. No Shareholder or former Shareholder of any
Series shall have a claim on or any right to any assets allocated or belonging
to any other Series.
Similarly, the debts, liabilities, obligations and expenses incurred,
contracted for or otherwise existing with respect to a particular Class shall be
enforceable against the assets belonging to such Class only, and not against the
assets of the Series or the Trust generally or any other Class. Each contract
entered into by the Trust which is or may be an obligation of a Class within a
Series shall contain a provision to the effect that the parties to the contract
will look only to the assets belonging to the Class for the satisfaction of any
liability, and not to any extent to the assets of any other Class or Series or
the Trust generally. If, notwithstanding the preceding sentence, any liability
properly charged to a Class is paid from the assets of another Class, the Class
from whose assets the liability was paid shall be reimbursed from the assets of
the Class to which such liability belonged.
Section 2.9 No Preemptive Rights. Shareholders shall have no preemptive or
other similar rights to subscribe to any additional Shares or other securities
issued by the Trust or the Trustees, whether of the same or another Series or
Class.
Section 2.10 Conversion Rights. The Trustees shall have the authority to
provide from time to time that the holders of Shares of any Series or Class
shall have the right to convert or exchange said Shares for or into Shares of
one or more other Series or Classes in accordance with such requirements and
procedures as may be established from time to time by the Trustees.
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Section 2.11 Legal Proceedings. No person, other than a Trustee, who is not
a Shareholder of a particular Series or Class shall be entitled to bring any
derivative action, suit or other proceeding on behalf of or with respect to such
Series or Class. No Shareholder of a Series or a Class may maintain a derivative
action with respect to such Series or Class unless holders of a least ten
percent (10%) of the outstanding Shares of such Series or Class join in the
bringing of such action. Except as otherwise provided in Section 3816 of the Act
and the foregoing provisions of this Section 2.11, all matters relating to the
bringing of derivative actions in the right of the Trust shall be governed by
the General Corporation Law of the State of Delaware relating to derivative
actions, and judicial interpretations thereunder, as if the Trust were a
Delaware corporation and the Shareholders were shareholders of a Delaware
corporation.
In addition to the requirements set forth in Section 3816 of the Act, a
Shareholder may bring a derivative action on behalf of the Trust with respect to
a Series or Class only if the following conditions are met: (a) the Shareholder
or Shareholders must make a pre-suit demand upon the Trustees to bring the
subject action unless an effort to cause the Trustees to bring such an action is
not likely to succeed; and a demand on the Trustees shall only be deemed not
likely to succeed and therefore excused if a majority of the Trustees, or a
majority of any committee established to consider the merits of such action, has
a personal financial interest in the transaction at issue, and a Trustee shall
not be deemed interested in a transaction or otherwise disqualified from ruling
on the merits of a Shareholder demand by virtue of the fact that such Trustee
receives remuneration for his service as a Trustee of the Trust or as a trustee
or director of one or more investment companies that are under common management
with or otherwise affiliated with the Trust; and (b) unless a demand is not
required under clause (a) of this paragraph, the Trustees must be afforded a
reasonable amount of time to consider such shareholder request and to
investigate the basis of such claim; and the Trustees shall be entitled to
retain counsel or other advisors in considering the merits of the request and
shall require an undertaking by the Shareholders making such request to
reimburse the Trust for the expense of any such advisors in the event that the
Trustees determine not to bring such action. For purposes of this Section 2.11,
the Trustees may designate a committee of one Trustee to consider a Shareholder
demand if necessary to create a committee with a majority of Trustees who do not
have a personal financial interest in the transaction at issue.
Section 2.12 Status of Shares. Shares shall be deemed to be personal
property giving only the rights provided in this instrument. Every Shareholder
by virtue of having become a Shareholder shall be held to have expressly
assented and agreed to the terms hereof. The death of a Shareholder during the
continuance of the Trust shall not operate to terminate the Trust nor entitle
the representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but only to the
rights of said decedent under this Trust. Ownership of Shares shall not entitle
the Shareholder to any title in or to the whole or any part of the Trust
property or right to call for a partition or division of the same or for an
accounting, nor shall the ownership of Shares constitute the Shareholders
partners.
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ARTICLE III
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THE TRUSTEES
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Section 3.1 Management of the Trust. The Trustees shall have exclusive and
absolute control over the Trust Property and over the business of the Trust to
the same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right, but with such powers of delegation as may be
permitted by this Trust Instrument. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without the State of Delaware, in any and
all states of the United States of America, in the District of Columbia, in any
and all commonwealths, territories, dependencies, colonies, or possessions of
the United States of America, and in any foreign jurisdiction and to do all such
other things and execute all such instruments as they deem necessary, proper or
desirable in order to promote the interests of the Trust although such things
are not herein specifically mentioned. Any determination as to what is in the
interests of the Trust made by the Trustees in good faith shall be conclusive.
In construing the provisions of this Trust Instrument, the presumption shall be
in favor of a grant of power to the Trustees.
The enumeration of any specific power in this Trust Instrument shall not be
construed as limiting the aforesaid power. The powers of the Trustees may be
exercised without order of or resort to any court.
Except for the Trustees named herein or appointed pursuant to Section 3.8,
or Trustees appointed to fill vacancies pursuant to Section 3.3 hereof, the
Trustees shall be elected by the Shareholders owning of record a plurality of
the Shares voting at a meeting of Shareholders. The initial Trustee of the Trust
shall be Neil M. Solomon.
Section 3.2 Term of Office of Trustees. Each Trustee shall hold office
during the existence of this Trust, and until its termination as herein
provided; except: (a) that any Trustee may resign his trust by written
instrument signed by him and delivered to the Chairman, President, Secretary, or
other Trustee of the Trust, which shall take effect upon such delivery or upon
such later date as is specified therein; (b) that any Trustee may be removed at
any time by written instrument, signed by a majority of the Trustees prior to
such removal, specifying the date when such removal shall become effective; (c)
that any Trustee who requests in writing to be retired or who has died, become
physically or mentally incapacitated by reason of disease or otherwise, or is
otherwise unable to serve, may be retired by written instrument signed by a
majority of the other Trustees, specifying the date of his retirement; and (d)
that a Trustee may be removed at any meeting of the Shareholders of the Trust by
a vote of Shareholders owning at least two-thirds of the outstanding Shares of
all Series.
Section 3.3 Vacancies and Appointment of Trustees. In case of the
declination to serve, death, resignation, retirement, removal, physical or
mental incapacity by reason of disease or otherwise of a Trustee, or a Trustee
is otherwise unable to serve, or an increase in
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the number of Trustees, a vacancy shall occur. Whenever a vacancy in the Board
of Trustees shall occur, until such vacancy is filled, the other Trustees shall
have all the powers hereunder and the certificate of the other Trustees of such
vacancy shall be conclusive. In the case of an existing vacancy, the remaining
Trustee or Trustees shall fill such vacancy by appointing such other person as
such Trustee or Trustees in their discretion shall see fit consistent with the
limitations under the 1940 Act, unless such Trustee or Trustees determine, in
accordance with Section 3.5, to decrease the size of the Board to the number of
remaining Trustees.
An appointment of a Trustee may be made by the Trustees then in office in
anticipation of a vacancy to occur by reason of retirement, resignation or
increase in number of Trustees effective at a later date, provided that said
appointment shall become effective only at or after the effective date of said
retirement, resignation or increase in number of Trustees.
An appointment of a Trustee shall be effective upon the acceptance of the
person so appointed to serve as trustee, except that any such appointment in
anticipation of a vacancy shall become effective at or after the date such
vacancy occurs.
Section 3.4 Temporary Absence of Trustee. Any Trustee may, by power of
attorney, delegate his power for a period not exceeding six months at any one
time to any other Trustee or Trustees, provided that in no case shall less than
two Trustees personally exercise the other powers hereunder except as herein
otherwise expressly provided or unless there is only one or two Trustees.
Section 3.5 Number of Trustees. The number of Trustees shall be one, or
such other number as shall be fixed from time to time by the Trustees.
