<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OR ABOUT APRIL 7, 1999
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Securities Act Registration No. 333-______
Investment Company Act Registration No. 811-_______
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. __ / /
Post-Effective Amendment No. __ / /
and/or
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. __ / /
(Check appropriate box or boxes)
HILLIARD LYONS INVESTMENT TRUST
(Exact Name of Rgistrant as Specified in Charter)
501 SOUTH 4TH SREET
LOUISVILLE, KENTUCKY 40202
(Address of Principal Executive Offices, including Zip Code)
Registrant's Telephone Number, Including Area Code: (800) 444-1854
ANN F. CODY
HILLIARD LYONS
501 SOUTH 4TH STREET
LOUISVILLE, KENTUCKY 40202
(Name and Address of Agent for Service)
COPY TO:
JAMES A. ARPAIA
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 NORTH LASALLE STREET
SUITE 2500
CHICAGO, ILLINOIS 60601
Approximate Date of Proposed Public Offering: As soon as possible 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.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or a
solicitation of an offer to buy, nor shall there be any sale of these securities
in any state in which the offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such state.
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<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED APRIL 7, 1999
[SENBANC_FUND_LOGO]
HILLIARD LYONS INVESTMENT TRUST
501 South 4th Street
Louisville, Kentucky 40202
1-800-444-1854
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THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL AND COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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<PAGE>
SENBANC FUND
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TABLE OF CONTENTS
<TABLE>
<S> <C>
SENBANC FUND SUMMARY............................................... 1
SENBANC FUND....................................................... 5
Investment Objective and Principal Types of Investments.......... 5
Investment Philosophy............................................ 5
Main Risks....................................................... 6
Other Types of Investments and Considerations.................... 8
MANAGEMENT OF THE FUND............................................. 8
Trustees and Adviser............................................. 8
Portfolio Manager................................................ 9
SHAREHOLDER INFORMATION............................................ 9
Net Asset Value.................................................. 9
How to Buy Shares................................................ 10
How to Sell (Redeem) Shares...................................... 12
Dividends, Distributions and Taxes............................... 14
DISTRIBUTION ARRANGEMENTS.......................................... 15
Distribution Agreement........................................... 15
Sales Charges.................................................... 16
Distribution Plan................................................ 18
FOR MORE INFORMATION.............................................. Back Cover
</TABLE>
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i
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SENBANC FUND
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SUMMARY
INVESTMENT OBJECTIVE
The Senbanc Fund (the "Fund") seeks long-term capital
appreciation.
MAIN INVESTMENT STRATEGIES
The Fund invests primarily in publicly traded equity
securities of banks and financial institutions conducting a
substantial portion of their business through banking
subsidiaries (which are generally referred to herein as
"Banks"). "Banks" may include commercial banks, industrial
banks, consumer banks, savings and loans, and bank holding
companies that receive a significant portion of their income
through their bank subsidiaries, as well as regional and
money center banks. The Fund generally invests in equity
securities of Banks which have at least $500 million in
consolidated total assets; however, the Fund's investments
are not influenced by a Bank's market capitalization (large,
medium or small).
Hilliard Lyons Investment Advisers, a division of J.J.B.
Hilliard, W.L. Lyons, Inc. and the investment adviser to the
Fund (the "Adviser"), uses a VALUE investment style for the
Fund. The Adviser seeks to identify the most undervalued
Banks by using an investment model which considers financial
ratios and other quantitative information. Generally, such
Banks have at least six years of current or predecessor
operating history and well-managed organizations and
operations. The Fund's portfolio is weighted most heavily to
the equity securities of Banks that the investment model
indicates are most undervalued for the longest period of
time.
MAIN RISKS OF INVESTING
Your investment in the Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation (the "FDIC") or any other government entity;
therefore, you could lose money by investing in the Fund.
Your investment in the Fund is subject to the following main
risks:
<TABLE>
<S> <C>
Market Risk: The Fund is designed for long-term investors
who can accept the risks of investing in a
portfolio with significant holdings of
equity securities. Equity securities tend to
be more volatile than other investment
choices, such as debt and money market
instruments. The value of your investment
may decrease in response to overall stock
market movements or the value of individual
securities held by the Fund.
</TABLE>
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1
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SENBANC FUND
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<TABLE>
<S> <C>
Industry Concentration Because the Fund concentrates in a single
Risk: industry (banking), its performance is
largely dependent on that specific
industry's performance, which may differ in
direction and degree from that of the
overall stock market. Volatile interest
rates or deteriorating economic conditions
can adversely affect the banking industry
and, therefore, the performance of the
equity securities of Banks.
Portfolio Management The skill of the Adviser will play a
Risk: significant role in the Fund's ability to
achieve its investment objective.
Small Company Risk: Investment in smaller companies involves
greater risk than investment in larger, more
established companies. The equity securities
of small and medium-size companies often
fluctuate in price to a greater degree than
equity securities of larger, more mature
companies. Smaller companies may have more
limited financial resources and less liquid
trading markets for their securities.
Nondiversification: This is a nondiversified fund; compared to
other funds, the Fund may invest a greater
percentage of its assets in a particular
issuer or a small number of issuers. As a
consequence, the Fund may be subject to
greater risks and larger losses than
diversified funds.
Initial Investors Not The Fund may not be fully-invested in the
Fully-Invested: equity securities of Banks immediately
following its commencement of operations;
therefore, your returns may be lower than
they otherwise would have been if the Fund
had been fully-invested and if the Fund's
portfolio securities had increased in value.
The Adviser anticipates that the benefit of
this strategy is that the Fund will be more
diversified within the banking industry over
a period of time.
</TABLE>
INVESTOR EXPENSES
The tables below describe the fees and expenses that you may
pay if you buy and hold shares of the Fund. Shareholder fees
are paid directly from your
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2
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SENBANC FUND
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account. Annual fund operating expenses are paid out of the
Fund's assets and are reflected in the Fund's share price
and dividends; therefore, such expenses are paid indirectly
by shareholders.
<TABLE>
<S> <C>
SHAREHOLDER FEES (fees paid directly from your account)
Maximum Sales Charge Imposed on Purchases............. 2.25%*
Maximum Deferred Sales Charge......................... None**
Maximum Sales Charge Imposed on Reinvested Dividends
and Other Distributions............................. None
Redemption Fee........................................ None
Exchange Fee.......................................... None
Maximum Account Fee................................... None
</TABLE>
* The Fund has a maximum front-end sales charge of 2.25%;
however, cumulative investments of at least $500,000 over
thirteen (13) months will be assessed a sales charge of
1.75% and cumulative investments of at least $1,000,000
over thirteen (13) months will not be assessed a sales
charge. For more detailed information, refer to the
section of this Prospectus titled "Distribution
Arrangements."
** Purchases of $1,000,000 or more are not subject to an
initial sales charge; however, a contingent deferred
sales charge is payable on these investments in the event
of a share redemption within 12 months following the
share purchase, at the rate of 1% of the lesser of the
value of the shares redeemed (exclusive of reinvested
dividends and capital gain distributions) or the total
cost of such shares.
<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES (expenses that are paid
out of the Fund's assets)
Management Fee........................................ 0.60%*
Distribution (12b-1) Fees............................. 0.60%
Other Expenses........................................ 0.63%**
-----
Total Annual Fund Operating Expenses.................. 1.83%**
-----
</TABLE>
* The Adviser intends to waive all management fees until
the Fund reaches $20 million in total assets.
** "Other Expenses" is based on estimated amounts
annualized for the current fiscal year; therefore, "Total
Annual Fund Operating Expenses" may actually be greater
or less than indicated in the table. However, the Adviser
intends to voluntarily cap the Fund's total annual
operating expenses at 1.75% of the Fund's assets
indefinitely.
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3
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SENBANC FUND
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EXAMPLE
This hypothetical example is intended to help you compare
the cost of investing in this Fund with the cost of
investing in other mutual funds. The Example assumes that:
- You invest $10,000;
- You redeem all of your shares at the end of the
periods shown;
- Your investment has a 5% annual return; and
- The Fund's operating expenses remain the same.
Although actual annual returns and Fund operating expenses
may be higher or lower, based on these assumptions, your
costs would be:
<TABLE>
<CAPTION>
1
Year 3 Years
----- --------
<S> <C>
$413 $ 735
</TABLE>
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4
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SENBANC FUND
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SENBANC FUND
The Fund is a series of the Hilliard Lyons Investment Trust
(the "Trust"), an open-end management investment company.
INVESTMENT OBJECTIVE AND PRINCIPAL TYPES OF INVESTMENTS
The Fund seeks long-term capital appreciation. Under normal
market conditions, the Fund will invest at least 65% of its
total assets in publicly traded equity securities of banks
and financial institutions conducting a substantial portion
of their business through banking subsidiaries (which are
generally referred to herein as "Banks"). "Banks" may
include commercial banks, industrial banks, consumer banks,
savings and loans, and bank holding companies that receive a
significant portion of their income through their bank
subsidiaries, as well as regional and money center banks. A
regional bank is one that provides full service banking
(i.e., savings accounts, checking accounts, commercial
lending and real estate lending), has assets that are
primarily of domestic origin, and typically has a principal
office outside of a large metropolitan area (e.g. New York
City or Chicago). A money center bank is one with a strong
international banking business and a significant percentage
of international assets, and is typically located in a large
metropolitan area. To the extent that the Fund invests in
the equity securities of bank holding companies, a portion
of the Fund's assets may be indirectly invested in
non-banking entities, since bank holding companies may
derive a portion of their income from such entities.
Generally, the equity securities in which the Fund will
invest are common stocks; however, the Fund may also at
times acquire (through its common stock holdings) preferred
stock, warrants, rights or other securities that are
convertible into common stock. Although the Fund seeks
opportunities for long-term capital appreciation, the Banks
in which the Fund invests may also pay regular dividends.
INVESTMENT PHILOSOPHY
The Adviser uses a VALUE investment style for the Fund. The
Adviser seeks to identify the most undervalued Banks on a
monthly basis by using an investment model that generates
information which allows the Adviser to compare its
determinations of current net worth with the underlying
market prices of Banks. The investment model considers
financial ratios and other quantitative information in
evaluating and rating Banks which generally have at least
six years of current or predecessor operating history and
well-managed organizations and operations. The Fund's
portfolio is weighted most heavily to the equity securities
of Banks that the investment model indicates are most
undervalued for the longest period of time.
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5
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SENBANC FUND
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The Adviser intends to build the Fund's portfolio by
investing each month in the top ten most undervalued Banks
as determined by its investment model. Comparable dollar
amounts will be invested in each of the top ten banks each
month, insofar as liquidity of those issues and the liquid
resources of the Fund allow. The Adviser generally does not
expect significant turnover within the top ten most
undervalued Banks from month to month. Therefore, limited
turnover will lead to multiple purchases of the securities
of the Banks that stay in the top ten for greater than one
month.
Generally, securities in the Fund's portfolio will be sold
when they are adequately valued (as determined by the
investment model) and when an initial purchase of a Bank's
securities has been held for a minimum of twelve months.
However, if a Bank has announced a major reorganization
(e.g. merger or acquisition), the Fund will generally sell
that Bank's securities regardless of the Bank's rating by
the investment model or the length of time the Bank's
securities have been held by the Fund. If the Bank is no
longer evaluated by the investment model for any reason, the
Banks's securities will be sold by the Fund. In addition,
sales may be made in order to enhance the Fund's cash
position in the case of unusually large redemption requests
of the Fund's shares or as a temporary defensive measure,
and such sales would be of those Bank securities then ranked
as least undervalued.
The Adviser generally expects the Fund's portfolio to
represent Banks of wide geographic dispersion within the
United States. In addition, the Fund generally invests in
equity securities of Banks which have at least $500 million
in consolidated total assets; however, the Fund's
investments are not influenced by a Bank's market
capitalization (large, medium or small). The skill of the
Adviser will play a significant role in the Fund's ability
to achieve its investment objective.
MAIN RISKS
All investments (including those in mutual funds) have
risks, and you could lose money by investing in the Fund. No
investment is suitable for all investors. The Fund is
intended for long-term investors who can accept the risks
entailed in investing in the equity securities of Banks. Of
course, there can be no assurance that the Fund will achieve
its objective.
Your investment in the Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation (the "FDIC") or any other government entity.
Because the Fund's investments are concentrated in the
banking industry, an investment in the Fund may be subject
to greater market fluctuations than an investment in a fund
that does not concentrate in a
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6
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SENBANC FUND
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particular industry. Thus, we recommend that you consider an
investment in the Fund as only one portion of your overall
investment portfolio.
MARKET RISK. Equity securities tend to be more volatile than
other investment choices, such as debt and money market
instruments. The value of your investment may decrease in
response to overall stock market movements or the value of
individual securities held by the Fund.
INDUSTRY CONCENTRATION RISK. Since the Fund's investments
will be concentrated in the banking industry, they will be
subject to risks in addition to those that apply to the
general equity market. Events may occur that significantly
affect the entire banking industry; therefore, the Fund's
share value may at times increase or decrease at a faster
rate than the share value of a mutual fund with investments
in many industries. The profitability of Banks is largely
dependent upon the availability and cost of capital funds,
and may show significant fluctuation as a result of volatile
interest rate levels. Healthy economic conditions are
important to the operations of Banks, and exposure to credit
losses resulting from possible financial difficulties of
borrowers can have an adverse effect on the financial
performance and condition of Banks. In addi-
tion, despite some measure of deregulation, Banks are still
subject to extensive governmental regulation which may limit
their activities as well as the amounts and types of loans
and other financial commitments that may be made and the
interest rates and fees that may be charged.
NONDIVERSIFICATION. The Fund is NONDIVERSIFIED, meaning that
it is not limited in the proportion of its assets that it
may invest in the obligations of a single issuer. However,
the Fund will comply with diversification requirements
imposed by the Internal Revenue Code for qualification as a
regulated investment company. As a nondiversified fund, the
Fund may invest a greater proportion of its assets in the
securities of a small number of issuers, and may be subject
to greater risk and substantial losses as a result of
changes in the financial condition or the market's
assessment of the issuers.
SMALL COMPANY RISK. The Adviser may invest the Fund's assets
in small and medium-size companies. Investment in smaller
companies involves greater risk than investment in larger
companies. The stocks of smaller companies often fluctuate
in price to a greater degree than stocks of larger
companies. Smaller companies may have more limited financial
resources and less liquid trading markets for their stock.
The Fund's share price may experience greater volatility
when the Fund is more heavily invested in small and
medium-size companies.
INITIAL INVESTORS NOT FULLY-INVESTED. The Fund may not be
fully-invested in the equity securities of Banks immediately
following its commencement of operations; therefore, your
returns may be lower than they otherwise would have been if
the Fund had been fully-invested and if the Fund's portfolio
securities
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7
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SENBANC FUND
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had increased in value. The Adviser anticipates that the
benefit of this strategy is that the Fund will be more
diversified within the banking industry over a period of
time.
OTHER TYPES OF INVESTMENTS AND CONSIDERATIONS
For cash management purposes or when the Adviser believes
that market conditions warrant it (i.e. a temporary
defensive position), the Fund may hold part or all of its
assets in cash or debt and money market instruments.
Investments in debt and money market instruments will
generally be limited to (1) obligations of the U.S.
government, its agencies and instrumentalities; and (2)
corporate notes, bonds and debentures rated at least AA by
Standard & Poor's Corporation ("Standard & Poor's") or Aa by
Moody's Investors Service ("Moody's") (see Appendix A to the
Statement of Additional Information ("SAI") -- "Description
of Securities Ratings"). The risks of these types of
investments and strategies are described in the SAI. To the
extent that the Fund holds cash or invests in debt and money
market instruments, the Fund may not achieve its investment
objective.
There are also specific restrictions on the Fund's
investments. These restrictions are detailed in the SAI.
YEAR 2000. The investment management and advisory services
provided to the Fund by the Adviser and the services
provided to the Fund and its shareholders by the transfer
agent and the custodian depend on the smooth functioning of
their computer systems. Many computer software systems in
use today cannot recognize the year 2000, but revert to 1900
or some other date, due to the manner in which dates were
encoded and calculated. That failure could have a materially
adverse impact on the handling of securities trades, pricing
and account services. The Adviser, transfer agent and
custodian have been actively working on necessary changes to
their own computer systems to prepare for the year 2000 and
expect that their systems will be adapted before that date.
However, there can be no assurance that they will be
successful, or that interactions with other noncomplying
computer systems will not impair their services at that
time. In addition, there can be no assurance that the year
2000 issue will not affect the companies in which the Fund
invests or worldwide markets and economies.
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MANAGEMENT OF
TRUSTEES AND ADVISER
THE FUND
The Board of Trustees has overall management responsibility
for the Fund. See the SAI for the names of and additional
information about the Trustees and officers. The Adviser,
which is located at Hilliard Lyons Center, Louisville,
Kentucky 40202, is responsible for providing investment
advisory and management
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8
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SENBANC FUND
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services to the Fund, subject to the direction of the Board
of Trustees. The Adviser is a division of J.J.B. Hilliard,
W.L. Lyons, Inc. ("Hilliard Lyons"), a registered investment
adviser, registered broker-dealer and member firm of the New
York Stock Exchange, Inc. ("NYSE"), other principal
exchanges and the National Association of Securities
Dealers, Inc. ("NASD"). Hilliard Lyons and its affiliate,
Hilliard Lyons Trust Company, a Kentucky chartered trust
company, are wholly owned subsidiaries of Hilliard Lyons,
Inc., a Kentucky corporation ("Hilliard Lyons, Inc.").
Hilliard Lyons, Inc. is a wholly owned subsidiary of PNC
Bank Corp. ("PNC"). PNC, a multi-bank holding company
headquartered in Pittsburgh, Pennsylvania, is one of the
largest financial services organizations in the United
States. PNC's address is One PNC Plaza, 249 Fifth Avenue,
Pittsburgh, Pennsylvania 15222-2707.
Together with predecessor firms, Hilliard Lyons has been in
the investment banking business since 1854. Hilliard Lyons
has been registered as an investment adviser since 1973. The
Adviser also serves as investment adviser to the Hilliard
Lyons Growth Fund, Inc., an open-end mutual fund with assets
as of December 31, 1998 of approximately $88 million, and to
the Hilliard Lyons Government Fund, Inc., an open-end money
market mutual fund with assets as of December 31, 1998 of
approximately $1,046,000,000. As of December 31, 1998, the
Adviser and its affiliates managed individual, corporate,
fiduciary and institutional accounts with assets totaling
approximately $4,611,000,000. Pursuant to
an investment advisory agreement with the Fund (the
"Advisory Agreement"), the Adviser is paid a management fee
at an annual rate of 0.60% of the average daily value of the
Fund's net assets; however, the Adviser intends to waive its
management fee until the Fund reaches $20 million in total
assets.
PORTFOLIO MANAGER
Alan F. Morel is the portfolio manager of the Fund and the
designer and originator of the proprietary programs that
generate The Hilliard Lyons Bank Stock Index, upon which the
Fund's investment model is based. Therefore, the investment
success of the Fund will depend significantly on the efforts
of Mr. Morel. Accordingly, the death, incapacity, removal or
resignation of Mr. Morel could adversely affect the Fund's
performance. Mr. Morel is a Vice President of Hilliard Lyons
and has been employed by Hilliard Lyons as an analyst since
1976. Neither Hilliard Lyons nor the Adviser currently has a
written employment agreement with Mr. Morel.
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SHAREHOLDER
NET ASSET VALUE
INFORMATION
The net asset value is determined as of the close of regular
trading on the floor of the New York Stock Exchange (the
"NYSE") (4:00 p.m., Eastern time) on each day the NYSE is
open for trading (referred to herein as a "business day").
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9
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SENBANC FUND
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Net asset value per share is determined by dividing the
difference between the values of the Fund's assets and
liabilities by the number of the Fund's shares outstanding.
Investments that are traded on an exchange or in the
over-the-counter market are valued based on the last sale
price as of the close of regular trading on the NYSE.
Short-term obligations with maturities of 60 days or less
are valued at amortized cost. Other securities for which
market quotations are not readily available are valued at
their fair value, as determined in good faith by the Adviser
under procedures established by, and under the supervision
and responsibility of, the Fund's Board of Trustees.
HOW TO BUY SHARES
GENERAL. Provident Distributors, Inc., Four Fall Corporate
Center, 6th Floor, West Conshohocken, Pennsylvania
19428-2961, is the distributor for the shares of the Fund
(the "Distributor"). Pursuant to a selling agreement between
the Distributor and Hilliard Lyons, Hilliard Lyons is a
selling agent for the shares of the Fund. Therefore, you may
purchase or redeem Fund shares through a Hilliard Lyons
investment broker. The Distributor may enter into selling
agreements with authorized dealers and financial
intermediaries other than Hilliard Lyons (collectively
referred to as "Authorized Dealers") at a future date
allowing Fund shares to be purchased and redeemed through
such Authorized Dealers. The Fund may modify or waive its
purchase and redemption procedures or requirements to
facilitate any future selling agreements.
INITIAL PURCHASES. Fund shares may be purchased through a
Hilliard Lyons investment broker or Authorized Dealer who
will open an account, explain the shareholder services
available from the Fund and answer any questions. The
minimum initial investment for Fund shares is $250, and the
minimum additional investment is $100. These minimums may be
waived at the discretion of the Fund, and the Fund reserves
the right to change its investment minimums without notice.
ADDITIONAL PURCHASE POLICIES. After an initial investment is
made and a shareholder's account is established, additional
purchases may be made by telephoning your Hilliard Lyons
investment broker or Authorized Dealer and placing an order.
Purchase orders received by your Hilliard Lyons investment
broker prior to "closing time" on any "business day" are
executed at the public offering price determined that day.
Purchase orders received by an Authorized Dealer on any
"business day" are executed at the public offering price
determined that day, provided the order is received by the
Authorized Dealer and transmitted to the Transfer Agent
prior to "closing time" on that day. Authorized Dealers are
responsible for transmitting purchase orders to the Transfer
Agent promptly. The failure of an Authorized Dealer to
promptly transmit an order
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10
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SENBANC FUND
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may cause the purchase price to be more or less than the
amount you otherwise would have paid. Purchase orders
received after "closing time" or on a day that is not a
"business day" are priced as of "closing time" on the next
succeeding "business day." A "business day" is any day on
which the NYSE is open for business; "closing time" is the
close of trading on the NYSE (4:00 p.m., Eastern time) or
such other day or time as the Fund's Trustees may establish
in the future. The Fund reserves the right to reject any
purchase order and to suspend the offering of Fund shares
for a period of time.
You may pay for purchases with checks drawn on domestic
offices of U.S. banks or with funds in brokerage accounts
maintained with Hilliard Lyons or Authorized Dealers. If
your check is subsequently dishonored, your Hilliard Lyons
investment broker or Authorized Dealer may have the right to
redeem your shares and to retain any dividends paid or
distributions made with respect to such shares. When your
payment is received by a brokerage firm before a settlement
date, unless otherwise directed by you, the monies may be
held as a free credit balance in your brokerage account and
the brokerage firm may benefit from the temporary use of
these monies.
AUTOMATIC INVESTMENT PLAN. The automatic investment plan
enables you to make regular monthly or quarterly investments
in shares through automatic charges to your bank account.
With your authorization and bank approval, your bank account
is automatically charged by your Hilliard Lyons investment
broker or Authorized Dealer for the amount specified ($100
minimum), which is automatically invested in shares at the
public offering price on or about the date you specify. Bank
accounts are charged on the day or a few days before
investments are credited, depending on the bank's
capabilities, and you will receive a confirmation statement
showing the current transaction. To participate in the
automatic investment plan, contact your Hilliard Lyons
investment broker or Authorized Dealer for an authorization
agreement, which contains details about the automatic
investment plan. If your bank account cannot be charged due
to insufficient funds, a stop-payment order or the closing
of your account, the automatic investment plan may be
terminated and the related investment reversed. You may
change the amount of the investment or discontinue the
automatic investment plan at any time by notifying your
Hilliard Lyons investment broker or Authorized Dealer.
RETIREMENT PLANS. Shares of the Fund may be purchased in
connection with various retirement plans, including
Individual Retirement Accounts ("IRAs"), section 403(b)
plans and retirement plans for self-employed individuals,
partnerships and corporations and their employees. Detailed
information concerning retirement plans is available from
your Hilliard Lyons investment broker or Authorized Dealer.
There may be fees in connection with establishing and
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11
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SENBANC FUND
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maintaining retirement plans. Investors should consult their
tax adviser for specific advice regarding their tax status
and the possible benefits of establishing retirement plans.