Section 3.6 Effect of Death, Resignation, Etc. of a Trustee. The
declination to serve, death, resignation, retirement, removal, incapacity, or
inability of the Trustees, or any one of them, shall not operate to terminate
the Trust or to revoke any existing agency created pursuant to the terms of this
Trust Instrument.
Section 3.7 Ownership of Assets of the Trust. Legal title in and beneficial
ownership of all of the assets of the Trust shall at all times be considered as
vested in the Trust, except that the Trustees may cause legal title in and
beneficial ownership of any Trust Property to be held by, or in the name of one
or more of the Trustees acting for and on behalf of the Trust, or in the name of
any person as nominee acting for and on behalf of the Trust. No Shareholder
shall be deemed to have a severable ownership interest in any individual asset
of the Trust or of any Series or Class, or any right of partition or possession
thereof, but each Shareholder shall have, except as otherwise provided for
herein, a proportionate undivided beneficial interest in each Series or Class
the Shares of which are owned by such Shareholders. The Shares shall be personal
property giving only the rights specifically set forth in this Trust Instrument.
The Trust, or at the determination of the Trustees, one or more of the Trustees
or a nominee acting for and on behalf of the Trust, shall be deemed to hold
legal title and beneficial ownership of any income earned on securities of the
Trust issued by any business entities formed, organized, or existing under the
laws of any jurisdiction, including the laws of any foreign country.
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Section 3.8 Series Trustees. In connection with the establishment of one or
more Series or Classes, the Trustees establishing such Series or Class may
appoint, to the extent permitted by the 1940 Act, separate Trustees with respect
to such Series or Classes (the "Series Trustees"). Series Trustees may, but are
not required to, serve as Trustees of the Trust of any other Series or Class of
the Trust. To the extent provided by the Trustees in the appointment of Series
Trustees, the Series Trustees may have, to the exclusion of any other Trustee of
the Trust, all the powers and authorities of Trustees hereunder with respect to
such Series or Class, but may have no power or authority with respect to any
other Series or Class. Any provision of this Trust Instrument relating to
election of Trustees by Shareholders only shall entitle the Shareholders of a
Series or Class for which Series Trustees have been appointed to vote with
respect to the election of such Series Trustees and the Shareholders of any
other Series or Class shall not be entitled to participate in such vote. In the
event that Series Trustees are appointed, the Trustees initially appointing such
Series Trustees shall, without the approval of any Outstanding Shares, amend
either this Trust Instrument or the By-laws to provide for the respective
responsibilities of the Trustees and the Series Trustees in circumstances where
an action of the Trustees or Series Trustees affects all Series of the Trust or
two or more Series represented by different Trustees.
Section 3.9 No Accounting. Except to the extent required by the 1940 Act
or, if determined to be necessary or appropriate by the other Trustees under
circumstances which would justify his or her removal for cause, no person
ceasing to be a Trustee for reasons including, but not limited to, death,
resignation, retirement, removal or incapacity (nor the estate of any such
person) shall be required to make an accounting to the Shareholders or remaining
Trustees upon such cessation.
ARTICLE IV
----------
POWERS OF THE TRUSTEES
----------------------
Section 4.1 Powers. The Trustees in all instances shall act as principals,
and are and shall be free from the control of the Shareholders. The Trustees
shall have full power and authority to do any and all acts and to make and
execute any and all contracts and instruments that they may consider necessary
or appropriate in connection with the management of the Trust. The Trustees
shall have full authority and power to make any and all investments which they,
in their sole discretion, shall deem proper to accomplish the purpose of this
Trust. Subject to any applicable limitation in this Trust Instrument, the
Trustees shall have power and authority:
(a) To invest and reinvest cash and other property, and to hold cash
or other property uninvested, and to sell, exchange, lend, pledge, mortgage,
hypothecate, write options on and lease any or all of the assets of the Trust;
(b) To operate as and carry on the business of an investment company,
and exercise all the powers necessary and appropriate to the conduct of such
operators, including the power to invest all or any part of its assets in the
securities of another investment company;
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(c) To borrow money and in this connection issue notes or other
evidence of indebtedness; to secure borrowings by mortgaging, pledging or
otherwise subjecting as security the Trust Property; to endorse, guarantee, or
undertake the performance of an obligation, liability or engagement of any
person and to lend Trust Property;
(d) To provide for the distribution of interests of the Trust either
through a Principal Underwriter in the manner hereinafter provided for or by the
Trust itself, or both, or otherwise pursuant to a plan of distribution of any
kind;
(e) To adopt By-laws not inconsistent with this Trust Instrument
providing for the conduct of the business of the Trust and to amend and repeal
them to the extent that they do not reserve that right to the Shareholders,
which By-laws shall be deemed a part of this Trust Instrument and are
incorporated herein by reference;
(f) To elect and remove such officers and appoint and terminate such
agents and contractors as they consider appropriate, any of whom may be a
Trustee, and may provide for the compensation of all of the foregoing;
(g) To employ one or more banks, trust companies or companies that are
members of a national securities exchange or such other entities as custodians
of any assets of the Trust, subject to the 1940 Act and to any conditions set
forth in this Trust Instrument;
(h) To retain one or more transfer agents and shareholder servicing
agents, or both;
(i) To set record dates in the manner provided herein or in the
By-laws;
(j) To delegate such authority (which delegation may include the power
to subdelegate) as they consider desirable to any officers of the Trust and to
any investment adviser, manager, administrator, custodian, underwriter or other
agent or independent contractor;
(k) To join with other holders of any securities or debt instruments
in acting through a committee, depository, voting trustee or otherwise, and in
that connection to deposit any security or debt instrument with, or transfer any
security or debt instrument to, any such committee, depository or trustee, and
to delegate to them such power and authority with relation to any security or
debt instrument (whether or not so deposited or transferred) as the Trustees
shall deem proper and to agree to pay, and to pay, such portion of the expenses
and compensation of such committee, depository or trustee as the Trustees shall
deem proper;
(l) To enter into joint ventures, general or limited partnerships and
any other combinations or associations;
(m) To pay pensions for faithful service, as deemed appropriate by the
Trustees, and to adopt, establish and carry out pension, profit-sharing, share
bonus, share purchase, savings, thrift and other retirement, incentive and
benefit plans, trusts and provisions, including the purchasing of life insurance
and annuity contracts as a means of providing such retirement and other
benefits, for any or all of the Trustees, officers, employees and agents of the
Trust;
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(n) To the extent permitted by law, indemnify any person with whom the
Trust or any Series or Class has dealings;
(o) To engage in and to prosecute, defend, compromise, abandon, or
adjust by arbitration, or otherwise, any actions, suits, proceedings, disputes,
claims and demands relating to the Trust, and out of the assets of the Trust or
any Series or Class thereof to pay or to satisfy any debts, claims or expenses
incurred in connection therewith, including those of litigation, and such power
shall include without limitation the power of the Trustees or any appropriate
committee thereof, in the exercise of their or its good faith business judgment,
to dismiss any action, suit, proceeding, dispute, claim or demand, derivative or
otherwise, brought by any person, including a Shareholder in its own name or the
name of the Trust, whether or not the Trust or any of the Trustees may be named
individually therein or the subject matter arises by reason of business for or
on behalf of the Trust;
(p) To purchase and pay for entirely out of Trust Property such
insurance as they may deem necessary or appropriate for the conduct of the
business of the Trust, including, without limitation, insurance policies
insuring the Trust Property and payment of distributions and principal on its
investments, and insurance policies insuring the Shareholders, Trustees,
officers, representatives, employees, agents, investment advisers, managers,
administrators, custodians, underwriters, or independent contractors of the
Trust individually against all claims and liabilities of every nature arising by
reason of holding, being or having held any such office or position, or by
reason of any action alleged to have been taken or omitted by any such person in
such capacity, including any action taken or omitted that may be determined to
constitute negligence, whether or not the Trust would have the power to
indemnify such person against such liability;
(q) To sell, exchange, lend, pledge, mortgage, hypothecate, write
options on and lease any or all of the assets of the Trust, subject to the
provisions of Section 9.4(b) hereof;
(r) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities, debt instruments or property; and to
execute and deliver powers of attorney to such person or persons as the Trustees
shall deem proper, granting to such person or persons such power and discretion
with relation to securities, debt instruments or property as the Trustees shall
deem proper;
(s) To exercise powers and rights of subscription or otherwise which
in any manner arise out of ownership of securities or debt instruments;
(t) To hold any security or property in a form not indicating any
trust, whether in bearer, book entry, unregistered or other negotiable form; or
either in the name of the Trustees or of the Trust or in the name of a
custodian, subcustodian or other depository or a nominee or nominees or
otherwise;
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(u) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes in
accordance with the provisions of Article II hereof and to establish Classes
thereof having relative rights, powers and duties as they may provide consistent
with applicable law;
(v) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation, issuer or concern, any security or
debt instrument of which is held in the Trust; to consent to any contract,
lease, mortgage, purchase or sale of property by such corporation, issuer or
concern, and to pay calls or subscriptions with respect to any security or debt
instrument held in the Trust;
(w) To compromise, arbitrate, or otherwise adjust claims in favor of
or against the Trust or any matter in controversy including, but not limited to,
claims for taxes;
(x) To make distributions of income and of capital gains to
Shareholders in the manner herein provided;
(y) To establish, from time to time, a minimum investment for
Shareholders in the Trust or in one or more Series or Classes, and to require
the redemption of the Shares of any Shareholders whose investment is less than
such minimum upon giving notice to such Shareholder;
(z) To cause each Shareholder, or each Shareholder of any particular
Series of Class, to pay directly, in advance or arrears, for charges of the
Trust's custodian or transfer, shareholder servicing or similar agent, an amount
fixed from time to time by the Trustees, by setting off such charges due from
such Shareholder from declared but unpaid dividends owed such Shareholder and/or
by reducing the number of Shares in the account of such Shareholder by that
number of full and/or fractional Shares which represents the outstanding amount
of such charges due from such Shareholder;
(aa) To establish one or more committees comprised of one or more of
the Trustees, and to delegate any of the powers of the Trustees to said
committees;
(bb) To interpret the investment policies, practices or limitations of
any Series or Class;
(cc) To establish a registered office and have a registered agent in
the State of Delaware;
(dd) To compensate or provide for the compensation of the Trustees,
officers, advisers, administrators, custodians, other agents, consultants,
contractors and employees of the Trust or the Trustees on such terms as they
deem appropriate;
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(ee) To invest part or all of the Trust Property (or part or all of
the assets of any Series), or to dispose of part or all of the Trust Property
(or part or all of the assets of any Series) and invest the proceeds of such
disposition, in interests issued by one or more other investment companies or
pooled portfolios (including investment by means of transfer of part or all of
the Trust Property in exchange for an interest or interests in such one or more
investment companies or pooled portfolios) all without any requirement of
approval by Shareholders. Any such other investment company or pooled portfolio
may (but need not) be a trust (formed under the laws of any state or
jurisdiction) which is classified as a partnership for federal income tax
purposes; and
(ff) In general, to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary, suitable
or proper for the accomplishment of any purpose or the attainment of any object
or the furtherance of any power herein set forth, either alone or in association
with others, and to do every other act or thing incidental or appurtenant to or
growing out of or connected with the aforesaid business or purposes, objects or
powers.
The foregoing clauses shall be construed both as objects and powers, and
the foregoing enumeration of specific powers shall not be held to limit or
restrict in any manner the general powers of the Trustees. Any action by one or
more of the Trustees in their capacity as such hereunder shall be deemed an
action on behalf of the Trust or the applicable Series or Class, and not an
action in an individual capacity.
No one dealing with the Trustees shall be under any obligation to make any
inquiry concerning the authority of the Trustees, or to see to the application
of any payments made or property transferred to the Trustees or upon their
order.
Section 4.2 Issuance and Repurchase of Shares. The Trustees shall have the
power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold, resell,
reissue, dispose of, exchange, and otherwise deal in Shares and, subject to the
provisions set forth in Article II and Article VII, to apply to any such
repurchase, redemption, retirement, cancellation or acquisition of Shares any
funds or property of the Trust, or the particular Series or Class of the Trust,
with respect to which such Shares are issued.
Section 4.3 Trustees and Officers as Shareholders. Any Trustee, officer or
other agent of the Trust may acquire, own and dispose of Shares to the same
extent as if such person were not a Trustee, officer or agent; and the Trustees
may issue and sell or cause to be issued and sold Shares to and buy such Shares
from any such person or any firm or company in which such person invested,
subject to the general limitations herein contained as to the sale and purchase
of such Shares.
Section 4.4 Action by the Trustees and Committees. The Trustees (and any
committee thereof) may act at a meeting held in person or in whole or in part by
conference telecommunications equipment. One-third, but not less than two, of
the Trustees shall constitute a quorum at any meeting unless there is only one
Trustee. Except as the Trustees may otherwise determine, one-third of the
members of any committee shall constitute a quorum at any meeting. The vote of a
majority of the Trustees (or committee members) present at a meeting at which a
quorum is present shall be the act of the Trustees (or any committee thereof).
The Trustees (and any committee thereof) may also act by written consent signed
by a majority of the Trustees (or committee members).
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Regular meetings of the Trustees may be held at such places and at such times as
the Trustees may from time to time determine. Special meetings of the Trustees
(and meetings of any committee thereof) may be called orally or in writing by
the Chairman of the Board of Trustees (or the chairman of any committee thereof)
or by any two other Trustees. Notice of the time, date and place of all meetings
of the Trustees (or any committee thereof) shall be given by the party calling
the meeting to each Trustee (or committee member) by telephone, telefax, or
telegram sent to the person's home or business address at least twenty-four
hours in advance of the meeting or by written notice mailed to the person's home
or business address at least seventy-two hours in advance of the meeting. Notice
of all proposed written consents of Trustees (or committees thereof) shall be
given to each Trustee (or committee member) by telephone, telefax, telegram, or
first class mail sent to the person's home or business address. Notice need not
be given to any person who attends a meeting without objecting to the lack of
notice or who executes a written consent or a written waiver of notice with
respect to a meeting. Written consents or waivers may be executed in one or more
counterparts. Execution of a written consent or waiver and delivery thereof may
be accomplished by telefax or other electronic means approved by the Trustees.
Section 4.5 Chairman of the Trustees. The Trustees may appoint one of their
number to be Chairman of the Board of Trustees. The Chairman shall preside at
all meetings of the Trustees at which he is present and may be (but is not
required to be) the chief executive officer of the Trust.
Section 4.6 Principal Transactions. Except to the extent prohibited by
applicable law, the Trustees may, on behalf of the Trust, buy any securities
from or sell any securities to, or lend any assets of the Trust to, any Trustee
or officer of the Trust or any firm of which any such Trustee or officer is a
member acting as principal, or have any such dealings with any Affiliated Person
of the Trust, investment adviser, investment sub-adviser, distributor or
transfer agent for the Trust or with any Interested Person of such Affiliated
Person or other person; and the Trust may employ any such Affiliated Person or
other person, or firm or company in which such Affiliated Person or other person
is an Interested Person, as broker, legal counsel, registrar, investment
advisor, investment sub-advisor, distributor, transfer agent, dividend
disbursing agent, custodian or in any other capacity upon customary terms.