HOW TO SELL (REDEEM) SHARES
REDEMPTIONS GENERALLY. You may submit redemption requests to
your Hilliard Lyons investment broker or Authorized Dealer
in person or by telephone, mail or wire. Redemption requests
directed to a Hilliard Lyons investment broker are effected
at the net asset value next computed after receipt of the
request. Redemption requests directed to an Authorized
Dealer are effected at the net asset value next computed
after receipt of the request by the Authorized Dealer and
transmission of the request to the Transfer Agent.
Redemption proceeds are credited to your brokerage account
for disbursement according to your instructions and will
normally be credited to your brokerage account within three
business days. Authorized Dealers are responsible for
transmitting redemption requests to the Transfer Agent
promptly. The failure of an Authorized Dealer to promptly
transmit a redemption request may cause the redemption
proceeds to be more or less than the amount you otherwise
would have received.
TELEPHONE REDEMPTIONS. During periods of dramatic economic
or market changes you may experience difficulty in
implementing a telephone redemption to your Hilliard Lyons
investment broker or Authorized Dealer because of increased
telephone volume. Your Hilliard Lyons investment broker or
Authorized Dealer may refuse a telephone redemption request
if it believes it is advisable to do so. You will bear the
risk of loss from fraudulent or unauthorized instructions
received over the telephone provided your Hilliard Lyons
investment broker or Authorized Dealer reasonably believes
that the instructions are genuine.
ADDITIONAL INFORMATION ON REDEMPTIONS. If Fund shares were
recently purchased, the redemption proceeds are not sent
until the check (including a certified or cashier's check)
received for the shares purchased has cleared. Payment for
shares requested to be redeemed may be delayed when the
purchase check has not cleared, but the delay will be no
longer than required to verify that the purchase check has
cleared. The Fund may suspend the right of redemption or
postpone the date of payment during any period when (i)
trading on the NYSE is restricted or the NYSE is closed,
other than customary weekend or holiday closings, (ii) the
Securities and Exchange Commission (the "SEC") has by order
permitted such suspension or (iii) an emergency, as defined
by the rules of the SEC, exists making disposal of portfolio
investments or determination of the value of the net assets
of the Fund not reasonably practicable.
- --------------------------------------------------------------------------------
12
<PAGE>
SENBANC FUND
- --------------------------------------------------------------------------------
The Fund reserves the right to honor any request for
redemption or repurchase by making payment in whole or in
part in readily marketable securities ("redemption in
kind"). These securities will be chosen by the Fund and
valued as they are for purposes of computing the Fund's net
asset value. A shareholder may incur transaction expenses in
converting these securities to cash.
Questions about redemption requirements should be referred
to your Hilliard Lyons investment broker or Authorized
Dealer. Because the Fund incurs certain fixed costs in
maintaining shareholder accounts, the Fund reserves the
right to redeem shareholder accounts of less than $250 in
net asset value. Such shareholder accounts will be redeemed
only if the balance has decreased below that level as a
result of shareholder redemptions and not because of
fluctuations in the net asset value of the Fund's shares. If
the Fund elects to redeem such shares, your Hilliard Lyons
investment broker or Authorized Dealer will notify you of
the Fund's intention to do so and provide you with an
opportunity to increase the amount so invested to $250 or
more within 30 days of the notice.
SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan
(the "Withdrawal Plan") is available for shareholders of the
Fund whose shares have a minimum net asset value of $10,000.
The Withdrawal Plan allows for monthly or quarterly payments
to the participating shareholder in amounts not less than
$100. Dividends and capital gain distributions on shares
held under the Withdrawal Plan are reinvested in additional
full and fractional shares of the Fund at net asset value.
The Withdrawal Plan may be terminated at any time. You
should not consider withdrawal payments to be dividends,
yield or income. If periodic withdrawals continuously exceed
reinvested dividend and capital gain distributions, your
original investment will be correspondingly reduced and
ultimately exhausted. Furthermore, each withdrawal
constitutes a redemption of shares, and any gain or loss you
realize must be reported for federal and state income tax
purposes. As it generally would not be advantageous to you
to make additional investments in the Fund while
participating in the Withdrawal Plan, purchases of shares in
amounts less than $5,000 by participants in the Withdrawal
Plan will not ordinarily be permitted. You should consult
your tax adviser regarding the tax consequences of
participating in the Withdrawal Plan.
REINSTATEMENT PRIVILEGE. If you redeem shares and have not
exercised the reinstatement privilege within the previous
twelve months, you may reinvest the proceeds of such
redemption in new shares of the Fund without a sales charge
by exercise of the reinstatement privilege. Reinvestment
will be at the net asset value next determined after your
Hilliard Lyons investment broker or Authorized Dealer
receives a letter requesting reinstatement and payment
therefor. Your Hilliard Lyons investment broker or
Authorized Dealer must receive the letter requesting
reinstatement and payment therefor within 60 days following
the redemption. A reinstatement fee of $25 will be charged
by your Hilliard
- --------------------------------------------------------------------------------
13
<PAGE>
SENBANC FUND
- --------------------------------------------------------------------------------
Lyons investment broker or Authorized Dealer. You should
consult your tax adviser regarding the tax consequences of
exercising the reinstatement privilege.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following discussion of taxation is not intended to be a
full discussion of income tax laws and their effect on
shareholders. You should consult your tax adviser as to the
tax consequences of ownership of the Fund's shares.
REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. Dividends and
distributions paid by the Fund are automatically reinvested
in additional shares of the Fund unless you indicate
otherwise to your Hilliard Lyons investment broker or
Authorized Dealer.
PAYMENT OF DIVIDENDS AND OTHER DISTRIBUTIONS. The Fund pays
its shareholders dividends from its net investment income
and distributes from any net capital gains that it has
realized. [Dividends and distributions are generally paid
once a year.] The Fund intends to distribute at least 98% of
any net investment income for the calendar year plus 98% of
net capital gains realized from the sale of securities. The
Fund intends to distribute any undistributed net investment
income and net realized capital gains in the following year.
TAX STATUS OF DIVIDENDS AND OTHER DISTRIBUTIONS. Except for
those shareholders exempt from federal income taxes,
shareholders will be subject to federal income tax at
ordinary income tax rates (up to a maximum marginal rate of
39.6% for individuals) on any dividends received that are
derived from net investment income and net realized
short-term capital gains. Distributions of net realized
long-term capital gain, when designated as such by the Fund,
are taxable to shareholders as long-term capital gains,
regardless of how long shares of the Fund are held.
Long-term capital gain distributions made to individual
shareholders are currently taxed at the maximum rate of 20%.
Distributions are taxable in the year they are paid, whether
they are taken in cash or reinvested in additional shares,
except that certain distributions declared in the last three
months of the year and paid in January are taxable as if
paid on December 31. Dividends and distributions may also be
subject to state and local taxes.
DISTRIBUTIONS TO RETIREMENT PLANS. Fund distributions
received by your qualified retirement plan, such as a 401(k)
Plan or IRA, are generally tax deferred. This means that you
are not required to report Fund distributions on your income
tax return, but rather, when your retirement plan makes
payments to you. Special rules may apply to payments from
your retirement plans.
HOW DISTRIBUTIONS AFFECT THE FUND'S NET ASSET
VALUE. Distributions are paid to shareholders as of the
record date of a distribution of the Fund, regardless of
- --------------------------------------------------------------------------------
14
<PAGE>
SENBANC FUND
- --------------------------------------------------------------------------------
how long shares have been held. Dividends and capital gains
awaiting distribution are included in the Fund's daily net
asset value. The share price of the Fund drops by the amount
of the distribution, net of any subsequent market
fluctuations. You should be aware that distributions from a
taxable mutual fund are not value-enhancing and may create
income tax obligations.
BUYING A DISTRIBUTION. A distribution paid shortly after you
purchase shares in the Fund will reduce the net asset value
of the shares by the amount of the distribution, which
nevertheless will be taxable to you even though it
represents a return of a portion of your investment.
BACKUP WITHHOLDING. Federal income taxes may be required to
be withheld ("backup withholding") at a 31% rate from
taxable dividends, capital gain distributions and redemption
proceeds paid to certain shareholders. Backup withholding
may be required if:
- You fail to furnish your properly certified social
security or other tax identification number;
- You fail to certify that your tax identification
number is correct or that you are not subject to
backup withholding due to the under-reporting of
certain income; or
- The Internal Revenue Service determines that your
account is subject to backup withholding.
These certifications should be completed and returned when
you open an account with your Hilliard Lyons investment
broker or Authorized Dealer. All amounts withheld must be
promptly paid to the IRS. You may claim the amount withheld
as a credit on your federal income tax return.
------------------------------------------------------------------------------
DISTRIBUTION
DISTRIBUTION AGREEMENT
ARRANGEMENTS
Provident Distributors, Inc. (the "Distributor") acts as the
principal distributor of the Fund's shares pursuant to a
distribution agreement (the "Distribution Agreement") with
the Fund. Hilliard Lyons has entered into a selling
agreement with the Distributor to sell shares of the Fund.
Pursuant to such selling agreement, and as further discussed
below, Hilliard Lyons receives the sales charges and Rule
12b-1 fees otherwise payable to the Distributor with respect
to Fund shares which the Distributor sells through Hilliard
Lyons. The Distributor may enter into additional selling
agreements in the future with Authorized Dealers to sell
shares of the Fund, and any such Authorized Dealers may also
receive the sales charges and Rule 12b-1 fees otherwise
payable to the Distributor with respect to Fund shares which
the Distributor sells through such Authorized Dealers.
- --------------------------------------------------------------------------------
15
<PAGE>
SENBANC FUND
- --------------------------------------------------------------------------------
SALES CHARGES
GENERAL. Purchases of the Fund's shares are subject to a
front-end sales charge of two and one-quarter percent
(2.25%) of the total purchase price; however, sales charges
may be reduced for large purchases as indicated below. Sales
charges are not imposed on shares that are purchased with
reinvested dividends or other distributions. The table below
indicates the front-end sales charge as a percentage of both
the offering price and the net amount invested:
<TABLE>
<CAPTION>
SALES CHARGE AS A %
SALES CHARGE AS A % OF NET AMOUNT
AMOUNT OF PURCHASE OF OFFERING PRICE INVESTED
- --------------------------------------- --------------------- ---------------------
<S> <C> <C>
Less than $500,000 2.25% 2.30%
At least $500,000 but less than
$1,000,000 1.75% 1.78%
$1,000,000 or greater 0.00% 0.00%
</TABLE>
No sales charge is payable at the time of purchase on
investments of $1 million or more; however; a 1% contingent
deferred sales charge is imposed in the event of redemption
within 12 months following any such purchase. See
"Contingent Deferred Sales Charge on Certain Redemptions"
below. The Distributor may pay a commission to Hilliard
Lyons investment brokers or Authorized Dealers who initiate
and are responsible for purchases of $1 million or more.
COMBINED PURCHASE PRIVILEGE. Certain purchases of Fund
shares made at the same time by you, your spouse and your
children under age 25 may be combined for purposes of
determining the "Amount of Purchase." The combined purchase
privilege may also apply to certain employee benefit plans
and trust estates. The combined purchase privilege is
further discussed in the SAI. You may also further discuss
the combined purchase privilege with your Hilliard Lyons
investment broker or Authorized Dealer.
CUMULATIVE QUANTITY DISCOUNT. You may combine the value of
shares held in the Fund, along with the dollar amount of
shares being purchased, to qualify for a cumulative quantity
discount. The value of shares held is the higher of their
cost or current net asset value. For example, if you hold
shares having a value of $475,000 and purchase $25,000 of
additional shares, the sales charge applicable to the
additional investment would be 1.75%, the rate applicable to
a single purchase of $500,000. In order to receive the
cumulative quantity discount, the value of shares held must
be brought to the attention of your Hilliard Lyons
investment broker or Authorized Dealer.
LETTER OF INTENT. If you anticipate purchasing at least
$500,000 of shares within a 13-month period, the shares may
be purchased at a reduced sales charge by completing and
returning a Letter of Intent (the "Letter"), which can be
provided to you by your Hilliard Lyons investment broker or
Authorized Dealer.
- --------------------------------------------------------------------------------
16
<PAGE>
SENBANC FUND
- --------------------------------------------------------------------------------
The reduced sales charge may also be obtained on shares
purchased within the 90 days prior to the date of receipt of
the Letter. Shares purchased under the Letter are eligible
for the same reduced sales charge that would have been
available had all the shares been purchased at the same
time. There is no obligation to purchase the full amount of
shares indicated in the Letter. Should you invest more or
less than indicated in the Letter during the 13-month
period, the sales charge will be recalculated based on the
actual amount purchased. A portion of the amount of the
intended purchase normally will be held in escrow in the
form of Fund shares pending completion of the intended
purchase.
SALES CHARGE WAIVERS. The Fund sells shares at net asset
value without imposition of sales charge to the following
persons: (i) current and retired (as determined by Hilliard
Lyons) employees of Hilliard Lyons and its affiliates, their
spouses and children under the age of 25 and employee
benefit plans for such employees, provided orders for such
purchases are placed by the employee; (ii) any other
investment company in connection with the combination of
such company with the Fund by merger, acquisition of assets
or otherwise; (iii) employees and Trustees of the Fund and
registered representatives of Authorized Dealers; (iv)
existing advisory clients of the Adviser or Hilliard Lyons
Trust Company on purchases effected by transferring all or a
portion of their investment management or trust account to
the Fund provided that such account had been maintained for
a period of six months prior to the date of purchase of Fund
shares; (v) investors purchasing shares through a Hilliard
Lyons investment broker to the extent that the purchase of
such shares is funded by the proceeds from the sale of
shares of any mutual fund (for which the investor paid a
front-end sales charge) other than a money market fund (a)
purchased within three years of the date of the purchase of
Fund shares and held for at least six months or (b)
purchased at any time and for which Hilliard Lyons was not a
selling dealer, provided that in either case the order for
Fund shares must be received within 30 days after the sale
of the other mutual fund; (vi) trust companies, bank trust
departments and registered investment advisors purchasing
for accounts over which they exercise investment authority
and which are held in a fiduciary, agency, advisory,
custodial or similar capacity, provided that the amount
collectively invested or to be invested in the Fund by such
entity or adviser during the subsequent 13-month period
totals at least $100,000; (vii) employer-sponsored
retirement plans with assets of at least $100,000 or 25 or
more eligible participants, and (viii) accounts established
under a fee-based program sponsored and maintained by a
registered broker-dealer or other financial intermediary and
approved by the Distributor.
In order to take advantage of a sales charge waiver, a
purchaser must certify to a Hilliard Lyons investment broker
or Authorized Dealer eligibility for a waiver
- --------------------------------------------------------------------------------
17
<PAGE>
SENBANC FUND
- --------------------------------------------------------------------------------
and must notify a Hilliard Lyons investment broker or
Authorized Dealer whenever eligibility for a waiver ceases
to exist. A Hilliard Lyons investment broker or Authorized
Dealer reserves the right to request additional information
from a purchaser in order to verify that such purchaser is
so eligible.
CONTINGENT DEFERRED SALES CHARGE ON CERTAIN
REDEMPTIONS. Purchases of $1 million or more are not subject
to an initial sales charge; however, a contingent deferred
sales charge is payable on these investments in the event of
a share redemption within 12 months following the share
purchase, at the rate of 1% of the lesser of the value of
the shares redeemed (exclusive of reinvested dividends and
capital gain distributions) or the total cost of such
shares. The contingent deferred sales charge is further
discussed in the SAI.
DISTRIBUTION PLAN
The Board of Trustees has adopted a distribution plan (the
"Distribution Plan") pursuant to Rule 12b-1 under the 1940
Act under which the Fund reimburses the Distributor at an
annualized rate of up to 0.60% of the Fund's average daily
net assets for distribution expenses actually incurred. Rule
12b-1 of the 1940 Act regulates the manner in which a mutual
fund may assume the costs of distributing and promoting the
sale of its shares. Pursuant to the Distribution Plan, the
Distributor may be reimbursed for expenses incurred in
connection with any activity primarily intended to result in
the sale of the Fund's shares. If the amount reimbursed is
insufficient to pay the expenses of distribution, the
Adviser bears the additional expenses. Any amount of excess
distribution expenses incurred by the Distributor in any
quarter for which the Distributor is not reimbursed can be
carried forward from one quarter to the next but no expenses
may be carried over from year to year. Because Rule 12b-1
fees are continually paid out of the Fund's assets, such
fees will increase the cost of your investment and may
potentially cost you more than paying other types of sales
charges.
In unanimously approving the Distribution Plan for the Fund,
the Board of Trustees determined that there is a reasonable
likelihood that the Distribution Plan will benefit the Fund
and its shareholders. Under its terms, the Distribution Plan
remains in effect so long as it is approved at least
annually by vote of the Board of Trustees, including a
majority of the Trustees who are not interested persons of
the Fund and who have no direct or indirect financial
interest in the operation of the Distribution Plan. The
Distributor is obligated to provide the Trustees quarterly
reports of amounts expended under the Distribution Plan and
the purpose for which the expenditures were made.
- --------------------------------------------------------------------------------
18
<PAGE>
[SENBANC_FUND_LOGO]
- ------------------------------------------------
INVESTMENT ADVISER
Hilliard Lyons Investment Advisers
Hilliard Lyons Center
501 South 4th Street
Louisville, Kentucky 40202
DISTRIBUTOR
Provident Distributors, Inc.
Four Fall Corporate Center
6th Floor
West Conshohocken, Pennsylvania 19428
CUSTODIAN
PFPC Trust Company
400 Bellevue Parkway
Wilmington, Delaware 19809
ADMINISTRATOR, TRANSFER AGENT AND
FUND ACCOUNTANT
PFPC Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
INDEPENDENT ACCOUNTANTS
Ernst & Young LLP
400 West Market Street
Louisville, Kentucky 40202
LEGAL COUNSEL
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, Illinois 60601
- ------------------------------------------------
FOR MORE INFORMATION
More information on the Fund is available without charge, upon request,
including the following:
ANNUAL/SEMI-ANNUAL REPORTS
The annual and semi-annual reports to shareholders describe the Fund's
performance, list portfolio holdings and contain a letter from the Fund's
Adviser discussing recent market conditions, economic trends and Fund
strategies. Management's discussion of Fund performance is incorporated by
reference into this prospectus from the reports to shareholders.
STATEMENT OF ADDITIONAL INFORMATION (SAI).
The SAI provides more details about the Fund and its policies. A current SAI
is on file with the Securities and Exchange Commission and is incorporated by
reference.
TO OBTAIN INFORMATION:
BY TELEPHONE
Call 1-800-444-1854
BY MAIL
Write to:
Senbanc Fund
c/o Hilliard Lyons Investment Trust
501 South 4th Street
Louisville, Kentucky 40202
ON THE INTERNET
Text-only versions of Fund documents can be viewed online or downloaded from the
SEC at http://www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, D.C. (1-800-SEC-0330) or by sending your request and a duplicating
fee to the SEC's Public Reference Section, Washington, D.C. 20549-6009.
Investment Company Act File No.: 811-
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION DATED APRIL 7, 1999
HILLIARD LYONS INVESTMENT TRUST
501 SOUTH 4TH STREET
LOUISVILLE, KENTUCKY 40202
1-800-444-1854
SENBANC FUND
This Statement of Additional Information ("SAI") is not a prospectus, but
provides additional information that should be read in conjunction with the
Fund's prospectus dated April 7, 1999, and any supplements thereto
("Prospectus"). The Prospectus may be obtained at no charge by telephoning
1-800-444-1854.
TABLE OF CONTENTS
PAGE
----
General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Investment Strategies and Risks. . . . . . . . . . . . . . . . . . . . . . . .1
Fund Policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Purchases and Redemptions. . . . . . . . . . . . . . . . . . . . . . . . . . .6
Net Asset Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Principal Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Investment Advisory Services . . . . . . . . . . . . . . . . . . . . . . . . 10
Distributor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Administrator and Fund Accountant. . . . . . . . . . . . . . . . . . . . . . 14
Custodian. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . . 16
Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Income Tax Considerations. . . . . . . . . . . . . . . . . . . . . . . . . . 18
Investment Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Appendix A -- Description of Securities Ratings. . . . . . . . . . . . . . .A-1
<PAGE>
GENERAL INFORMATION
Senbanc Fund (the "Fund") is a series of the Hilliard Lyons Investment Trust
(the "Trust"), an open-end management investment company. Hilliard Lyons
Investment Advisers (the "Adviser") provides management and investment advisory
services to the Fund. The Trust is a Delaware business trust organized under a
declaration of trust ("Declaration of Trust") dated January 12, 1999. The
Declaration of Trust may be amended by a vote of either the Fund's shareholders
or its Board of Trustees (the "Board"). The Trust may issue an unlimited number
of shares in one or more series or classes as the Board may authorize. Each
share of a series of the Trust is entitled to participate pro rata in any
dividends and other distributions declared by the Board on shares of that
series, and all shares of a series of the Trust have equal rights in the event
of liquidation of that series. Currently, the Fund is the only series
authorized and outstanding. The Fund commenced operations on ___________ __,
1999.
As a business trust, the Trust is not required to hold annual shareholder
meetings. However, special meetings may be called for purposes such as electing
or removing Trustees, changing fundamental policies, or approving an investment
advisory contract. All shares of all series of the Trust are voted together in
the election of Trustees. On any other matter submitted to a vote of
shareholders, shares are voted in the aggregate and not by individual series,
except that shares are voted by individual series when required by the
Investment Company Act of 1940 (the "1940 Act") or other applicable law, or when
the Board determines that the matter affects only the interests of one or more
series separately, in which case shareholders of the unaffected series are not
entitled to vote on such matters.
INVESTMENT STRATEGIES AND RISKS
The following information supplements the discussion of the Fund's investment
objective, strategies and risks discussed in the Prospectus.
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation. There is no assurance that the
Fund will achieve its investment objective. The investment objective is
fundamental and may only be changed with shareholder approval.
INVESTMENT PHILOSOPHY
The Adviser uses a VALUE investment style for the Fund. The Adviser seeks to
identify the most undervalued Banks (as defined below under the section titled,
"Principal Types of Investments and Related Risks") by using an investment model
that considers financial ratios and other quantitative information. Generally,
such Banks have at least six years of current or predecessor operating history
and well-managed organizations and operations. The Fund's portfolio is weighted
most heavily to the equity securities of Banks that the investment model
indicates are most undervalued for the longest period of time.
PRINCIPAL TYPES OF INVESTMENTS AND RELATED RISKS
Under normal market conditions, the Fund will invest at least 65% of its total
assets in publicly traded equity securities of banks and financial institutions
conducting a substantial portion of their business through banking subsidiaries
(which are generally referred to herein as "Banks"). Banks may include
commercial banks, industrial banks, consumer banks, savings and loans, and bank
holding companies that receive a significant portion of their income through
their bank subsidiaries, as well as regional and money center banks. A regional
bank is one that provides full service banking (i.e., savings accounts, checking
accounts, commercial lending and real estate lending), has assets that are
primarily of domestic origin, and typically has a principal office outside of a
large metropolitan area (e.g. New York City or Chicago). A money center bank is
one with a strong international banking business and a significant percentage of
international assets, and is typically located in a large metropolitan area. To
the extent that the Fund invests in the equity securities of bank holding
companies, a portion of the Fund's assets may be indirectly invested in
non-banking entities, since bank holding companies may derive a portion of their
income from such entities.
<PAGE>
Generally, the equity securities in which the Fund invests are common stocks;
however, the Fund may also at times acquire (through its common stock holdings)
preferred stock, warrants, rights or other securities that are convertible into
common stock. The Fund generally invests in equity securities of Banks which
have at least $500 million in consolidated total assets; however, the Fund's
investments are not influenced by a Bank's market capitalization (large, medium
or small).
Your investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (the "FDIC") or any
other government entity; therefore, you could lose money by investing in the
Fund. The Fund is not a complete investment program. We recommend that you
consider an investment in the Fund as only one portion of your overall
investment portfolio.
MARKET RISK. Investments in equity securities are subject to inherent
market risks and fluctuations in value due to earnings, economic conditions and
other factors beyond the Adviser's control. Therefore, the return and net asset
value of the Fund will fluctuate, and you could lose money by investing in the
Fund.
INDUSTRY CONCENTRATION RISK. Since the Fund's investments will be
concentrated in the banking industry, the Fund will be subject to risks in
addition to those that apply to the general equity market. Events may occur
that significantly affect the entire banking industry. Thus, the Fund's share
value may at times increase or decrease at a faster rate than the share value of
a mutual fund with investments in many industries. In addition, despite some
measure of deregulation, Banks are still subject to extensive governmental
regulation which limits their activities. The availability and cost of funds to
Banks are crucial to their profitability. Consequently, volatile interest
rates and deteriorating economic conditions can adversely affect their financial
performance and condition.