ARTICLE V
---------
INVESTMENT ADVISOR, INVESTMENT SUB-ADVISOR,
PRINCIPAL UNDERWRITER, ADMINISTRATOR, TRANSFER AGENT,
CUSTODIAN AND OTHER CONTRACTORS
-------------------------------
Section 5.1 Certain Contracts. Subject to compliance with the provisions of
the 1940 Act, but notwithstanding any limitations of present and future law or
custom in regard to delegation of powers by trustees generally, the Trustees
may, at any time and from time to
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time and without limiting the generality of their powers and authority otherwise
set forth herein, enter into one or more contracts with any one or more
corporations, trusts, associations, partnerships, limited partnerships, other
type of organizations, or individuals to provide for the performance and
assumption of some or all of the following services, duties and responsibilities
to, for or of the Trust and/or the Trustees, and to provide for the performance
and assumption of such other services, duties and responsibilities in addition
to those set forth below as the Trustees may determine to be appropriate:
(a) Investment Adviser and Investment Sub-Adviser. The Trustees may in
their discretion, from time to time, enter into an investment advisory or
management contract or contracts with respect to the Trust or any Series whereby
the other party or parties to such contract or contracts shall undertake to
furnish the Trust with such management, investment advisory, statistical and
research facilities and services and such other facilities and services, if any,
and all upon such terms and conditions, as the Trustees may in their discretion
determine. Notwithstanding any other provision of this Trust Instrument, the
Trustees may authorize any investment adviser (subject to such general or
specific instructions as the Trustees may from time to time adopt) to effect
purchases, sales or exchanges of portfolio securities, other investment
instruments of the Trust, or other Trust Property on behalf of the Trustees, or
may authorize any officer, agent, or Trustee to effect such purchases, sales or
exchanges pursuant to recommendations of the investment adviser (and all without
further action by the Trustees). Any such purchases, sales and exchanges shall
be deemed to have been authorized by the Trustees.
The Trustees may authorize, subject to applicable requirements of the 1940
Act, the investment adviser to employ, from time to time, one or more
sub-advisers to perform such of the acts and services of the investment adviser,
and upon such terms and conditions, as may be agreed upon between the investment
adviser and sub-adviser. Any reference in this Trust Instrument to the
investment adviser shall be deemed to include such sub-advisers, unless the
context otherwise requires.
(b) Principal Underwriter. The Trustees may in their discretion from
time to time enter into an exclusive or non-exclusive underwriting contract or
contracts providing for the sale of Shares, whereby the Trust may either agree
to sell Shares to the other party to the contract or appoint such other party
its sales agent for such Shares. In either case, the contract may also provide
for the repurchase or sale of Shares by such other party as principal or as
agent of the Trust.
(c) Administrator. The Trustees may in their discretion from time to
time enter into one or more contracts whereby the other party or parties shall
undertake to furnish the Trust with administrative services. The contract or
contracts shall be on such terms and conditions as the Trustees may in their
discretion determine.
(d) Transfer Agent. The Trustees may in their discretion from time to
time enter into one or more transfer agency and Shareholder service contracts
whereby the other party or parties shall undertake to furnish the Trustees with
transfer agency and Shareholder
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services. The contract or contracts shall be on such terms and conditions as the
Trustees may in their discretion determine.
(e) Administrative Service and Distribution Plans. The Trustees may,
on such terms and conditions as they may in their discretion determine, adopt
one or more plans pursuant to which compensation may be paid directly or
indirectly by the Trust for Shareholder servicing, administration and/or
distribution services with respect to one or more Series or Classes including
without limitation, plans subject to Rule 12b-1 under the 1940 Act, and the
Trustees may enter into agreements pursuant to such plans.
(f) Fund Accounting. The Trustees may in their discretion from time to
time enter into one or more contracts whereby the other party or parties
undertakes to handle all or any part of the Trust's accounting responsibilities,
whether with respect to the Trust's properties, Shareholders or otherwise.
(g) Custodian and Depository. The Trustees may in their discretion
from time to time enter into one or more contracts whereby the other party or
parties undertakes to act as depository for and to maintain custody of the
property of the Trust or any Series or Class and accounting records in
connection therewith.
(h) Parties to Contract. Any contract described in this Article V
hereof may be entered into with any corporation, firm, partnership, trust or
association, although one or more of the Trustees or officers of the Trust may
be an officer, director, trustee, shareholder, or member of such other party to
the contract, and no such contract shall be invalidated or rendered void or
voidable by reason of the existence of any relationship, nor shall any person
holding such relationship be disqualified from voting on or executing the same
in his capacity as Shareholder and/or Trustee, nor shall any person holding such
relationship be liable merely by reason of such relationship for any loss or
expense to the Trust under or by reason of said contract or accountable for any
profit realized directly or indirectly therefrom, provided that the contract
when entered into was not inconsistent with the provisions of this Article V.
The same person (including a firm, corporation, partnership, trust, or
association) may be the other party to contracts entered into pursuant to this
Article V, and any individual may be financially interested or otherwise
affiliated with persons who are parties to any or all of the contracts mentioned
in this Section 5.1.
ARTICLE VI
----------
SHAREHOLDER VOTING POWERS AND MEETINGS
--------------------------------------
Section 6.1 Voting. The Shareholders shall have power to vote only: (a) for
the election of one or more Trustees in order to comply with the provisions of
the 1940 Act (including Section 16(a) thereof); (b) with respect to any contract
entered into pursuant to Article V to the extent required by the 1940 Act; (c)
with respect to termination of the Trust or a Series or Class thereof to the
extent required by applicable law; (d) with respect to any plan adopted pursuant
to Rule 12b-1 (or any successor rule) under the 1940 Act, and related
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matters, to the extent required under the 1940 Act; and (e) with respect to such
additional matters relating to the Trust as may be required by this Trust
Instrument, the By-laws or any registration of the Trust or Series as an
investment company under the 1940 Act with the Commission (or any successor
agency) or as the Trustees may consider necessary or desirable.
On each matter submitted to a vote of Shareholders, unless the Trustees
determine otherwise, all Shares of all Series and Classes shall vote as a single
class; provided, however, that: (a) as to any matter with respect to which a
separate vote of any Series or Class is required by the 1940 Act or other
applicable law or is required by attributes applicable to any Series or Class,
such requirements as to a separate vote by that Series or Class shall apply; (b)
unless the Trustees determine that this clause (b) shall not apply in a
particular case, to the extent that a matter referred to in clause (a) above
affects more than one Series or Class and the interests of each such Series or
Class in the matter are identical, then the Shares of all such affected Series
or Classes shall vote as a single class; and (c) as to any matter which does not
affect the interests of a particular Series or Class, only the holders of Shares
of the one or more affected Series or Classes shall be entitled to vote. Each
whole Share shall be entitled to one vote as to any matter on which it is
entitled to vote, and each fractional Share shall be entitled to a proportionate
fractional vote. There shall be no cumulative voting in the election of
Trustees. Shares may be voted in person or by proxy or in any manner provided
for in the By-laws. A proxy may be given in writing, by telefax, or in any other
manner provided for in the By-laws. Anything in this Trust Instrument to the
contrary notwithstanding, in the event a proposal by anyone other than the
officers or Trustees of the Trust is submitted to a vote of the Shareholders of
the Trust or one or more Series or Classes thereof, or in the event of any proxy
contest or proxy solicitation or proposal in opposition to any proposal by the
officers or Trustees of the Trust, Shares may be voted only in person or by
written proxy. Until Shares are issued, the Trustees may exercise all rights of
Shareholders and may take any action required or permitted by law, this Trust
Instrument or any of the By-laws of the Trust to be taken by Shareholders.
Section 6.2 Meetings. Meetings of Shareholders (including meetings
involving only the holders of Shares of one or more but less than all Series or
Classes) may be called by the Trustees from time to time to be held at such
place within or without the State of Delaware, and on such date as may be
designated in the call thereof for the purpose of taking action upon any matter
as to which the vote or authority of the Shareholders is required or permitted
as provided in Section 6.1. Special meetings of the Shareholders of any Series
may be called by the Trustees and shall be called by the Trustees upon the
written request of Shareholders owning at least twenty-five percent (25%) of the
Outstanding Shares entitled to vote, except to the extent that a lesser
percentage is prescribed by the 1940 Act. Notice shall be sent, postage prepaid,
by mail or such other means determined by the Trustees, at least 7 days prior to
any such meeting.
Section 6.3 Quorum and Required Vote. Unless a larger percentage is
required by law, by any provision of this Trust Instrument or by the Trustees,
one-third of the Shares entitled to vote in person or by proxy on a particular
matter shall be a quorum for the transaction of business at a Shareholders'
meeting with respect to that matter. Any lesser
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number shall be sufficient for adjournments. Any adjourned session or sessions
may be held without the necessity of further notice. Except when a larger vote
is required by law, by any provision of this Trust Instrument or by the
Trustees, a majority of the Shares voted in person or by proxy on a particular
matter at a meeting at which a quorum is present shall decide any questions with
respect to that matter and a plurality shall elect a Trustee.
Section 6.4 Action by Written Consent. Subject to the provisions of the
1940 Act and other applicable law, any action taken by Shareholders may be taken
without a meeting if a majority of the Shares entitled to vote on the matter (or
such larger proportion thereof as shall be required by law, by any provision of
this Trust Instrument or by the Trustees) consent to the action in writing. Such
consent shall be treated for all purposes as a vote taken at a meeting of
Shareholders. The Trustees may adopt additional rules and procedures regarding
the taking of Shareholder action by written consents.
ARTICLE VII
-----------
DISTRIBUTIONS AND REDEMPTIONS
-----------------------------
Section 7.1 Distributions.
(a) The Trustees may from time to time declare and pay dividends or
other distributions with respect to any Series or Class. The amount of such
dividends or distributions and the payment of them and whether they are in cash
or any other Trust Property shall be wholly in the discretion of the Trustees.
(b) Dividends and other distributions may be paid or made to the
Shareholders of record at the time of declaring a dividend or other distribution
or among the Shareholders of record at such other date or time or dates or times
as the Trustees shall determine, which dividends or distributions, at the
election of the Trustees, may be paid pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees may
determine. All dividends and other distributions on Shares of a particular Class
shall be distributed pro rata to the Shareholders of that Series or Class in
proportion to the number of Shares of that Series or Class they held on the
record date established for such payment, except that in connection with any
dividend or distribution program or procedure the Trustees may determine that no
dividend or distribution shall be payable on Shares as to which the
Shareholder's purchase order and/or payment in the prescribed form has not been
received by the time or times established by the Trustees under such program or
procedure. The Trustees may adopt and offer to Shareholders such dividend
reinvestment plans, cash dividend payout plans or related plans as the Trustees
shall deem appropriate.
(c) Anything in this Trust Instrument to the contrary notwithstanding,
the Trustees may at any time declare and distribute a stock dividend pro rata
among the Shareholders of a particular Series, or Class thereof, as of the
record date of that Series or Class fixed as provided in Section (b) hereof. The
Trustees shall have full discretion, to the extent not inconsistent with the
1940 Act, to determine which items shall be treated as income
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and which items as capital; and each such determination and allocation shall be
conclusive and binding upon the Shareholders.
Section 7.2 Redemption by Shareholder.
(a) Unless the Trustees otherwise determine with respect to a
particular Series or Class at the time of establishing and designating the same,
each holder of Shares of a particular Series or Class thereof shall have the
right at such times as may be permitted by the Trust, but no less frequently
than once each week, to require the Trust to redeem (out of the assets belonging
to the applicable Series or Class) all or any part of his Shares at a redemption
price equal to the Net Asset Value per Share of that Series or Class next
determined in accordance with Section 7.4 after the Shares are properly tendered
for redemption, less such redemption fee or other charge, if any, as may be
fixed by the Trustees. Except as otherwise provided in this Trust Instrument,
payment of the redemption price shall be in cash; provided, however, that to the
extent permitted by applicable law, the Trustees may authorize the Trust to make
payment wholly or partly in securities or other assets belonging to the
applicable Series at the value of such securities or assets used in such
determination of Net Asset Value.
(b) Notwithstanding the foregoing, the Trust may postpone payment of
the redemption price and may suspend the right of the holders of Shares of any
Series or Class to require the Trust to redeem Shares of that Series or Class
during any period or at any time when and to the extent permissible under the
1940 Act.
(c) In the event that a Shareholder shall submit a request for the
redemption of a greater number of Shares than are then allocated to such
Shareholder, such request shall not be honored.
Section 7.3 Redemption by Trust. Unless the Trustees otherwise determine
with respect to a particular Series or Class at the time of establishing and
designating the same, each Share of each Series or Class thereof that has been
established and designated is subject to redemption (out of the assets belonging
to the applicable Series or Class) by the Trust at the redemption price which
would be applicable if such Share was then being redeemed by the Shareholder
pursuant to Section 7.2 at any time if the Trustees determine in their sole
discretion that failure to so redeem may have materially adverse consequences to
the holders of the Shares, or any Series or Class of the Trust, and upon such
redemption the holders of the Shares so redeemed shall have no further right
with respect thereto other than to receive payment of such redemption price. In
addition, the Trustees, in their sole discretion, may cause the Trust to redeem
(out of the assets belonging to the applicable Series or Class) all of the
Shares of one or more Series or Classes held by (a) any Shareholder if the value
of such Shares held by such Shareholder is less than the minimum amount
established from time to time by the Trustees, (b) all Shareholders of one or
more Series or Classes if the value of such Shares held by all Shareholders is
less than the minimum amount established from time to time by the Trustees or
(c) any Shareholder to reimburse the Trust for any loss or expense it has
sustained or incurred by reason of the failure of such Shareholder to make full
payment for Shares purchased by such Shareholder, or by reason of any defective
redemption request, or by reason of indebtedness incurred because of such
Shareholder as described in Section 9.11
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or to collect any charge relating to a transaction effected for the benefit of
such Shareholder or as provided in the prospectus relating to such Shares.
Section 7.4 Net Asset Value. The Net Asset Value per Share of any Series or
Class thereof shall be the quotient obtained by dividing the value of the net
assets of that Series or Class (being the value of the assets belonging to that
Series or Class less the liabilities belonging to that Series or Class) by the
total number of Shares of that Series or Class outstanding, all determined in
accordance with the methods and procedures, including without limitation those
with respect to rounding, established by the Trustees from time to time.
The Trustees may determine to maintain the Net Asset Value per Share
of any Series at a designated constant dollar amount and in connection therewith
may adopt procedures not inconsistent with the 1940 Act for the continuing
declarations of income attributable to that Series or Class thereof as dividends
payable in additional Shares of that Series or Class thereof at the designated
constant dollar amount and for the handling of any losses attributable to that
Series or Class thereof. Such procedures may, among other things, provide that
in the event of any loss each Shareholder of a Series or Class thereof shall be
deemed to have contributed to the capital of the Trust attributable to that
Series or Class thereof his pro rata portion of the total number of Shares
required to be cancelled in order to permit the Net Asset Value per Share of
that Series or Class thereof to be maintained, after reflecting such loss, at
the designated constant dollar amount. Each Shareholder of the Trust shall be
deemed to have agreed, by his investment in the Trust, to make the contribution
referred to in the preceding sentence in the event of any such loss.
ARTICLE VIII
------------
LIMITATION OF LIABILITY AND INDEMNIFICATION
-------------------------------------------
Section 8.1 Limitation of Liability. Neither a Trustee nor an officer of
the Trust, when acting in such capacity, shall be personally liable to any
person other than the Trust or a beneficial owner for any act, omission or
obligation of the Trust, any Trustee or any officer of the Trust. Neither a
Trustee nor an officer of the Trust shall be liable for any act or omission in
his capacity as Trustee or as an officer of the Trust, or for any act or
omission of any other officer or any employee of the Trust or of any other
person or party, provided that nothing contained herein or in the Act shall
protect any Trustee or officer against any liability to the Trust or to
Shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee or the duties of such officer
hereunder.
Section 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
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<PAGE>
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.
Section 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.
Section 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.
Section 8.5 Shareholders. Each Shareholder of the Trust and of each Series
or Class shall not be personally liable for the debts, liabilities, obligations
and expenses incurred by, contracted for, or otherwise existing with respect to,
the Trust or by or on behalf of any Series or Class. The Trustees shall have no
power to bind any Shareholder personally or to call upon any Shareholder for the
payment of any sum of money or assessment whatsoever other than such as the
Shareholder may at any time personally agree to pay pursuant to terms hereof or
by way of subscription for any Shares or otherwise.