Banks are subject to extensive governmental regulations which may limit
both the amounts and types of loans and other financial commitments that may be
made and the interest rates and fees that may be charged. The profitability of
Banks is largely dependent upon the availability and cost of capital funds, and
may show significant fluctuation as a result of volatile interest rate levels.
In addition, healthy economic conditions are important to the operations of
Banks, and exposure to credit losses resulting from possible financial
difficulties of borrowers can have an adverse effect on the value of the Fund.
NONDIVERSIFICATION RISK. The Fund is NONDIVERSIFIED, meaning that it is
not limited in the proportion of its assets that it may invest in the
obligations of a single issuer. However, the Fund will comply with
diversification requirements imposed by the Internal Revenue Code for
qualification as a regulated investment company. As a nondiversified fund, the
Fund may invest a greater proportion of its assets in the securities of a small
number of issuers, and may be subject to greater risk and substantial losses as
a result of changes in the financial condition or the market's assessment of the
issuers.
SMALL COMPANY RISK. The Adviser may invest the Fund's assets in small and
medium-size companies. Investment in smaller companies involves greater risk
than investment in larger companies. The stocks of smaller companies often
fluctuate in price to a greater degree than stocks of larger companies. Smaller
companies may have more limited financial resources and less liquid trading
markets for their stock. The Fund's share price may experience greater
volatility when the Fund is more heavily invested in small and medium-size
companies.
INITIAL INVESTORS NOT FULLY-INVESTED. The Fund may not be fully-invested
in the equity securities of Banks immediately following its commencement of
operations; therefore, your returns may be lower than they otherwise would have
been if the Fund had been fully-invested and if the Fund's portfolio securities
had increased in value. The Adviser anticipates that the benefit of this
strategy is that the Fund will be more diversified within the banking industry
over a period of time.
OTHER TYPES OF INVESTMENTS AND RELATED RISKS
<PAGE>
Although they are not principal types of investments and strategies of the Fund,
the Fund may also invest to a limited extent in the following types of
investments and is subject to the risks of such investments.
DEBT SECURITIES AND MONEY MARKET INSTRUMENTS. For cash management purposes
or when the Adviser believes that market conditions warrant it (i.e. a temporary
defensive position), the Fund may invest a portion of its total assets in
obligations of the U.S. government, its agencies and instrumentalities and debt
securities of companies in any industry, including corporate notes, bonds and
debentures. Investments in debt securities are subject to interest rate risk
and credit risk. The market value of debt securities in the Fund's portfolio
will decrease as interest rates rise and increase as interest rates fall. In
addition, to the extent the Fund invests in debt securities, the Fund's share
price will be subject to losses from possible financial difficulties of
borrowers whose debt securities are held by the Fund. Debt securities in which
the Fund may invest will generally be rated at least Aa by Moody's Investors
Service ("Moody's"), AA by Standard & Poor's Corporation ("Standard & Poor's" or
"S&P") or the equivalent by other nationally recognized ratings agencies (See
Appendix A -- "Description of Securities Ratings"). In general, the ratings of
Moody's and S&P represent the opinions of these agencies as to the quality of
the securities which they rate. It should be emphasized, however, that such
ratings are relative and subjective and are not absolute standards of quality.
Subsequent to its purchase by the Fund, an issue of securities may cease to be
rated or its rating may be reduced below the minimum required for purchase by
the Fund. Neither of these events will require the sale of the securities by
the Fund, but the Adviser will consider the event in its determination of
whether the Fund should continue to hold the securities. To the extent that the
Fund holds cash or invests in debt securities and money market instruments, the
Fund may not achieve its investment objective.
CONVERTIBLE SECURITIES. The Fund may generally not purchase but may
acquire (through its holdings in common stocks) convertible securities. These
may include corporate notes or preferred stock, but are ordinarily long-term
debt obligations convertible at a stated exchange rate into common stock of the
issuer. All convertible securities entitle the holder to exchange the
securities for a specified number of shares of common stock, usually of the same
company, at specified prices within a certain period of time. They also entitle
the holder to receive interest or dividends until the holder elects to exercise
the conversion privilege.
As with all debt securities, the market value of convertible securities tends to
decrease as interest rates rise and, conversely, to increase as interests rates
fall. Convertible securities generally offer lower interest or dividend yields
than nonconvertible securities of similar quality. However, when the market
price of the common stock underlying a convertible security approaches or
exceeds the conversion price, the price of the convertible security tends to
reflect the value of the underlying common stock. As the market price of the
underlying common stock declines, the convertible security tends to trade
increasingly on a yield basis, and thus may not depreciate to the same extent as
the underlying common stock.
The provisions of any convertible security determine its ranking in a company's
capital structure. In the case of subordinated convertible debentures, the
holders' claims on assets and earnings are subordinated to the claims of other
creditors, and are senior to the claims of preferred and common shareholders.
In the case of convertible preferred stock, the holders' claims on assets and
earnings are subordinated to the claims of all creditors and are senior to the
claims of common shareholders.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund may generally not
purchase but may acquire (through its holdings in common stocks) securities on a
when-issued or delayed delivery basis. Delivery of and payment for these
securities may occur a month or more after the date of the transaction. The
purchase price and the interest rate payable, if any, are fixed on the purchase
commitment date or at the time the settlement date is fixed. The securities so
purchased are subject to market fluctuation, and no income accrues to the Fund
until settlement takes place. At the time the Fund makes the commitment to
purchase securities on a when-issued or delayed delivery basis, it must record
the transaction and reflect the value of such securities each day in determining
its net asset value. At the time it is received, a when-issued security may be
valued at less than its purchase price. The Fund must make commitments for such
when-issued transactions only when it intends to acquire the securities. To
facilitate such purchases, the Fund must maintain with the custodian a
segregated account of liquid assets in the name of the Fund, consisting of cash,
United States government securities or other appropriate high grade debt
obligations in an amount at least equal to such
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<PAGE>
commitments. On delivery dates for such transactions, the Fund must meet its
obligations from maturities or sales of the securities held in the segregated
account or from cash on hand.
ILLIQUID SECURITIES. The Fund may invest up to 15% of its net assets in
illiquid securities. Securities may be illiquid because they are unlisted or
subject to legal restrictions on resale, or due to other factors which, in the
Adviser's opinion, raise questions concerning the Fund's ability to liquidate
the securities in a timely and orderly manner without substantial loss. While
such purchases may be made at an advantageous price and offer attractive
opportunities for investment not otherwise available on the open market, the
Fund may not have the same freedom to dispose of such securities as in the case
of the purchase of securities in the open market or in a public distribution.
These securities may be resold in a liquid dealer or institutional trading
market, but the Fund may experience delays in its attempts to dispose of such
securities. If adverse market conditions develop, the Fund may not be able to
obtain as favorable a price as that prevailing at the time the decision is made
to sell. In any case, where a thin market exists for a particular security,
public knowledge of a proposed sale of a large block may depress the market
price of such securities.
REPURCHASE AGREEMENTS. From time to time, the Fund may enter into
repurchase agreements with qualified banks or securities broker-dealers which
furnish collateral at least equal in value or market price to the amount of
their repurchase obligation. Under the terms of a typical repurchase agreement,
the Fund acquires an underlying debt obligation for a relatively short period
(usually not more than seven days), subject to an obligation of the seller to
repurchase, and the Fund to resell, the obligation at an agreed-upon price and
time, thereby determining the yield during the Fund's holding period. This
arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The value of the underlying
securities is monitored on an ongoing basis by the Adviser to ensure that the
value is at least equal at all times to the total amount of the repurchase
obligation, including interest. The Fund bears a risk of loss in the event that
the other party to a repurchase agreement defaults on its obligations and the
Fund is delayed or prevented from exercising its rights to dispose of the
underlying securities, including the risk of a possible decline in the value of
the underlying securities during the period in which the Fund seeks to assert
its rights to them, the risk of incurring expenses associated with asserting
those rights and the risk of losing all or a part of the income from the
agreement. In addition, if bankruptcy proceedings are commenced with respect to
the seller of the security, realization upon the collateral by the Fund may be
delayed or limited.
The Fund only enters into repurchase agreements involving U.S. government
obligations, or obligations of its agencies or instrumentalities, usually for a
period of seven days or less. The term of each of the Fund's repurchase
agreements is always less than one year and the Fund does not enter into
repurchase agreements of a duration of more than seven days if, taken together
with all other illiquid securities in the Fund's portfolio, more than 15% of its
net assets would be so invested.
WARRANTS AND RIGHTS. The Fund may generally not purchase but may acquire
(through its holdings in common stocks) warrants and rights, which are
securities permitting, but not obligating, their holder to purchase the
underlying securities at a predetermined price. Generally, warrants and rights
do not carry with them the right to receive dividends or exercise voting rights
with respect to the underlying securities, and they do not represent any rights
in the assets of the issuer. As a result, an investment in warrants and rights
may be considered to entail greater investment risk than certain other types of
investments. In addition, the value of warrants and rights does not necessarily
change with the value of the underlying securities, and they cease to have value
if they are not exercised on or prior to their expiration date. Investment in
warrants and rights increases the potential profit or loss to be realized from
the investment of a given amount of the Fund's assets as compared with investing
the same amount in the underlying stock.
LENDING. The Fund may make short-term loans of its portfolio securities to
banks, brokers and dealers. Lending portfolio securities exposes the Fund to
the risk that the borrower may fail to return the loaned securities or may not
be able to provide additional collateral or that the Fund may experience delays
in recovery of the loaned securities or loss of rights in the collateral if the
borrower fails financially. To minimize these risks, the borrower must agree to
maintain collateral marked to market daily, in the form of cash or U.S.
government obligations, with the Fund's custodian in an amount at least equal to
the market value of the loaned securities.
4
<PAGE>
BORROWING. The Fund may have to deal with unpredictable cashflows as
shareholders purchase and redeem shares. Under adverse conditions, the Fund
might have to sell portfolio securities to raise cash to pay for redemptions at
a time when investment considerations would not favor such sales. In addition,
frequent purchases and sales of portfolio securities tend to decrease Fund
performance by increasing transaction expenses.
The Fund may deal with unpredictable cashflows by borrowing money. Through such
borrowings the Fund may avoid selling portfolio securities to raise cash to pay
for redemptions at a time when investment considerations would not favor such
sales. In addition, the Fund's performance may be improved due to a decrease in
the number of portfolio transactions. After borrowing money, if subsequent
shareholder purchases do not provide sufficient cash to repay the borrowed
monies, the Fund will liquidate portfolio securities in an orderly manner to
repay the borrowed money.
To the extent that the Fund borrowed money prior to selling securities, the Fund
would be leveraged such that the Fund's net assets may appreciate or depreciate
in value more than an unleveraged portfolio of similar securities. Since
substantially all of the Fund's assets will fluctuate in value and the interest
obligations on borrowings may be fixed, the net asset value per share of the
Fund will increase more when the Fund's portfolio assets increase in value and
decrease more when the Fund's portfolio assets decrease in value than would
otherwise be the case. Moreover, interest costs on borrowings may fluctuate
with changing market rates of interest and may partially offset or exceed the
returns which the Fund earns on portfolio securities. Under adverse conditions,
the Fund might be forced to sell portfolio securities to meet interest or
principal payments at a time when market conditions would not be conducive to
favorable selling prices for the securities.
FUND POLICIES
FUNDAMENTAL POLICIES
The Fund has adopted the following fundamental policies for the protection of
shareholders that may not be changed without the approval of a majority of the
Fund's outstanding shares, defined in the 1940 Act as the lesser of (i) 67% of
the Fund's shares present at a meeting if the holders of more than 50% of the
outstanding shares are present in person or by proxy, or (ii) more than 50% of
the Fund's outstanding shares. Under these policies, THE FUND MAY NOT:
1. Borrow money, except as permitted under the 1940 Act and as interpreted or
modified by regulatory authority having jurisdiction from time to time;
2. Issue senior securities, except as permitted under the 1940 Act and as
interpreted by regulatory authority having jurisdiction from time to time;
3. Purchase physical commodities or contracts relating to physical
commodities;
4. Engage in the business of underwriting securities issued by others, except
to the extent that the Fund may be deemed an underwriter in connection with
the disposition of portfolio securities;
5. Purchase or sell real estate, which term does not include securities of
companies which deal in real estate or mortgages or investments secured by
real estate or interests therein, except that the Fund reserves freedom of
action to hold and sell real estate acquired as a result of the Fund's
ownership of securities;
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<PAGE>
6. Make loans to other persons except (i) loans of portfolio securities, and
(ii) to the extent that entry into repurchase agreements and the purchase
of debt instruments or interests in indebtedness in accordance with the
Fund's investment objective and policies may be deemed to be loans; or
7. Concentrate its investments in a particular industry, as that term is used
in the 1940 Act, and as interpreted or modified by regulatory authority
having jurisdiction, from time to time, except that the Fund may
concentrate its investments in the banking industry.
NON-FUNDAMENTAL POLICIES
In addition to the fundamental policies mentioned above, the Board
voluntarily adopted the following policies and restrictions which are observed
in the conduct of its affairs. These represent intentions of the Board based
upon current circumstances. They differ from fundamental investment policies in
that they may be changed or amended by action of the Board without prior notice
to or approval of shareholders. Accordingly, the Fund may not:
8. Invest for the purpose of exercising control over management of any
company;
9. Invest its assets in securities of any investment company, except by open
market purchases, including an ordinary broker's commission, or in
connection with a merger, acquisition of assets, consolidation or
reorganization, and any investments in the securities of other investment
companies will be in compliance with the 1940 Act;
10. Invest more than 15% of the value of its net assets in illiquid securities.
If any percentage limitation is adhered to at the time of an investment, a later
increase or decrease in the percentage resulting from a change in the value of
portfolio securities or in the amount of the Fund's assets will not constitute a
violation of such restriction.
PURCHASES AND REDEMPTIONS
Read the Fund's Prospectus for information regarding the purchase and redemption
of Fund shares, including any applicable sales charges. The following
information supplements information in the Fund's Prospectus.
GENERAL
CONTINGENT DEFERRED SALES CHARGE ON CERTAIN REDEMPTIONS. Purchases of $1
million or more are not subject to an initial sales charge; however, a
contingent deferred sales charge is payable on these investments in the event of
a share redemption within 12 months following the share purchase, at the rate of
1% of the lesser of the value of the shares redeemed (exclusive of reinvested
dividends and capital gain distributions) or the total cost of such shares. In
determining whether a
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<PAGE>
contingent deferred sales charge is payable, and the amount of the charge, it is
assumed that shares purchased with reinvested dividend and capital gain
distributions and then other shares held the longest are the first redeemed.
The contingent deferred sales charge is waived in the event of (a) the death or
disability (as defined in (S)72(m)(7) of the Internal Revenue Code of 1986, as
amended (the "Code")) of the shareholder, (b) a lump sum distribution from a
benefit plan qualified under the Employee Retirement Income Security Act of 1974
("ERISA"), or (c) systematic withdrawals from ERISA plans if the shareholder is
at least 59 1/2 years old. The Fund applies the waiver for death or disability
to shares held at the time of death or the initial determination of disability
of either an individual shareholder or one who owns the shares of a joint tenant
with the right of survivorship or as a tenant in common.
REDEMPTION IN KIND. The Fund has made an election pursuant to Rule 18f-1
under the 1940 Act to enable the Fund to elect to limit payments in cash for
large redemptions. Under the provisions of Rule 18f-1 under the 1940 Act, the
Fund may limit cash redemptions with respect to each shareholder during any
90-day period to the lesser of (1) $250,000 or (2) 1% of the net asset value
("NAV") of the Fund at the beginning of such period. If deemed advisable by the
Board, the Fund may pay the redemption price in excess of the amounts described
above in whole or in part in securities owned by the Fund. The market value of
such securities shall be determined as of the close of trading on the New York
Stock Exchange, Inc. ("NYSE") on the business day on which the redemption is
effective. In such case a shareholder might incur transaction costs if he or
she sold the securities received.
REDUCING OR ELIMINATING THE FRONT-END SALES CHARGE
You can reduce or eliminate the front-end sales charge on shares of the
Fund as follows:
QUANTITY DISCOUNTS. Purchases of at least $500,000 can reduce the sales
charges you pay, and purchases of at least $1,000,000 can eliminate the sales
charges you pay.
COMBINED PURCHASE PRIVILEGE. The following purchases may be combined for
purposes of determining the "Amount of Purchase": (a) individual purchases, if
made at the same time, by a single purchaser, the purchaser's spouse and
children under the age of 25 purchasing shares for their own account, including
shares purchased by an employee benefit plan(s) exclusively for the benefit of
such individual(s) (such as an IRA, individual-type section 403(b) plan or
single-participant Keogh-type plan) or by a Company, as defined in Section
2(a)(8) of the 1940 Act, solely controlled, as defined in the 1940 Act, by such
individual(s), or (b) individual purchases by trustees or other fiduciaries
purchasing shares (i) for a single trust estate or a single fiduciary account,
including an employee benefit plan, or (ii) concurrently by two or more employee
benefit plans of a single employer or of employers affiliated with each other in
accordance with Section 2(a)(3)(c) of the 1940 Act (excluding in either case an
employee benefit plan described in "(a)" above), provided such trustees or other
fiduciaries purchase shares in a single payment. Purchases made for nominee or
street name accounts may not be combined with purchases made for such other
accounts.
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<PAGE>
ACCUMULATED PURCHASES. If you make an additional purchase of Fund shares,
you can count previous shares purchased still invested in the Fund in
calculating the applicable sales charge on the additional purchase.
LETTER OF INTENT. You can sign a Letter of Intent committing to purchase
at least $500,000 (or $1,000,000) in Fund shares within a 13 month period to
combine such purchases in calculating the sales charge. A portion of your Fund
shares will be held in escrow. If you complete your purchase commitments as
stated in the Letter of Intent, your Fund shares held in escrow will be released
to your account. If you do not fulfill the Letter of Intent, the appropriate
amount of Fund shares held in escrow will be redeemed to pay the sales charges
that were not applied to your purchases.
NET ASSET VALUE
Each security traded on a national securities exchange or traded
over-the-counter and quoted on the Nasdaq System is valued based on the last
sale price as of the close of regular trading on the floor of the NYSE on the
date of valuation. Securities so traded for which there was no sale on the date
of valuation and other securities are valued at the mean of the most recent bid
and asked quotations, except that bonds not traded on a securities exchange or
quoted on the Nasdaq System are valued at prices provided by a recognized
pricing service unless the Adviser believes that any such price does not
represent a fair value. Each money market instrument having a maturity of
60 days or less from the valuation date is valued on an amortized cost basis.
Other securities and assets are valued at fair value, as determined in good
faith by the Adviser under procedures established by, and under the supervision
and responsibility of, the Fund's Board.
The net asset value per share of the Fund's shares is determined on each
"business day," currently any day the NYSE is open for business. The NYSE is
presently scheduled to be closed on New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day, and on the preceding Friday or subsequent Monday when one of
these holidays falls on a Saturday or Sunday, respectively.
Generally, trading in corporate bonds, U.S. government securities and money
market instruments is substantially completed each day at various times. The
prices of such securities used in computing the net asset value of the Fund's
shares are determined as of such times. Occasionally, events affecting the
value of such securities may occur in the interim, which will not be reflected
in the computation of the Fund's net asset value. If events materially
affecting the value of the Fund's securities occur during such period, then
these securities are valued at their fair value as determined in good faith by
the Board.
MANAGEMENT
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The Trust's Board manages the business affairs of the Trust. The Board
establishes policies and reviews and approves contracts and their continuance.
The Board also elects the officers and selects the Trustees to serve as
committee members.
The following table sets forth certain information with respect to the Trustees
and executive officers of the Fund:
POSITION(S) HELD PRINCIPAL OCCUPATION(S)
NAME; ADDRESS AGE WITH FUND DURING PAST FIVE YEARS
- ------------- --- ---------------- --------------------------------
James W. Stuckert* 61 Trustee, Chairman and Chief Executive
Hilliard Lyons Chairman of the Officer of Hilliard Lyons since
501 South 4th Street Board December 1995. Formerly
Louisville, Kentucky Executive Vice President and
40202 Director of Hilliard Lyons.
William W. Crawford** 70 Trustee Retired. President and Chief
3003 Gulf Shore Operating Officer of Hilliard
Boulevard Lyons until 1995.
North #901
Naples, Florida 33940
Robert L. Decker** 51 Trustee Executive Vice President and
Churchill Downs Chief Financial Officer of
700 Central Avenue Churchill Downs since March 1997.
Louisville, Kentucky Formerly Vice President - Finance
40208 of the Hilton International Hotel
Company, a division of Ladbrook
Group PLC.
T. Kennedy Helm III** 52 Trustee Attorney and Managing Partner of
Stites and Harbison Stites and Harbison, Louisville,
400 West Market Street Kentucky.
Louisville, Kentucky
40202
W. Patrick Mulloy** 45 Trustee President and Chief Executive
Atria Senior Quarters Officer of Atria, Inc. Formerly
501 South Fourth Avenue Attorney and Partner of
Suite 140 Greenbaum, Doll & McDonald,
Louisville, Kentucky Louisville, Kentucky.
40202
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* Trustee who is an "interested person" of the Fund and of the Adviser, as
defined in the 1940 Act.
** Trustee is a member of the Audit and Nominating Committee of the Board of
Trustees.
Officers and Trustees affiliated with the Adviser serve without any compensation
from the Fund. In compensation for their services to the Fund, Trustees who are
not affiliates of the Fund or the Adviser are paid $2,000 for each Board meeting
attended and are reimbursed for out-of-pocket expenses. The Fund has no
retirement or pension plans. The following table sets forth the compensation
estimated to be paid by the Fund during its first full fiscal year to each of
the noninterested Trustees:
<TABLE>
<CAPTION>
ESTIMATED AGGREGATE
NAME OF TRUSTEE COMPENSATION FROM THE FUND
--------------- --------------------------
<S> <C>
William W. Crawford $8,000
Robert L. Decker $8,000
T. Kennedy Helm III $8,000
W. Patrick Mulloy $8,000
</TABLE>
As of _________ __, 199_, none of the Fund's officers and Trustees owned shares
of the Fund.
As of __________ __, 199_, Hilliard Lyons, the initial shareholder of the Fund,
held _____ shares or 100% of the Fund.
PRINCIPAL SHAREHOLDERS
As of __________ __, 199_, no persons owned of record or beneficially 5% or more
of the shares of the Fund except the persons indicated below:
NAME AND ADDRESS % OWNED
---------------- -------
Hilliard Lyons 100%
501 South 4th Street
Louisville, Kentucky 40202
INVESTMENT ADVISORY SERVICES
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Hilliard Lyons Investment Advisers (the "Adviser"), a division of J.J.B.
Hilliard, W.L. Lyons, Inc. ("Hilliard Lyons"), acts as the Fund's investment
adviser and performs certain administrative services for the Fund.
The Adviser is located at Hilliard Lyons Center, Louisville, Kentucky 40202.
Hilliard Lyons and its affiliate, Hilliard Lyons Trust Company, a Kentucky
chartered trust company, are wholly owned subsidiaries of Hilliard Lyons, Inc.,
a Kentucky corporation ("Hilliard Lyons, Inc."). Hilliard Lyons, Inc. is a
wholly owned subsidiary of PNC Bank Corp. ("PNC"). PNC, a multi-bank holding
company headquartered in Pittsburgh, Pennsylvania, is one of the largest
financial services organizations in the United States. PNC's address is One PNC
Plaza, 249 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2707. . Together with
predecessor firms, Hilliard Lyons has been in the investment banking business
since 1854. It is a registered investment adviser and a registered
broker-dealer and member firm of the NYSE, other principal exchanges and the
National Association of Securities Dealers, Inc. As of December 31, 1998, the
Adviser and its affiliates managed individual, corporate, fiduciary and
institutional accounts with assets aggregating approximately $4.6 billion.
The Adviser's obligations pursuant to the Advisory Agreement with the Fund
include, subject to the general supervision of the Board, (a) acting as
investment adviser for the Fund's assets and supervising and managing the
investment and reinvestment of the Fund's assets, (b) supervising continuously
the investment program of the Fund and the composition of its investment
portfolio, (c) arranging for the purchase and sale of securities and other
assets held in the investment portfolio of the Fund (subject to certain
restrictions and covenants), (d) maintaining books and records with respect to
the Fund's securities transactions and rendering to the Fund's Board such
periodic and special reports as the Board may request, and (e) maintaining a
policy and practice of conducting its investment advisory services independently
of the commercial banking operations of its affiliates.
As compensation for its services, the Fund has agreed to pay the Adviser a
monthly fee in arrears at an annual rate equal to 0.60% of the Fund's average
daily net assets. The Adviser has voluntarily agreed to waive the fees payable
to it under the Advisory Agreement until the Fund reaches $20 million in total
assets and, if necessary, reimburse the Trust by the amount by which the Fund's
total annual operating expenses for any year exceed 1.75% of average net assets.
The Advisory Agreement does not prohibit the Adviser or any of its affiliates
from providing similar services to other investment companies and other clients
(whether or not their investment objectives and policies are similar to those of
the Fund) or from engaging in other activities. When other clients of the
Adviser desire to purchase or sell a security at the same time such security is
purchased or sold for the Fund, such purchases and sales will, to the extent
feasible, be allocated among the Fund and such clients in a manner believed by
the Adviser to be equitable to such clients and the Fund. However, it cannot be
expected that all of the Adviser's clients, including the Fund, will receive
equal treatment at all times.
The Advisory Agreement was approved by the Board and by a majority of the
Trustees who are not parties to the Advisory Agreement or "interested persons"
(as such term is defined in the 1940 Act) of any party thereto, on __________
__, 1999 and became effective on ___________ __, 1999. It
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<PAGE>
will continue in effect until _____ __, 200_ and from year to year thereafter
provided such continuance is specifically approved at least annually (a) by the
vote of a majority of the outstanding shares of the Fund (as defined under "Fund
Policies") or by a majority of the Trustees of the Fund, and (b) by the vote of
a majority of the Trustees of the Fund who are not parties to the Advisory
Agreement or "interested persons" (as such term is defined in the 1940 Act) of
any party thereto, cast in person at a meeting called for the purpose of voting
on such approval. The Advisory Agreement will terminate automatically if
assigned (as defined in the 1940 Act) and is terminable at any time without
penalty by the Trustees of the Fund or by vote of a majority of the outstanding
shares of the Fund on 60 days' written notice to the Adviser and by the Adviser
on 60 days' written notice to the Fund.
DISTRIBUTOR
Provident Distributors, Inc., Four Fall Corporate Center, 6th Floor, West
Conshohocken, Pennsylvania 19428-2961, is the distributor for the shares of the
Fund (the "Distributor").
The Distributor's obligations pursuant to the Distribution Agreement with the
Fund include (a) using reasonable time and effort in assisting in the sale and
distribution of the Fund's shares and (b) qualifying and maintaining its
qualification as a broker-dealer in such states where shares of the Fund are
qualified for sale. As compensation for its services and related expenses, the
Fund has agreed to reimburse the Distributor through the operation of the Fund's
Distribution Plan, as further discussed below. The Distribution Agreement does
not prohibit the Distributor or any of its affiliates from providing similar
services to other investment companies and other clients (whether or not their
investment objectives and policies are similar to those of the Fund) or from
engaging in other activities.
The Distribution Agreement was approved by the Board and by a majority of the
Trustees who are not parties to the Distribution Agreement or "interested
persons" (as such term is defined in the 1940 Act) of any party thereto, on
__________ __, 1999 and became effective on ___________ __, 1999. It will
continue in effect until _____ __, 2000 and from year to year thereafter
provided such continuance is specifically approved at least annually (a) by the
vote of a majority of the outstanding shares of the Fund (as defined under "Fund
Policies") or by a majority of the Trustees of the Fund, and (b) by the vote of
a majority of the Trustees of the Fund who are not parties to the Distribution
Agreement or "interested persons" (as such term is defined in the 1940 Act) of
any party thereto, cast in person at a meeting called for the purpose of voting
on such approval. The Distribution Agreement will terminate automatically if
assigned (as defined in the 1940 Act) and is terminable at any time without
penalty by the Trustees of the Fund or by vote of a majority of the outstanding
shares of the Fund on 60 days' written notice to the Distributor and by the
Distributor on 60 days' written notice to the Fund.
Hilliard Lyons has entered into a selling agreement with the Distributor to sell
shares of the Fund. Pursuant to such selling agreement, Hilliard Lyons receives
the sales charges and Rule 12b-1 fees otherwise payable to the Distributor with
respect to Fund shares which the Distributor sells through
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<PAGE>
Hilliard Lyons. The Distributor may enter into additional selling agreements
in the future with authorized dealers and financial intermediaries (collectively
referred to as "Authorized Dealers") to sell shares of the Fund, and any such
Authorized Dealers may also receive the sales charges and Rule 12b-1 fees
otherwise payable to the Distributor with respect to Fund shares which the
Distributor sells through such Authorized Dealers.
RULE 12b-1 FEES
The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of
1940 (the "Distribution Plan") that allows the Fund to pay distribution and
other fees for the sale and distribution of its shares and for services provided
to shareholders. Because these fees are paid out of the Fund's assets on an
ongoing basis, over time these fees will increase the cost of your investment
and may cost you more than paying other types of sales charges. Pursuant to the
Distribution Plan, the Fund reimburses the Distributor at an annualized rate of
up to 0.60% of the Fund's average daily net assets for distribution expenses
actually incurred.
Rule 12b-1 regulates the manner in which a mutual fund may assume the costs of
distributing and promoting the sale of its shares. In unanimously approving the
Distribution Plan, the Fund's Board of Trustees determined that there is a
reasonable likelihood that the Distribution Plan will benefit the Fund and its
shareholders. Pursuant to the Distribution Plan, the Distributor may be
reimbursed for expenses incurred in connection with any activity primarily
intended to result in the sale of the Fund's shares, including without
limitation (i) printing and distributing copies of any prospectuses and annual
and interim reports of the Fund (after the Fund has prepared and set in type
such materials) that are used by the Distributor or brokers, dealers and other
financial intermediaries who may have a selling agreement with the Distributor
(collectively referred to as "Intermediaries") in connection with the offering
of the Fund's shares; (ii) preparing, printing or otherwise manufacturing and
distributing any other literature or materials of any nature used by the
Distributor and Intermediaries in connection with promoting, distributing or
offering the Fund's shares; (iii) advertising, promoting and selling the Fund's
shares to broker-dealers, banks and the public; (iv) distribution-related
overhead and the provision of information programs and shareholder services
intended to enhance the attractiveness of investing in the Fund; (v) incurring
initial outlay expenses in connection with compensating Intermediaries for (a)
selling the Fund's shares and (b) providing personal services to shareholders
and the maintenance of shareholder accounts including paying interest on and
incurring other carrying costs on funds borrowed to pay such initial outlays;
and (vi) acting as agent for the Fund in connection with implementing the
Distribution Plan. If the amount reimbursed is insufficient to pay the expenses
of distribution, the Adviser bears the additional expenses. Any amount of excess
distribution expenses incurred by the Distributor in any quarter for which the
Distributor is not reimbursed can be carried forward from one quarter to the
next, but no expenses may be carried over from year to year.
Under its terms, the Distribution Plan remains in effect so long as it is
approved at least annually by vote of the Fund's Board of Trustees, including a
majority of the Trustees who are not interested persons of the Fund and who have
no direct or indirect financial interest in the operation of the
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<PAGE>
Distribution Plan. The Distributor is obligated to provide the Trustees
quarterly reports of amounts expended under the Distribution Plan and the
purpose for which the expenditures were made.
ADMINISTRATOR AND FUND ACCOUNTANT
PFPC Inc. ("PFPC") is the administrator and Fund accountant for the Fund
pursuant to an Administration and Accounting Services Agreement dated _______
__, 1999 between the Trust and PFPC. The asset-based fee for administrative and
accounting services for the Fund is 0.10% of the first $250 million of average
daily net assets; 0.075% of the next $250 million of average daily net assets;
0.05% of the next $250 million of average daily net assets; and 0.03% of the
average daily net assets in excess of $750 million.
There is a minimum monthly fee of $8,333 (excluding out-of-pocket expenses).
PFPC has agreed to waive a portion of the minimum monthly fees payable under the
Administration and Accounting Services Agreement during the first year of
operations for the Fund to the extent such fees are applicable. The maximum
minimum fee payable to PFPC during the first year of operations for the Fund
will be approximately $46,000.
CUSTODIAN
PFPC Trust Company ("PFPC Trust") is the custodian for the Fund pursuant to a
Custodian Services Agreement dated ______ __, 1999 between the Trust and PFPC
Trust. As custodian, PFPC Trust is responsible for holding all securities and
cash of the Fund, receiving and paying for securities purchased, delivering
against payment securities sold receiving and collecting income from investments
and performing other administrative duties, all as directed by authorized
persons. PFPC Trust does not exercise any supervisory function in such matters
as purchase and sale of portfolio securities, payment of dividends or payment of
expenses of the Fund. The asset-based fee for custodian services for the Fund is
0.015% of the first $100 million of average daily gross assets; 0.01% of the
next $400 million of average daily gross assets; and 0.008% of average daily
gross assets over $500 million.
There is a minimum monthly fee of $1,500 (excluding transaction charges and
out-of-pocket expenses). PFPC Trust has agreed to waive a portion of the minimum
monthly fees payable under the Custodian Services Agreement for the first year
of operations for the Fund to the extent such fees are applicable. The maximum
minimum fee payable to PFPC Trust during the first year of operations for the
Fund will be approximately $9,000
14
<PAGE>
TRANSFER AGENT
PFPC Inc. ("PFPC") is the Fund's transfer agent, registrar, dividend-disbursing
agent and shareholder servicing agent pursuant to a Transfer Agency Services
Agreement dated ____________ __, 1999 between the Trust and PFPC. As transfer
agent, PFPC provides certain bookkeeping and data processing services and
services pertaining to the maintenance of shareholder accounts. The following
account-based fees for transfer agency services for the Fund apply: Annual,
Semi-Annual Dividend -- $10.00 per account per annum; Quarterly Dividend --
$12.00 per account per annum; Monthly Dividend -- $15.00 per account per annum;
Daily Accrual Dividend -- $18.00 per account per annum; and Inactive Account --
$0.30 per account per month
There is a minimum monthly fee of $3,000 (excluding transaction charges,
networking charges and out-of-pocket expenses). PFPC has agreed to waive a
portion of the minimum monthly fees payable under the Transfer Agency Services
Agreement for the first year of operations for the Fund to the extent such fees
are applicable. The maximum minimum fee payable to PFPC during the first year of
operations for the Fund will be approximately $18,000.
15
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for Hilliard Lyons Investment Trust are Ernst
& Young LLP. The accountants audit and report on the Fund's annual financial
statements, review certain regulatory reports and the Fund's federal income tax
returns, and perform other professional accounting, auditing, tax and advisory
services when engaged to do so by Hilliard Lyons Investment Trust.
COUNSEL
Vedder, Price, Kaufman & Kammholz, 222 North LaSalle Street, Chicago, Illinois
60601, is legal counsel to the Fund.
PORTFOLIO TURNOVER
The Fund does not seek to realize profits by participating in short-term market
movements and intends to purchase securities for long-term capital appreciation.
While the rate of portfolio turnover is not a limiting factor when the Adviser
deems changes appropriate, it is anticipated, given the Fund's investment
objective, that its annual portfolio turnover should not exceed 25%; however,
the Fund's actual portfolio turnover rate may be higher than the Adviser's
estimate. Portfolio turnover is calculated by dividing the lesser of the Fund's
purchases or sales of portfolio securities during the period in question by the
monthly average of the value of the Fund's portfolio securities during that
period. Excluded from consideration in the calculation are all securities with
maturities of one year or less when purchased by the Fund.
PORTFOLIO TRANSACTIONS
In addition to making the investment decisions of the Fund, the Adviser
implements such decisions by arranging the execution of the purchase or sale of
portfolio securities with the objective of obtaining prompt, efficient and
reliable executions of such transactions at the most favorable prices obtainable
("best execution"). The Adviser is authorized to place orders for securities
transactions with various broker-dealers, including Hilliard Lyons, subject to
the requirements of applicable laws and regulations. Transactions in securities
other than those for which a securities exchange is the principal market are
generally made with principals or market makers at a negotiated "net" price
16
<PAGE>
which usually includes a profit to the dealer. Brokerage commissions are paid
primarily for effecting transactions in securities traded on an exchange,
although transactions in the over-the-counter market may be executed on an
agency basis if it appears likely that a more favorable overall price can be
obtained.
With respect to transactions handled by Hilliard Lyons on a national securities
exchange, the commissions must conform to Rule 17e-1 under the 1940 Act, which
permits an affiliated person of a registered investment company to receive
brokerage commissions from such registered investment company, provided that
such commissions are reasonable and fair compared to commissions received by
other brokers in connection with comparable transactions involving similar
securities during a comparable period of time. The Board has adopted
"procedures" which provide that commissions paid to Hilliard Lyons may not
exceed (i) those which would have been charged by other qualified brokers for
comparable customers in similar transactions or (ii) those charged by Hilliard
Lyons for comparable customers in similar transactions. Rule 17e-1 requires
that the Board, including its Trustees who are not "interested persons" of the
Fund or Hilliard Lyons determine no less frequently than quarterly that all
transactions effected pursuant to the Rule 17e-1 during the preceding quarter
were effected in compliance with such procedures. Hilliard Lyons is also
required to furnish reports and maintain records in connection with such
reviews.
The use of Hilliard Lyons as a broker for the Fund is subject to the provisions
of Section 11(a) under the Securities Exchange Act of 1934 (the "1934 Act").
Section 11(a)(1)(H) permits an exchange member to execute on that exchange's
floor, using its own floor brokers, trades on behalf of its managed accounts,
including affiliated investment advisers and investment companies. Members must
comply with the following two conditions, set out in Section 11(a)(1)(H), in
order to execute these trades lawfully: (1) A member must obtain from the
person(s) authorized to transact business for a managed account written
authorization permitting the member to effect trades on behalf of the account
before doing so (if a customer already has provided a member with an
authorization pursuant to Rule 11(a)2-2(T), the member need not obtain another
written authorization to meet the Section 11(a)(1)(H) authorization
requirement); and (2) at least annually, the member must disclose to the same
person(s) the amount of the aggregate compensation the member received in
effecting such transactions. Further, members will be required to comply with
any rules the SEC may prescribe with respect to the above two express
requirements. The SEC has not indicated any such plans to date. The Adviser
previously obtained authorization from the Fund pursuant to Rule 11(a)2-2(T) and
has disclosed to the Fund the amount of the aggregate compensation Hilliard
Lyons received in effecting all such transactions.
When consistent with the objective of obtaining best execution, Fund brokerage
may be directed to brokers or dealers, other than Hilliard Lyons, which charge
commissions that are higher than might be charged by another qualified broker or
dealer and which furnish at no extra charge brokerage and/or research services
to the Adviser considered by the Adviser to be useful or desirable in its
investment management of the Fund and its other advisory accounts. Such
brokerage and research services are of the type described in Section 28(e) of
the 1934 Act. Under Section 28(e), the commissions charged by a broker
furnishing such brokerage or research services may be greater than that which
another qualified broker might charge if the Adviser determines, in good faith,
that the
17
<PAGE>
amount of such commission is reasonable in relation to the value of brokerage or
research services provided by the executing broker, viewed in terms of either
the particular transaction or the overall responsibilities of the Adviser or its
affiliate to the accounts over which they exercise investment discretion. The
Adviser need not place or attempt to place a specific dollar value on such
services or on the portion of the commission which reflects such services but is
required to keep records sufficient to demonstrate the basis of its
determinations.
Investment research obtained by allocations of Fund brokerage is used to augment
the internal research and investment strategy capabilities of the Adviser.
Research services furnished by brokers through which the Fund effects securities
transactions are used by the Adviser in carrying out its investment management
responsibilities with respect to all of its accounts. Such investment
information may be useful to one or more of the other accounts of the Adviser
and research information received for the commissions of such other accounts may
be useful to the Fund as well as such other accounts.
INCOME TAX CONSIDERATIONS
Each dividend and capital gain distribution, if any, declared by the Fund on its
outstanding shares will be paid on the payment date fixed by the Board in cash
or in additional shares of the Fund having an aggregate net asset value as of
the record date of such dividend or distribution equal to the cash amount of
such dividend or distribution. Dividends and capital gain distributions will
normally be reinvested in additional shares of the Fund at net asset value
without a sales charge, unless otherwise elected at purchase. A shareholder may
change such election at any time prior to the record date for a particular
dividend or distribution by written request to your Hilliard Lyons investment
broker or Authorized Dealer.
It is the present policy of the Fund to make distributions annually of its net
investment income and of its net realized capital gains, if any, at the end of
the year in which earned or at the beginning of the next year. There is no
fixed dividend rate, and there can be no assurance that the Fund will pay any
dividends or realize any capital gains. Investors considering buying shares of
the Fund just prior to a dividend or capital gain distribution record date
should be aware that, although the price of shares purchased at that time may
reflect the amount of the forthcoming distribution, those who purchase just
prior to such date will receive a distribution that will nevertheless be taxable
to them.
The Fund is subject to a nondeductible 4% excise tax measured with respect to
certain undistributed amounts of ordinary income and capital gains. If
necessary to avoid this tax, and if in the best interests of the shareholders,
the Fund's Board will, to the extent permitted by the SEC, declare and pay
distributions of its net investment income and net realized capital gains more
frequently than stated above. To avoid the tax, the Fund must distribute during
each calendar year at least the sum of (1) 98% of its ordinary income (not
taking into account any capital gains or losses) for the calendar year, (2) 98%
of its capital gains in excess of its capital losses for the 12-month period
ending on October 31 of the calendar year, and (3) all ordinary income and net
capital gains for previous years that were not previously distributed. A
distribution will be treated as paid during the calendar year if it is actually
paid during the calendar year or declared by the Fund in October,
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November or December of the year, payable to shareholders of record as of a
specified date in such a month and actually paid by the Fund during January of
the following year. Any such distributions paid during January of the following
year will be deemed to be paid and received on December 31 of the year the
distributions are declared, rather than when the distributions are received.
The Fund intends to qualify for tax treatment as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Code").
Qualification as a regulated investment company relieves the Fund of federal
income tax on that part of its net ordinary income and net realized capital
gains which it pays out to its shareholders. To qualify, the Fund must meet
certain relatively complex tests relating to the source of its income and the
diversification of its assets, including the requirement that less than 30% of
its gross income (generally exclusive of losses) may be derived from the sale or
other disposition of securities held for less than three months, and must
distribute at least 98% of its investment company taxable income (as defined in
the Code). In addition, the Fund must diversify its holdings so that, at the
end of each fiscal quarter, (i) at least 50% of the market value of the Fund's
assets is represented by cash, cash items, United States government securities,
securities of other regulated investment companies and other securities with
such other securities limited, in respect of any one issuer, to an amount not
greater than 5% of the value of the Fund's assets and 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of its
assets is invested in the securities of any one issuer (other than United States
government securities or the securities of other regulated investment
companies). The Fund does not anticipate any difficulty in meeting these
requirements. Dividends out of net ordinary income and distributions of net
short-term capital gains are taxable to shareholders as ordinary income. In the
case of corporate shareholders, such distributions are eligible for the 70%
dividends-received deduction, subject to proportionate reduction of the amount
eligible for deduction if the aggregate qualifying dividends received by the
Fund from domestic corporations in any year are less than its "gross income" as
defined by the Code. A corporation's dividends-received deduction will be
disallowed unless the corporation holds shares in the Fund at least 46 days.
Furthermore, a corporation's dividends-received deduction will be disallowed to
the extent the corporation's investment in shares of the Fund is financed with
indebtedness.
The excess of net long-term capital gains over the net short-term capital losses
realized and distributed by the Fund to its shareholders as capital gain
distributions is taxable to the shareholders as long-term capital gains,
irrespective of the length of time a shareholder may have held the shares. Such
long-term capital gain distributions are not eligible for the dividends-received
deduction referred to above. Any dividend or distribution received by a
shareholder on shares of the Fund shortly after the purchase of such shares will
have the effect of reducing the net asset value of such shares by the amount of
such dividend or distribution. Furthermore, such dividend or distribution,
although in effect a return of capital, is subject to applicable income taxation
as described above regardless of the length of time the shares may have been
held. If a shareholder held shares less than six months and during that period
received a distribution taxable to such shareholder as long-term capital gain,
any loss realized on the sale of such shares during such six-month period would
be a long-term loss to the extent of such distribution. The tax treatment of
distributions from the Fund is the same whether the distributions are received
in additional shares or in cash. Shareholders
19
<PAGE>
receiving distributions in the form of additional shares will have a cost basis
for federal income tax purposes in each share received equal to the net asset
value on the reinvestment date.
Federal income taxes may be required to be withheld ("backup withholding") at a
31% rate from taxable dividends, capital gain distributions and redemption
proceeds paid to certain shareholders. Backup withholding may be required if
(i) a shareholder fails to furnish a properly certified social security or other
tax identification number; (ii) a shareholder fails to certify that the
shareholder's tax identification number is correct or that the shareholder is
not subject to backup withholding due to the under-reporting of certain income;
or (iii) the Internal Revenue Service determines that a shareholder's account is
subject to backup withholding. These certifications should be completed and
returned when a shareholder opens an account with a Hilliard Lyons investment
broker or Authorized Dealer. All amounts withheld must be promptly paid to the
IRS. A shareholder may claim the amount withheld as a credit on the
shareholder's federal income tax return.
The Fund may be subject to state or local taxes in the jurisdiction in which the
Fund may be deemed to be doing business. Dividends and distributions declared
by the Fund may also be subject to state and local taxes.
Shareholders should consult their tax advisers about the application of the
provisions of tax law in light of their particular tax situations.
INVESTMENT PERFORMANCE
The Fund may quote certain total return figures from time to time. A "total
return" on a per share basis is the amount of dividends distributed per share
plus or minus the change in the net asset value per share for a period. A
"total return percentage" may be calculated by dividing the value of a share at
the end of a period by the value of the share at the beginning of the period and
subtracting one. For a given period, an "average annual total return" may be
computed by finding the average annual compounded rate that would equate a
hypothetical initial amount invested of $1,000 to the ending redeemable value.
Average Annual Total Return is computed as follows: ERV = P(1+T) to the
power of n
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period at the end of the period
(or fractional portion thereof).
Investment performance figures assume reinvestment of all dividends and
distributions and do not take into account any federal, state, or local income
taxes which shareholders must pay on a current basis. They are not necessarily
indicative of future results. The performance of the Fund is a result
20
<PAGE>
of conditions in the securities markets, portfolio management and operating
expenses. Although investment performance information 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. Of
course, past performance is not indicative of future results.
As the Fund commenced operations on __________ ____, 1999, there is currently no
annual performance information for the Fund.
In advertising, sales literature and other publications, the Fund's performance
may be quoted in terms of total return or average annual total return, which may
be compared with various indices and investments, other performance measures or
rankings, or other mutual funds or indices or averages of other mutual funds.
OTHER INFORMATION
The Fund's Prospectus and this SAI omit certain information contained in the
Registration Statement, which the Fund has filed with the Securities and
Exchange Commission under the Securities Act of 1933, and reference is hereby
made to the Registration Statement for further information with respect to the
Fund and the securities offered hereby. The Registration Statement is available
for inspection by the public at the Securities and Exchange Commission in
Washington, D.C.
21
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APPENDIX A -- DESCRIPTION OF SECURITIES RATINGS
RATINGS IN GENERAL
A rating of a rating service represents the service's opinion as to the credit
quality of the security being rated. However, the ratings are general and are
not absolute standards of quality or guarantees as to the creditworthiness of an
issuer. Consequently, the Adviser believes that the quality of debt securities
in which the Fund may invest should be continuously reviewed and that individual
analysts give different weights to the various factors involved in credit
analysis. A rating is not a recommendation to purchase, sell or hold a security
because it does not take into account market value or suitability for a
particular investor. When a security has received a rating from more than one
service, each rating should be evaluated independently. Ratings are based on
current information furnished by the issuer or obtained by the rating services
from other sources which they consider reliable. Ratings may be changed,
suspended or withdrawn as a result of changes in or unavailability of such
information, or for other reasons.
The following is a description of the characteristics of ratings of corporate
debt securities used by Moody's Investors Service, Inc. ("Moody's") and Standard
& Poor's Corporation ("S&P").
RATINGS BY MOODY'S
Aaa. Bonds rated Aaa are judged to be the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or exceptionally stable margin and
principal is secure. Although the various protective elements are likely to
change, such changes as can be visualized are unlikely to impair the
fundamentally strong position of such bonds.
Aa. Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa bonds or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa bonds.
A. Bonds rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa. Bonds rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
A-1
<PAGE>
Ba. Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B. Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa. Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca. Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
RATINGS BY S&P
AAA. Debt rated AAA has the highest rating. Capacity to pay interest and
repay principal is extremely strong.