In case any Shareholder or former Shareholder of any Series or Class shall
be held to be personally liable solely by reason of his being or having been a
Shareholder of such Series
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<PAGE>
or Class and not because of his acts or omissions or for some other reason, the
Shareholder or former Shareholder (or his heirs, executors, administrators or
other legal representatives, or, in the case of a corporation or other entity,
its corporate or other general successor) shall be entitled out of the assets
belonging to the applicable Series or Class to be held harmless from and
indemnified against all loss and expense arising from such liability. The Trust,
on behalf of the affected Series, shall, upon request by the Shareholder, assume
the defense of any claim made against the Shareholder for any act or obligation
of the Series or Class and satisfy any judgment thereon from the assets of the
Series or Class. The indemnification and reimbursement required by the preceding
sentence shall be made only out of assets of the one or more Series or Classes
whose Shares were held by said Shareholder at the time the act or event occurred
which gave rise to the claim against or liability of said Shareholder. The
rights accruing to a Shareholder under this Section shall not impair any other
right to which such Shareholder may be lawfully entitled, nor shall anything
herein contained restrict the right of the Trust or any Series or Class thereof
to indemnify or reimburse a Shareholder in any appropriate situation even though
not specifically provided herein.
ARTICLE IX
----------
MISCELLANEOUS
-------------
Section 9.1 Trust Not a Partnership. It is hereby expressly declared that a
trust and not a partnership is created hereby. All persons extending credit to,
contracting with or having any claim against any Series of the Trust or any
Class within any Series shall look only to the assets of such Series or Class
for payment under such credit, contract or claim; and neither the Shareholders
nor the Trustees, nor any of the Trust's officers, employees or agents, whether
past, present or future, shall be personally liable therefor. Every note, bond,
contract or other undertaking issued by or on behalf of the Trust or the
Trustees relating to the Trust or to a Series or Class shall include a
recitation limiting the obligations represented thereby to the Trust or to one
or more Series or Classes and its or their assets (but the omission of such a
recitation shall not operate to bind any Shareholder, Trustee, officer, employee
or agent of the Trust).
Section 9.2 Trustees' Good Faith Action, Expert Advice, No Bond or Surety.
The exercise by the Trustees of their powers and discretions hereunder shall be
binding upon everyone interested. Subject to the provisions of Article VIII: (i)
the Trustees shall not be responsible or liable in any event for any neglect or
wrongdoing of any officer, agent, employee, consultant, adviser, administrator,
distributor or principal underwriter, custodian or transfer, dividend
disbursing, Shareholder servicing or accounting agent of the Trust, nor shall
any Trustee be responsible for the act or omission of any other Trustee; (ii)
the Trustees may take advice of counsel or other experts with respect to the
meaning and operation of this Trust Instrument and their duties as Trustees, and
shall be under no liability for any act or omission in accordance with such
advice or for failing to follow such advice; and (iii) in discharging
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their duties, the Trustees, when acting in good faith, shall be entitled to rely
upon the books of account of the Trust and upon written reports made to the
Trustees by any officer appointed by them, any independent public accountant,
and (with respect to the subject matter of the contract involved) any officer,
partner or responsible employee of a contracting party appointed by the
Trustees. The Trustees as such shall not be required to give any bond or surety
or any other security for the performance of their duties.
Section 9.3 Establishment of Record Dates. The Trustees may close the Share
transfer books of the Trust for a period not exceeding one hundred twenty (120)
days preceding the date of any meeting of Shareholders, or the date for the
payment of any dividends or other distributions, or the date for the allotment
of rights, or the date when any change or conversion or exchange of Shares shall
go into effect; or in lieu of closing the stock transfer books as aforesaid, the
Trustees may fix in advance a date, not exceeding one hundred twenty (120) days
preceding the date of any meeting of Shareholders, or the date for payment of
any dividend or other distribution, or the date for the allotment of rights, or
the date when any change or conversion or exchange of Shares shall go into
effect, as a record date for the determination of the Shareholders entitled to
notice of, and to vote at, any such meeting, or entitled to receive payment of
any such dividend or other distribution, or to any such allotment of rights, or
to exercise the rights in respect of any such change, conversion or exchange of
Shares, and in such case such Shareholders and only such Shareholders as shall
be Shareholders of record on the date so fixed shall be entitled to such notice
of, and to vote at, such meeting, or to receive payment of such dividend or
other distribution, or to receive such allotment or rights, or to exercise such
rights, as the case may be, notwithstanding any transfer of any Shares on the
books of the Trust after any such record date fixed as aforesaid.
Section 9.4 Dissolution and Termination of Trust or Series.
(a) This Trust shall continue without limitation of time but subject
to the provisions of sub-sections (b) and (c) of this Section 9.4.
(b) Notwithstanding anything in Section 9.5 to the contrary, the
Trustees may without Shareholder approval (unless such approval is required by
the 1940 Act) in dissolution of the Trust or an applicable Series or Class,
(i) sell and convey all or substantially all of the assets of
the Trust or any Series or Class to another trust,
partnership, limited liability company, association or
corporation, or to a separate Series or Class of shares
thereof, organized under the laws of any state or
jurisdiction, for adequate consideration which may include
the assumption of all outstanding obligations, taxes and
other liabilities, accrued or contingent, of the Trust or
any Series or Class, and which may include shares of
beneficial interest, stock or other ownership interests of
such trust, partnership, limited liability company,
association or corporation or of a series thereof; or
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<PAGE>
(ii) at any time sell and convert into money all of the assets of
the Trust or any Series or Class.
Following a sale or conversion in accordance with the foregoing sub-section
9.4(b)(i) or (ii), and upon making reasonable provision, in the determination of
the Trustees, for the payment of all liabilities of the Trust or the affected
Series or Class as required by applicable law, by such assumption or otherwise,
the Shareholders of each Class of a Series involved in such sale or conversion
shall be entitled to receive, as a Class, when and as declared by the Trustees,
the excess of the assets belonging to that Series that are allocated to such
Class over the liabilities belonging to that Series that are allocated to such
Class. The assets so distributable to the Shareholders of any particular Class
of a Series shall be distributed among such Shareholders in proportion to the
number of Shares of that Class held by them and recorded on the books of the
Trust. In the event a Series is not divided into Classes, the foregoing
provisions shall be applied on a Series by Series basis.
(c) Upon completion of the distribution of the remaining proceeds or
the remaining assets as provided in sub-section (b), the Trust (in the case of a
sale or conversion with respect to the Trust as a whole or the last remaining
Series) or any affected Series or Class shall terminate and the Trustees and the
Trust or any affected Series or Class shall be discharged of any and all further
liabilities and duties hereunder and the right, title and interest of all
parties with respect to the Trust or such affected Series or Class shall be
cancelled and discharged.
Upon termination of the Trust, following completion of winding up of its
business, the Trustees shall cause a certificate of cancellation of the Trust's
certificate of trust to be filed in accordance with the Act, which certificate
of cancellation may be signed by any one Trustee.
Section 9.5 Merger, Consolidation, Incorporation. Anything in this Trust
Instrument to the contrary notwithstanding, the Trustees, in order to change the
form of organization and/or domicile of the Trust, may, without prior
Shareholder approval, (i) cause the Trust to merge or consolidate with or into
one or more trusts, partnerships, limited liability companies, associations or
corporations which is or are formed, organized or existing under the laws of a
state, commonwealth possession or colony of the United States, or (ii) cause the
Trust to incorporate under the laws of Delaware. Any agreement of merger or
consolidation or certificate of merger may be signed by a majority of the
Trustees. Pursuant to and in accordance with the provisions of Section 3815(f)
of the Act, and notwithstanding anything to the contrary contained in this Trust
Instrument, an agreement of any merger or consolidation approved in accordance
with this Section 9.5 may effect any amendment to the Trust Instrument or effect
the adoption of a new trust instrument of the Trust if it is the surviving or
resulting trust in the merger or consolidation. Any merger or consolidation of
the Trust other than as described in the foregoing provisions of this Section
9.5 shall, in addition to the approval of the Trustees, require a Majority
Shareholder Vote. Nothing in this Section 9.5 shall require, however,
Shareholder approval of any transaction whereby the Trust or any Series thereof
acquires or assumes all or any part of the assets and liabilities of any other
entity.