AA. Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A. Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB. Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.
BB, B, CCC, CC, and C. Debt rated BB, B, CCC, CC or C is regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and C the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
C1. This rating is reserved for income bonds on which no interest is being
paid.
A-2
<PAGE>
D. Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears. The D rating is also used upon the filing of a
bankruptcy petition if debt service payments are jeopardized.
Notes:
The ratings from AA to CCC may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories.
Foreign debt is rated on the same basis as domestic debt measuring the
creditworthiness of the issuer; ratings of foreign debt do not take into account
currency exchange and related uncertainties.
The "r" is attached to highlight derivative, hybrid and certain other
obligations that S&P believes may experience high volatility or high variability
in expected returns due to noncredit risks. Examples of such obligations are:
securities whose principal or interest return is indexed to equities,
commodities, or currencies; certain swaps and options; and interest-only and
principal-only mortgage securities. The absence of an "r" symbol should not be
taken as an indication that an obligation will exhibit no volatility or
variability in total return.
A-3
<PAGE>
HILLIARD LYONS INVESTMENT TRUST
FORM N-1A
PART C: OTHER INFORMATION
ITEM 23. EXHIBITS
(a) Declaration of Trust of Registrant.
(b) Bylaws of Registrant.
(c) None.
(d) Investment Advisory Agreement between Registrant and Hilliard Lyons
Investment Advisors, a division of J.J.B. Hilliard, W.L. Lyons, Inc.*
(e) (i) Distribution Agreement between Registrant and Provident
Distributors, Inc.*
(ii) Broker-Dealer Agreement between J.J.B. Hilliard, W.L. Lyons, Inc.
and Provident Distributors, Inc.*
(f) None.
(g) Custodian Services Agreement between Registrant and PFPC Trust
Company.*
(h) (i) Transfer Agency Services Agreement between Registrant and PFPC
Inc.*
(ii) Administration and Accounting Services Agreement between
Registrant and PFPC Inc.*
(i) Opinion of Counsel.*
(j) Consent of Independent Auditors.*
(k) Not applicable.
(l) Subscription Agreement with initial stockholder.*
(m) Distribution Plan pursuant to Rule 12b-1.*
(n) Not applicable.
(o) Not applicable.
* To be filed by Amendment.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Inapplicable.
C-1
<PAGE>
ITEM 25. INDEMNIFICATION.
Article V of Registrant's Declaration of Trust, filed herewith as
Exhibit 1, provides for the indemnification of Registrant's Trustees, officers,
employees and agents against liabilities incurred by them in connection with the
defense or disposition of any action or proceeding in which they may be involved
or with which they may be threatened, while in office or thereafter, by reason
of being or having been in such office, except with respect to matters as to
which it has been determined that they acted with willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of their office ("Disabling Conduct").
Registrant has obtained from a major insurance carrier a Trustees' and
officers' liability policy covering certain types of errors and omissions.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to Trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a Trustee, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
Trustee, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
J.J.B. Hilliard, W.L. Lyons, Inc., through its division, Hilliard Lyons
Investment Advisors, is the investment adviser of the Registrant. For
information concerning the business, profession, vocation or employment of a
substantial nature of J.J.B. Hilliard, W.L. Lyons, Inc., reference is made to
Form ADV filed by it under the Investment Advisers Act of 1940.
Set forth below is a list as of March 12, 1999 of all officers (at the
Executive Vice President level and above) of J.J.B. Hilliard, W.L. Lyons, Inc.
and the name and business address of the company (if any), other than J.J.B.
Hilliard, W.L. Lyons, Inc. and its affiliates, with which each such individual
has been connected since January 1, 1998, as well as the capacity in which such
individual was connected:
OTHER BUSINESS, PROFESSION,
NAME POSITION WITH ADVISER VOCATION OR EMPLOYMENT
- ---- --------------------- ----------------------
James M. Rogers Executive Vice President None
and Chief Operating Officer
James R. Allen Executive Vice President, None
C-2
<PAGE>
Branch Administration
James W. Stuckert Chief Executive Officer Royal Gold, Inc. (Director)
1600 Wynkoop Street
Suite 1000
Denver, Colorado 80202
DataBeam Corporation
(Director)
3191 Nicholsville Road
Lexington, Kentucky 50403
Lawson United Corporation
(Director)
113 West Main
Glasgow, Kentucky 42141
Thomas Transportation Group,
Inc. (Director)
3600 Chamberlain Lane, Suite
610
Louisville, Kentucky 40241
Samuel C. Harvey Executive Vice President, None
Investment Management Group
F. James Walker Executive Vice President, None
Financial Services
E. Neal Cory, II Executive Vice President, None
Investment Management Group
Some of the officers of J.J.B. Hilliard, W.L. Lyons, Inc. serve as officers
of Hilliard Lyons, Inc. and as directors or officers, or both, of other
subsidiaries of Hilliard Lyons, Inc., each of which subsidiaries, other than
Hilliard Lyons Trust Company, is organized for the purpose of carrying out the
investment banking activities of J.J.B. Hilliard, W.L. Lyons, Inc. or activities
in support thereof.
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) Provident Distributors, Inc. is Registrant's principal underwriter.
As of January 28, 1999, Provident Distributors, Inc. also served as
principal underwriter for the following registered investment
companies:
Pacific Horizon Funds, Inc.
Time Horizon Funds
World Horizon Funds, Inc.
Pacific Innovations Trust
C-3
<PAGE>
International Dollar Reserve Fund I, Ltd.
Municipal Fund for Temporary Investment
Municipal Fund for New York Investors, Inc.
Municipal Fund for California Investors, Inc.
Temporary Investment Fund, Inc.
Trust for Federal Securities
Columbia Common Stock Fund, Inc.
Columbia Growth Fund, Inc.
Columbia International Stock Fund, Inc.
Columbia Special Fund, Inc.
Columbia Small Cap Fund, Inc.
Columbia Real Estate Equity Fund, Inc.
Columbia Balanced Fund, Inc.
Columbia Daily Income Company
Columbia U.S. Government Securities Fund, Inc.
Columbia Fixed Income Securities Fund, Inc.
Columbia Municipal Bond Fund, Inc.
Columbia High Yield Fund, Inc.
Columbia National Municipal Bond Fund, Inc.
Kiewit Mutual Fund
Kalmar Pooled Investment Trust
The RBB Fund, Inc.
Robertson Stephens Investment Trust
Hilliard Lyons Government Fund, Inc.
Hilliard Lyons Growth Fund, Inc.
The Rodney Square Fund, Inc.
The Rodney Square Tax-Exempt Fund, Inc.
The Rodney Square Strategic Equity Fund, Inc.
The Rodney Square Strategic Fixed-Income Fund, Inc.
The BlackRock Funds, Inc. (Distributed by BlackRock Distributors,
Inc., a wholly owned subsidiary of Provident Distributors, Inc.)
The OffitBank Investment Fund, Inc. (Distributed by Offit Funds
Distributor, Inc., a wholly owned subsidiary of Provident
Distributors, Inc.)
C-4
<PAGE>
The OffitBank Variable Insurance Fund, Inc. (Distributed by Offit
Funds Distributor, Inc., a wholly owned subsidiary of Provident
Distributors, Inc.)
CVO Greater China Fund, Inc. (Distributed by Offit Funds
Distributor, Inc., a wholly owned subsidiary of Provident
Distributors, Inc.)
(b) Set forth below is certain information pertaining to the directors and
officers of Provident Distributors, Inc., the Registrant's principal
underwriter:
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITION WITH UNDERWRITER POSITION WITH REGISTRANT
- ---------------- ------------------------- ------------------------
Monroe J. Haegele Director, Chief Executive None
Four Falls Officer
Corporate Center
6th Floor
West Conshohocken,
PA 19428-2961
Philip H. Rinnander Secretary None
Four Falls
Corporate Center
6th Floor
West Conshohocken,
PA 19428-2961
Jane Haegele President None
Four Falls
Corporate Center
6th Floor
West Conshohocken,
PA 19428-2961
Barbara A. Rice Managing Director None
Four Falls
Corporate Center
6th Floor
West Conshohocken,
PA 19428-2961
Jason A. Greim Director of Mutual Fund None
Four Falls Operations
Corporate Center
C-5
<PAGE>
6th Floor
West Conshohocken,
PA 19428-2961
(c) Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents are maintained (i) at the offices
of the Registrant, (ii) at the offices of the Registrant's investment adviser,
Hilliard Lyons Investment Advisors, or (iii) at the offices of the Registrant's
custodian, PFPC Trust Company, or transfer agent, administrator and fund
accountant, PFPC Inc.
ITEM 29. MANAGEMENT SERVICES.
Not applicable.
ITEM 30. UNDERTAKINGS.
Not applicable.
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Louisville, State of Kentucky, on the 7th day of
April, 1999.
HILLIARD LYONS INVESTMENT TRUST
By: /s/ Ann Cody
------------------------------
Ann Cody, President
Pursuant to the requirements of the Securities Act of 1933, this initial
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
/s/ Ann Cody President and Trustee April 7, 1999
- ------------------- (Chief Executive Officer)
Ann Cody
/s/ Ann Cody Treasurer April 7, 1999
- ------------------- (Chief Financial and Accounting Officer)
Ann Cody
/s/
- ------------------
<PAGE>
EXHIBIT INDEX
HILLIARD LYONS INVESTMENT TRUST
FORM N-1A REGISTRATION STATEMENT
(a) Declaration of Trust of Registrant.
(b) Bylaws of Registrant.
(c) None.
(d) (i) Investment Advisory Agreement between Registrant and
Hilliard Lyons Investment Advisors, a division of
J.J.B. Hilliard, W.L. Lyons, Inc.*
(e) (i) Distribution Agreement between Registrant and
Provident Distributors, Inc.*
(ii) Broker-Dealer Agreement between J.J.B. Hilliard, W.L.
Lyons, Inc. and Provident Distributors, Inc.*
(f) None.
(g) (i) Custodian Services Agreement between Registrant and
PFPC Trust Company.*
(h) (i) Transfer Agency Services Agreement between Registrant
and PFPC Inc.*
(ii) Administration and Accounting Services Agreement
between Registrant and PFPC Inc.*
(i) Opinion of Counsel.*
(j) Consent of Independent Auditors.*
(k) Not applicable.
(l) Subscription Agreement with initial stockholder.*
(m) Distribution Plan pursuant to Rule 12b-1.*
(n) Not applicable.
(o) Not applicable.
* To be filed by Amendment.
<PAGE>
DECLARATION OF TRUST
OF
HILLIARD LYONS INVESTMENT TRUST
A Delaware Business Trust
January 12, 1999
<PAGE>
DECLARATION OF TRUST
OF
HILLIARD LYONS INVESTMENT TRUST
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.1 NAME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 TRUST PURPOSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.3 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
ARTICLE II
TRUSTEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.1 NUMBER AND QUALIFICATION . . . . . . . . . . . . . . . . . . . . . . . .3
2.2 TERM AND ELECTION. . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.3 RESIGNATION AND REMOVAL. . . . . . . . . . . . . . . . . . . . . . . . .4
2.4 VACANCIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.5 MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.6 OFFICERS; CHAIRPERSON OF THE BOARD . . . . . . . . . . . . . . . . . . .6
2.7 BY-LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
ARTICLE III
POWERS OF TRUSTEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
3.1 GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
3.2 INVESTMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
3.3 LEGAL TITLE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
3.4 SALE OF INTERESTS. . . . . . . . . . . . . . . . . . . . . . . . . . . .7
3.5 BORROW MONEY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
3.6 DELEGATION; COMMITTEE. . . . . . . . . . . . . . . . . . . . . . . . . .7
3.7 COLLECTION AND PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . .8
3.8 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.9 MISCELLANEOUS POWERS . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.10 FURTHER POWERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
ARTICLE IV
INVESTMENT ADVISORY, ADMINISTRATIVE, AND PLACEMENT AGENT SERVICES . . . . . . .9
i
<PAGE>
4.1 INVESTMENT ADVISORY AND OTHER SERVICES . . . . . . . . . . . . . . . . .9
4.2 PARTIES TO CONTRACT. . . . . . . . . . . . . . . . . . . . . . . . . . .9
ARTICLE V
LIMITATIONS OF LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.1 NO PERSONAL LIABILITY OF TRUSTEES, OFFICERS,
EMPLOYEES OR AGENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.2 INDEMNIFICATION OF TRUSTEES, OFFICERS, EMPLOYEES AND AGENTS. . . . . . 10
5.3 LIABILITY OF HOLDERS; INDEMNIFICATION. . . . . . . . . . . . . . . . . 11
5.4 NO BOND REQUIRED OF TRUSTEES . . . . . . . . . . . . . . . . . . . . . 11
5.5 NO DUTY OF INVESTIGATION; NOTICE IN TRUST INSTRUMENTS, ETC.. . . . . . 11
5.6 RELIANCE ON EXPERTS, ETC.. . . . . . . . . . . . . . . . . . . . . . . 11
5.7 ASSENT TO DECLARATION. . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VI
INTERESTS IN THE TRUST. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.1 GENERAL CHARACTERISTICS. . . . . . . . . . . . . . . . . . . . . . . . 12
6.2 ESTABLISHMENT OF SERIES OF INTERESTS . . . . . . . . . . . . . . . . . 12
6.3 ESTABLISHMENT OF CLASSES . . . . . . . . . . . . . . . . . . . . . . . 13
6.4 ASSETS OF SERIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.5 LIABILITIES OF SERIES. . . . . . . . . . . . . . . . . . . . . . . . . 14
6.6 DIVIDENDS AND DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . 14
6.7 VOTING RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.8 RECORD DATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.9 TRANSFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.10 EQUALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.11 FRACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.12 CLASS DIFFERENCES. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.13 CONVERSION OF INTERESTS. . . . . . . . . . . . . . . . . . . . . . . . 16
6.14 INVESTMENTS IN THE TRUST . . . . . . . . . . . . . . . . . . . . . . . 16
6.15 TRUSTEES AND OFFICERS AS HOLDERS . . . . . . . . . . . . . . . . . . . 16
6.16 NO PREEMPTIVE RIGHTS; DERIVATIVE SUITS . . . . . . . . . . . . . . . . 16
6.17 NO APPRAISAL RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.18 STATUS OF INTERESTS AND LIMITATION OF PERSONAL LIABILITY . . . . . . . 17
ARTICLE VII
PURCHASES AND REDEMPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.1 PURCHASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.2 REDEMPTION BY HOLDER . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.3 REDEMPTION BY TRUST. . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.4 NET ASSET VALUE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ii
<PAGE>
ARTICLE VIII
HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.1 RIGHTS OF HOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.2 REGISTER OF INTERESTS. . . . . . . . . . . . . . . . . . . . . . . . . 19
8.3 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.4 MEETINGS OF HOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.5 NOTICE OF MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.6 RECORD DATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.7 PROXIES, ETC.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.8 REPORTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.9 INSPECTION OF RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . 21
8.10 VOTING POWERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.11 HOLDER ACTION BY WRITTEN CONSENT . . . . . . . . . . . . . . . . . . . 21
8.12 HOLDER COMMUNICATIONS. . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE IX
Duration; Termination of Trust;
AMENDMENT; MERGERS; ETC.. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.1 DURATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.2 TERMINATION OF TRUST . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.3 AMENDMENT PROCEDURE. . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.4 MERGER, CONSOLIDATION AND SALE OF ASSETS . . . . . . . . . . . . . . . 24
9.5 INCORPORATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE X
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.1 CERTIFICATE OF DESIGNATION; AGENT FOR SERVICE OF PROCESS . . . . . . . 24
10.2 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.3 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.4 RELIANCE BY THIRD PARTIES. . . . . . . . . . . . . . . . . . . . . . . 25
10.5 PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS . . . . . . . . . . . . 25
10.6 TRUST ONLY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.7 WITHHOLDING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.8 HEADINGS AND CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
iii
<PAGE>
DECLARATION OF TRUST
OF
HILLIARD LYONS INVESTMENT TRUST
This DECLARATION OF TRUST OF HILLIARD LYONS INVESTMENT TRUST is made
on the 12th day of January, 1999 by the party signatory hereto, as Trustee.
WHEREAS, the Trustee desires to form a business trust under the law of
Delaware for the investment and reinvestment of its assets; and
WHEREAS, it is proposed that the Trust assets be composed of cash,
securities and other assets contributed to the Trust by the Holders of Interests
in the Trust entitled to ownership rights in the Trust;
NOW, THEREFORE, the Trustee hereby declares that the Trustees will
hold in trust all cash, securities and other assets which they may from time to
time acquire in any manner as Trustees hereunder, and manage and dispose of the
same for the benefit of the Holders of Interests in the Trust, and subject to
the following terms and conditions.
ARTICLE I
THE TRUST
1.1 NAME. The name of the Trust created hereby (the "Trust") shall
be "Hilliard Lyons Investment Trust," and so far as may be practicable the
Trustees shall conduct the Trust's activities, execute all documents and sue or
be sued under that name, which name (and the word "Trust" wherever hereinafter
used) shall not refer to the Trustees in their individual capacities or to the
officers, agents, employees or Holders of Interest in the Trust. However,
should the Trustees determine that the use of the name of the Trust is not
advisable, they may select such other name for the Trust as they deem proper and
the Trust may hold its property and conduct its activities under such other
name. Any name change shall become effective upon the execution by a majority
of the then Trustees of an instrument setting forth the new name and the filing
of a certificate of amendment pursuant to Section 3810(b) of the DBTA. Any such
instrument shall not require the approval of the Holders of Interests in the
Trust, but shall have the status of an amendment to this Declaration.
1.2 TRUST PURPOSE. The purpose of the Trust is to conduct, operate
and carry on the business of an open-end management investment company
registered under the 1940 Act. In furtherance of the foregoing, it shall be the
purpose of the Trust to do everything necessary, suitable, convenient or proper
for the conduct, promotion and attainment of any businesses and purposes which
at any time may be incidental or may appear conducive or expedient for the
accomplishment
<PAGE>
of the business of an open-end management investment company registered under
the 1940 Act and which may be engaged in or carried on by a trust organized
under the DBTA, and in connection therewith, the Trust shall have and may
exercise all of the powers conferred by the laws of the State of Delaware upon a
Delaware business trust.
1.3 DEFINITIONS. As used in this Declaration, the following terms
shall have the following meanings:
(a) "1940 Act" shall mean the Investment Company Act of 1940,
as amended from time to time, and the rules and regulations thereunder, as
adopted or amended from time to time.
(b) "Affiliated Person," "Assignment" and "Interested Person"
shall have the meanings given such terms in the 1940 Act.
(c) "Administrator" shall mean any party furnishing services
to the Trust pursuant to any administrative services contract described in
Section 4.1.
(d) "By-Laws" shall mean the By-Laws of the Trust as amended
from time to time.
(e) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the rules and regulations thereunder, as adopted
or amended from time to time.
(f) "Commission" shall mean the Securities and Exchange
Commission.
(g) "Declaration" shall mean this Declaration of Trust, as
amended from time to time. References in this Declaration to "Declaration,"
"hereof," "herein" and "hereunder" shall be deemed to refer to the Declaration
rather than the article or section in which such words appear. This Declaration
shall, together with the By-Laws, constitute the governing instrument of the
Trust under the DBTA.
(h) "DBTA" shall mean the Delaware Business Trust Act,
Delaware Code Annotated Title 12, Sections 3801, ET SEQ., as amended from time
to time.
(i) "Fiscal Year" shall mean an annual period as determined
by the Trustees unless otherwise provided by the Code or applicable
regulations.
(j) "Holders" shall mean as of any particular time any or all
holders of record of Interests in the Trust or in Trust Property, as the case
may be, at such time.
2
<PAGE>
(k) "Interest: shall mean a Holder's units of interest into
which the beneficial interest in the Trust and each series and class of the
Trust shall be divided from time to time.
(l) "Investment Adviser" shall mean any party furnishing
services to the Trust pursuant to any investment advisory contract described in
Section 4.1 hereof.
(m) "Majority Interests Vote" shall mean the vote, at a
meeting of the Holders of Interests, of the lesser of (i) 67% or more of the
Interests present or represented at such meeting, provided the Holders of more
than 50% of the Interests are present or represented by proxy or (ii) more than
50% of the Interests.
(n) "Person" shall mean and include an individual,
corporation, partnership, trust, association, joint venture and other entity,
whether or not a legal entity, and a government and agencies and political
subdivisions thereof.
(o) "Registration Statement" as of any particular time shall
mean the Registration Statement of the Trust which is effective at such time
under the 1940 Act.
(p) "Trust Property" shall mean as of any particular time any
and all property, real or personal, tangible or intangible, which at such time
is owned or held by or for the account of the Trust or the Trustees or any
series of the Trust established in accordance with Section 6.2.
(q) "Trustees" shall mean such persons who are indemnified as
trustees of the Trust on the signature page of this Declaration, so long as they
shall continue in office in accordance with the terms of this Declaration of
Trust, and all other persons who at the time in question have been duly elected
or appointed as trustees in accordance with the provisions of this Declaration
of Trust and are then in office, in their capacity as trustees hereunder.
ARTICLE II
TRUSTEES
2.1 NUMBER AND QUALIFICATION. The number of Trustees shall
initially be one and shall thereafter be fixed from time to time by written
instrument signed by a majority of the Trustees so fixed, then in office,
provided, however, that the number of Trustees shall in no event be less than
one. A Trustee shall be an individual at least 21 years of age who is not under
a legal disability.
(a) Any vacancy created by an increase in Trustees shall be
filled by the appointment or election of an individual having the
qualifications described in this Article as provided in Section 2.4. Any
such appointment shall not become effective, however, until the individual
appointed or elected shall have accepted in writing such appointment or
election and agreed in writing
3
<PAGE>
to be bound by the terms of the Declaration. No reduction in the number of
Trustees shall have the effect of removing any Trustee from office.
(b) Whenever a vacancy in the number of Trustees shall occur,
until such vacancy is filled as provided in Section 2.4 hereof, the Trustees in
office, regardless of their number,
shall have all the powers granted to the Trustees and shall discharge all the
duties imposed upon the Trustees by this Declaration.
2.2 TERM AND ELECTION. Each Trustee named herein, or elected or
appointed prior to the first meeting of the Holders, shall (except in the event
of resignations or removals or vacancies pursuant to Section 2.3 or 2.4 hereof)
hold office until his or her successor has been elected at such meeting and has
qualified to serve as Trustee. Beginning with the Trustees elected at the first
meeting of Holders, each Trustee shall hold office during the lifetime of this
Trust and until its termination as hereinafter provided unless such Trustee
resigns or is removed as provided in Section 2.3 below or his term expires
pursuant to Section 2.4 hereof.
2.3 RESIGNATION AND REMOVAL. Any Trustee may resign (without need
for prior or subsequent accounting) by an instrument in writing signed by him or
her and delivered or mailed to the Chairperson, if any, the President or the
Secretary and such resignation shall be effective upon such delivery, or at a
later date according to the terms of the instrument.
(a) Any of the Trustees may be removed with or without cause
by the affirmative vote of the Holders of two-thirds (2/3) of the Interests or
(provided the aggregate number of Trustees, after such removal and after giving
effect to any appointment made to fill the vacancy created by such removal,
shall not be less than the number required by Section 2.1 hereof) with cause, by
the action of two-thirds (2/3) of the remaining Trustees, or without cause, by
the action of eighty percent (80%) of the remaining Trustees. Removal with
cause shall include, but not be limited to, the removal of a Trustee due to
physical or mental incapacity.
(b) Upon the resignation or removal of a Trustee, or his or
her otherwise ceasing to be a Trustee, he or she shall execute and deliver such
documents as the remaining Trustees shall require for the purpose of conveying
to the Trust or the remaining Trustees any Trust Property held in the name of
the resigning or removed Trustee. Upon the death of any Trustee or upon removal
or resignation due to any Trustee's incapacity to serve as trustee, his or her
legal representative shall execute and deliver on his or her behalf such
documents as the remaining Trustees shall require as provided in the preceding
sentence.
2.4 VACANCIES. The term of office of a Trustee shall terminate
and a vacancy shall occur in the event of the earliest to occur of the
following: the Trustee's attainment of age 72, the Trustee's death,
resignation, adjudicated incompetence or other incapacity to perform the
duties of the office, or the removal of the Trustee. A vacancy shall also
occur in the event of an increase in the number of Trustees as provided in
Section 2.1. No such vacancy shall operate to annul this Declaration or to
revoke any existing trust created pursuant to the terms of this Declaration.
In the case of a vacancy, the Holders of a plurality of the Interests
entitled to vote, acting at any meeting
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of the Holders held in accordance with Article VIII hereof, or, to the extent
permitted by the 1940 Act, a majority vote of the Trustees continuing in
office acting by written instrument or instruments, may fill such vacancy,
and any Trustee so elected by the Trustees or the Holders shall hold office
as provided in this Declaration. There shall be no cumulative voting by the
Holders in the election of Trustees.
2.5 MEETINGS. Meetings of the Trustees shall be held from time to
time within or without the State of Delaware upon the call of the Chairperson,
if any, the President, the Chief Operating Officer, the Secretary, an Assistant
Secretary or any two Trustees.
(a) Regular meetings of the Trustees may be held without call
or notice at a time and place fixed by the By-Laws or by resolution of the
Trustees. Notice of any other meeting shall be given not later than 72 hours
preceding the meeting by United States mail or by electronic transmission to
each Trustee at his or her business address as set forth in the records of
the Trust or otherwise given personally not less than 24 hours before the
meeting but may be waived in writing by any Trustee either before or after
such meeting. The attendance of a Trustee at a meeting shall constitute a
waiver of notice of such meeting except where a Trustee attends a meeting for
the express purpose of objecting to the transaction of any business on the
ground that the meeting has not been lawfully called or convened.
(b) A quorum for all meetings of the Trustees shall be
one-third of the total number of Trustees, but (except at such time as there is
only one Trustee) no less than two Trustees. Unless provided otherwise in this
Declaration, any action of the Trustees may be taken at a meeting by vote of a
majority of the Trustees present (a quorum being present) or without a meeting
by written consent of a majority of the Trustees, which written consent shall be
filed with the minutes of proceedings of the Trustees or any such committee. If
there be less than a quorum present at any meeting of the Trustees, a majority
of those present may adjourn the meeting until a quorum shall have been
obtained.
(c) Any committee of the Trustees, including an executive
committee, if any, may act with or without a meeting. A quorum for all meetings
of any such committee shall be two or more of the members thereof, unless the
Board shall provide otherwise. Unless provided otherwise in this Declaration,
any action of any such committee may be taken at a meeting by vote of a majority
of the members present (a quorum being present) or without a meeting by written
consent of a majority of the members, which written consent shall be filed with
the minutes of proceedings of the Trustees or any such committee.
(d) With respect to actions of the Trustees and any committee
of the Trustees, Trustees who are Interested Persons of the Trust or are
otherwise interested in any action to be taken may be counted for quorum
purposes under this Section 2.5 and shall be entitled to vote to the extent
permitted by the 1940 Act.
(e) All or any one or more Trustees may participate in a
meeting of the Trustees or any committee thereof by means of a conference
telephone or similar communications
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equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to such communications
system shall constitute presence in person at such meeting, unless the 1940
Act specifically requires the Trustees to act "in person," in which case such
term shall be construed consistent with Commission or staff releases or
interpretations.
2.6 OFFICERS; CHAIRPERSON OF THE BOARD. The Trustees shall, from
time to time, elect officers of the Trust, including a President, a Secretary
and a Treasurer. The Trustees shall elect or appoint, from time to time, a
Trustee to act as Chairperson of the Board who shall preside at all meetings of
the Trustees and carry out such other duties as the Trustees shall designate.
The Trustees may elect or appoint or authorize the President to appoint such
other officers or agents with such powers as the Trustees may deem to be
advisable. The President, Secretary and Treasurer may, but need not, be a
Trustee. The Chairperson of the Board and such officers of the Trust shall
serve in such capacity for such time and with such authority as the Trustees
may, in their discretion, so designate or as provided for in the By-Laws.
2.7 BY-LAWS. The Trustees may adopt and, from time to time, amend
or repeal the By-Laws for the conduct of the business of the Trust not
inconsistent with this Declaration, and such By-Laws are hereby incorporated in
this Declaration by reference thereto.
ARTICLE III
POWERS OF TRUSTEES
3.1 GENERAL. The Trustees shall have exclusive and absolute
control over management of the business and affairs of the Trust, but with such
powers of delegation as may be permitted by this Declaration and the DBTA. The
Trustees may perform such acts as in their sole discretion are proper for
conducting the business and affairs of the Trust. The enumeration of any
specific power herein shall not be construed as limiting the aforesaid power.
Such powers of the Trustee may be exercised without order of, or recourse to,
any court.
3.2 INVESTMENTS. The Trustees shall have power to:
(a) conduct, operate and carry on the business of an
investment company; and
(b) subscribe for, invest in, reinvest in, purchase or
otherwise acquire, hold, pledge, sell, assign, transfer, exchange, distribute
or otherwise deal in or dispose of United States and foreign currencies and
related instruments including forward contracts, and securities, including
common and preferred stock, warrants, bonds, debentures, time notes and all
other evidences of indebtedness, negotiable or non-negotiable instruments,
obligations, certificates of deposit or indebtedness, commercial paper,
repurchase agreements, reverse repurchase agreements, convertible securities,
forward contracts, options, futures contracts, and other securities,
including, without limitation, those issued, guaranteed or sponsored by any
state, territory or possession of the United
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States and the District of Columbia and their political subdivisions,
agencies and instrumentalities, or by the United States Government, any
foreign government, or any agency, instrumentality or political subdivision
of the United States Government or any foreign government, or international
instrumentalities, or by any bank, savings institution, corporation or other
business entity organized under the laws of the United States or under
foreign laws; and to exercise any and all rights, powers and privileges of
ownership or interest in respect of any and all such investments of every
kind and description, including, without limitation, the right to consent and
otherwise act with respect thereto, with power to designate one or more
persons, firms, associations, or corporations to exercise any of said rights,
powers and privileges in respect of any of said instruments; and the Trustees
shall be deemed to have the foregoing powers with respect to any additional
securities in which the Trustees may determine to invest.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.
3.3 LEGAL TITLE. Legal title to all the Trust Property shall be
vested in the Trust as a separate legal entity under the DBTA, except that
the Trustees shall have the power to cause legal title to any Trust Property
to be held by or in the name of one or more of the Trustees or in the name of
any other Person on behalf of the Trust on such terms as the Trustees may
determine.
In the event that title to any part of the Trust Property is vested in
one or more Trustees, the right, title and interest of the Trustees in the Trust
Property shall vest automatically in each person who may hereafter become a
Trustee upon his or her due election and qualification. Upon the resignation,
removal or death of a Trustee he or she shall automatically cease to have any
right, title or interest in any of the Trust Property, and the right, title and
interest of such Trustee in the Trust Property shall vest automatically in the
remaining Trustees. To the extent permitted by law, such vesting and cessation
of title shall be effective whether or not conveyancing documents have been
executed and delivered.
3.4 SALE OF INTERESTS. Subject to the more detailed provisions set
forth in Article VII, the Trustees shall have the power to permit persons to
purchase Interests and to add or reduce, in whole or in part, their Interest in
the Trust.
3.5 BORROW MONEY. The Trustees shall have power to borrow money or
otherwise obtain credit and to secure the same by mortgaging, pledging or
otherwise subjecting as security the assets of the Trust, including the lending
of portfolio securities, and to endorse, guarantee or undertake the performance
of any obligation, contract or engagement of any other person, firm, association
or corporation.
3.6 DELEGATION; COMMITTEE. The Trustees shall have the power,
consistent with their continuing exclusive authority over the management of
the Trust and the Trust Property, to delegate from time to time to such of
their number or to officers, employees or agents of the Trust
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the doing of such things and the execution of such instruments, either in the
name of the Trust or the names of the Trustees or otherwise, as the Trustees
may deem expedient.
3.7 COLLECTION AND PAYMENT. The Trustees shall have the power to
collect all property due to the Trust; to pay all claims, including taxes,
against the Trust Property; to prosecute, defend, compromise or abandon any
claims relating to the Trust Property; to foreclose any security interest
securing any obligations, by virtue of which any property is owed to the Trust;
and to enter into releases, agreements and other instruments.
3.8 EXPENSES. The Trustees shall have the power to incur and pay
any expenses which in the opinion of the Trustees are necessary or incidental to
carry out any of the purposes of this Declaration, and to pay reasonable
compensation from the funds of the Trust to themselves as Trustees. The
Trustees shall fix the compensation of all officers, employees and Trustees.
The Trustees may pay themselves such compensation for special services,
including legal and brokerage services, as they in good faith may deem
reasonable (subject to any limitations in the 1940 Act), and reimbursement for
expenses reasonably incurred by themselves on behalf of the Trust. There shall
be no retirement compensation plan for the Trustees; provided, however, that the
Trustees may adopt a deferred compensation plan consistent with industry and
regulatory standards.
3.9 MISCELLANEOUS POWERS. The Trustees shall have the power to:
(a) employ or contract with such Persons as the Trustees may deem desirable for
the transaction of the business of the Trust and terminate such employees or
contractual relationships as they consider appropriate; (b) enter into joint
ventures, partnerships and any other combinations or associations; (c) purchase,
and pay for out of Trust Property, insurance policies (including, but not
limited to, fidelity bonding and errors and omission policies) insuring the
Investment Adviser, Administrator, distributor, Holders, Trustees, officers,
employees, agents, or independent contractors of the Trust against all claims
arising by reason of holding any such position or by reason of any action taken
or omitted by any such Person in such capacity, whether or not the Trust would
have the power to indemnify such Person against liability; (d) establish
pension, profit-sharing and other retirement, incentive and benefit plans for
any officers, employees and agents of the Trust; (e) to the extent permitted by
law, indemnify any Person with whom the Trust has dealings, including the
Investment Adviser, Administrator, distributor, Holders, Trustees, officers,
employees, agents or independent contractors of the Trust, to such extent as the
Trustees shall determine; (f) guarantee indebtedness or contractual obligations
of others; (g) determine and change the Fiscal Year of the Trust and the method
by which its accounts shall be kept; and (h) adopt a seal for the Trust, but the
absence of such seal shall not impair the validity of any instrument executed on
behalf of the Trust.
3.10 FURTHER POWERS. 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, whether within or without the State of
Delaware, in any and all states of the United States of America, in the
District of Columbia, in any foreign countries, and in any and all
commonwealths, territories, dependencies, colonies, possessions, agencies or
instrumentalities of the United States of America and of foreign countries,
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
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specifically mentioned. Any determination as to what is in the interests of
the Trust made by the Trustees in good faith shall be conclusive and shall be
binding upon the Trust and the Holders, past, present and future. In
construing the provisions of this Declaration, the presumption shall be in
favor of a grant of power to the Trustees. The Trustees shall not be
required to obtain any court order to deal with Trust Property.
ARTICLE IV
INVESTMENT ADVISORY, ADMINISTRATIVE,
AND PLACEMENT AGENT SERVICES
4.1 INVESTMENT ADVISORY AND OTHER SERVICES. The Trustees may in
their discretion, from time to time, enter into contracts or agreements for
investment advisory services, administrative services (including transfer and
dividend disbursing agency services), distribution services, fiduciary
(including custodian) services, placement agent services, Holder servicing and
distribution services, or other services, whereby the other party to such
contract or agreement shall undertake to furnish the Trustees such services as
the Trustees shall, from time to time, consider desirable and all upon such
terms and conditions as the Trustees may in their discretion determine.
Notwithstanding any other provisions of this Declaration to the contrary, 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, loans or exchanges of Trust Property on behalf of the Trustees
or may authorize any officer, employee or Trustee to effect such purchases,
sales, loans or exchanges pursuant to recommendations of any such Investment
Adviser (all without further action by the Trustees). Any such purchases,
sales, loans or exchanges shall be binding upon the Trust.
4.2 PARTIES TO CONTRACT. Any contract or agreement of the
character described in Section 4.1 of this Article IV or in the By-Laws of the
Trust may be entered into with any Person, although one or more of the Trustees
or officers of the Trust or any Holder may be an officer, director, trustee,
shareholder, or member of such other party to the contract or agreement, and no
such contract or agreement shall be invalidated or rendered voidable by reason
of the existence of any such relationship, 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 such contract or agreement or held
accountable for any profit realized directly or indirectly therefrom, provided
that the contract or agreement when entered into was reasonable and fair and not
inconsistent with the provisions of this Article IV or the By-Laws. Any Trustee
or officer of the Trust or any Holder may be the other party to contracts or
agreements entered into pursuant to Section 4.1 hereof or the By-Laws of the
Trust, and any Trustee or officer of the Trust or any Holder may be financially
interested or otherwise affiliated with Persons who are parties to any or all of
the contracts or agreements mentioned in this Section 4.2.
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ARTICLE V
LIMITATIONS OF LIABILITY
5.1 NO PERSONAL LIABILITY OF TRUSTEES, OFFICERS, EMPLOYEES OR
AGENTS. No Trustee, officer, employee or agent of the Trust when acting in
such capacity shall be subject to any personal liability whatsoever, in his
or her individual capacity, to any Person, other than the Trust or its
Holders, in connection with Trust Property or the affairs of the Trust; and
all such Persons shall look solely to the Trust Property for satisfaction of
claims of any nature against a Trustee, officer, employee or agent of the
Trust arising in connection with the affairs of the Trust. No Trustee,
officer, employee or agent of the Trust shall be liable to the Trust, Holders
of Interests therein, or to any Trustee, officer, employee, or agent thereof
for any action or failure to act (including, without limitation, the failure
to compel in any way any former or acting Trustee to redress any breach of
trust), except for his or her own bad faith, willful misfeasance, gross
negligence or reckless disregard of his or her duties.
5.2 INDEMNIFICATION OF TRUSTEES, OFFICERS, EMPLOYEES AND AGENTS.
The Trust shall indemnify each of its Trustees, officers, employees, and agents
(including Persons who serve at its request as directors, officers or trustees
of another organization in which it has any interest, as a shareholder, creditor
or otherwise) against all liabilities and expenses (including amounts paid in
satisfaction of judgments, in compromise, as fines and penalties, and as counsel
fees) reasonably incurred by him or her in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
in which he or she may be involved or with which he or she may be threatened,
while in office or thereafter, by reason of his or her being or having been such
a Trustee, officer, employee or agent, except with respect to any matter as to
which he or she shall have been adjudicated to have acted in bad faith, willful
misfeasance, gross negligence or reckless disregard of his or her duties;
provided, however, that as to any matter disposed of by a compromise payment by
such Person, pursuant to a consent decree or otherwise, no indemnification
either for said payment or for any other expenses shall be provided unless there
has been a determination that such Person did not engage in willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office by the court or other body approving the settlement
or other disposition or by a reasonable determination, based upon review of
readily available facts (as opposed to a full trial-type inquiry), that he or
she did not engage in such conduct or by a reasonable determination, based upon
a review of the facts, that such Person was not liable by reason of such
conduct, by (a) the vote of a majority of a quorum of Trustees who are neither
"interested persons" of the Trust as defined in Section 2(a)(19) of the 1940 Act
nor parties to the proceeding, or (b) a written opinion from independent legal
counsel approved by the Trustees. The rights accruing to any Person under these
provisions shall not exclude any other right to which he or she may be lawfully
entitled; provided that no Person may satisfy any right of indemnity or
reimbursement granted herein or in Section 5.1 or to which he or she may be
otherwise entitled except out of the Trust Property. The Trustees may make
advance payments in connection with indemnification under this Section 5.2,
provided that the indemnified Person shall have given a written undertaking to
reimburse the Trust in the event it is subsequently determined that he or she is
not entitled to such indemnification.
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5.3 LIABILITY OF HOLDERS; INDEMNIFICATION. The Trust shall
indemnify and hold each Holder harmless from and against any claim or
liability to which such Holder may become subject solely by reason of his or
her being or having been a Holder and not because of such Holder's acts or
omissions or for some other reason, and shall reimburse such Holder for all
legal and other expenses reasonably incurred by him or her in connection with
any such claim or liability (upon proper and timely request by the Holder);
provided, however, that no Holder shall be entitled to indemnification by any
series established in accordance with Section 8.8 unless such Holder is a
Holder of Interests of such series. The rights accruing to a Holder under
this Section 5.3 shall not exclude any other right to which such Holder may
be lawfully entitled, nor shall anything herein contained restrict the right
of the Trust to indemnify or reimburse a Holder in any appropriate situation
even though not specifically provided herein.
5.4 NO BOND REQUIRED OF TRUSTEES. No Trustee shall, as such, be
obligated to give any bond or surety or other security for the performance of
any of his or her duties hereunder.
5.5 NO DUTY OF INVESTIGATION; NOTICE IN TRUST INSTRUMENTS, ETC. No
purchaser, lender, or other Person dealing with the Trustees or any officer,
employee or agent of the Trust shall be bound to make any inquiry concerning the
validity of any transaction purporting to be made by the Trustees or by said
officer, employee or agent or be liable for the application of money or property
paid, loaned, or delivered to or on the order of the Trustees or of said
officer, employee or agent. Every obligation, contract, instrument, certificate
or other interest or undertaking of the Trust, and every other act or thing
whatsoever executed in connection with the Trust, shall be conclusively relied
upon as having been executed or done by the executors thereof only in their
capacities as Trustees, officers, employees or agents of the Trust. Every
written obligation, contract, instrument, certificate or other interest or
undertaking of the Trust made by the Trustees or by any officer, employee or
agent of the Trust, in his or her capacity as such, shall contain an appropriate
recital to the effect that the Trustee, officer, employee or agent of the Trust
shall not personally be bound by or liable thereunder, nor shall resort be had
to their private property or the private property of the Holders for the
satisfaction of any obligation or claim thereunder, and appropriate references
shall be made therein to the Declaration, and may contain any further recital
which they may deem appropriate, but the omission of such recital shall not
operate to impose personal liability on any of the Trustees, officers, employees
or agents of the Trust. The Trustees may maintain insurance for the protection
of the Trust Property, Holders, Trustees, officers, employees and agents in such
amount as the Trustees shall deem advisable.
5.6 RELIANCE ON EXPERTS, ETC. Each Trustee and officer or employee
of the Trust shall, in the performance of his or her duties, be fully and
completely justified and protected with regard to any act or any failure to act
resulting from reliance in good faith upon the books of account or other records
of the Trust, upon an opinion of counsel, or upon reports made to the Trust by
any of its officers or employees or by any Investment Adviser, Administrator,
accountant, appraiser or other experts or consultants selected with reasonable
care by the Trustees, officers or employees of the Trust, regardless of whether
such counsel or expert may also be a Trustee.
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5.7 ASSENT TO DECLARATION. Every Holder, by virtue of having
become a Holder in accordance with the terms of this Declaration, shall be
held to have expressly assented and agreed to the terms hereof and to have
become a party hereto.
ARTICLE VI
INTERESTS IN THE TRUST
6.1 GENERAL CHARACTERISTICS. (a) The Trustees shall have the power
and authority, without Holder approval, to issue Interests in one or more series
from time to time as they deem necessary or desirable. Each series shall be
separate from all other series in respect to the assets and liabilities
allocated to that series and shall represent a separate investment portfolio of
the Trust. The Trustees shall have exclusive power, without Holder approval, to
establish and designate such separate and distinct series, as set forth in
Section 6.2, and to fix and determine the relative rights and preferences as
between the Interests of the separate series as to right of redemption, special
and relative rights as to dividends and other distributions and on liquidation,
conversion rights, and conditions under which the series shall have separate
voting rights or no voting rights.
(b) The Trustees may, without Holder approval, divide Interests
of any series into two or more classes, Interests of each such class having such
preferences and special or relative rights and privileges (including conversion
rights, if any) as the Trustees may determine as provided in Section 6.3. The
fact that a series shall have been initially established and designated without
any specific establishment or designation of classes, shall not limit the
authority of the Trustees to divide a series and establish and designate
separate classes thereof.
(c) The number of Interests authorized shall be unlimited, and
the Interests so authorized may be represented in part by fractional Interests.
From time to time, the Trustees may divide or combine the Interests of any
series or class into a greater or lesser number without thereby changing the
proportionate beneficial interests in the series or class. The Trustees may
issue Interests of any series or class thereof for such consideration and on
such terms as they may determine (or for no consideration if pursuant to an
Interest dividend or split-up), all without action or approval of the Holders.
All Interests when so issued on the terms determined by the Trustees shall be
fully paid and non-assessable. The Trustees may classify or reclassify any
unissued Interests or any Interests previously issued and reacquired of any
series or class thereof into one or more series or classes thereof that may be
established and designated from time to time. The Trustees may hold as treasury
Interests, reissue for such consideration and on such terms as they may
determine, or cancel, at their discretion from time to time, any Interests of
any series or class thereof reacquired by the Trust.
6.2 ESTABLISHMENT OF SERIES OF INTERESTS. (a) Without limiting the
authority of the Trustees set forth in Section 6.2(b) to establish and designate
any further series, the Trustees hereby establish and designate one series, as
follows:
Seneca Bank Fund
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The provisions of this Article VI shall be applicable to the above
designated series and any further series that may from time to time be
established and designated by the Trustees as provided in Section 6.2(b).
(b) The establishment and designation of any series of Interests
other than the one set forth above shall be effective upon the execution, by a
majority of the Trustees, of an instrument setting forth such establishment and
designation and the relative rights and preferences of such series, or as
otherwise provided in such instrument. At any time that there are no Interests
outstanding of any particular series previously established and designated, the
Trustees may by an instrument executed by a majority of their number abolish
that series and the establishment and designation thereof. Each instrument
referred to in this paragraph shall have the status of an amendment of this
Declaration.
(c) Section 9.2 of this Declaration of Trust shall apply also
with respect to each such series as if such series were a separate trust.
6.3 ESTABLISHMENT OF CLASSES. (a) The division of any series into
two or more classes and the establishment and designation of such classes shall
be effective upon the execution by a majority of the Trustees of an instrument
setting forth such division, and the establishment, designation, and relative
rights and preferences of such classes, or as otherwise provided in such
instrument. The relative rights and preferences of the classes of any series
may differ in such respects as the Trustees may determine to be appropriate,
provided that such differences are set forth in the aforementioned instrument.
At any time that there are no Interests outstanding of any particular class
previously established and designated, the Trustees may by an instrument
executed by a majority of their number abolish that class and the establishment
and designation thereof. Each instrument referred to in this paragraph shall
have the status of an amendment to this Declaration.
(b) Section 9.2 of this Declaration of Trust shall apply also
with respect to each such class as if such class were a separate trust.
6.4 ASSETS OF SERIES. All consideration received by the Trust for
the issue or sale of Interests of a particular series together with all Trust
Property 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
irrevocably belong to that series for all purposes, subject only to the rights
of creditors of such series and except as may otherwise be required by
applicable tax laws, and shall be so recorded upon the books of account of the
Trust. Separate and distinct records shall be maintained for each series and
the assets associated with a series shall be held and accounted for separately
from the other assets of the Trust, or any other series. In the event that
there is any Trust Property, or any income, earnings, profits, and proceeds
thereof, funds, or payments which are not readily identifiable as belonging to
any particular series, the Trustees shall allocate them among any one or more of
the series established and designated from time to time in such manner and on
such basis as they, in their sole discretion, deem
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fair and equitable. Each such allocation by the Trustees shall be conclusive
and binding upon the Holders of all Interests for all purposes.
6.5 LIABILITIES OF SERIES. (a) The Trust Property belonging to
each particular series shall be charged with the liabilities of the Trust in
respect to that series and all expenses, costs, charges and reserves
attributable to that series, and 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 to and among any one or more of the series established and
designated from time to time in such manner and on such basis as the Trustees
in their sole discretion deem fair and equitable. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the Holders of all Interests for all purposes.
The Trustees shall have full discretion, to the extent not inconsistent with
the 1940 Act, to determine which items shall be treated as income and which
items as capital, and each such determination and allocation shall be
conclusive and binding upon the Holders.
(b) Without limitation of the foregoing provisions of this
Section, 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 of such series only, and not against the assets
of any other series. Notice of this limitation on interseries 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 DBTA, and upon the giving of such notice
in the certificate of trust, the statutory provisions of Section 3804 of the
DBTA relating to limitations on interseries 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. Every note, bond,
contract or other undertaking issued by or on behalf of a particular series
shall include a recitation limiting the obligation represented thereby to that
series and its assets.
6.6 DIVIDENDS AND DISTRIBUTIONS. (a) Dividends and distributions on
Interests of a particular series or any class thereof may be paid with such
frequency as the Trustees may determine, which may be daily or otherwise,
pursuant to a standing resolution or a resolution adopted only once or with such
frequency as the Trustees may determine, to the Holders of Interests in that
series or class, from such of the income and capital gains, accrued or realized,
from the Trust Property belonging to that series, or in the case of a class,
belonging to that series and allocable to that class, as the Trustees may
determine, after providing for actual and accrued liabilities belonging to that
series. All dividends and distributions on Interests in a particular series or
class thereof shall be distributed pro rata to the Holders of Interests in that
series or class in proportion to the total outstanding Interests in that series
or class held by such Holders at the date and time of record established for the
payment of such dividends or distribution, except to the extent otherwise
required or permitted by the preferences and special or relative rights and
privileges of any series or class. Such dividends and distributions may be made
in cash or Interests of that series or class or a combination thereof as
determined by the Trustees or pursuant to any program that the Trustees may have
in effect at the time for the election by each Holder of the mode of the paying
of such dividend
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or distribution to that Holder. Any such dividend or distribution paid in
Interests will be paid at the net asset value thereof as determined in
accordance with Section 7.4.