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<PAGE>
Section 9.6 Filing of Copies, References, Headings. The original or a copy
of this Trust Instrument and of each amendment hereof or Trust Instrument
supplemental hereto shall be kept at the office of the Trust where it may be
inspected by any Shareholder. Anyone dealing with the Trust may rely on a
certificate by an officer or Trustee of the Trust as to whether or not any such
amendments or supplements have been made and as to any matters in connection
with the Trust hereunder, and with the same effect as if it were the original,
may rely on a copy certified by an officer or Trustee of the Trust to be a copy
of this Trust Instrument or of any such amendment or supplemental Trust
Instrument. In this Trust Instrument or in any such amendment or supplemental
Trust Instrument, references to this Trust Instrument, and all expressions like
"herein," "hereof" and "hereunder," shall be deemed to refer to this Trust
Instrument as amended or affected by any such supplemental Trust Instrument. All
expressions like "his," "he" and "him," shall be deemed to include the feminine
and neuter, as well as masculine, genders. Headings are placed herein for
convenience of reference only and in case of any conflict, the text of this
Trust Instrument rather than the headings, shall control. This Trust Instrument
may be executed in any number of counterparts each of which shall be deemed an
original.
Section 9.7 Applicable Law. The trust set forth in this instrument is made
in the State of Delaware, and the Trust and this Trust Instrument, and the
rights and obligations of the Trustees and Shareholders hereunder, are to be
governed by and construed and administered according to the Act and the laws of
said State; provided, however, that there shall not be applicable to the Trust,
the Trustees or this Trust Instrument (a) the provisions of Section 3540 of
Title 12 of the Delaware Code or (b) any provisions of the laws (statutory or
common) of the State of Delaware (other than the Act) pertaining to trusts which
relate to or regulate: (i) the filing with any court or governmental body or
agency of trustee accounts or schedules of trustee fees and charges, (ii)
affirmative requirements to post bonds for trustees, officers, agents or
employees of a trust, (iii) the necessity for obtaining court or other
governmental approval concerning the acquisition, holding or disposition of real
or personal property, (iv) fees or other sums payable to trustees, officers,
agents or employees of a trust, (v) the allocation of receipts and expenditures
to income or principal, (vi) restrictions or limitations on the permissible
nature, amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding of trust assets, or (vii) the
establishment of fiduciary or other standards or responsibilities or limitations
on the acts or powers of trustees, which are inconsistent with the limitations
or liabilities or authorities and powers of the Trustees set forth or referenced
in this Trust Instrument. The Trust shall be of the type commonly called a
"business trust," and without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a trust under
Delaware law. The Trust specifically reserves the right to exercise any of the
powers or privileges afforded to trusts or actions that may be engaged in by
trusts under the Act, and the absence of a specific reference herein to any such
power, privilege or action shall not imply that the Trust may not exercise such
power or privilege or take such actions.
Section 9.8 Amendments. Except as specifically provided herein, the
Trustees may, without Shareholder vote, amend or otherwise supplement this Trust
Instrument by making an amendment, a Trust Instrument supplemental hereto or an
amended and restated trust
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<PAGE>
instrument. Shareholders shall have the right to vote: (i) on any amendment
which would affect their right to vote granted in Section 6.1, (ii) on any
amendment to this Section 9.8, (iii) on any amendment for which such vote is
required by law and (iv) on any amendment submitted to them by the Trustees. Any
amendment required or permitted to be submitted to Shareholders which, as the
Trustees determine, shall affect the Shareholders of one or more Series or
Classes shall be authorized by vote of the Shareholders of each Series or Class
affected and no vote of shareholders of a Series or Class not affected shall be
required. Anything in this Trust Instrument to the contrary notwithstanding, any
amendment to Article VIII hereof shall not limit the rights to indemnification
or insurance provided therein with respect to action or omission of any persons
protected thereby prior to such amendment.
Section 9.9 Fiscal Year. The fiscal year of the Trust shall end on a
specified date as determined from time to time by the Trustees.
Section 9.10 Provisions in Conflict with Law. The provisions of this Trust
Instrument are severable, and if the Trustees shall determine, with the advice
of counsel, that any of such provisions is in conflict with the 1940 Act, the
regulated investment company provisions of the Internal Revenue Code or with
other applicable laws and regulations, the conflicting provision shall be deemed
never to have constituted a part of this Trust Instrument; provided, however,
that such determination shall not affect any of the remaining provisions of this
Trust Instrument or render invalid or improper any action taken or omitted prior
to such determination. If any provision of this Trust Instrument shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction and
shall not in any manner affect such provisions in any other jurisdiction or any
other provision of this Trust Instrument in any jurisdiction.
Section 9.11 Allocation of Certain Expenses. Each Shareholder will, at the
discretion of the Trustees, indemnify the Trust against all expenses and losses
resulting from indebtedness incurred in connection with facilitating (i)
requests pending receipt of the collected funds from investments sold on the
date of such Shareholder's redemption request; (ii) redemption requests from
such Shareholder who has also notified the Trust of its intention to deposit
funds in its accounts on the date of said redemption request; or (iii) the
purchase of investments pending receipt of collected funds from such Shareholder
who has notified the Trust of its intention to deposit funds in its accounts on
the date of the purchase of the investments.
IN WITNESS WHEREOF, the undersigned, being the Trustee of the Trust, has
executed this Declaration of Trust as of the 14th day of January, 1999.
/s/ Neil M. Solomon
-------------------
Neil M. Solomon
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THE COMMUNITY REINVESTMENT ACT
QUALIFIED INVESTMENT FUND
BY-LAWS
These By-laws (the "By-laws") of The Community Reinvestment Act
Qualified Investment Fund (the "Trust"), a Delaware business trust, are subject
to the Trust's Agreement and Declaration of Trust dated January 14, 1999, as
from time to time amended, supplemented or restated (the "Trust Instrument").
Capitalized terms used herein which are defined in the Trust Instrument are used
as therein defined.
ARTICLE I
---------
PRINCIPAL OFFICE
----------------
The principal office of the Trust shall be located in such location as
the Trustees may from time to time determine. The Trust may establish and
maintain such other offices and places of business as the Trustees may from time
to time determine.
ARTICLE II
----------
OFFICERS AND THEIR ELECTION
---------------------------
SECTION 2.1 OFFICERS. The officers of the Trust shall be a President,
a Treasurer, a Secretary, and such other officers as the Trustees may from time
to time elect. It shall not be necessary for any Trustee or other officer to be
a holder of Shares in the Trust.
SECTION 2.2 ELECTION OF OFFICERS. Two or more offices may be held by a
single person. Subject to the provisions of Section 2.3 hereof, the officers
shall hold office until their successors are chosen and qualified and serve at
the pleasure of the Trustees.
SECTION 2.3 RESIGNATIONS. Any officer of the Trust may resign by
filing a written resignation with the President, the Secretary or the Trustees,
which resignation shall take effect on being so filed or at such later time as
may be therein specified.
<PAGE>
ARTICLE III
-----------
POWERS AND DUTIES OF OFFICERS AND TRUSTEES
------------------------------------------
SECTION 3.1 CHIEF EXECUTIVE OFFICER. Unless the Trustees have
designated the Chairman as the chief executive officer of the Trust, the
President shall be the chief executive officer of the Trust and shall preside at
all meetings of the Shareholders.
SECTION 3.2 TREASURER. The Treasurer shall be the principal financial
and accounting officer of the Trust. He shall deliver all funds and securities
of the Trust which may come into his hands to such company as the Trustees shall
employ as Custodian in accordance with the Trust Instrument and applicable
provisions of law. He shall make annual reports regarding the business and
condition of the Trust, which reports shall be preserved in Trust records, and
he shall furnish such other reports regarding the business and condition of the
Trust as the Trustees may from time to time require. The Treasurer shall perform
such additional duties as the Trustees or the chief executive officer may from
time to time designate.
SECTION 3.3 SECRETARY. The Secretary shall record in books kept for
the purpose all votes and proceedings of the Trustees and the Shareholders at
their respective meetings. He shall have the custody of the seal of the Trust.
The Secretary shall perform such additional duties as the Trustees or the chief
executive officer may from time to time designate.
SECTION 3.4 VICE PRESIDENT. Any Vice President of the Trust shall
perform such duties as the Trustees or the chief executive officer may from time
to time designate. At the request or in the absence or disability of the
President, the most senior Vice President present and able to act may perform
all the duties of the President and, when so acting, shall have all the powers
of and be subject to all the restrictions upon the President.
SECTION 3.5 ASSISTANT TREASURER. Any Assistant Treasurer of the Trust
shall perform such duties as the Trustees or the Treasurer may from time to time
designate, and, in the absence of the Treasurer, the most senior Assistant
Treasurer present and able to act may perform all the duties of the Treasurer.
SECTION 3.6 ASSISTANT SECRETARY. Any Assistant Secretary of the Trust
shall perform such duties as the Trustees or the Secretary may from time to time
designate, and, in the absence of the Secretary, the most senior Assistant
Secretary present and able to act may perform all the duties of the Secretary.
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<PAGE>
SECTION 3.7 ADDITIONAL OFFICERS. The Trustees from time to time may
appoint such other officers or agents as they may deem advisable, each of whom
shall have such title, hold office for such period, have such authority and
perform such duties as the Trustees may determine.
SECTION 3.8 SURETY BONDS. The Trustees may require any officer or
agent of the Trust to execute a bond (including, without limitation, any bond
required by the Investment Company Act of 1940 (the "1940 Act")) in such sum and
with such surety or sureties as the Trustees may determine, conditioned upon the
faithful performance of his duties to the Trust including responsibility for
negligence and for the accounting of any of the Trust's property, funds or
securities that may come into his hands.
SECTION 3.9 REMOVAL. Any officer may be removed from office at any
time by the Trustees.
SECTION 3.10 REMUNERATION. The salaries or other compensation, if any,
of the officers of the Trust shall be fixed from time to time by resolution of
the Trustees.
ARTICLE IV
----------
SHAREHOLDERS' MEETINGS
----------------------
SECTION 4.1 NOTICES. Notices of any meeting of the Shareholders shall
be given by the Secretary by delivering or mailing, postage prepaid, to each
Shareholder entitled to vote at said meeting, written or printed notification of
such meeting at least seven days before the meeting, to such address as may be
registered with the Trust by the Shareholder. Notice of any Shareholder meeting
need not be given to any Shareholder if a written waiver of notice, executed
before or after such meeting, is filed with the record of such meeting, or to
any Shareholder who shall attend such meeting in person or by proxy. Notice of
adjournment of a Shareholders' meeting to another time or place need not be
given, if such time and place are announced at the meeting or reasonable notice
is given to persons present at the meeting.
SECTION 4.2 VOTING-PROXIES. Subject to the provisions of the Trust
Instrument, Shareholders entitled to vote may vote either in person or by proxy,
provided that either (i) an instrument authorizing such proxy to act is executed
by the Shareholder in writing and dated not more than eleven months before the
meeting, unless the instrument specifically provides for a longer period or (ii)
the Trustees adopt by resolution an electronic, telephonic, computerized or
other alternative to execution of a written instrument authorizing the proxy to
act, which authorization is received not more than eleven months
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<PAGE>
before the meeting. Proxies shall be delivered to the Secretary of the Trust or
other person responsible for recording the proceedings before being voted. A
proxy with respect to Shares held in the name of two or more persons shall be
valid if executed by one of them unless at or prior to exercise of such proxy
the Trust receives a specific written notice to the contrary from any one of
them. Unless otherwise specifically limited by their terms, proxies shall
entitle the holder thereof to vote at any adjournment of a meeting. A proxy
purporting to be exercised by or on behalf of a Shareholder shall be deemed
valid unless challenged at or prior to its exercise and the burden of proving
invalidity shall rest on the challenger. At all meetings of the Shareholders,
unless the voting is conducted by inspectors, all questions relating to the
qualifications of voters, the validity of proxies, and the acceptance or
rejection of votes shall be decided by the Chairman of the meeting. Except as
otherwise provided herein or in the Trust Instrument, all matters relating to
the giving, voting or validity of proxies shall be governed by the General
Corporation Law of the State of Delaware relating to proxies, and judicial
interpretations thereunder, as if the Trust were a Delaware corporation and the
Shareholders were shareholders of a Delaware corporation.
SECTION 4.3 PLACE OF MEETING. All meetings of the Shareholders shall
be held at such places as the Trustees may designate.
ARTICLE V
---------
SHARES OF BENEFICIAL INTEREST
-----------------------------
SECTION 5.1 SHARE CERTIFICATE. No certificates certifying the
ownership of Shares shall be issued except as the Trustees may otherwise
authorize. The Trustees may issue certificates to a Shareholder of any Series or
Class thereof for any purpose and the issuance of a certificate to one or more
Shareholders shall not require the issuance of certificates generally. In the
event that the Trustees authorize the issuance of Share certificates, such
certificate shall be in the form prescribed from time to time by the Trustees
and shall be signed by the President or a Vice President and by the Treasurer,
Assistant Treasurer, Secretary or Assistant Secretary. Such signatures may be
facsimiles if the certificate is signed by a transfer or shareholder services
agent or by a registrar, other than a Trustee, officer or employee of the Trust.
In case any officer who has signed or whose facsimile signature has been placed
on such certificate shall have ceased to be such officer before such certificate
is issued, it may be issued by the Trust with the same effect as if he or she
were such officer at the time of its issue.
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<PAGE>
SECTION 5.2 LOSS OF CERTIFICATE. In case of the alleged loss or
destruction or the mutilation of a Share certificate, a duplicate certificate
may be issued in place thereof, upon such terms as the Trustees may prescribe.
SECTION 5.3 DISCONTINUANCE OF ISSUANCE OF CERTIFICATES. The Trustees
may at any time discontinue the issuance of Share certificates and may, by
written notice to each Shareholder, require the surrender of Share certificates
to the Trust for cancellation. Such surrender and cancellation shall not affect
the ownership of Shares in the Trust.
ARTICLE VI
----------
INSPECTION OF BOOKS
-------------------
The Trustees shall from time to time determine whether and to what
extent, and at what times and places, and under what conditions and regulations
the accounts and books of the Trust or any of them shall be open to the
inspection of the Shareholders; and no Shareholder shall have any right to
inspect any account or book or document of the Trust except as conferred by law
or otherwise by the Trustees.
ARTICLE VII
-----------
AMENDMENTS
----------
These By-laws may be amended from time to time by the Trustees.
ARTICLE VIII
------------
HEADINGS
--------
Headings are placed in these By-laws for convenience of reference only
and, in case of any conflict, the text of these By-laws rather than the headings
shall control.
-5-
DRAFT 12/14/98
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of , 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;
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(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 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
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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 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.
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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 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.
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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 , 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.
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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:
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Authorized Officer
CRAFUND ADVISORS, INC.
By:
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Authorized Officer
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SCHEDULE A
TO THE
INVESTMENT MANAGEMENT AGREEMENT
BETWEEN
THE COMMUNITY REINVESTMENT ACT QUALIFIED INVESTMENT FUND
AND
CRAFUND ADVISORS, INC.
DATED AS OF ________________, 1999
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<CAPTION>
NAME OF FUND COMPENSATION* DATE
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<S> <C> <C>
The Community Reinvestment Act Annual Rate of 0.50% of such Fund's ________, 1999
Qualified Investment Fund average net assets
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*All Fees are computed daily and paid monthly.
CRAFUND ADVISORS, INC. THE COMMUNITY REINVESTMENT ACT
QUALIFIED INVESTMENT FUND
By: By:
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Name: Name:
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Title: Title:
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