(b) The Interests in a series or a class of the Trust shall
represent beneficial interests in the Trust Property belonging to such series
or in the case of a class, belonging to such series and allocable to such
class. Each Holder of Interests in a series or a class shall be entitled to
receive its pro rata share of distributions of income and capital gains made
with respect to such series or such class. Upon reduction or withdrawal of
its Interests or indemnification for liabilities incurred by reason of being
or having been a Holder of Interests in a series or a class, such Holder
shall be paid solely out of the funds and property of such series or in the
case of a class, the funds and property of such series and allocable to such
class of the Trust. Upon liquidation or termination of a series or class of
the Trust, Holders of Interests in such series or class shall be entitled to
receive a pro rata share of the Trust Property belonging to such series or in
the case of a class, belonging to such series and allocable to such class.
6.7 VOTING RIGHTS. Notwithstanding any other provision hereof, on
each matter submitted to a vote of the Holders, each Holder shall be entitled to
one vote for each whole Interest standing in his name on the books of the Trust,
and each fractional Interest shall be entitled to a proportionate fractional
vote, irrespective of the series thereof or class thereof, and all Interests of
all series and classes thereof shall vote together as a single class; provided,
however, that (a) as to any matter with respect to which a separate vote of one
or more series or classes thereof is permitted or required by the 1940 Act or
the provisions of the instrument establishing and designating the series or
class, such requirements as to a separate vote by such series or class thereof
shall apply in lieu of all Interests of all series and classes thereof voting
together; and (b) as to any matter which affects only the interests of one or
more particular series or classes thereof, only the Holders of the one or more
affected series or classes shall be entitled to vote, and each such series or
class shall vote as a separate series or class.
6.8 RECORD DATES. The Trustees may from time to time close the
transfer books or establish record dates and times for the purposes of
determining the Holders entitled to be treated as such, to the extent provided
or referred to in Section 8.6.
6.9 TRANSFER. All Interests of each particular series or class
thereof shall be transferable, but transfers of Interests of a particular series
or class thereof will be recorded on the Interest transfer records of the Trust
applicable to that series or class only at such times as Holders shall have the
right to require the Trust to redeem Interests of that series or class and at
such other times as may be permitted by the Trustees.
6.10 EQUALITY. Except as provided herein or in the instrument
designating and establishing any class or series, all Interests of each
particular series or class thereof shall represent an equal proportionate
interest in the assets belonging to that series, or in the case of a class,
belonging to that series and allocable to that class, subject to the liabilities
belonging to that series, and each Interest of any particular series or class
shall be equal to each other Interest of that series or class; but the
provisions of this sentence shall not restrict any distinctions permissible
under Section
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6.6 that may exist with respect to dividends and distributions on Interests
of the same series or class. The Trustees may from time to time divide or
combine the Interests of any particular series or class into a greater or
lesser number of Interests of that series or class without thereby changing
the proportionate beneficial interest in the assets belonging to that series
or class or in any way affecting the rights or Interests of any other series
or class.
6.11 FRACTIONS. Any fractional Interest of any series or class, if
any such fractional Interest is outstanding, shall carry proportionately all the
rights and obligations of a whole Interest
of that series or class, including rights and obligations with respect to
voting, receipt of dividends and distributions, redemption of Interests, and
liquidation of the Trust.
6.12 CLASS DIFFERENCES. Subject to Section 6.3, the relative rights
and preferences of the classes of any series may differ in such other respects
as the Trustees may determine to be appropriate in their sole discretion,
provided that such differences are set forth in the instrument establishing and
designating such classes and executed by a majority of the Trustees.
6.13 CONVERSION OF INTERESTS. Subject to compliance with the
requirements of the 1940 Act, the Trustees shall have the authority to provide
that Holders of Interests of any series shall have the right to convert said
Interests into one or more other series in accordance with such requirements and
procedures as may be established by the Trustees. The Trustees shall also have
the authority to provide that Holders of Interests of any class of a particular
series shall have the right to convert said Interests into one or more other
classes of that particular series or any other series in accordance with such
requirements and procedures as may be established by the Trustees.
6.14 INVESTMENTS IN THE TRUST. The Trustees may accept investments in
the Trust from such persons and on such terms and for such consideration, not
inconsistent with the provisions of the 1940 Act, as they from time to time
authorize. The Trustees may authorize any distributor, principal underwriter,
custodian, transfer agent or other person to accept orders for the purchase of
Interests that conform to such authorized terms and to reject any purchase
orders for Interests whether or not conforming to such authorized terms.
6.15 TRUSTEES AND OFFICERS AS HOLDERS. 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 Interests 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
Interests 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 Interests generally.
6.16 NO PREEMPTIVE RIGHTS; DERIVATIVE SUITS. Holders shall have no
preemptive or other right to subscribe to any additional Interests or other
securities issued by the Trust. No action may be brought by a Holder on behalf
of the Trust unless Holders owning no less than 10% of the then outstanding
Interests, or series or class thereof, join in the bringing of such action. A
Holder of Interests in a particular series or a particular class of the Trust
shall not be entitled to participate
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in a derivative or class action lawsuit on behalf of any other series or any
other class or on behalf of the Holders of Interests in any other series or
any other class of the Trust.
6.17 NO APPRAISAL RIGHTS. Holders shall have no right to demand
payment for their Interests or to any other rights of dissenting Holders in the
event the Trust participates in any transaction which would give rise to
appraisal or dissenters' rights by a stockholder of a corporation organized
under the General Corporation Law of Delaware, or otherwise.
6.18 STATUS OF INTERESTS AND LIMITATION OF PERSONAL LIABILITY.
Interests shall be deemed to be personal property giving only the rights
provided in this Amended and Restated Declaration of Trust. Every Holder by
virtue of acquiring Interests shall be held to have expressly assented and
agreed to the terms hereof and to be bound hereby. The death, incapacity,
dissolution, termination or bankruptcy of a Holder during the continuance of
the Trust shall not operate to dissolve or terminate the Trust or any series
thereof nor entitle the representative of such Holder to an accounting or to
take any action in court or elsewhere against the Trust or the Trustees, but
shall entitle the representative of such Holder only to the rights of such
Holder under this Trust. Ownership of Interests shall not entitle the Holder
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 Interests constitute the Holders as partners. Neither the
Trust nor the Trustees, nor any officer, employee or agent of the Trust,
shall have any power to bind personally any Holder, nor except as
specifically provided herein to call upon any Holder for the payment of any
sum of money or assessment whatsoever other than such as the Holder may at
any time personally agree to pay.
ARTICLE VII
PURCHASES AND REDEMPTIONS
7.1 PURCHASES. The Trustees, in their discretion, may, from time to
time, without a vote of the Holders, permit the purchase of Interests by such
party or parties (or increase in the Interests of a Holder), for such type of
consideration, including, without limitation, cash or property, at such time or
times (including, without limitation, each business day), and on such terms as
the Trustees may deem best, and may in such manner acquire other assets
(including, without limitation, the acquisition of assets subject to, and in
connection with the assumption of, liabilities) and businesses.
7.2 REDEMPTION BY HOLDER. Each Holder of Interests of the Trust or
any series or class thereof shall have the right at such times as may be
permitted by the Trust to require the Trust to redeem all or any part of his or
her Interests of the Trust, or series or class thereof, at a redemption price
equal to the net asset value per Interest of the Trust or series or class
thereof, next determined in accordance with Section 7.4 hereof after the
Interests are properly tendered for redemption, subject to any contingent
deferred sales charge or redemption charge in effect at the time of redemption.
Payment of the redemption price shall be in cash; provided, however, that if the
Trustees determine, which determination shall be conclusive, that conditions
exist which make
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payment wholly in cash unwise or undesirable, the Trust may, subject to the
requirements of the 1940 Act, make payment wholly or partly in securities or
other assets belonging to the Trust or series or class thereof of which the
Interests being redeemed are part of the value of such securities or assets
used in such determination of the net asset value.
Notwithstanding the foregoing, the Trust may postpone payment of the
redemption price and may suspend the right of the Holders of Interests of the
Trust, or series or class thereof, to require the Trust to redeem Interests of
the Trust, or of any series or class thereof, during any period or at any time
when and to the extent permissible under the 1940 Act.
7.3 REDEMPTION BY TRUST. Each Interest of the Trust, or series or
class thereof that has been established and designated is subject to redemption
by the Trust at the redemption price which would be applicable if such Interest
was then being redeemed by the Holder pursuant to Section 7.2 hereof: (a) at any
time, if the Trustees determine in their sole discretion and by majority vote
that it is in the best interest of the Trust, or any series or class thereof, to
so redeem, or (b) upon such other conditions as may from time to time be
determined by the Trustees and set forth in the then current Prospectus of the
Trust with respect to maintenance of Holder accounts of a minimum amount. Upon
such redemption the Holders of the Interests so redeemed shall have no further
right with respect thereto other than to receive payment of such redemption
price.
7.4 NET ASSET VALUE. The net asset value per Interest of any series
shall be (a) in the case of a series whose Interests are not divided into
classes, the quotient obtained by dividing the value of the net assets of that
series (being the value of the assets belonging to that series less the
liabilities belonging to that series) by the total number of Interests of that
series outstanding, and (b) in the case of a class of Interests of a series
whose Interests are divided into classes, the quotient obtained by dividing the
value of the net assets of that series allocable to such class (being the value
of the assets belonging to that series allocable to such class less the
liabilities belonging to such class) by the total number of Interests of such
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
Interest of any series or any class at a designated constant dollar amount and
in connection therewith may adopt procedures consistent with the 1940 Act for
continuing declarations of income attributable to that series or that class as
dividends payable in additional Interests of that series at the designated
constant dollar amount and for the handling of any losses attributable to that
series or that class. Such procedures may provide that in the event of any loss
each Holder shall be deemed to have contributed to the capital of the Trust
attributable to that series his or her pro rata portion of the total number of
Interests required to be canceled in order to permit the net asset value per
Interest of that series or class to be maintained, after reflecting such loss,
at the designated constant dollar amount. Each Holder of the Trust shall be
deemed to have agreed, by his or her investment in any series or class with
respect to which the Trustees shall have adopted any such procedure, to make the
contribution referred to in the preceding sentence in the event of any such
loss.
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ARTICLE VIII
HOLDERS
8.1 RIGHTS OF HOLDERS. The right to conduct any business
hereinbefore described is vested exclusively in the Trustees, and the Holders
shall have no rights under this Declaration or with respect to the Trust
Property other than the beneficial interest conferred by their Interests and the
voting rights accorded to them under this Declaration.
8.2 REGISTER OF INTERESTS. A register shall be kept by the Trust
under the direction of the Trustees which shall contain the names and addresses
of the Holders and the number of Interests held by each Holder. Each such
register shall be conclusive as to the identity of the Holders of the Trust and
the Persons who shall be entitled to payments of distributions or otherwise to
exercise or enjoy the rights of Holders. No Holder shall be entitled to receive
payment of any distribution, nor to have notice given to it as herein provided,
until it has given its address to such officer or agent of the Trustees as shall
keep the said register for entry thereon. No certificates certifying the
ownership of interests need be issued except as the Trustees may otherwise
determine from time to time.
8.3 NOTICES. Any and all notices to which any Holder hereunder may
be entitled and any and all communications shall be deemed duly served or given
if presented personally to a Holder, left at his or her residence or usual place
of business, or sent via United States mail or by electronic transmission to a
Holder at his or her address as it is registered with the Trust, as provided in
Section 8.2. If mailed, such notice shall be deemed to be given when deposited
in the United States mail addressed to the Holder at his or her address as it is
registered with the Trust, as provided in Section 8.2, with postage thereon
prepaid.
8.4 MEETINGS OF HOLDERS. Meetings of the Holders may be called at
any time by a majority of the Trustees and shall be called by any Trustee upon
written request of Holders holding, in the aggregate, not less than 10% of the
Interests (or series or class thereof), such request specifying the purpose or
purposes for which such meeting is to be called. Any such meeting shall be held
within or without the State of Delaware on such day and at such time as the
Trustees shall designate. Holders of one-third of the Interests in the Trust,
present in person or by proxy, shall constitute a quorum for the transaction of
any business, except as may otherwise be required by the 1940 Act or other
applicable law or by this Declaration or the By-Laws of the Trust. If a quorum
is present at a meeting, an affirmative vote by the Holders present, in person
or by proxy, holding more than 50% of the total Interests (or series or class
thereof) of the Holders present, either in person or by proxy, at such meeting
constitutes the action of the Holders, unless the 1940 Act, other applicable
law, this Declaration or the By-Laws of the Trust require a greater number of
affirmative votes. Notwithstanding the foregoing, the affirmative vote by the
Holders present, in person or by proxy, holding less than 50% of the Interests
(or class or series thereof) of the Holders present, in person or by proxy, at
such meeting shall be sufficient for adjournments. Any meeting of Holders,
whether or not a quorum is present, may be adjourned for any lawful purpose
provided that no meeting shall be adjourned for more than six months beyond the
originally scheduled meeting date. Any adjourned
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session or sessions may be held, within a reasonable time after the date set
for the original meeting without the necessity of further notice.
8.5 NOTICE OF MEETINGS. Written or printed notice of all meetings of
the Holders, stating the time, place and purposes of the meeting, shall be given
as provided in Section 8.3. At any such meeting, any business properly before
the meeting may be considered, whether or not stated in the notice of the
meeting. Any adjourned meeting held as provided in Section 8.4 shall not
require the giving of additional notice.
8.6 RECORD DATE. For the purpose of determining the Holders who are
entitled to notice of any meeting, to vote at any meeting, to participate in any
distribution, or for the purpose of any other action, the Trustees may from time
to time fix a date, not more than 90 calendar days prior to the date of any
meeting of the Holders or payment of distributions or other action, as the case
may be, as a record date for the determination of the persons to be treated as
Holders of record for such purposes, and any Holder who was a Holder at the date
and time so fixed shall be entitled to vote at such meeting or to be treated as
a Holder of record for purposes of such other action, even though he or she has
since that date and time disposed of his or her Interests, and no Holder
becoming such after that date and time shall be so entitled to vote at such
meeting or to be treated as a Holder of record for purposes of such other
action. If the Trustees shall divide the Interests into two or more series in
accordance with Section 6.2 herein, nothing in this Section shall be construed
as precluding the Trustees from setting different record dates for different
series and if the Trustees shall divide any series into two or more classes in
accordance with Section 6.3 herein, nothing in this Section 8.6 shall be
construed as precluding the Trustees from setting different record dates for
different classes.
8.7 PROXIES, ETC. At any meeting of Holders, any Holder entitled to
vote thereat may vote by proxy, provided that no proxy shall be voted at any
meeting unless it shall have been placed on file with the Secretary, or with
such other officer or agent of the Trust as the Secretary may direct, for
verification prior to the time at which such vote shall be taken.
(a) Pursuant to a resolution of a majority of the Trustees,
proxies may be solicited in the name of one or more Trustees or one or more of
the officers of the Trust. Only Holders of record shall be entitled to vote.
Each Holder shall be entitled to a vote proportionate to its Interest in the
Trust.
(b) When Interests are held jointly by several persons, any one
of them may vote at any meeting in person or by proxy in respect to such
Interest, but if more than one of them shall be present at such meeting in
person or by proxy, and such joint owners or their proxies so present disagree
as to any vote to be cast, such vote shall not be received in respect to such
Interest.
(c) A proxy purporting to be executed by or on behalf of a
Holder shall be deemed valid unless challenged at or prior to its exercise, and
the burden of proving invalidity shall rest on the challenger. If the Holder is
a minor or a person of unsound mind, and subject to guardianship or to the legal
control of any other person regarding the charge or management of his
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or her Interest, he or she may vote by his or her guardian or such other
person appointed or having such control, and such vote may be given in person
or by proxy.
8.8 REPORTS. The Trustees shall cause to be prepared, at least
annually, a report of operations containing a balance sheet and statement of
income and undistributed income of the Trust prepared in conformity with
generally accepted accounting principles and an opinion of an independent
public accountant on such financial statements. The Trustees shall, in
addition, furnish to the Holders at least semi-annually an interim report
containing an unaudited balance sheet as of the end of such period and an
unaudited statement of income and surplus for the period from the beginning of
the current Fiscal Year to the end of such period.
8.9 INSPECTION OF RECORDS. The records of the Trust shall be open to
inspection by Holders during normal business hours and for any purpose not
harmful to the Trust.
8.10 VOTING POWERS. (a) The Holders shall have power to vote only (i)
for the election of Trustees as contemplated by Section 2.2 hereof, (ii) with
respect to any investment advisory contract as contemplated by Section 4.1
hereof, (iii) with respect to termination of the Trust as provided in Section
9.2 hereof, (iv) with respect to amendments to the Declaration of Trust as
provided in Section 9.3 hereof, (v) with respect to any merger, consolidation or
sale of assets as provided in Section 9.4 hereof, (vi) with respect to
incorporation of the Trust to the extent and as provided in Section 9.5 hereof,
and (vii) with respect to such additional matters relating to the Trust as may
be required by the 1940 Act, DBTA, or any other applicable law, the Declaration,
the By-Laws or any registration of the Trust with the Commission (or any
successor agency) or any state, or as and when the Trustees may consider
necessary or desirable.
(b) Each Holder shall be entitled to vote based on the ratio his
or her Interest bears to the Interests of all Holders entitled to vote. Until
Interests are issued, the Trustees may exercise all rights of Holders and may
take any action required by law, the Declaration or the By-Laws to be taken by
Holders. The By-Laws may include further provisions for Holders' votes and
meetings and related matters not inconsistent with this Declaration.
8.11 HOLDER ACTION BY WRITTEN CONSENT. Any action which may be taken
by the Holders may be taken without notice and without a meeting if Holders
holding more than 50% of the total Interests entitled to vote (or such larger
proportion thereof as shall be required by any express provision of this
Declaration) shall consent to the action in writing and the written consents
shall be filed with the records of the meetings of Holders. Such consents shall
be treated for all purposes as votes taken at a meeting of the Holders.
8.12 HOLDER COMMUNICATIONS. (a) Whenever ten or more Holders who
have been such for at least six months preceding the date of application, and
who hold in the aggregate at least 1% of the total Interests, shall apply to the
Trustees in writing, stating that they wish to communicate with other Holders
with a view to obtaining signatures for a request for a meeting of Holders and
accompanied by a form of communication and request which they wish to transmit,
the Trustees shall within five business days after receipt of such application
either (i) afford to such
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applicants access to a list of the names and addresses of all Holders as
recorded on the books of the Trust; or (ii) inform such applicants as to the
approximate number of Holders, and the approximate cost of transmitting to
them the proposed communication and form of request.
(b) If the Trustees elect to follow the course specified in
clause (ii) above, the Trustees, upon the written request of such applicants,
accompanied by a tender of the material to be transmitted and of the
reasonable expenses of transmission, shall, with reasonable promptness,
transmit, by United States mail or by electronic transmission, such material
to all Holders at their addresses as recorded on the books, unless within
five business days after such tender the Trustees shall transmit, by United
States mail or by electronic transmission, to such applicants and file with
the Commission, together with a copy of the material to be transmitted, a
written statement signed by at least a majority of the Trustees to the effect
that in their opinion either such material contains untrue statements of fact
or omits to state facts necessary to make the statements contained therein
not misleading, or would be in violation of applicable law, and specifying
the basis of such opinion. The Trustees shall thereafter comply with any
order entered by the Commission and the requirements of the 1940 Act and the
Securities Exchange Act of 1934.
ARTICLE IX
DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS; ETC.
9.1 DURATION. Subject to possible termination in accordance with the
provisions of Section 9.2, the Trust created hereby shall continue perpetually
pursuant to Section 3808 of DBTA.
9.2 TERMINATION OF TRUST. (a) The Trust may be terminated (i) by
the affirmative vote of the Holders of not less than two-thirds of the Interests
in the Trust at any meeting of the Holders, or (ii) by an instrument in writing,
without a meeting, signed by a majority of the Trustees and consented to by the
Holders of not less than two-thirds of such Interests, or (iii) by the Trustees
by written notice to the Holders. Upon any such termination,
(i) The Trust shall carry on no business except for the
purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of
the Trust and all of the powers of the Trustees under this Declaration
shall continue until the affairs of the Trust shall have been wound up,
including the power to fulfill or discharge the contracts of the Trust,
collect its assets, sell, convey, assign, exchange, or otherwise dispose of
all or any part of the remaining Trust Property to one or more Persons at
public or private sale for consideration which may consist in whole or in
part of cash, securities or other property of any kind, discharge or pay
its liabilities, and do all other acts appropriate to liquidate its
business; provided that any sale, conveyance, assignment, exchange, or
other disposition of
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all or substantially all of the Trust Property shall require approval of
the principal terms of the transaction and the nature and amount of the
consideration by the Holders with a Majority Interests Vote.
(iii) After paying or adequately providing for the payment
of all liabilities, and upon receipt of such releases, indemnities and
refunding agreements, as they deem necessary for their protection, the
Trustees may distribute the remaining Trust Property, in cash or in kind or
partly each, among the Holders according to their respective rights.
(b) Upon termination of the Trust and distribution to the
Holders as herein provided, a majority of the Trustees shall execute and lodge
among the records of the Trust an instrument in writing setting forth the fact
of such termination and file a certificate of cancellation in accordance with
Section 3810 of the DBTA. Upon termination of the Trust, the Trustees shall
thereon be discharged from all further liabilities and duties hereunder, and the
rights and interests of all Holders shall thereupon cease.
9.3 AMENDMENT PROCEDURE.
(a) All rights granted to the Holders under this Declaration of
Trust are granted subject to the reservation of the right of the Trustees to
amend this Declaration of Trust as herein provided, except as set forth herein
to the contrary. Subject to the foregoing, the provisions of this Declaration
of Trust (whether or not related to the rights of Holders) may be amended at any
time, so long as such amendment is not in contravention of applicable law,
including the 1940 Act, by an instrument in writing signed by a majority of the
Trustees (or by an officer of the Trust pursuant to the vote of a majority of
such Trustees). Any such amendment shall be effective as provided in the
instrument containing the terms of such amendment or, if there is no provision
therein with respect to effectiveness, upon the execution of such instrument and
of a certificate (which may be a part of such instrument) executed by a Trustee
or officer of the Trust to the effect that such amendment has been duly adopted.
(b) No amendment may be made, under Section 9.3(a) above, which
would change any rights with respect to any Interest in the Trust by reducing
the amount payable thereon upon liquidation of the Trust, by repealing the
limitations on personal liability of any Holder or Trustee, or by diminishing or
eliminating any voting rights pertaining thereto, except with a Majority
Interests Vote.
(c) A certification signed by a majority of the Trustees setting
forth an amendment and reciting that it was duly adopted by the Holders or by
the Trustees as aforesaid or a copy of the Declaration, as amended, and executed
by a majority of the Trustees, shall be conclusive evidence of such amendment
when lodged among the records of the Trust.
(d) Notwithstanding any other provision hereof, until such time
as Interests are first sold, this Declaration may be terminated or amended in
any respect by the affirmative vote of a majority of the Trustees or by an
instrument signed by a majority of the Trustees.
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9.4 MERGER, CONSOLIDATION AND SALE OF ASSETS. The Trust may merge
or consolidate with any other corporation, association, trust or other
organization or may sell, lease or exchange all or substantially all of its
property, including its good will, upon such terms and conditions and for such
consideration when and as authorized by no less than a majority of the Trustees
and by a Majority Interests Vote of the Trust or by an instrument or
instruments in writing without a meeting, consented to by the Holders of not
less than 50% of the total Interests of the Trust or such series, as the case
may be, and any such merger, consolidation, sale, lease or exchange shall be
deemed for all purposes to have been accomplished under and pursuant to the
statutes of the State of Delaware. In accordance with Section 3815(f) of DBTA,
an agreement of merger or consolidation may effect any amendment to the
Declaration or By-Laws or effect the adoption of a new declaration of trust or
by-laws of the Trust if the Trust is the surviving or resulting business trust.
A certificate of merger or consolidation of the Trust shall be signed by a
majority of the Trustees.
9.5 INCORPORATION. Upon a Majority Interests Vote, the Trustees may
cause to be organized or assist in organizing a corporation or corporations
under the laws of any jurisdiction or any other trust, partnership, association
or other organization to take over all of the Trust Property or to carry on any
business in which the Trust shall directly or indirectly have any interest, and
to sell, convey and transfer the Trust Property to any such corporation, trust,
association or organization in exchange for the equity interests thereof or
otherwise, and to lend money to, subscribe for the equity interests of, and
enter into any contracts with any such corporation, trust, partnership,
association or organization, or any corporation, partnership, trust, association
or organization in which the Trust holds or is about to acquire equity
interests. The Trustees may also cause a merger or consolidation between the
Trust or any successor thereto and any such corporation, trust, partnership,
association or other organization if and to the extent permitted by law, as
provided under the law then in effect. Nothing contained herein shall be
construed as requiring approval of the Holders for the Trustees to organize or
assist in organizing one or more corporations, trusts, partnerships,
associations or other organizations and selling, conveying or transferring a
portion of the Trust Property to such organizations or entities.
ARTICLE X
MISCELLANEOUS
10.1 CERTIFICATE OF DESIGNATION; AGENT FOR SERVICE OF PROCESS. The
Trust shall file, in accordance with Section 3812 of DBTA, in the office of the
Secretary of State of Delaware, a certificate of trust, in the form and with
such information required by Section 3810 of DBTA and executed in the manner
specified in Section 3811 of DBTA. In the event the Trust does not have at
least one Trustee qualified under Section 3807(a) of DBTA, then the Trust shall
comply with Section 3807(b) of DBTA by having and maintaining a registered
office in Delaware and by designating a registered agent for service of process
on the Trust, which agent shall have the same business office as the Trust's
registered office. The failure to file any such certificate, to maintain a
registered office, to designate a registered agent for service of process, or to
include such other information shall not affect the validity of the
establishment of the Trust, the Declaration, the By-Laws or any action taken
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by the Trustees, the Trust officers or any other Person with respect to the
Trust except insofar as a provision of the DBTA would have governed, in which
case the Delaware common law governs.
10.2 GOVERNING LAW. This Declaration is executed by all of the
Trustees and delivered with reference to DBTA and the laws of the State of
Delaware, and the rights of all parties and the validity and construction of
every provision hereof shall be subject to and construed according to DBTA
and the laws of the State of Delaware (unless and to the extent otherwise
provided for and/or preempted by the 1940 Act or other applicable federal
securities laws); provided, however, that there shall not be applicable to
the Trust, the Trustees or this Declaration (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 DBTA)
pertaining to trusts which are inconsistent with the rights, duties, powers,
limitations or liabilities of the Trustees set forth or referenced in this
Declaration.
10.3 COUNTERPARTS. This Declaration may be simultaneously executed in
several counterparts, each of which shall be deemed to be an original, and such
counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any such original counterpart.
10.4 RELIANCE BY THIRD PARTIES. Any certificate executed by an
individual who, according to the records of the Trust or of any recording office
in which this Declaration may be recorded, appears to be a Trustee hereunder,
certifying to (a) the number or identity of Trustees or Holders, (b) the due
authorization of the execution of any instrument or writing, (c) the form of any
vote passed at a meeting of Trustees or Holders, (d) the fact that the number of
Trustees or Holders present at any meeting or executing any written instrument
satisfies the requirements of this Declaration, (e) the form of any By-Laws
adopted by or the identity of any officers elected by the Trustees, or (f) the
existence of any fact or facts which in any manner relate to the affairs of the
Trust, shall be conclusive evidence as to the matters so certified in favor of
any person dealing with the Trustees and their successors.
10.5 PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS. (a) The
provisions of this Declaration 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 DBTA, or with other applicable laws and
regulations, the conflicting provisions shall be deemed never to have
constituted a part of this Declaration; provided, however, that such
determination shall not affect any of the remaining provisions of this
Declaration or render invalid or improper any action taken or omitted prior to
such determination.
(b) If any provision of this Declaration 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 provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
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10.6 TRUST ONLY. It is the intention of the Trustees to create only a
business trust under DBTA with the relationship of trustee and beneficiary
between the Trustees and each Holder from time to time. It is not the intention
of the Trustees to create a general partnership, limited partnership, joint
stock association, corporation, bailment, or any form of legal relationship
other than a Delaware business trust except to the extent such trust is deemed
to constitute a corporation under the Code and applicable state tax laws.
Nothing in this Declaration of Trust shall be construed to make the Holders,
either by themselves or with the Trustees, partners or members of a joint stock
association.
10.7 WITHHOLDING. Should any Holder be subject to withholding
pursuant to the Code or any other provision of law, the Trust shall withhold all
amounts otherwise distributable to such Holder as shall be required by law and
any amounts so withheld shall be deemed to have been distributed to such Holder
under this Declaration of Trust. If any sums are withheld pursuant to this
provision, the Trust shall remit the sums so withheld to and file the required
forms with the Internal Revenue Service, or other applicable government agency.
10.8 HEADINGS AND CONSTRUCTION. Headings are placed herein for
convenience of reference only and shall not be taken as a part hereof or control
or affect the meaning, construction or effect of this instrument. Whenever the
singular number is used herein, the same shall include the plural; and the
neuter, masculine and feminine genders shall include each other, as applicable.
IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.
January 12, 1999
- ---------------------------------------------
Ann Cody
Trustee
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CERTIFICATE OF TRUST
OF
HILLIARD LYONS INVESTMENT TRUST
The undersigned, constituting the sole member of the Board of Trustees
of Hilliard Lyons Investment Trust (the "Trust"), in order to form a Delaware
business trust pursuant to Section 3810 of the Delaware Business Trust Act, does
hereby certify the following:
1. The name of the Delaware business trust is Hilliard Lyons
Investment Trust.
2. Prior to the issuance of beneficial interests, the Trust will
become a registered investment company under the Investment Company Act of 1940,
as amended.
3. Notice is hereby given that pursuant to Section 3804 of the
Delaware Business Trust Act, the debts, liabilities, obligations and expenses
incurred, contracted for or otherwise existing with respect to a particular
series of the Trust shall be enforceable against the assets of such series only
and not against the assets of the Trust generally.
4. The registered office of the Trust in Delaware is c/o The
Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801.
5. The registered agent for service of process on the Trust is The
Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801.
6. This Certificate of Trust shall be effective on the date it is
filed with the Office of the Delaware Secretary of State.
IN WITNESS WHEREOF, the undersigned Trustee of Hilliard Lyons
Investment Trust has executed this Certificate as of the 12th day of January,
1999.
-----------------------------------
Ann Cody
Trustee
<PAGE>
HILLIARD LYONS INVESTMENT TRUST
BY-LAWS
These By-Laws are made as of the 12th day of January, 1999 and adopted
pursuant to Section 2.7 of the Declaration of Trust establishing HILLIARD LYONS
INVESTMENT TRUST dated January 12, 1999, as from time to time amended
(hereinafter called the "Declaration"). All words and terms capitalized in
these By-Laws shall have the meaning or meanings set forth for such words or
terms in the Declaration.
ARTICLE I
MEETINGS OF HOLDERS
Section 1.1 ANNUAL MEETING. An annual meeting of the Holders of
Interests in the Trust, which may be held on such date and at such hour as may
from time to time be designated by the Board of Trustees and stated in the
notice of such meeting, is not required to be held unless certain actions must
be taken by the Holders as set forth in Section 8.10 of the Declaration, or
except when the Trustees consider it necessary or desirable.
Section 1.2 CHAIRPERSON. The President or, in his or her absence,
the Chief Operating Officer shall act as chairperson at all meetings of the
Holders and, in the absence of both of them, the Trustee or Trustees present at
the meeting may elect a temporary chairperson for the meeting, who may be one of
themselves or an officer of the Trust.
Section 1.3 PROXIES: VOTING. Holders may vote either in person or
by duly executed proxy and each Holder shall be entitled to a vote proportionate
to his or her Interest in the Trust, all as provided in Article VIII of the
Declaration. No proxy shall be valid after eleven (11) months from the date of
its execution, unless a longer period is expressly stated in such proxy.
Section 1.4 FIXING RECORD DATES. For the purpose of determining the
Holders who are entitled to notice of or to vote or to act at a meeting,
including any adjournment thereof, or who are entitled to participate in any
distributions, or for any other proper purpose, the Trustees may from time to
time fix a record date in the manner provided in Section 8.6 of the Declaration.
If the Trustees do not, prior to any meeting of the Holders, so fix a record
date, then the date of mailing notice of the meeting shall be the record date.
Section 1.5 INSPECTORS OF ELECTION. In advance of any meeting of the
Holders, the Trustees may appoint Inspectors of Election to act at the meeting
or any adjournment thereof. If Inspectors of Election are not so appointed, the
chairperson, if any, of any meeting of the Holders may, and on the request of
any Holder or his or her proxy shall, appoint Inspectors of Election of the
meeting. The number of Inspectors shall be either one or three. If appointed
at the meeting on the
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request of one or more Holders or proxies, a Majority Interests vote shall
determine whether one or three Inspectors are to be appointed, but failure to
allow such determination by the Holders shall not affect the validity of the
appointment of Inspectors of Election. In case any person appointed as
Inspector fails to appear or fails or refuses to act, the vacancy may be
filled by appointment made by the Trustees in advance of the convening of the
meeting or at the meeting by the person acting as chairperson. The
Inspectors of Election shall determine the Interests owned by Holders, the
Interests represented at the meeting, the existence of a quorum, the
authenticity, validity and effect of proxies, shall receive votes, ballots or
consents, shall hear and determine all challenges and questions in any way
arising in connection with the right to vote, shall count and tabulate all
votes or consents, determine the results, and do such other acts as may be
proper to conduct the election or vote with fairness to all Holders. If
there are three Inspectors of Election, the decision, act or certificate of a
majority is effective in all respects as the decision, act or certificate of
all. On request of the chairperson, if any, of the meeting, or of any Holder
or his or her proxy, the Inspectors of Election shall make a report in
writing of any challenge or question or matter determined by them and shall
execute a certificate of any facts found by them.
1.6 PLACE OF MEETINGS. All meetings of Holders shall be held at the
principal office of the Trust or at such other place within the United States as
shall be designated by the Trustees or the President of the Trust. The
principal office of the Trust is located at 501 South 4th Street, Louisville,
Kentucky 40202.
ARTICLE II
TRUSTEES
Section 2.1 ANNUAL AND REGULAR MEETINGS. The Trustees shall hold an
Annual Meeting of the Trustees for the election of officers and the transaction
of other business which may come before such meeting. Regular meetings of the
Trustees may be held without call or notice at such place or places and times as
the Trustees may by resolution provide from time to time.
Section 2.2 SPECIAL MEETINGS. Special Meetings of the Trustees shall
be held upon the call of the Chairperson, if any, the President, the Secretary,
or any two Trustees, at such time, on such day and at such place, as shall be
designated in the notice of the meeting.
Section 2.3 NOTICE. Notice of a meeting shall be given by mail
(which term shall include overnight mail) or by telegram (which term shall
include a cablegram or telefacsimile) or delivered personally (which term shall
include notice by telephone). If notice is given by mail, it shall be mailed
not later than 72 hours preceding the meeting and if given by telegram or
personally, such notice shall be delivered not later than 24 hours preceding the
meeting. Notice of a meeting of Trustees may be waived before or after any
meeting by signed written waiver. Neither the business to be transacted at, nor
the purpose of, any meeting of the Board of Trustees need the notice or waiver
of notice of such meeting, and no notice need be given of action proposed to be
taken by written consent. The attendance of a Trustee at a meeting shall
constitute a waiver of notice of such meeting except where a Trustee attends a
meeting for the express purpose of objecting, at the
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commencement of such meeting, to the transaction of any business on the
ground that the meeting has not been lawfully called or convened.
Section 2.4 CHAIRPERSON: RECORDS. The Trustees shall appoint a
Chairperson of the Board from among their number. Such Chairperson of the Board
shall act as chairperson at all meetings of the Trustees; in his or her absence
the President shall act as chairperson; and, in the absence of all of them, the
Trustees present shall elect one of their number to act as temporary
chairperson. The results of all actions taken at a meeting of the Trustees, or
by written consent of the Trustees, shall be recorded by the Secretary.
Section 2.5 AUDIT COMMITTEE. The Board of Trustees may, by the
affirmative vote of a majority of the entire Board, appoint from its members an
Audit Committee composed of two or more Trustees who are not "interested
persons" (as defined in the 1940 Act) of the Trust, as the Board may from time
to time determine. The Audit Committee shall (a) recommend independent public
accountants for selection by the Board, (b) review the scope of audit,
accounting and financial internal controls and the quality and adequacy of the
Trust's accounting staff with the independent public accountants and such other
persons as may be deemed appropriate, (c) review with the accounting staff and
the independent public accountants the compliance of transactions of the Trust
with its investment adviser, administrator or any other service provider with
the financial terms of applicable contracts or agreements, (d) review reports of
the independent public accountants and comment to the Board when warranted, (e)
report to the Board at least once each year and at such other times as the
committee deems desirable, and (f) be directly available at all times to
independent public accountants and responsible officers of the Trust for
consultation on audit, accounting and related financial matters.
Section 2.6 NOMINATING COMMITTEE OF TRUSTEES. The Board of Trustees
may, by the affirmative vote of a majority of the entire Board, appoint from its
members a Trustee Nominating Committee composed of two or more Trustees. The
Trustee Nominating Committee shall recommend to the Board a slate of persons to
be nominated for election as Trustees by the Holders at a meeting of the Holders
and a person to be elected to fill any vacancy occurring for any reason in the
Board. Notwithstanding anything in this Section to the contrary, if the Trust
has in effect a plan pursuant to Rule 12b-1 under the 1940 Act, the selection
and nomination of those Trustees who are not "interested persons" (as defined in
the 1940 Act) shall be committed to the discretion of such non-interested
Trustees.
Section 2.7 EXECUTIVE COMMITTEE. The Board of Trustees may appoint
from its members an Executive Committee composed of those Trustees as the Board
may from time to time determine, of which committee the Chairperson of the Board
shall be a member. In the intervals between meetings of the Board, the
Executive Committee shall have the power of the Board to (a) determine the value
of securities and assets owned by the Trust, (b) elect or appoint officers of
the Trust to serve until the next meeting of the Board, and (c) take such action
as may be necessary to manage the business of the Trust. All action by the
Executive Committee shall be recorded and reported to the Board at its meeting
next succeeding such action.
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Section 2.8 OTHER COMMITTEES. The Board of Trustees may appoint from
among its members other committees composed of two or more of its Trustees which
shall have such powers as may be delegated or authorized by the resolution
appointing them.
Section 2.9 COMMITTEE PROCEDURES. The Board of Trustees may at any
time change the members of any committee, fill vacancies or discharge any
committee. In the absence of any member of any committee, the member or members
thereof present at any meeting, whether or not they constitute a quorum, may
unanimously appoint to act in the place of such absent member a member of the
Board. Each committee may fix its own rules of procedure and may meet as and
when provided by those rules. Copies of the minutes of all meetings of
committees other than the Nominating Committee and the Executive Committee shall
be distributed to the Board unless the Board shall otherwise provide.
ARTICLE III
OFFICERS
Section 3.1 OFFICERS OF THE TRUST; COMPENSATION. The officers of the
Trust shall consist of a President, a Secretary, a Treasurer and such other
officers or assistant officers, including Vice Presidents, as may be elected by
the Trustees. Any two or more of the offices may be held by the same person.
The Trustees may designate a Vice President as an Executive Vice President and
may designate the order in which the other Vice Presidents may act. No officer
of the Trust need be a Trustee. The Board of Trustees may determine what, if
any, compensation shall be paid to officers of the Trust.
Section 3.2 ELECTION AND TENURE. At the initial organization meeting
and thereafter at each annual meeting of the Trustees, the Trustees shall elect
the President, Secretary, Treasurer and such other officers as the Trustees
shall deem necessary or appropriate in order to carry out the business of the
Trust. Such officers shall hold office until the next annual meeting of the
Trustees and until their successors have been duly elected and qualified. The
Trustees may fill any vacancy in office or add any additional officers at any
time.
Section 3.3 REMOVAL OF OFFICERS. Any officer may be removed at any
time, with or without cause, by action of a majority of the Trustees. This
provision shall not prevent the making of a contract of employment for a
definite term with any officer and shall have no effect upon any cause of action
which any officer may have as a result of removal in breach of a contract of
employment. Any officer may resign at any time by notice in writing signed by
such officer and delivered or mailed to the President or Secretary, and such
resignation shall take effect immediately, or at a later date according to the
terms of such notice in writing.
Section 3.4 BONDS AND SURETY. Any officer may be required by the
Trustees to be bonded for the faithful performance of his or her duties in such
amount and with such sureties as the Trustees may determine.
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Section 3.5 PRESIDENT AND VICE-PRESIDENTS. The President shall be
the chief executive officer of the Trust and, subject to the control of the
Trustees, shall have general supervision, direction and control of the
business of the Trust and of its employees and shall exercise such general
powers of management as are usually vested in the office of president of a
corporation. The President shall preside at all meetings of the Holders and,
in the absence of the Chairperson of the Board, the President shall preside
at all meetings of the Trustees. Subject to direction of the Trustees, the
President shall have the power, in the name and on behalf of the Trust, to
execute any and all loan documents, contracts, agreements, deeds, mortgages,
and other instruments in writing, and to employ and discharge employees and
agents of the Trust. Unless otherwise directed by the Trustees, the
President shall have full authority and power, on behalf of all of the
Trustees, to attend and to act and to vote, on behalf of the Trust at any
meetings of business organizations in which the Trust holds an interest, or
to confer such powers upon any other persons, by executing any proxies duly
authorizing such persons. The President shall have such further authorities
and duties as the Trustees shall from time to time determine. In the absence
or disability of the President, the Vice Presidents in order of their rank or
the Vice President designated by the Trustees, shall perform all of the
duties of President, and when so acting shall have all the powers of and be
subject to all of the restrictions upon the President. Subject to the
direction of the President, the Treasurer and each Vice President shall have
the power in the name and on behalf of the Trust to execute any and all loan
documents, contracts, agreements, deeds, mortgages and other instruments in
writing, and, in addition, shall have such other duties and powers as shall
be designated from time to time by the Trustees, the Chairperson, or the
President.
Section 3.6 SECRETARY. The Secretary shall keep the minutes of all
meetings of, and record all votes of, Holders, Trustees and any committees of
Trustees, provided that, in the absence or disability of the Secretary, the
Holders or Trustees or committee may appoint any other person to keep the
minutes of a meeting and record votes. The Secretary shall attest the signature
or signatures of the officer or officers executing any instrument on behalf of
the Trust. The Secretary shall also perform any other duties commonly incident
to such office in a Delaware business trust and shall have such other
authorities and duties as the Trustees shall from time to time determine.
Section 3.7 TREASURER. Except as otherwise directed by the Trustees,
the Treasurer shall have the general supervision of the monies, funds,
securities, notes receivable and other valuable papers and documents of the
Trust, and shall have and exercise under the supervision of the Trustees and of
the Chairperson and the President all powers and duties normally incident to his
office. He or she may endorse for deposit or collection all notes, checks and
other instruments payable to the Trust or to its order. He or she shall deposit
all funds of the Trust as may be ordered by the Trustees, the Chairperson or the
President. He or she shall keep accurate account of the books of the Trust's
transactions which shall be the property of the Trust and which, together with
all other property of the Trust in his or her possession, shall be subject at
all times to the inspection and control of the Trustees. Unless the Trustees
shall otherwise determine, the Treasurer shall be the principal accounting
officer of the Trust and shall also be the principal financial officer of the
Trust. He or she shall have such other duties and authorities as the Trustees
shall from time to time determine. Notwithstanding anything to the contrary
herein contained, the Trustees may authorize any adviser or administrator to
maintain bank accounts and deposit and disburse funds on behalf of the Trust.
5
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Section 3.8 OTHER OFFICERS AND DUTIES. The Trustees may elect
such other officers and assistant officers as they shall from time to time
determine to be necessary or desirable in order to conduct the business of
the Trust. Assistant officers shall act generally in the absence of the
officer whom they assist and shall assist that officer in the duties of his
or her office. Each officer, employee and agent of the Trust shall have such
other duties and authority as may be conferred upon him or her by the
Trustees or delegated to him or her by the President.
ARTICLE IV
CUSTODIAN
Section 4.1 APPOINTMENT AND DUTIES. The Trustees shall at all times
employ a custodian or custodians with authority as its agent, but subject to
such restrictions, limitations and other requirements, if any, as may be
contained in these By-Laws:
(1) to hold the securities owned by the Trust and deliver the
same upon written order;
(2) to receive and receipt for any moneys due to the Trust and
deposit the same in its own banking department or elsewhere as the Trustees
may direct;
(3) to disburse such funds upon orders or vouchers;
(4) if authorized by the Trustees, to keep the books and accounts
of the Trust and furnish clerical and accounting services; and
(5) if authorized to do so by the Trustees, to compute the net
income and net assets of the Trust;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. The Trustees may also authorize the custodian to employ one
or more subcustodians, from time to time, to perform such of the acts and
services of the custodian and upon such terms and conditions as may be agreed
upon between the custodian and such sub-custodian and approved by the Trustee.
Section 4.2 CENTRAL CERTIFICATE SYSTEM. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct the
custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, any such other person or
entity with which the Trustees may authorize deposit in accordance with the 1940
Act.
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ARTICLE V
MISCELLANEOUS
Section 5.1 DEPOSITORIES. In accordance with Article IV of these
By-Laws, the funds of the Trust shall be deposited in such depositories as
the Trustees shall designate and shall be drawn out on checks, drafts or
other orders signed by such officer, officers, agent or agents (including any
adviser or administrator), as the Trustees may from time to time authorize.
Section 5.2 SIGNATURES. All contracts and other instruments shall be
executed on behalf of the Trust by such officer, officers, agent or agents, as
provided in these By-Laws or as the Trustees may from time to time by resolution
or authorization provide.
Section 5.3 SEAL. The seal of the Trust shall, subject to alteration
by the Trustees, consist of a flat-faced circular die with the word "Delaware",
together with the name of the Trust and the year of its organization, cut or
engraved thereon; but, unless otherwise required by the Trustees, the seal shall
not be necessary to be placed on, and its absence shall not impair the validity
of, any document, instrument or other paper executed and delivered by or on
behalf of the Trust.
Section 5.4 FISCAL YEAR. The fiscal year of the Trust shall be
established by the Board of Trustees and may be changed from time to time.
ARTICLE VI
INTERESTS
Section 6.1 INTERESTS. Except as otherwise provided by law, the
Trust shall be entitled to recognize the exclusive right of a person in whose
name Interests stand on the record of Holders as the owners of such Interests
for all purposes, including, without limitation, the rights to receive
distributions, and to vote as such owner, and the Trust shall not be bound to
recognize any owner, and the Trust shall not be bound to recognize any equitable
or legal claim to or interest in any such Interests on the part of any other
person.
Section 6.2 REGULATIONS. The Trustees may make such additional rules
and regulations, not inconsistent with these By-Laws, as they may deem expedient
concerning the sale and purchase of Interests of the Trust.
Section 6.3 DISTRIBUTION DISBURSING AGENTS AND THE LIKE. The
Trustees shall have the power to employ and compensate such distribution
disbursing agents, warrant agents and agents for the reinvestment of
distributions as they shall deem necessary or desirable. Any of such agents
shall have such power and authority as is delegated to any of them by the
Trustees.
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ARTICLE VII
AMENDMENT OF BY-LAWS
Section 7.1 AMENDMENT AND REPEAL OF BY-LAWS. In accordance with
Section 2.7 of the Declaration, the Trustees shall have the power to alter,
amend or repeal the By-Laws or adopt new By-Laws at any time. The Trustees
shall in no event adopt By-Laws which are in conflict with the Declaration,
DBTA, the 1940 Act or applicable federal securities laws.
Section 7.2 NO PERSONAL LIABILITY. The Declaration establishing
HILLIARD LYONS INVESTMENT TRUST provides that the name "HILLIARD LYONS
INVESTMENT TRUST" does not refer to the Trustees as individuals or personally;
and no Trustee, officer, employee or agent of, or Holder of Interest in,
HILLIARD LYONS INVESTMENT TRUST shall be held to any personal liability, nor
shall resort be had to their private property for the satisfaction of any
obligation or claim or otherwise in connection with the affairs of HILLIARD
LYONS INVESTMENT TRUST (except to the extent of a Holder's Interest in the
Trust).
8
